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527: Countdown to Disaster—Four Threats Facing the U.S. with Richard Duncan Nov 11, 2024

Keith discusses the current state of the US economy, noting that while it is considered strong by conventional measures, there are four major threats on the horizon that the country is not doing enough to address. He’s joined by our guest, macroeconomic expert, Richard Duncan to discuss these topics. Richard proposes a solution that could strengthen the US's competitive position against China.

Shifting from Capitalism to Creditism.

Also, hear about the risks facing the real estate and stock markets in the near-term, such as the historically high wealth-to-income ratio and the ongoing quantitative tightening by the Federal Reserve.

Learn more about Richard’s work through his video newsletter, Macro Watch. Use discount code GRE for 50% off at:

RichardDuncanEconomics.com

Show Notes:

GetRichEducation.com/527

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 0:01

Keith, welcome to GRE. I'm your host. Keith Weinhold, per conventional measures, today's us. Economy is strong, but there are four vicious threats on the horizon, and we're not doing enough about them. Our macroeconomist guests will discuss that with us today. How alarming is it, and what's the solution to our crises, this week on get rich education,

Speaker 1 0:27

since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, who delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit get rich education.com

Corey Coates 1:12

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 1:28

Welcome to GRE from Fort Wayne, Indiana to Fort Lee New Jersey and across 188 nations worldwide. I'm Keith Weinhold, and you are back inside get rich education. We've been here for you, every single week since 2014 coming off of an election last week, this spurs more macroeconomic thought, monetary and fiscal policy, and more than that. And you know, one thing that I'm always looking for are signs of inflation versus deflation, because we live in a long term inflationary world. Well, you wouldn't keep a million bucks under a mattress because it would only be worth 300k in a few decades. But in deflation, you would flip your strategy and actually be a saver. You might keep millions out of the mattress, because deflation would actually increase the purchasing power of every single one of your dollars. Now, I've got a pretty unpopular take for you here at some point, probably now you've got to give the Fed credit for a soft landing. And what does a soft landing mean? Exactly. It means bringing down inflation without putting the economy into a recession. Well, inflation is down to about 2% now, unemployment is still low, near 4% and GDP growth for last quarter came in at 2.8% okay, yes, I sure understand that those benefits are distributed unevenly, but at this point, how much more of a soft landing Do you really want? And by the way, this sure doesn't mean that I love the Federal Reserve. I mean, they get no credit from me for not jumping on inflation sooner, when it peaked two and a half years ago, or even before that point, well, those high consumer prices as a result of that are still with us, and that's a problem, and they got that part wrong. We're about to talk with our global macroeconomic expert, really. He is one of the foremost authorities in the entire world today. We're going to talk about four major catastrophes the US economic future faces. One of those four is our ballooning national debt and deficit. And to review that for you, first, the debt is our overall accumulation of debt over the years now at 36 trillion. And when it comes to these awful, dreadful debt and deficit issues, I will ask our guests the question, when is it game over? Where is that tipping point? What would need to happen and the deficit? Okay, that refers to the annual shortfall, the annual thing, that shortfall that our bloated government keeps coming up with at the end of every year, all right, so therefore revenue minus spending equals deficit. Another way to say that is income minus expenses equals a deficit when the expenses are greater than the income. Well, that figure is near $2 trillion we're spending 2 trillion more than we raise in revenue each year. And here's an example. I'll use real world numbers rounded off to the nearest trillion. So if the government's annual revenue is only 5 trillion and you have to subtract out spending, which is 7 trillion, that could. Gives us an annual deficit of 2 trillion, pretty simple stuff, and that more or less gets added onto our overall debt of 36 trillion. Another major problem is this growing competition from China. Yes, I know that people like to discuss their demographic problems, but still, their population is more than four times the US population, and you learn about what other advantages they have over us and what we direly need to do to catch up. In our guests opinion, these issues incur some rather detailed explanations. So I'm really going to let our guest expert takeover for a while today, this weekend, I will be in San Antonio, Texas. San Antonio is an uptrending real estate market because they are really a beneficiary in distribution with their proximity to Mexico in the near shoring movement that's taking place. And then I will be in Austin, Texas, for a few days, Austin is one of the few major US metros that have seen rents substantially decline recently. I'll bring you next week's show from Austin, where I might talk more about that. Then, from the 20th to the 24th of this month, I'll be in New Orleans at the famed New Orleans investment conference, where they're pulling out all the stops at the 50th anniversary of the event, and that is the longest running investment event in America and perhaps the world. I hope to meet some of you there in New Orleans, just like I do each time I'm at the event. Let's talk about the bigger picture economy that your real estate and investments float within next.

This week's guest is the author of four books analyzing the crises that brought the global economy to the brink of collapse in recent decades. One of the books forecast the 2008 global financial crisis with great accuracy. We're going to discuss future crises here today, before we're done, he has worked as an equities and Investment Analyst, and then he went on to hold some rather esteemed roles at the World Bank in DC and as a consultant to the IMF in Asia. He joins us from Thailand today. He now publishes a video newsletter called macro watch, and long time listeners know that today's guest was also this show's very first guest that was back on GRE podcast episode seven, only 10 years ago now, in November 2014, and he's really become quite the friend of the show, and we've looked out for each other ever since. It's terrific to have back global macro economist Richard Duncan

Richard Duncan 7:46

Keith, hey, thank you for having me back. It's great to speak with you again.

Keith Weinhold 7:50

Oh, it's so good to have you here an entire decade of our lives. And as times change, economies are surely dynamic, and you're so good at spotlighting crises and explaining them in a way to people that they can understand. So Richard, why don't you talk to us now about risks facing the nation? Yes, I'm talking about the United States.

Richard Duncan 8:15

A lot of podcasts focus on all the problems the United States is facing, and it is certainly true that the United States is facing very serious risk. So I'd like to start off this conversation telling you what I think the greatest risk facing our country are. There are four main things I'd like to hit on. The first is something you mentioned to me before in our exchange of emails, is that the US government does have a very high level of government debt relative to GDP, and the budget deficits are large. So that's problem number one. Problem number two, in my opinion, looking at this from where I live in Asia, is that the United States is at risk of being conquered by China in the not too distant future. Risk Number Two. Risk Number three, we have very serious domestic political divisions within the United States. Risk Number four is that our post capitalist economic system, which I call creditism, must have credit growth to survive. If credit contracts, then our economy will spiral into a Great Depression that will be probably worse than the one of the 1930s so those are the big four problems that we have, and it doesn't do anyone any good just to talk about our country's problems if you don't offer a solution to them. So in my opinion, all of these problems can be overcome by accelerating economic growth in the United States, while all of these problems would be made very much worse by anything that causes us economic growth to slow down. The way to make the US economy grow much faster is to have the US Government finance a very, very large investment in the industries and technologies of the future over the next 10 years, starting immediately. The alternative austerity would cause the economy to spiral down into deflation. We'd like your listeners to think of austerity when they hear the word austerity. I'd like them to think of the word death. It's austerity is equal to death. Yeah, the US doesn't have to be a declining power. The first American Century doesn't have to be the last. It can be the first of many. The solution for driving the US economy to grow much more rapidly and solving all four of the problems that I mentioned above is a US sovereign wealth fund. Thank heavens. Both parties now support the establishment of a US sovereign wealth fund. On September 5, former President Trump came out in support of establishing a US sovereign wealth fund, and on the following day, the Biden administration said, then working on this for months and had a plan that they were developing. So this is fantastic news for the United States. It offers great hope for solving all of our greatest problems. And I'd like to spend, you know, a few minutes explaining to your listeners what a US sovereign wealth fund is, yes, urgently necessary, and why both parties have now come to understand why this is important to establish.

Keith Weinhold 11:27

Yeah, please tell us why you think the US sovereign wealth fund is so urgently needed, and what it is because for even longer than the 10 years since you were first here, for about 15 years now, you have championed and promoted this US sovereign wealth fund. You discussed it on CNBC Squawk Box and all over the place. Last year, you presented about it in a speech in DC to 15 members of the House, Ways and Means Committee. So tell us about the US sovereign wealth fund and why you think it's urgently needed.

Richard Duncan 11:56

Let's begin with, what is a sovereign wealth fund? Well, effectively, a sovereign wealth fund is where a country invest in individual companies or even in startups. There are sovereign wealth funds all around the world. Norway has the largest, Singapore has two very effective ones called gdic and Temasek, which had been enormously profitable and successful, and it made the people in Singapore much richer. So a sovereign wealth fund in the United States would be an investment bond financed by the United States government with the US. This investment fund would take stakes in existing companies and also in startup companies, hopefully on a very large scale. Now, some people have asked, Why is this framework necessary? Why do we need a sovereign wealth fund to do that when the government is already making investments in the military, for instance, and funding some R and D research? Well, the difference between what the government is doing now and a sovereign wealth fund is with a sovereign wealth fund, the government would actually keep equity stakes in these companies that they invest in, meaning that when these companies they invest in become enormously profitable, the profits would be owned by every American. The Americans would have the equity stakes in all of the investments that this sovereign wealth fund makes. And it would be a situation where the government provides the financing, but the private sector manages the companies. The government just finances these companies in new industries and new technologies, and the government has the ability to invest on a very much larger scale than the private sector does. For example, The United States has a lot of great companies in the private sector that have accomplished really, truly great things in recent years and long past as well. But these private sector companies cannot invest on the same scale that the Chinese government can. The Chinese government is investing on a much larger scale than any of the American companies could ever dream to invest on. And that's explains why China is overtaking us now technologically, and if they continue to invest at a rapid rate that they're doing currently, then before long, there are going to be far ahead of us technologically and therefore economically, and more worryingly, militarily, the US government has the ability to invest truly on a multi trillion dollar scale over the next decade in new industries and technologies, things like artificial intelligence, quantum computing, nanotech, biotech, genetic engineering and developing energy sources like fusion, and it has the ability to do this on such a large scale that it would be certain to succeed. And once these companies start creating cancer vaccines or fusion, for instance, they would be enormously profitable, and they could be listed on. NASDAQ at multi trillion dollar valuations, and the American public would own equity stakes in these companies, and would then would directly reap the rewards of these profits that these companies would generate. That is what a sovereign wealth fund is, why it's desperately needed, is, well, first of all, we should do it, because we can easily afford to do it. And the results, the breakthroughs, the technological breakthroughs and medical miracles that these sorts of companies would produce, would we really have the shot of curing all the diseases and radically extending life expectancy, developing sources of limitless energy that would bring down the cost of energy radically. Just across the board, it would induce a technological revolution that would turbo charge us economic growth, create UNDRIP wealth, and at the same time, shore up US national security in the face of this growing threat from China. So for all of those reasons, it is urgently necessary. In my opinion.

Keith Weinhold 16:04

both Norway and Singapore have had similar models to this. US sovereign wealth fund, and we certainly think of those two nations as prosperous places, tell me more about why it's a success so the government finances it does that incentivize companies to therefore take more risk?

Richard Duncan 16:25

It allows them to invest more. It allows them to invest on a much larger scale than that. Could if they have to rely on their own funding sources. Rather than investing millions of dollars, they could invest billions of dollars or 10s of billions of dollars. For instance, at the moment, the National Cancer Institute in the United States, this annual budget is $6 billion a year. $6 billion a year is not curing cancer. If we look back a few years ago, the Fed was creating $120 billion a month through quantitative easing per month. So with just 5% of one month of QE, you could double the National Cancer Institute's budget. Now that's not what this sovereign wealth fund would do. That just illustrates the scale. How much greater the scale would be that the government could invest on relative to what is currently being invested at the moment by the government and by the private sector combined.

Keith Weinhold 17:28

Do any critics ever ask about Wait? Is this too much government intervention into the free market? Is this a move away from capitalism? What do you say to those sort of critics?

Richard Duncan 17:38

I say to them that capitalism died in World War One. It certainly didn't survive the 20th century. Now the government. In the 19th century, we had capitalism. The government had very little involvement in the economy then and gold was money. But now gold is no longer money. The Fed creates some money. Government spending is something like nearly $7 trillion out of a GDP. That is around just not quite $30 trillion yet. So the government has been directing the economy going back at least since World War Two. This hasn't been capitalism for a very long time. Under capitalism, the private sector made investments, and some businessmen would make profits from their investments, and they would save that profit as capital and reinvest that capital. That's how capitalism grew. That's why they called it capitalism. It was based on capital accumulation and investment. But that's not how our economic system has worked for decades. Our system now is not driven by investment and saving by the private sector. It's driven by credit creation and consumption and more credit creation and more consumption and our economies has now been transformed from capitalism. It has evolved into creditism, with the government playing the directing role. So total credit in the United States, just last quarter blew through $100 trillion for the first time. By what I mean by total credit is the same thing as total debt. Total credit is equal to total debt. So this is all the debt of all sectors of the economy, the government sector, the household sector, the corporate sector, the financial sector, Fannie Mae and Freddie Mac all the sectors of the economy, it just went through $100 trillion and Breda ism has created very rapid growth, especially all around the world, not only in the United States, because it has allowed the US economy to grow so rapidly and to import so much from other countries that this is why The Asian miracle occurred. I've lived through the Asian miracle because the US has been running massively large trade deficits since the early 1980s and all these countries in Asia have been running massively large trade surpluses, and all this spending that the Americans have been doing has been fueled by this rapidly. Radically expansion of credit. Total credit first went through $1 trillion in 1964 now it's $100,000,000,000,000. 60 years later. Now our system is not capitalism. The government is very involved. Anytime there's any problem with the economy, the government steps in. In 2008 the government prevented a new Great Depression when the private sector the households defaulted on their debts and caused all the banks to fail, and Freddie Mac did fail and had to be taken over by the government. So at that time, we narrowly avoided a Great Depression, because the government increased its budget deficits by more than a trillion dollars a year for four years in a row, and the Fed expanded. The Fed created three and a half trillion dollars between the end of 2007 and 2014, expanding its balance sheet by about five times. So that's not capitalism. We don't have capitalism. So people who are worried about us abandoning capitalism. They're behind the times that happened a long time ago. That shouldn't be a concern. They should be aware now that we are competing against players who don't play by the capitalist rules of little government intervention in the markets we're now competing against China, and China is one giant sovereign wealth fund intent on dominating the world by investing very aggressively in new industries and technologies. In the year 2000 the United States invested, I think, 10 times as much in research and development as China did. But now China is actually investing more in research and development and the US is and that explains why China is ahead in so many areas of technology. They had 5g years before we did. They are the leaders in electric vehicles and batteries. We have to put up 100% tariffs to keep out electric vehicles from China because they're so much better than our electric vehicles. They dominate solar panels. And are worse, they have hypersonic missiles and we don't, and I'm sure they have other military advantages that we don't, because they invest much more aggressively in new industries and technologies than our government does. And if we don't rectify this quickly, then we are soon going to be overtaken by China militarily, and our national security is at risk, much more than most Americans understand. But this realization has slowly grown on policymakers in Washington, and now both parties are worried about this, and this is why we have this growing fear of China, and why we have proposals to limit technology transfers to China, and this is why we've done things like the chips and science act, where the government has agreed to finance a $280 billion investment in new industries and technologies a couple of years ago, with 50 billion of that going into setting up manufacturing facilities within the in the US to create semiconductors, rather than relying solely on Taiwan to obtain all of our semiconductors, because China could take Taiwan at any moment, and then then he would end up with all the semiconductor chips that go into powering artificial intelligence. And whoever develops Artificial General Intelligence first is going to rule the world, and therefore it had better be the United States rather than China, because we don't want to live in a world dominated by China, believe me.

Keith Weinhold 23:26

Well, a lot of macro voices agree with you. About two months ago, we had the president of the Mises Institute here, and the way he characterized things are in the United States. 100 years ago, we had islands of socialism in a sea of capitalism, and today we merely have islands of capitalism in a sea of socialism. Do you see the US sovereign wealth fund being able to solve all four of the United States big problems that you outlined, debt and deficit conquering by China, political division and creditism. Can it solve all four of those?

Richard Duncan 24:04

Yes, it can. So as you know, Keith, a couple of years ago, I published my fourth book. It was called the money revolution. Yeah? How to find the book? Sure, yeah. How to finance the next American century. It was a subtitle. Now I argue that it would be very easy for the US to invest on a multi trillion dollar scale, new industries and new technologies over the next decade, and if we do that through a sovereign wealth fund, then would generate so much growth and be so profitable that instead of causing the government debt to increase, it would actually make the economy so much larger and generate so many more tax revenues, and the government would make so many profits from these companies that it has equity stakes in that it would reduce the government debt in absolute terms, and radically reduce the government debt relative to GDP, which would grow far faster than it has been growing in recent decades. This problem, number one, solved the high level of government debt. A high level of debt to GDP just make the GDP grow a lot faster, and the ratio of debt to GDP will go down. Problem number two is the US is at risk of being conquered by China. We can out invest China. We can invest more than China can afford to invest. We still have the best universities and the best entrepreneurs and scientists. So if we invest on a large enough scale, we will win, and China will not conquer us. Third, if the economy is growing at 7% a year instead of 1% a year, that is going to alleviate a lot of the domestic tensions that exist currently, much of the reason there's the origins of this domestic political divide that we're now suffering from in the US is because such a large part of the population has been left behind when all the factories moved overseas, countries like China and Vietnam, we de industrialized, and the people who Used to have good factory jobs, good, unionized, high paying factory jobs. All those people were left out in the cold, and they're not happy about it. And so if our economy were growing much more rapidly, these people would have much better jobs and much higher salaries, and they would be much happier than they are at the moment. And the final one was our post capitalist system of creditism requires credit growth to survive. So if the government is financing these investments on a multi trillion dollar scale, it's going to make credit expand, and that's going to keep the economy expanding. So yes, it would solve all four of those problems.

Keith Weinhold 26:35

One of those four problems is the debt and the deficit. I want to dive into that more with Richard as it becomes more and more problematic in the United States, and just how far we can kick this can down the road. You're listening to get rich education. We're talking with macro economist Richard Duncan. More, we come back. I'm your host. Keith Weinhold.

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Jim Rickards 28:40

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Keith Weinhold 28:55

Welcome back to get rich education. We are going big this week, talking about the global economy, although mostly centered on the United States, with macroeconomist Richard Duncan. You can learn more about him at RichardDuncaneconomics.com and Richard I want to talk about the debt in the deficit. The debt is the United States overall debt as it accumulates year after year, and the deficit is just the annual thing, and it's so interesting and concerning. When I look at this, when you look at the line items in the United States government's annual spending, we now see that interest payments are taking the second largest chunk, only to Social Security. Social Security's number one interest is the second biggest expense, even more than defense spending and on Medicare. So I just wonder, as I see the interest payments going up and up and up and projected to be our greatest expense every year. You know, one thing I think about Richard is when our interest payments alone exceed our. Revenue somewhere down the road, is that when it's game over, or is that when we're on the way to game over? So can you talk to us about really, where the concern crops up with the deficit, like I talked about, and with the debt that's now at about $36 trillion

Richard Duncan 30:17

deficit and debt is a real problem. It was the first problem that I mentioned when we kicked off the conversation. There are two components of that. One is the fact that government debt has been increasing very rapidly. At the end of 2007 total government debt was around $9 trillion by 2014 it had doubled to $18 trillion because the government had to respond to the collapse of the private sector in 2008 and prevent us from having a great depression at that time, and then after 2014 it has doubled again, from 18 trillion to $36 trillion now, much of that was due to the need for the government to keep us from having another Great Depression during COVID When government stimulus amounted to about $5 trillion and the Fed created a similar amount over just a two year period. So now we have a much higher level of government debt. But the second component of that is that interest rates are very much higher than they used to be. The federal funds rate went up from 0% a few years back to a high of five and a quarter, actually a range between five and a quarter and five and a half. And recently, the Fed cut the federal funds rate by 50 basis points. But you can still say it is 4.9% let's call it 4.9% so interest rates are far higher than they used to be, but they don't have to remain high. The reason interest rates went up is because the Fed increased the federal funds rate. And the reason the Fed increased the federal funds rate is because we had high rates of inflation. Inflation peaked at 9% or so in 2022 but most recently, the CPI has come back down to 2.4% and the Fed's favorite measure of inflation, that PCE Price Index, has come down to 2.2% and that means that the federal funds rate, which is 4.9% is more than twice as high as the inflation rate is. That shows us that we have very tight monetary policy, and the Fed should be able to reduce interest rates very rapidly going forward. They've told us in their dot plot projections that they expect that interest rates will end this year the federal funds rate at 4.4% and then in next year, at 3.4% and 2026 at 2.9% so that reduction in interest rates will bring down the cost of the total interest expense that you mentioned as being so high currently, the risk, however, is that we get a rebound in inflation. We're inflation to surge again, then interest rates won't come down. In fact, they could go higher. So all of my career, more or less, has been spent in Asia. And the main theme that is run through the global economy, the development of the global economy over the last three and a half decades has been globalization, globalization in the form of us running very large trade deficits with other countries. Literally, the US current account deficit since the early 1980s has been $15 trillion meaning countries with the trade surpluses have had a $15 trillion trade surplus, and that's why they've all been transformed economically as a result of their trade surplus with the US, but what the US got out of this was the ability to buy things made with very low cost labor, and that was extremely disinflationary, that drove down the inflation rate in the US, and that allowed interest rates in the US to come down to very low levels that we've seen during most of this century, Up until the time COVID started. The real danger is now, if we do impose very high trade tariffs on China and our other trading partners, then that will cause a very serious spike in inflation. And it won't just be one off, because, of course, when the tariffs are put in place, that will immediately cause everything to be that much more expensive. The US companies importing goods from abroad would have to pay that tariff, then those US companies would pass those higher expenses on to the consumers, so we'd get an immediate spike in inflation. But that would also mean that the companies abroad it wouldn't be so profitable for them to have their manufacturing facilities abroad, they would try to bring those back home. And given that the unemployment rate in the US is so low already, only 4.1% there's not enough labor to allow these manufacturing facilities to come back to the US and start producing goods in the US. So that would cause an upward spiral. In wages and the wage push inflation spiral of the type that we had in the late 1960s and early 1970s so that is a In other words, tariffs would put an end to globalization, and that would cause a such a severe spike in inflation and interest rates, it would essentially be the death nail for creditism, which requires credit growth to survive. The end of globalization would mean this end of this 30 year global economic boom that the world has enjoyed, and therefore it is a very severe threat, and it would push up the interest expense of the US government, which you let off with, instead of lower interest rates, bringing down the interest expense the government has to pay every year, we would have instead higher interest rates, which would make the amount that the government has to pay on its interest even higher than it is at the moment, and make the budget deficit even larger than it is at the moment, and Make the government debt grow even faster than it's growing at the moment. So let's hope that doesn't happen. Instead, the better approach is to invest, to have the government finance large scale investments in new industries and technologies make the economy grow much more rapidly and we can grow our way out of this debt problem that we're currently in,

Keith Weinhold 36:21

yes more inflation, whether that comes from higher tarrifs or any other sources, will lead to higher interest rates to counteract that higher inflation, which will Yes, pump up the deficit in the debt that much more. And you know, one thing that I like about Richard is, you know, a lot of people complain about things, or say, what are we going to do? Or Things look bad, and Richard is saying some of that, but he offers a way forward with the US sovereign wealth fund, like he talked about before, investing our way out of it. So Richard, if we don't invest in this debt and deficit situation gets worse. It could be a hard question to answer, but I'd like your best guess at how far can we kick the can down the road? When is it game over? How big do our interest payments on the debt and deficit have to get?

Richard Duncan 37:10

the game is never over. No matter how bad things become, humanity will survive and carry on. So even in the Great Depression, people made it through, even through World War Two that resulted, largely as a result of the Great Depression. A lot of people died. 60 million people died, but the game didn't end. So regardless of how bad the economic system system were to become, humanity will survive and there will be a solution. Now, a lot of people put forward that, the idea that they point out that we have this high level of government debt, and their solution is to reduce government spending. The government spends something like $6.8 trillion last year. That was the amount the government spent. The budget deficit last year was 1.8 trillion so in order to eliminate the budget deficit, the government would have to spend $1.8 trillion less. In other words, it would have to cut its spending by 27% but the government cut its spending by 27% they're going to happen. The economy would immediately spiral into a depression. So even that reduction in spending wouldn't balance the budget, because the government revenues would collapse, and they would have even fewer tax revenues, so the deficit would still be there, the economy would collapse, and the unemployment rate would be 20 plus percent, and would just fall further behind China and be at greater risk from a national security perspective, and much more miserable As a society overall. That's why it's always say people should consider think of the words austerity and death at the same time, because austerity would bring about the collapse of our economic system and the Great Depression unless your civilization would survive it. trying to answer your question more directly, how high could this go? Well, governments don't default on their debt when push comes to shove. If the government's having a hard time paying interest on its debt, the Fed will just print more money. And in a case where between 2008 and 2014 when the Fed created three and a half trillion dollars, they printed a lot of money at that short space of time, and they got away with it without having high rates of inflation. The highest rate of inflation we had during that period was 3.8% in 2011 and by the early months of 2015 we had deflation again for a few months. Prices actually fell negative CPI for a few months in 2015 so if we have a global economy, as we do at the moment, full of we have nearly 8 billion people, I would guess 2 billion of them at least live on less than $5 a day. So the US could get away with having a lot of paper money printing without having higher, very high rates of inflation and the government could finance itself that way for quite a long time. Of course, if we have a closed domestic economy brought about by extremely high tariff barriers, then we would end up with hyperinflation in the United States. But even with hyperinflation, it would be very painful for people who have all their cash in the bank or under their mattress, but people with assets, those asset prices would appreciate more or less in line with the inflation, and it would erode the government debt relative to the size of the economy, because the GDP would grow in nominal terms very rapidly because of the hyperinflation, and the debt, which is not inflation adjusted, would be evaporated away by the inflation.

Keith Weinhold 40:43

right? that's why here at GRE we are all invested and aimed toward prudent use of leverage with assets like real estate and we sure have been the beneficiaries of that wave of inflation that followed COVID there. Richard, well, we're talking about the debt and the deficit somewhat, which, interestingly, has actually doubled since the first time you were here on the show. When you were here, 10 years ago, it was at 18 trillion, and today it's at 36 trillion. We talked about, how far can you kick the can down the road back then? Well, here we are, 10 years later, and it's doubled. Talk to us. You know, you talked previously about the greatest risk to the United States economy. Tell us now, as we are investors here on this show, about the greatest risk to the real estate and stock market, I would just say within the next year. What are some of those risks to those particular markets?

Richard Duncan 41:38

We've already discussed the main risk that high tariffs would potentially cause a new spike of inflation and force the Fed to hike interest rates rather than cutting interest rates. But there are some other risk as well. One is the fact that we already have a very high level of wealth relative to income. Let me back up a second. You were talking about debt doubling since we first spoke 10 years ago. Here's another statistic for you. Just in the last four and a half years, the total wealth of the Americans, all of their assets minus all of their liabilities. In other words, household sector net worth. Since the end of 2019 it has increased by $47 trillion in four and a half years. That's about a 40% increase. Now, $47 trillion is enough to pay off the entire US government tip, which we've been worrying about with $11 trillion left over. So not everything is as bleak as it sounds on the surface. We've had a huge explosion of wealth in the last four and a half years that's been driven by property and also by stocks. The problem now is, is that the level of income the asset prices, are very inflated relative to their historic norms. And one of the ratios that I always keep an eye on is called the wealth to income ratio. It takes the household sector net worth. In other words, the wealth that we were just discussing, which, by the way, is now $164 trillion of wealth owned by the Americans. The wealth divided by income, disposable personal income, this wealth to income ratio is now an extraordinarily high level. The ratio is 785% whereas the average of that ratio going back to 1950 has been 550% the previous two peaks were in the year 2000 when it hit 620 during the NASDAQ bubble, and then that bubble popped, and the stock market crashed, and we had a recession, and it went back to 550 and then it surged to a new peak of 680 during the property bubble. And then that bubble popped, and we almost went into a depression, and that a lot of wealth was destroyed. We had a severe recession. The government had to bail us out from and that ratio went back to 550 again. Now it is just off the charts relative to its previous peaks, because people 680 now it's 785 so people used to suggest that higher asset prices were justified because interest rates were near 0% but even after the Fed hiked interest rates from near 0% to about 5% The asset prices have stayed inflated. That does suggest that asset prices are very inflated and therefore very vulnerable to any sort of shock that could occur, whether geopolitical or economic or domestic political problems. So that's a concern. Another concern is quantitative tightening is still occurring. Quantitative tightening is the opposite of quantitative easing. When, with quantitative easing, the Fed creates money and pumps it into the financial markets, and that tends to make asset prices go up, and it also tends to make interest rates on government debt stay low, because if it pushes up bond prices, it pushes down. Bond yields. Well, now the opposite is occurring. Over the last two years, the Fed has destroyed roughly $2 trillion it created $5 trillion from the end of 2019 till about 2022 during the COVID pandemic, and the policy response to that, the Fed created $5 trillion but now it's destroyed 2 trillion of that five that it created, and is still destroying dollars at the rate of about $60 billion a month, or $700 billion a year. And as it does, as it destroys dollars, it takes dollars out of the financial system, which all other things being the same, tends to make financial conditions tighter, putting upward pressure on bond yields and downward pressure on asset prices. So as this continues, this is a concern, because reduce the liquidity in the system by another $700 billion if it continues for another year, having said that there is still an enormous amount of excess liquidity in the system as a result of all of the money that the Fed has created, going back to 2008 I estimate that the excess liquidity is somewhere around three and a half trillion dollars. If you look at bank reserves and the reverse repos at the Fed is about three and a half trillion dollars of excess liquidity, and the Fed actually has to pay interest to the banks on their bank reserves to hold interest rates up. That's how the Fed controls the federal funds rate now. It pays the banks roughly right now, 4.8% interest on all of the banks bank reserves, and so the banks will not lend money to anyone at less than 4.8% interest, because the Fed will pay them 4.8% interest. Why would they lend to anyone else for less if it suddenly stopped paying interest on these bank reserves, these banks would look around and where would they invest their three and a half trillion dollars in? No one's going to pay them 4.8% or even 3.8% or 2.8% interest rates would plunge because of all the excess liquidity that exists. So this excess liquidity has been a thing that's been driving the economy since COVID started, and it's why we've managed to avoid recession, which everyone is expected to arrive any moment now for the last two and a half years. So there are concerns, but there are also, as always, other reasons for optimism.

Keith Weinhold 47:24

Well, that wealth to income ratio that Richard talked about, that's a calculation that you yourself can do. One's net worth is almost eight times their income now, which is at a historic high, which is one concerning point that Richard brought up. Well, Richard, I want you to tell us about your terrific video newsletter, macro watch unless you have any other last thoughts first.

Richard Duncan 47:51

well, just one last word on the US sovereign wealth fund. Thank you very much for giving me a chance to discuss that and to explain why both Democrats and Republicans are now in favor of establishing a US sovereign wealth fund, one of the few issues that has bipartisan support. And this must come as a surprise to many of your listeners and most Americans, in fact, why have both parties agreed on really setting up a US sovereign wealth fund? So I'm glad I've had a chance to explain it and why it's so urgently necessary. I'd just like to emphasize the extraordinary benefits that this delivers to the American people, both individually and at a national level, individually, in terms of medical breakthroughs and better health and much more rapid economic growth for the economy, so much more wealth and much more national security as well. So I hope the Americans will get on board with this idea and give it their full support, because it's exactly what our country needs to solve all the four issues, the major issues that I laid out at the beginning of this conversation. But with that said, if your listeners would like to learn more about my work, Macrowatch. Microwatch is a video newsletter. Every couple of weeks, I upload a new video discussing something important happening in the global economy and how that's likely to affect the stock market, property, currencies and commodities. They can find macro watch on my website, which is RichardDuncanEconomics.com that's RichardDuncanEconomics.com Macro Watch has been going on now for 11 years, they'll find more than 100 hours of videos in the microwatch archives. They can begin watching immediately, and they'll receive a new video every couple of weeks. And I'd like to offer your listeners a subscription discount. If they go to Richard Duncan economics.com and hit the subscribe button, they'll be prompted to put in a discount coupon code, if they put it in G, R, E, they can subscribe to macro watch at a 50% discount. That's great. That's GRE so I hope they'll check that out, and at the very least, they can sign up there for my free blog and follow my work that way.

Keith Weinhold 49:56

And I have benefited from consuming macro watch content myself over the years, allowing me to sort of stretch my thought process and go macro, which we don't always do as real estate investors. Oh, Richard, it's been valuable as always, and you really offered a solution, a way forward here, something that's really refreshing. It's been great as always, having you back on the show.

Richard Duncan 50:18

Yeah. Thank you very much. I look forward to the next time

Keith Weinhold 50:21

me too. when it comes to the term capitalism, if that's truly a system that we're no longer in, you know, it seems to get replaced with the word meritocracy, and that is a word that I like, meritocracy, where producers get rewards for being productive, but even that is under attack, and the government just always seems to be stepping in with a safety net. Seemingly everywhere you look, it won't let banks fail. We saw them jump in early last year with Silicon Valley Bank and other bank failures, the government won't let homeowners fail either. I mean, you don't have to think back very far with mortgage loan forbearance in the COVID era, on issues of the debt and deficit. Even Fed Chair Jerome Powell himself has called it unsustainable. That's the word that he used. Like Richard said today, we won't default. We'll just print more. So when it comes to the inflation versus deflation tug of war, the future keeps looking inflationary, but at what rate of inflation? That's what I don't know, and no one really knows. If you like Richard Duncan's content, and you sort of wished he and I's conversation would go on. Well, he is a regular guest here, so I expect him back. But if you're telling yourself, I want more of his content and I want to make it visual at the same time to help really bring this to life, well, visit RichardDuncanEconomics.com hit the subscribe button and get 50% off. That's five zero, 50% off with the discount code. GRE. Happy Veterans Day. Until next week, I'm your host, Keith Weinhold, don't quit your Daydream.

Speaker 2 52:17

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 you

Keith Weinhold 52:46

The preceding program was brought to you by your home for wealth, building, getricheducation.com

526: Make America Rich Again, Coaching Call Nov 04, 2024

Keith discusses the inefficiency of compound interest in wealth building, advocating for compound leverage through real estate investments. He illustrates how a $100,000 investment in a $500,000 property at a 6% annual return can yield much higher returns due to leverage (see the math below).

He also explains how mortgage rates are influenced by long-term bond yields and discusses the benefits of real estate over stocks.

A coaching call with GRE Investment Coach Naresh highlights the process of investing in real estate, including financing considerations and the role of a coach in guiding investors.

Here’s the math on a 5:1 leveraged RE return at a 6% appreciation rate:

Year One: $500,000 x 1.06 = $530,000. Subtract $400K debt = $130,000 equity

Year Two: $530,000 x 1.06 = $561,800. Subtract $400K debt = $161,800 equity

Year Three: $561,800 x 1.06 = $595,508. Subtract $400K debt = $195,508 equity.

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 0:00

Keith, welcome to GRE I'm your host. Keith Weinhold, make America rich again in play numbers. You'll get a fresh take today on how compound interest does not build wealth and compound leverage does. Then you'll learn about how bond market moves affect mortgage rates. Finally, you get to listening to a call between one of our investment coaches and a GRE follower today on Get Rich Education.

Speaker 1 0:33

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Corey Coates 1:19

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 1:35

Welcome to GRE from Altoona, Pennsylvania to Saskatoon, Saskatchewan, and across 188 nations worldwide. I'm Keith Weinhold, and this is get rich education, the voice of real estate investing Since 2014 you're going to hear some things that you've never heard before today, and some listeners tell us that GRE is unlike any real estate information they've ever heard. And with what I want to tell you today, well, again, it's information that I've never heard anywhere else, either. So what I endeavor to regularly do for you here on this show is to tell you what I wish I had known sooner make America rich again, nope, that is not my presidential campaign platform for my run in the year 2032, or anything like that. It is this, don't get your money to work for you. In fact, if you want real wealth, don't work for money or get your money to work for you. Don't make either of those things the focus anyway, avoid growing your money through compound interest, because that's not the formula either. Now you and I have covered that ground before, if you're new here, and that material makes you say what you might have thought things like that were the holy grail of wealth building, nope, and today, for the first time on the show, in over 500 episodes, I'm gonna put some real numbers to that to show you exactly what I mean. Let me explain to you how to invest to truly win in a way that you've never seen in your life. You're not gonna improve only your life, but generationally, your entire family's life. At your job, you are like a dock worker. You're trying to pull your boat up to the dock so that you can then make a short, easy hop onto the boat and get away. And you'll learn how I did that and how I would begin investing today if I could start all over again. Now, after I had graduated college and had a job, I used to think, Well, yeah, I'll invest through a 401K in mutual funds, because it's easy and it's just deducted right from my paycheck. Well, when you do the easy thing in life, there's usually not much reward. And back then, I thought, Well, why would I invest in real estate anyway? I mean, a stock and mutual fund return on investment is about 10% over time. Real Estate is more like five or 6% plus real estate has all these maintenance hassles, and in the stock market, your 10% return enjoys compound interest. I don't really know how that works over on the real estate side, all right. Well, let's look at some numbers with how this would all work anyway. Here we go with $100,000 invested in stocks at 10% after year one, it's grown to $110,000 in year two, you don't just have 120k you've got more, because the 10% compounds on the 110 10k so now in year two, you've got $121,000 and I bet that you don't see any problem in this yet, right? Hey, things are going great. And after year three, you're up to $133,100 All right, so there we are. You begin with 100k and after three years, you've got then $33,100 in profit, your gain, on top of your 100k All right, that's what compound interest does. Well, let's take a closer look at that. $33,100 first, okay, I could attack it a slew of reasonable ways, if I wanted to, we could subtract out the constant drags on that of inflation, emotion, taxes, fees and volatility. But let's just take one volatility. We smoothed out our 10% return saying that you achieved it every year in that example there, we know that does not happen in the real world. Stocks are volatile, and the more volatile the return, the lower the return. Because instead, if you were up 20% one year and then down 20% the next year, which stocks are known to do you're not even you're down your 100k would instead go up to 120k in year one and down to 96k in year two, a loss, like I've told you before, that right there is the difference between what's called the compounded annual growth rate and the average annual return. But we'll just leave stocks number right there. We'll say that despite all five drags, volatility, of which is just one, the compound interest still somehow gave you this $33,100 gain. That number is about to look really disappointing, and this is about to get really interesting.

Let's compare that to real estate, and we'll say that despite that, it only returns, say, 6% per year here. Well, how do most people buy real estate? They do it with other people's money. OPM, remember earlier that I talked to you about how you don't create wealth from getting only your money to work for you, like you did in the stock example. Yeah, here's how you ethically use other people's money to buy real estate. When you invest 100k in a rental property. That's your 20% down. You get to borrow 80% from the bank, 400k so now you control a $500,000 property. And here's the thing, its entire value appreciates a 6% all 500k not only your 100k invested, yes, so you're now about to get the return on both your 100k and all of the bank's money. 400k that you get to leverage returns from both are about to go to you. Oh, yes, let's run these numbers, instead of compound interest, you're about to get compound leverage, using those borrowed funds to amplify your own return. So with your 100k invested on a 500k property at 6% after year one, you've got 130k after year two, $161,800 and after year three, $195,508 why? Because, again, your 6% return was accumulating on the 500k property. All right, so after year three, with this $195,508 you're gonna subtract out your 100k down payment, and your gain is $95,508 All right, that is compared to your compound interest based stock and mutual fund return of just $33,100 if you'd like to see the math for that leverage. Return that is in the show notes. Look for it there. See, by employing other people's money, it's like when you were a kid and in the evening, your body cast a shadow five times taller than you actually were. That's how leverage allows you to magnify returns and appear to be a bigger, taller investor than you actually are. Yes, your 20% down payment on real estate gave you five to one leverage amplifying your returns. If you listen to the show for a while, you understand that, but you never saw that numeric dollar per dollar comparison like we just did. So after three years, how about 33k profit on stocks and 95k on real estate? Real estate returns almost three times as much. But in reality, it's probably more than a 3x win for real estate because you're 95 Gain over three years in real estate, equity is actually going to be higher, because your tenant is also paying down your principal balance on your 400k loan every single month for 36 months in this three year example, if your property is vacant, 10% of the time they paid it down for you 33 out of 36 months, and as we know, at the same time, inflation pays down your loan even faster than the tenant does. Real Estate is also more tax advantaged than your stock gain, because you never have to pay capital gains tax on your 95k profit with a 1031 tax deferred exchange. And on the downside for real estate, upon owning the property, you will need to pay closing costs of maybe four to 5% of the purchase price. All right now, in this 95k gain for real estate versus 33k gain for stocks, I did some rounding there. Yes, even if your stock return was in a 401 K type fund, well, you would still have to either pay the tax now with a Roth or later with a traditional retirement plan. So you're still paying the tax. The higher real estate return is also more likely because real estate is less volatile than stocks, and I've got more vitally important things to tell you about how you just grew wealth about three times faster with leverage than with compound interest. And yes, this is exactly the kind of stuff I wish I knew when I had just started out. Now if you think you don't have the money for a down payment. I'll get into that. But first, a big review here, and I've woven threads of this review through previous episodes. First, don't focus on getting only your money to work for you. And second, stress compound leverage, not compound interest. Optimize using other people's money. And when you take out a loan for rental property, you get to use other people's money three ways at the same time, three different entities, you're using their money. Number one, it's for the bank's loan, like we discussed. Number two, you're using the government's money for generous tax incentives. I only touched on one of the tax incentives. And then, thirdly, you are using the tenants money to pay down your mortgage loan and pay all of your properties operating expenses, like maintenance repairs, insurance, property taxes and pay your property manager to make this all mostly passive for you. I don't manage any of my own properties. I think you already know that. And on top of that, hopefully you'll have a little residual income after expenses every month, your monthly profit of rent income minus expenses, that is called cash flow. And when I talk about doing this ethically, use an experienced property manager. Never get called a slumlord. Provide housing that's clean, safe, affordable and functional, okay, some really core, enduring, GRE mantras in there. But what if real estate goes down in value? It's not common, but I did have it happen to me around 2008 we won't even talk about what happens when stocks go down in value, but when real estate values went down in 2008 it just didn't matter that my rental property's values were temporarily suppressed because my rents were higher than my expenses, I was still making income each month off the property. That's a good way to own property, if you can. I'm not motivated to sell an asset. I mean, are you motivated to sell an asset that's paying you income every month during a time when it's capital value dip, so probably not. And by the way, there is nothing new or esoteric here. You just haven't had it explained to you in this way before. This 33k from stocks and mutual funds versus 95k from real estate you haven't seen that before. This is simply buying houses with plain vanilla 30 year fixed rate loans, and it's just simply long term buy and hold. This is not flipping, as I like to say. This is not day trading. This is decade trading, as you continue along in your real estate journey, keep stacking more properties, and it's gonna go faster than you think, because you've got this power of compound leverage, and your tenant also pays you income that you can use toward buying the next property, and then as a backup, you have that trapped equity that keeps accumulating in your property. And the reason this goes faster than you think is that you can also release that equity by removing it with a completely tax free event, a cash out refinance, all while you still hold onto the asset and you. Use the untrapped equity to put down payments on more property. Now, what if you think you don't have the money to start or get as big as you want, as fast as you want? Well, I've met a lot of people that when they understand this compound leverage concept, they withdraw their 401 K funds, pay a penalty and pay the taxes, and they put those funds toward real estate. I mean, you would owe taxes on it anyway. Now that part may or may not be ready for you, but you know, once I understood this, what I did is I stopped contributing to my 401K and I instead got into compound leverage. Yeah, this is how to make America rich again. Now, what if you think you don't have 100k to invest in property like we did in our example? Well, there are perfectly good $200,000 properties at GREmarketplace.com where you could make a $40,000 down payment. But you still might be thinking, I'll just say that the real estate market is just really competitive now, and that your small down payment maybe it can't compete with a deep pockets all cash offer, because all cash buyers can close really fast, but no your small down payment can still compete with all cash offers, because Some sellers don't want a quick sale for either tax reasons or myriad lifestyle reasons that they might have, I like to say that using debt is like using fire if it's misallocated, like with 23% credit card debt, that's what the average credit card interest rate is right now, 23% well that can burn down your financial house. But if you know how to use the debt in a controlled manner, like from income property that others paid down for you, oh, that fire is contained in a stove, and that fire or fireplace will heat your home. If I could start all over again with what I know now, it would be to embrace good debt, because tenants pay down this debt for me, so use it as leverage to build a real estate empire. Think of it this way, besides the employer match, every dollar that you lock inside a 401K is $1 that you cannot use to leverage other people's money. Back when I started investing, I should not have contributed to a conventional retirement plan beyond the employer match myself. So I used leverage to pull my boat up to the dock more than three times faster and escape the day job when I was still young enough to enjoy it. And once you know the difference, why would you want to do life any other way? You might have heard that real estate has made more people wealthy than any other investment today.

You've learned how now, sometimes it is hard to stop and turn off a mindset if the same thing has been believed for a long time. I think we've all experienced that. If you believe something for a long time, well then it's hard to change your mind on that, and you might even fight and defend that core belief. That could be the case here with me, denigrating the wealth building capability of compound interest. And if you're still wrestling with that yourself, a great compliment where I discuss this more in depth and in a different way, can be found on an episode that I did earlier this year that is on GRE Podcast, episode 507 episode 507 is called compound interest is weak. I'm here to talk to you about things that are really gonna move the meter in your financial life, like what I've covered with you so far, and what I'm gonna help you learn next. You know, there's just some information out there, even real estate information, it's just not that useful. Say, for example, mortgage purchase applications were down from last week, but yet they were up month over month. Well, that might matter to certain sub industries, but it doesn't move the meter in your life with how you're going to actionably build wealth.

Hey, before we move on, I want to give a major shout out to this show's long time, steady, capable sound engineer, Vedran. He just hit the 10 year mark of filling that important role for us here. Yet 10 years almost since the inception of this show. He's been with us since November of 2014 so since about episode five, and he's edited every single episode since then, and he recently told me that he looks forward to the next 10. Congratulations, Vedran. Also, thanks to you, the listener, the follower. Here, we held three GRE live virtual events this year, webinars. You. You are really taking action. Back in June, we broke a record with 307 registrants for that event. And then our latest event that was held about 10 days ago saw another record broken, 528 of you registering, and I say thanks, because you make me feel good. You're showing that I'm helping make a difference in your life. And now maybe you're thinking these events or this platform, it's getting too well known, and if you show up to a future event that you might not get to ask a question, no, that's not the case. Not everyone that registers shows up for the event live, and then you can ask a lot of your own questions with a personal free coaching call as well. I'll let you listen into a coaching call later on, today's show. In fact, now I've shared with you a few times before that changes to mortgage rates don't follow changes in the federal funds rate that Jerome Powell and the FOMC said. I've also told you that mortgage rates closely track long term bond yields, but let me tell you about what all that really means, and this is going to help you understand and perhaps even predict the future direction of mortgage rates. In fact, it's unusual. You know, the largest market in the world is not the real estate market, it's not the stock market, it's the bond market. And What's unusual is here we are on episode 526, and we've really never discussed the bond market. Well, you're probably aware that a month and a half ago, the Fed dropped interest rates by a half point. Their next decision is in just three days. Now I don't think they should drop rates again, though they could. That's because since the rate cut, GDP and job growth have been strong. That's why I don't think they should do it. I mean, rates usually get cut to help a wounded economy, so why lower them now? I mean, recessions usually see rate cuts. But here's what even fewer people understand when the Fed cut rates a month and a half ago by a half point, why have mortgage rates soared since then? They were about 6.1% and then the Fed made their cut, and mortgage rates recently spiked up to 6.9% well, many still feel that the long term trend for all types of interest rates is lower. But you know for one thing, rates are really hard to predict. The Fed only controls short term rates. Long term rates, like the 30 year and 15 year mortgage are tied most closely to the yield on the 10 year treasury note, and here after I'll just call that the 10 year All right, so what is this and what controls it? Well, don't let that name intimidate you. This is get rich education. So let's break down each word yield on the 10 year treasury note. Yield just means interest rate. 10 years is the period of time that this loan is made for the duration the US Treasury issues them so they receive the loan and a note is an IOU. It was also known as a bond. That is what's held by the person or the entity that loaned the money, the person that loaned this money to the Treasury. It could be you yourself, or it could be a foreign nation. So you hold on to this note because you made the loan to the Treasury. That's the breakdown of every word of the phrase the yield on the 10 year treasury note. Okay, so to say it a different way, if you hold a 10 year treasury note, that is basically your receipt, your proof that you made a 10 year long IOU to our federal government and it is going to pay you an interest rate known as a yield. All right, that is the simplest explanation I can give. Well, a month and a half ago when Jerome Powell cut short term rates, the 10 year was 3.7% at that time, and at the beginning of last week, it was up to 4.2% that's the highest since July. And again, 30 year mortgage rates most closely track the 10 year all right, as you and I sort of hold hands through this together next, let's ask what made them rise. And you know, some think this is harder to understand than trying to understand why YouTube viewers constantly fall for ludicrous housing price crash videos. Okay, but relax. This is easy. When the economy gets hot, all these things tend to rise in value, real estate, stocks and also productivity rises. Employment rises. Is an inflation that tends to rise as well. Because a 10 year investor needs a real return above the rate of inflation, this yield must rise as well. That's it. You got it. You got it. So therefore, when a rosy jobs report comes out, the 10 year tends to go up. When a strong retail sales report comes out, the 10 year yield tends to go up or a high flying CPI is released, the 10 year tends to go up. And therefore, because it rose in the past month, investors have expectations for a strong economy and more persistent inflation. So conversely, expect both the yield on the 10 year treasury note and the 30 year mortgage rate to fall when the economic outlook gets more dim. It's important to understand that, like a lot of things in the stock market, yields on the 10 year they tend to be more of a reflection of future economic expectations than the current economy. And this should be pretty easy for you to remember, because when you think about it, that makes sense. Since you've lent out your money to the federal government for 10 years. I mean, you're really interested in what that 10 year future is going to look like. So yes, though this is somewhat less exciting than watching a motorcycle jump over the Grand Canyon now that you listen closely for the last few minutes. Congratulations. Now you know that the 10 year can tell you both what investors expect to happen in the future, and can tell you the direction of 30 year mortgage rates. And, yeah, I mean, this is just more the type of material that I wish someone had explained to me sooner, in a way, just like that. And you know, are you interested in doing things that at the end, they make you say, You know what, I just got 1% better this week. I mean, think about the kind of person you'll be if you make yourself just 1% better each week. Now you better understand how leverage beats compound interest and what makes mortgage rates move. Go out and vote tomorrow as far as next, listen into one of our GRE investment coaching calls. I'm Keith Weinhold. You're listening to get rich education.

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Zack Lemaster 29:08

this is rent to retirement. Zach Lemaster, listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 29:22

Welcome. Back to get rich Education. I'm your host. Keith Weinhold, there will only ever be one GRE podcast episode five under 26 and you're listening to it. Let's let you listen into a coaching call between GRE investment coach Naresh and GRE follower, Brenda, and then I'll be back to wrap it up at the end.

Naresh Vissa 29:41

hey, Brenda, good to Good to see you after emailing back and forth. Thanks for setting up this call.

Brenda 29:47

Yeah, thanks, Naresh, thanks for setting up time to talk to me.

Naresh Vissa 29:49

Yeah. Well, tell me what made you schedule this call, like, Why did you hit that button saying I want to talk to the real estate investment coach?

Brenda 29:59

Yeah, well, I've seen some of the newsletters that come from GRE I'm familiar with some of the podcasts, but then I had gotten into the newsletters, and then I saw that there was an option for a free consultation to talk to you. And I thought, Well, I'm not sure what this really means, or what we talk about, or how you can help me, as far as, like, the vision, or how do I set my goals? Or what is it exactly that I would do with you with GRE, like, what kind of consultation Do you provide?

Naresh Vissa 30:29

Yeah, well, so that's you came to the right place. So let me tell you a little bit about GRE, a little bit about me, who we are, how we operate. So get rich. Education is an education company. As you know, you listen to the podcast, you read the newsletter. It's free. The podcast is free. The newsletter is free. You can go to our website, read our blog, go through past podcasts. You can subscribe to our YouTube channel, subscribe to our social media, Tiktok, Instagram, Facebook, X, you name it. That's all free content available for you, and this service, the real estate investment coaching, is completely free of charge. I know that sounds kind of crazy, but you'll never pay as a dime. I'm here to help you throughout and along your real estate investment journey. Think of me as a super connector, someone who can introduce you to all the right people, whether it's specific markets you want to invest in. Providers. There, wholesalers, flippers, lenders, appraisers, although your lender will take care of the appraiser part, if you need a second lender, financing, CPAs, attorneys, anything at all, just come to me and I can introduce you to the right people, or at least point you in the right direction. I'll try my best to do it 100% of the time. I don't, or I should say, I don't, have answers 100% of the time, but I do have answers most of the time, and I can forward you and refer you, point you in the right direction. So think of me as a super connector. Think of me as your silent partner in deals, because I get any equity in the deals who you don't have to pay anything to think of me as an advisor, a consultant. Again, this is a completely free service. There's you're not going to get like, a bill in the mail saying, Hey, you talked to Naresh five times, so you owe us $1,000 for that. Now, there's none of that. So the most common question I get after telling people this or, like, well, then, I mean, you can't be doing this for free. Like, why are you doing great? Like, like, yeah, what's the catch here? And they also have, I mean, I'm sure you're wondering, how do you make money? Well, if you listen to the podcast, if you go to our website, you'll see advertisements, sponsorships. We are paid marketing fees, advertising fees from partners. So you listen to the podcast, I'm sure you hear many of those commercials. We make our money on the back end, so we can keep services like this and our newsletter and our podcast free on the front note, like I said, GRE is not is an education company. We are not a broker or a wholesaler or a flipper or a builder or an agency or a realtor service or any of that a brokerage, where we're not of that, we're purely education, education based through our educational content or free educational coaching, which I offer too. So that's what you are. Got it .we work with all those other companies. So we can refer you to all those other types of companies that can help you on your real estate investment journey. But we are not any of those. Now me, personally, I am an investor myself. I own eight properties in southeastern United States. I got started in 2017 I bought my first property in a single family home. That was rehab. Back then, rehabs are very hot. That was what you should get in, that what made sense to get into. And I scaled pretty quickly. I went from one to eight in a matter of it's been seven years since I bought that first property, but I actually went from one to eight in a matter of more, like two and a half years, I just kind of went so I bought, like I said, southeastern United States, bought my last property in 2020 I'm saving up for my next property because I personally now only, like new construction, I rehabs have their place, certainly For certain investors. And at the time, I got six rehabs, rehab properties from 2017 to 2019 so I personally, though, am now saving up because new construction is more expensive than than rehab. So I'm saving up for my next real estate property, which is most likely going to be a new construction. So that's a little bit about my investing background. I've been a real estate coach Since 2019 came in 2021 to GRE and have run the coaching side ever since. So that's a little bit about me on the real estate side, on the coaching side. Now, my background is not in real. Real Estate. I like, I said, I got in 2017 before that, and I still do work in tech. So I worked in tech from 2000 really, from 2005 and still do work in tech. So it was through my tech work that I got involved in real estate, because I would do back end tech work for real estate companies. And doing that work, I was like, Oh, I started learning about real estate, and then I said, huh, if this doesn't seem hard or difficult. And I also got an investment coach who helped me, like I said, with that competitor, they also had investment coaches or investment counselors. So I had a coach who helped me a little bit, but that's what the coaches are for there to help investors like me, especially newbie investors, or even veteran investors. They're there to help investors with the networking part, with the who are offering the best deals, special deals, special interest rates, who's honest, who's dishonest? That's what I'm here to do. So that's a little bit about GRE About me, about my background, how our coaching program works. So now, Brenda, it's all about you. I want to hear I'm sure you have tons of questions based on what I just said, but before you ask those questions, I'm just going to start out with, how much cash do you have ready to invest? Because really, I could be of most service if you're looking to invest, otherwise, I can't really be of much service. So how much cash do you have ready to go to invest? And then I'll answer, I'll say something about that, and then I'll let you ask whatever questions you want.

Brenda 36:35

Sounds good. Just a cash ready for deployment is 100,000 but I'm assuming that doesn't all have to go to one property, right? Or depending on the property?

Naresh Vissa 36:46

Yeah, so, so is that lick? So what I should have clarified my question as how much liquid cash do you have on not like a 401, K, or properties that you have to cash out refinance, or it's just if you today, if you were to take a property and and you had cash ready to do so be $100,000 Yeah, correct. Okay, so, so a few things that's very good, because with 100,000 that gives you optionality. You can either go for a rehab property, and we have rehab property right now. Our hottest provider is in Memphis, Tennessee, and you can get a rehab property. Worst case scenario, let's just say the property, the average property, is about $100,000 and so you just put down a 25% down payment. So let's just give or take, let's say $30,000 I tell our investors. I say, Look, if you want to buy your first property, or Yeah, your first rehab property, you need at least $50,000 cash, liquid in the bank, ready to go. That's just because you want that cushion. You don't want to put all your eggs in one basket. So I say, if you want a rehab property, you need 50,000 if you want a new construction, single family 100,000 because the new constructions are going to cost you at least $240,000 at least. So if you take 25% of that, plus closing costs and cushion and everything, just if you want to be a good investor, you have to be disciplined. And you have to be disciplined enough to be able to save the 50,000 or the $100,000 if you want to make it as a real estate investor. So 50,000 for a rehab property, 100,000 for a new construction. If you want a duplex, you need, I say, a new construction duplex, which is probably our hottest new construction asset class right now in Florida, 150,000 for a new construction. Down payment or not. Down Payment task, ready to go for a new construction duplex, because those are selling for about 490,000 give or pay. So it's 50,000 for rehab that you should have in the bank. 100,001 in the bank for a new construction, single family. 150,000 for a duplex. Anything beyond that, then we can talk. You know, later you wanted a squad or something else, but that's generally what I say. And I tell, I tell investors. I say, Look, if you only have $30,000 in the thing, let's connect after you get up, because I don't want you putting all that 30,000 into a rehabbed property, whereas, who knows, maybe the economy might go into a recession and it stays vacant for six months. I don't want you to have to go through that. So let's stick to those numbers. So you said you have 100,000 so you have options. You can you can get either a rehab property or you can get a new construction. So it's completely up to you. It's about your new construction. Single family, it's completely up to you. I personally, I, like I said, I started out with the rehabs, and then I've kind of graduated up to new construction. God, they the lowest risk you can take with 100,000 is by starting with a. Be just a low price rehab where you put in $30,000 and full, you know, down payment burden, costs, everything else you put that, you know, 30 grand, if it first property, you put that 25 to 30 grand in, and you treat that as a learning experience. And you go through the experience, and if everything goes smoothly, then you can buy the second property, and you can decide whether, hey, do I want to continue with this rehab, or I'd still have enough capital for the new construction single payer. But I would start small. If you're new, if you're an advanced veteran investor who has six figure, well into the six figures in the bank, ready to go. I tell those people. I say, hey, let's just go for new construction. Let's go for the new construction. Single family. Let's go for the duplexes. Some of them have 700 $800,000 in some cases, a million dollars plus. I say, hey, let's let's just go for the quad to the construction four Plex. The incentives are great, etc, etc. So in your case, 100,000 you certainly have choices. And what I'll do after this call is, well, first I want to hear, based on what I said, What are your thoughts on anything, whether it's renew, construction versus rehab, and then what I brought up earlier about coaching?

Brenda 41:12

Yeah, I actually thank you, Naresh, I really like what you said about starting small. I have purchased two single family homes in the past, their rentals, but I never went through a coach. I just kind of did it on my own, and luckily, things worked out. But certainly having a coach and starting out small, just to kind of go through the process, it's really helpful. Here's the situation that I think is just a little bit different, and I know that this would probably be something that I talked to like a lender about. But in your experience, I actually just came from an 18 year career. Actually, I was in tech myself, but I'm now transitioned from a corporate w2 into more, but 1099, what's classified as like a independent company, you know, type of income, what has been your experience with other clients that transitioned from that type? Is it easier? Is it harder to obtain loans? Is there going to be different requirements? 25% does that still stand?

Naresh Vissa 42:13

Yeah. So I could give you a full, you know, lecture on this, or something called the housing expense ratio and something called the total obligation ratio. I'm not going to get into those details, because the lenders, I can refer you to lenders, and they can explain all that, and those ratios mean a lot to getting you pre qualified. But what I will say is, unfortunately, if you are 1099, you are at a disadvantage, because it's not steady, consistent income, unless you can show two years of steady, consistent income. I mean, really is the last for your last two years of tax return. So if it's a new 1099, gig, yep, you're gonna have to wait until you have two years of consistent high income. If you've been doing it for a while, then send your last two years. And if it's, you know, if it's looking good, then, then you'll get approved. The other option, and this is, this is not a personal question or anything, but it married couples can go together on one loan. So if this actually helped me out a lot, because my wife is a high income earner, and I have my own business, and my business does pretty well, but if you're 1099 as as you know, there are all sorts of things you can do with your tax return that are completely legal and to where you pay yourself as little as possible, so that you can cut your income tax. So in any case, that's like 1099 workers are a disadvantage for mortgage because all they care about is your pay stub, your you know, how much income did you have? So there were times when I put my wife on the mortgage and she's got a high income, and so you can put a spouse on there, and you can both do it together. Now you're allowed 10 loans per person, so if you want a spouse go on a mortgage that counts, even if it's for one mortgage, one property, that counts as one for each of you. So for two working husband and wife. For a couple where both spouses are working with good income, I say look, you'll want one spouse to do 10 properties and another spouse to do a completely different 10 mortgages. That way you can do 20 combined. Now, if you do it together, then you'll only be able to buy 10 combined because you're older than so 1099, workers. We get that question a lot, and it actually it is a problem, because the standards changed after 2008 so either wait the two years and have your consistent records to show high income, or if you already have it right now, then you can get approved.

Brenda 44:54

Got it. Got it. This would be for just conventional loans. What about other loan products? Like, I think I've heard of the DSCR loan where maybe just the rental property would cover, you know, part of the I'm not sure, like, I guess you're guaranteeing that the property will make enough money to cover the payment of the loan.

Naresh Vissa 45:12

Yeah, DSCR and loans are hard to get approved. Really, what I should do is introduce you to some of our lending partners. If you're interested. DSCR is meant more so for people who have utilized you want to use those 10 loans first, so because if you go you're going to have a higher interest rate if you go with the deal. So those DSCR loans, or Portfolio loans, are meant for people who have used their 10. Their spouse has used their 10. They've got capital low rolling in their ultra high net worth. So they're fine, okay, just get me another loan. I need the tax benefit. I need the tax break. I'm fine paying a 10% interest. So they'll go for a portfolio loan or a vsdr loan. In your case, first property, your first investment property, first turnkey we want to go for a loan.

Brenda 45:58

Got it makes sense. And then another question, so this was about the financing. But another question that I meant to ask earlier is, I know you mentioned, like, you know, I am not like a realtor or anything like that, but how does it work? Like, I'm think about when I'm purchasing a home, personally, I kind of say, hey, I want to three bedrooms, four bedrooms, this many baths. Like, how does that work with you? Like, do I give you criteria of what I'm looking for, or, you know, based on my goals? Do you kind of craft a plan? How does that work?

Naresh Vissa 46:29

Yeah, so I actually sent you an email just right before this call it. I think you got the email, and it includes a link to about 20% of our inventory. It's not all of our inventory. That inventory is just there. To get you started to see the types of properties that we have available. We have some constructions and the markets that we cover, again, it's only about 20% of the inventory. If you go to our GRE marketplace, you can see all of the markets that we cover. Your biggest source will be, I send out emails. So your biggest source will be, if I email you, I'll email you like a property. It'll be, Hey, I just came across this deal. It's like, it's my VIP email list. So you'll get my, you know, VIP emails, and that's going to be your, your best source. You also get Keith white holds newsletter, which promotes properties from time to time and and we only promote the best. We there are hundreds of properties we can promote. We only distill it down to the best of the best. So don't think, oh, like, there might be another property that narration knows about. Now we promote through our social media, through my email list, through Keith's newsletter, through the podcast, through the webinars, the best of the best. So that's the best way to to find out,

Brenda 47:49

got it your inventory or what you currently right,

Naresh Vissa 47:52

and with your permission, I can add you to my VIP email list. If it's okay, yeah, that would be cool. I'll go ahead and add you, and you'll start getting those emails in real time. I only send out an email maybe once every three weeks, so I really only want to send the best of the best. I want to waste people's time.

Brenda 48:07

Great. So what if you do send me an email and I'm like, Yeah, I love it. I think this is fits exactly what I'm looking for. Do I email you back? Do I contact you? Like, how do we stay in contact?

Naresh Vissa 48:18

So email is the best form of communication, because in real estate and business in general, we want documentation of everything. We don't want any miscommunications. So if you see something you like, email me. I'm available. You have my phone number. You can text me, you can call me, you can email me. I'm very accessible, but email is preferred, because that way it's in writing, and I'll know exactly what you want, the address, everything. So let's say you see a property that you like from an email that you get from Keith or from me, and you email me to say, hey, I'm interested. What are next steps? I will get you in touch with the actual like I said, we're just an education company. I'll get you in touch with the actual builder or the broker or the agent on the property, and they'll be able to answer way more questions than I can answer way more and that that's for anything. If your question is about financing, I can get you in touch with several good, low rate lenders, and they can answer all your questions about financing. Your question is CPA Tax stuff. I can get we have, uh, several good contacts who can help you out there as well.

Brenda 49:20

Got it, got it. So then what, what does our communication look like from there? Like, do if I say yes, I want it, then you get me in contact with them, and then I kind of work with whoever it is that has this property. And then hopefully we just close on the property. And that's it, right? Am I understanding that correctly?

Naresh Vissa 49:40

Sure? So, so all correctly? Yeah, I'll refer you over to them, and they will, they will take care of you. Should copy me on all emails that way. Okay, what's going on? Copy, you remember, I'm your coach. I'm here to help you, like it's free, so copy to an email so I know what's going on. If there's a problem, I can jump in. In many cases, I hold a leverage over a lot of these. People, if a problem happens, I can step in and say, Hey, treat her better. Or, you know, you should waive this cost, or whatnot. So copy, because the people who get into trouble are the people who didn't copy me on the emails. And many, many time, time just goes by, and then they come with their problem as they Hey, if you came to me a year ago, I could have actually helped you with this. Now, the statutes expired, and it's, it's a complete mess. So always, even after you're done posing on the property and you have a tenant in there and just copy me on me.

Brenda 50:30

Got it. Okay, So kind of bring you along the journey. Okay, so let's say I'm at the end, like, do these providers help me? I'm assuming in some of these cases, you've mentioned places that are far from where I live. So do they help provide additional resources, like, who's going to manage my property, or who's going to find me a tenant? Like, could they help me with that?

Naresh Vissa 50:51

Absolutely. So the entire point of GRE of this investment coaching program, the entire point is so that you can become what's called a laptop landlord. You can literally live free and have just take a step back and have your properties run on their own. So the idea is not for you to invest down the street and become a property manager and a landlord down the street. It's you can be anywhere in the world. Buy properties anywhere. Like I said, I live in Florida, but by Prop, I've never visited any of my properties. I've never met a tenant. So that's what you want to do, and that's what we help people do. If you want to buy a property across the street and become you can do that yourself. Go through all the loops yourself. We are here to help you invest in Ohio, in Tennessee, in Florida and Texas and all these places that you may not have even visited every other life, but you can still have a very fruitful investment journey. So we set all that up for you, the property management, every all that it's going to be taken care of, so that your hands off. That's why it's called turnkey real estateReal real estate investing.

Brenda 51:56

Got it. Okay, sounds good. And typically, how long does this process take? I mean, I'm sure it's different for everybody, but what can I expect, like from beginning, from when I talk to you, to when hopefully I have a property that I'm signing off on?

Naresh Vissa 52:12

In some cases, it's literally taken two days. In other cases, it's taken there's not even an answer, because people did end up buying Okay, yeah, so, so, yeah, in in the case of, like, our Memphis burr properties, which are rehab properties in Memphis, I recommend that you watch our burr webinar. I can send that to you after this call, if you'd like. But I had people who watched the webinar talk to me. I introduced them that same day to the provider in Memphis. They talk to their provider in Memphis, and then the next day, they pick the property, and the day after that, they sign a contract. Oh, okay, so it's all about the investor. If you're a serious investor, it can be very quick, like me, I was very serious. That's why I scaled. I bought eight and two and a half years, eight properties in two and a half years. Other people, if you want to take your time, it could, you could literally take your time and never buy any and a lot of people are doing that, because in 2019 they said, Oh, you know what, I'm gonna wait. There's gonna be a crash and this and that. And so they waited, they waited, and prices skyrocketed, and now they said, You know what, I'm I'm priced out of the market, so I'm just not gonna invest in real estate anymore.

Brenda 53:16

Yeah, it's that analysis paralysis. I've experienced that. Yeah, yeah, got it. Okay, cool.

Naresh Vissa 53:23

All right. So any other questions?

Brenda 53:25

No, this is really helpful. It's kind of good to know, like, kind of where you step in and kind of where you hand off, and again, the timeline is different for everybody, but it's kind of good to know that I could literally be standing here two days later and have a property if I want. So good.

Naresh Vissa 53:42

Yeah. So as we end this call, next step, so I told you about new construction versus rehab. Are you? Are you interested in both, or leaning towards one or the other? Right now? Just

Brenda 53:54

probably the rehabs, because I think, like what you said, I like the idea of the E step into like, let me see how this process goes first before kind of committing a bigger chunk of capital to something larger. Yeah, I agree.

Naresh Vissa 54:06

Okay, so here's what I'm going to do as next steps. I'm going to send you a link to the webinar we did for our hottest rehab asset class right now, hottest rehab provider out of Memphis. It's the Memphis Burkey webinar. I went ahead and just emailed that to you. So watch that webinar. It will answer like every question imaginable regarding the provider, how they do their process, the properties, everything. So watch that webinar and then shoot me an email after you're done with the webinar on what you're thinking just you can watch webinar today and you want to shoot me an email right after, just let me know what you're thinking, and we can go from there. I think that's would be the next step. Just watch that webinar, and then we'll, we'll reconnect.

Brenda 54:54

Sounds good? Okay, I like that.

Naresh Vissa 54:57

Okay, very good. Well, I sent that link to you, and. And that's about it. If you have no more questions like I said, you can add my phone number to your phone book and feel free to reach out whatever you want.

Brenda 55:07

will do. Thank you so much.

Naresh Vissa 55:09

All right, thank you. It was great.

Keith Weinhold 55:11

Yeah, I hope that you found that helpful in making America rich again. Namely, you. Of course, no two coaching calls are the same. Some GRE followers will perhaps have more questions than Brenda did. There. We are here to learn your situation. We know the mistakes you've got to avoid, and we can connect you with the best income property for you across the nation. We really filter it down to the best of the best, and besides being a truly free coaching call, we don't try to upsell you to a paid course or anything like that, because we don't even have any product to sell really. So even if you wanted to buy something from GRE, I don't know if you could, maybe unless you buy a GRE logo t shirt from our website or something like that. So keep all of your funds for the property down payment. As far as now, you can book a coaching call at GREmarketplace.com and select the free investment coaching area. Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

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Keith Weinhold 56:41

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525: Immigration Surge Tightens Housing Demand, How to Avoid Paying State Income Tax Oct 28, 2024

Keith highlights the unprecedented surge in immigration and its impact on housing demand. The conversation also covers state income tax policies, noting that nine states have no income tax, and the impact of international tax laws on US citizens abroad.

Immigrants now make up more than 14% of the US population, the highest proportion since 1910.

The US is facing a significant housing shortage, with an estimated 4.5 million housing units needed.

Housing shortages are expected to continue, with homelessness rates rising by 12% year over year.

Learn about the challenges of being a US citizen living abroad and the potential for double taxation.

Resources:

Connect with Tom's team at WealthAbility for a free consultation on permanently reducing taxes.

Show Notes:

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Complete episode transcript:

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Keith Weinhold 0:01

welcome to GRE I'm your host. Keith Weinhold, both an immigrant surge and a big wave of US born residents is tightening housing demand near unprecedented levels. Then we're joined by show regular Tom terrific again, but it's not Tom Brady on how to legally avoid paying state income tax and the fact that if you're from the US, if you move out, you must still pay tax on your worldwide income, plus more tax strategies that you can benefit from today on Get Rich Education.

Speaker 1 0:34

since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show, guess who? Top Selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit getricheducation.com

Corey Coates 1:20

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 1:36

Welcome to GRE from Athens Georgia to Athens, Greece and across 488 nations worldwide. I'm your host. Keith Weinhold, get rich education. Founder, Forbes real estate council member, best selling. Author, long time real estate investor and holder of a humble bachelor's degree in geography from a college in Pennsylvania that nobody's ever heard of. It's that time of year where you now have Halloween decorations in your front yard competing hard for space with political campaign signs. What's your HOA gonna do now? Welcome in this slack shot operation right here is the get rich education podcast. I think you know that by now it's episode 525

Brace yourself, immigration has absolutely exploded. I've got the latest numbers on that, and there's a chart recently published in The Wall Street Journal that shows it all legal and illegal. We're a real estate platform, so the question I'm asking is, Where in the heck are we going to house all of these people? In addition to soaring immigration, we'll look at our own domestic US born surging population that are forming households now, and that part might have flown under your radar. This is an urgent issue. All of this isn't just coming. It is already here, this explosion of housing demand, it will indelibly shape both broader society and real estate's supply demand component for decades, it is really approaching the unprecedented we look at net immigration to the US since 2000 it's really these past four years where the numbers have shot up like a rocket through 2020 immigration averaged around 1.2 million people per year, but since 2021 it has more than doubled to around two and a half million net immigrants per year. But the number of illegals arriving among them has gone up as much as 10x starting in 2021 and the overall figures they keep rising. Last year, there were over 3 million immigrants, about three times the total number that we averaged in the first 20 years of this century. So a 3x total net inflow, legal and illegal. And these figures in the Wall Street Journal chart, they are sourced by the CBO. Now you might think that the immigrants that did not enter legally could eventually get deported, but some of them that are already living and working here, gained something called Temporary Protected Status that keeps them here. Well, our central question remains, Where in the heck are we going to house all of these immigrants in a nation of almost three 40 million people? Do you have any idea what our foreign born population is up to now, okay, so not the descendants of those people, just the foreign born population here now, out of the 340 million total US population, any guess? Venture a guess. Last year, the US foreign born population reached 47.8 million. And that figure 47 point 8 million, that is five times more than in 19 75x Do you even realize that's almost double the population of the entire continent of Australia, now crammed into the states. That's how many immigrants, 47.8 million is. It's also the same as the population of all of Spain. That's another way of saying it all in the US today. And by the way, that is my geography degree at work, right there. Hey, the geography muscle is one that I just don't get to flex enough. Immigrants now make up more than 14% of the population. That is one in seven Americans. And that proportion, right there is the most since 1910, per Pew Research. Well, where are the immigrants from? Alright? Before I get into that, if we go back about 60 years, immigrant growth accelerated after Congress made changes to US immigration laws in 1965 that was a key year before 1965 the law favored immigrants from Northern and Western Europe, and it mostly barred immigration from Asia, all right, Well, so here in modern times, where are immigrants from? Mexico is the top country in 2022, 10.6, million immigrants living in the US were born there. That is almost a quarter of all immigrants. And then the next largest origin groups in order are those from India, China, the Philippines, and then El Salvador. All right, so there are a lot of new immigrants here, like a demographic shock wave that's going to drive the demand for housing. But there's way more to this housing crunch story. Combine this nascent immigration influx along with America's own high birth rate years. And this is something that you might not be aware of, though, what I just talked about that might have been somewhat informative to you. You probably had some idea that immigration is higher now, because it's been in the news cycle for a few years here, but something that you probably don't know. And yes, fertility rates are down today, but there was a boom of US born residents from the years 1990 to 2010 and then you might say, well, so what 1990 to 2010 that was in the past? But no, actually, it is just the beginning, because when it comes to housing, it has less to do with the birth year. Currently, what you have to do is add perhaps 25 or 35 years to that birth year, because that's the age of when that person tends to start their own household. And the average age of today's first time homebuyer is 35 to 36 years old. Well, the US is peak birth year occurred in 2007 then adds 35 or so to it. And that means that, on average, they will buy their first home in the early 2040s and a lot of them were going to start renting in the 2020s and 2030s So suffice to say, a lot more Americans will need homes. Well, what else will those high birth years from 1990 to 2010 mean now and into the future? Realize that over 13,000 Americans are turning 35 every single day, both now and years in to the future, record highs. Yes, every single day, just another demographic figure that's on the rise, and there are deaths to account for as well. But the population aging into home ownership is projected to exceed the population aging out like with deaths for a long time, this will pump housing demand. The US has about 144 million housing units today, and we are going to need more housing of all types. Well, between all the fresh immigration I discussed and this US born surge, you've indubitably got the recipe for a ridiculous amount of demographic driven housing demand. And you know, maybe over the past few years, at times, you or some of your friends or family, they've wondered why housing prices have risen fast, why rents have risen fast, and why? Even a tripling of mortgage rates couldn't stop it. It could only slow it down. It's because of this demand that is just coming, and it's going to keep on coming from both the US born demographic surge and an immigrant surge. And here's the thing, as we know this is all amidst a still lackluster US housing supply today, so greater demand, yet still a meager supply. Zillow estimates that we're still four and a half million housing units short, and the housing deficit is growing, although other outlets have estimates that, you know, they really are all over the place. These estimates as to how great the shortage is, 3 million is probably closer to a good amalgamation of how severe the housing shortage is, all right. Well, how do we reduce the housing deficit? We need to start more construction, but it had its recent peak in 2022 and it's fallen since then, in single family homes, because builders faced higher interest rates then and new apartment building starts, they have fallen too. And two years ago we had a lot of apartment building starts, actually. And as you drive through major cities today, you might still see cranes in the air. You still see a lot of active apartment building construction, actually, but more of those projects began two years ago. They began to freeze as interest rates rose, and now they've just got to complete what they've already begun. It can be two years from an apartment construction start to a completion. So as some of these complete, there will be some absorption time there on apartments. But the starts are way down on apartments. This year, we should have at least double the number of apartment starts being started than what we have now. So this sets us up for more future shortages, regulation and zoning. We know that that slows down building for most any housing type, single family, homes, apartments, condos, whatever it is. And nimbyism is a condition that's especially pervasive in the construction of new apartment buildings. Neighbors don't perceive new single family homes as a threat in their neighborhood like they do apartments, whether that's warranted or not. That's how people feel. That's the sentiment. That's the type of neighbor that shows up at a public meeting and speaks out against new apartment buildings. So to summarize what you've learned so far, it's really the confluence of four housing factors coming together here, two of them for higher demand and two for lower supply. The two for higher demand are more immigrants and a surge of US born people from 1990 to 2010 that are just starting to get old enough to need their own place. That's the higher demand side. And then the two factors on the paltry supply side are both a lack of current supply and not enough building for the future. Either it is an increasingly dire situation, and it can even be in your face. Actually. How is it in your face? Well, it's one reason that you see more homeless people on the street in your nearest city, although you might see more US born homeless than you do immigrant homeless. HUD tells us that the homelessness rate has jumped 12% year over year. That's the fastest homelessness increase rate they've ever reported. I talked to you about that before, and I'm waiting for HUD to release their new number in December. They released that annually. You know, amidst this demand, supply imbalance, in fact, anymore, let's look at it this way. Let's flip the script. Consider what could possibly stop insatiable US housing demand from exceeding supply for decades. And when you do, when you think about what could stop that, it starts to get absurd a sudden, new construction technology that pumps out homes like a popcorn machine, climate change that roasts us into human popcorn, not the good kind, and AI or VR, so advanced that We're all going to live inside some sort of force field. How about an even worse pandemic, or even a world war that would have to kill at least 10s of millions of people, or something like that, or aliens or asteroids destroying Earth? Or how about a depression level economic contraction. But see all these scenarios that would derail the housing demand trend. They range from the pretty unlikely to the downright ludicrous. Starts to sound like a Sci-fi flick, and amidst a lot of those afflictions, your life's biggest concern wouldn't be your real estate investment portfolio. It would be primordial human survival. Now, before I summarize your big takeaway here, let me tell you immigration, it has near term downsides, like a lack of housing and a demand for public assistance. And yes, I know a huge pack of new immigrants can appear sort of like a Walmart at first glance, huge, chaotic and full of people that seem like they've given up on life.

But that is certainly not always the case. A lot of immigrants are ambitious long term new young people drive an economy. Immigrants have long been a backbone of innovation. A lot of our tech giants were started by immigrants or their children, and also a lot of immigrants find those construction jobs that can help us build our way out of the housing shortage crisis, but that is going to take a long time. The bottom line here is that if you're looking for your own home, waiting probably won't help. As an investor, own more properties now, own lots of rental housing, you're going to have something that everybody needs. Housing demand is expected to exceed supply well into the future. Both this US born surge of people and the immigrants, what they do is they tend to be renters for years before they become buyers, if they ever become buyers, from here today, it's a realistic scenario to expect then soaring real estate prices, higher rents and lofty occupancy rates for years.

Well, Tom terrific is back in the house, and we are talking taxes. Brady's in the gun bulletin to his left. He's got the hoo man on the right wing with Dobson to the right Collie and Tomkins left. Brady throws it to the end zone for kenbrell Tompkins. Leaping. Kenbrell Tompkins, Brady's back.

That's your quarterback. Show ponies, where's the beat? All right, that's enough. Scott zolak, Bob Sochi on the call there 95 the sports hub in Boston. No Tom. Brady is not the Tom terrific that we often have here. Brady simply doesn't know enough about taxes. We've got the tax expert with us, the extraordinary Tom. We're right. What about that spirited play call at the end there? Did he say unicorns show ponies? Where's the beef? I don't really get all that. So getting back to real estate and taxes here, look, here's the thing, when you see what your government spends money on, and you're disgusted by some of these spending programs, doesn't that give you a supreme motivation to want to reduce your taxes? Well, we're going to talk about state income taxes where they're high where they're low. There are currently nine income tax free states. Are more states looking to drop their income tax to zero and join them? Or is it going the other direction, where they're looking to raise them if you live in one state and invest in another. We'll get into how that looks too. Canadian listeners, sorry, we don't plan to have provincial income tax discussion today. Now, I seem to have become here no more for my real estate investing voice than anything else. Last month, I was in Pennsylvania for a while, and I ran into one of my high school teachers. He was the art teacher, but he also taught a class called journalism in publications. That was an elective class, and I took that class as a high school student. I think I was a senior then, well, our job was to lay out the yearbook, writing, positioning and centering this text here in that image over there. Well, I told my old journalism and publications teacher that he's been a substantial influence on me because, as you know, I write our Don't quit your Daydream letter to you about every week. And I just love doing that, I've always thought of myself as more of a writer than a talker, and I myself really enjoy writing and laying out the body and images of our newsletter and sending it to you about weekly on crucial information that you must know About, real estate investing, economics and wealth mindset. It's got a dash of humor, and every single letter can be read in less than five minutes, often less than three minutes. I would love to have you as one of our 1000s of weekly readers, and it is free. You can get it simply by texting GRE to 6866. come along and join us for real estate investing information and fun. Just take a moment and do it right now while it's on your mind. Text, GRE to 6686 lots more. Straight ahead. I'm Keith Weinhold. You're listening to get Rich education.

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Chris Martenson 21:42

this is peak prosperity's Chris Martinson. Listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 21:58

This week's guest is, to me, the world's foremost tax pro. He is an international authority on how you can permanently reduce your taxes, and he really makes taxes easy, fun and understandable, like no one else that I've ever met does. He runs a terrific educational platform too. It's called wealth ability. Welcome back to get rich education. Tom, we're right.

Tom Wheelwright 22:21

Thanks, Keith, always good to be here.

Keith Weinhold 22:23

Yeah, it's so good to have you back, because taxes are such a dynamic topic. And one place where I wonder if it's going to be dynamic, Tom, is we have a number of states that don't have any state income tax, which is something that people have to pay on top of their federal income tax. Federal alone can be up to 37% some of the states with the fastest population growth, like Tennessee, Florida and Texas, don't have any state income tax. So what I'm wondering, Tom is, are more states considering abolishing the income tax like those states have done.

Tom Wheelwright 22:59

We've actually seen a lot of states in the last couple of years reduced their income tax rates. So Arizona, where I live, is one of them. We went from over a potential tax rate of like eight and a half percent potential to an actual tax rate of 5% there was actually a proposal passed that would have increased it down to a tax rate of two and a half percent. Our former governor, Doug Ducey, his goal was to abolish the income tax in Arizona, and we did get down to two and a half percent. There are a number of states, typically in the middle of the country. You don't see any states on the coasts doing this, outside of Florida, that are reducing their tax rates. So you do see states doing that. You see other states that are increasing their tax rates. Recently, I was reading about Bill Belichick, and he said, Massachusetts is always hard getting the top earners, the top free agents, into New England. Because he says, This is taxachusetts, because they have a surtax on millionaires. Well, of course, all football players are millionaires. That is an issue. People are leaving states like California, Massachusetts, New York, New Jersey, and they're moving to low tax states such as Arizona, Texas, Florida and, you know, the whole southern belt.

Keith Weinhold 24:15

with Belichick having Tom Brady. It didn't matter if he couldn't bring in the best players, because Tom Brady made stars out of nobodies. It seems like he could complete a pass to any no name wide receiver or tight end for two decades there in New England. But can you tell us more about maybe interesting dynamics with state income tax? For example, I know that California has punitively high state income taxes, and then you have other states that have tax rate tables and some that have flat taxes, like, I think Pennsylvania has about a 3% flat income tax. Colorados is 4.4 so can you tell us more?

Tom Wheelwright 24:51

Yeah, there are, you know, the federal income tax has graduated rates. We go, actually, from a zero rate to currently a 37% rate, which is not really 37% rate. It's really 41% because there's a 4% add on tax that pretty much you're gonna pay. So it's really over 40% California has a graduated tax rate, but it goes up to 13% Minnesota has a high income tax. New York has a high income tax. So Massachusetts, we're seeing high income taxes. The states that provide have big governments and provide lots of services have high tax rates. That's why we see it on the coasts. Interesting enough. Minnesota. Minnesota is the liberal state in the middle of the country, and so they have liberal states tend to have very high tax rates, and conservative states tend to have very low tax rates.

Keith Weinhold 25:45

Now we have a lot of real estate investors here that have learned that the best deals are outside their home state. So that investor might be domiciled in a Minnesota, but investing in, say, Arkansas, tell us about how the state income tax affects them.

Tom Wheelwright 25:59

So it's kind of like being a US citizen, right? You live in the US. You're taxed on your worldwide income. You live in Minnesota. You're taxed on your worldwide income in Minnesota. So by virtue of where your residency is, you are taxed on all of your income. Now you'll get a credit, typically, for taxes paid to another state. Well, let's say that your tax rate in your state is 10% and then you invest in a state with a tax rate of 3% well you're going to get tax credit of 3% so you're still going to pay 7% in your state, plus 3% that state. You're still going to pay your 10% it's just going to be some of that's going to go to another state. Some of it's going to go to your state. But in total, your tax rate is likely to be wherever you live. That's youroverall state tax rate. I'll give you another example. Let's say that you invest in Texas, you live in in Minnesota, you're going to pay Minnesota tax rates on your income, you get no credit because you have no tax in Texas. What's worse is, though, you have property tax in Texas, but you don't get a credit in Minnesota for your property tax paid in Texas. So you have much higher property taxes in Texas than you do in most states. Right? Because every state has to raise revenue, right? In Texas has decided to it largely on sales tax and property tax. So that means that you don't get that offset. Property taxes are pretty serious in Texas. If you're an investor in Texas, you know that property taxes are pretty serious, but you don't get any kind of benefit in Minnesota, but you still pick up the income in Minnesota.

Keith Weinhold 27:38

In some Texas jurisdictions, property taxes can be 3% annually based on the property's value, pretty punitive. There in Texas, Texas is a good example. That's where we have often high property tax rates, but zero state income tax. So with these other states that have zero state income tax, are they subsidizing that with property taxes or sales taxes, or in what other way are they making up that?

Tom Wheelwright 28:03

Of course, for example, we were talking earlier about Tennessee. Tennessee doesn't have a personal income tax, but if you have your real estate owned through a limited liability company, you do have a 6% tax on the income of the LLC. So even though it's a pass through entity for Tennessee purposes, it's taxed. They have all sorts of mechanisms to raise revenue. All states need revenue. Now, some states raise less revenue per capita than other states. Those are the states that people tend to move to. But don't forget those other taxes. I mean, sales taxes. Sales taxes can be very high, right? And you pay sales taxes typically don't pay them on food or prescription drugs, but you typically pay them on pretty much everything else, and including leasing a car, they're going to get their money. It's just how they get their money.

Keith Weinhold 28:50

Well, we've been talking about ways that you could potentially legally escape taxation, depending on what state that you live in. So in a domestic sense, and Tom we pull back and we think about that in an international sense. A lot of Americans don't seem to realize that if they're, I guess, born and raised and get citizenship in the United States when they become an adult and get older and they go abroad, they have to continue to pay US taxes if they move to Norway or Dubai. Can you tell us about that?

Tom Wheelwright 29:21

Yeah, so US citizens are taxed on worldwide income as long as they're a US citizen. Here's what's really interesting in the US let's say you give up your US citizenship, you're still subject to taxes on your worldwide income for 10 years. Wow, after you give up your citizenship so you no one get any of the benefits of being a citizen. You've given that up, and you still have taxes for 10 years. Earlier this year, we did an episode, and we talked a little bit about this unrealized capital gains tax, right? People don't think, well, I'll just leave. Doesn't work that way. You're still going to have the capital gains tax for at least 10 years, and the only way to get rid of it is to give up your citizenship and wait 10 years. It's a pretty restrictive law, because most countries only tax if you live there, if you're a citizen of France, but you move to Belgium, you're taxed in Belgium, you're not taxed in France. Not true with us.

Keith Weinhold 30:19

Yeah, that's remarkable. I didn't know about that 10 year thing. Even if you renounce your citizenship, those taxes will follow you for 10 years regardless of where else in the world you live. Um, I'm just maybe this is a little bit of devil's advocate. I mean, this sounds preposterous when we first think about how Americans are taxed abroad for the rest of their life, but maybe thinking of it philosophically, if it does make sense in any way, which is really hard for me to say, but maybe it's because, okay, well, you were born and raised in the United States, where we have this very mature infrastructure and stable currency and good educational system, so you got to be a beneficiary of that. So when you're 30, you can't move away and never give us any tax money to support that. Again, what are your thoughts with that?

Tom Wheelwright 31:02

different countries have different tax systems? What I will say is, just like the state discussion, you do get a credit for taxes paid to another country. So if you have income taxes, let's say you're living in Portugal and you pay Portuguese income taxes, you're not going to pay taxes twice. You're going to pay the higher of the two rates, either the Portuguese tax rate or the US tax rate, but you should not be paying tax twice. Now, if you're going to do that, you need a really good team of tax professionals. You need a good US tax professional, and you need a good tax professional where you live, and those two tax professionals need to talk to each other on a regular basis, because otherwise you can end up paying double tax, and that is the worst of all worlds. You do not want to end up paying double tax. So make sure that just know that if you're going to invest in another country, or you're going to live in another country, you need double the tax advice.

Keith Weinhold 31:05

I am just going to speculate that there are an awful lot of people that don't consider taxes before they move, whether that's domestic or international, not that that should be the top consideration, but a lot of people probably aren't even thinking about it.

Tom Wheelwright 32:13

A lot of people aren't. That's true. Now, are there ways to reduce your taxes internationally, particularly if you're in business? Yes, there are ways that you can reduce your taxes. So know that there is still tax planning available. But I hear about people saying, I'm going to invest in the Dominican Republican, or I'm going to invest in Dubai, or I'm going to invest somewhere else. Just know that you've got now two sets of laws that you're working with you're working with US laws, and you're working with that country's laws. And so make sure that you've got good advisory on both sides. When we're talking about moving for tax considerations, we should cover Puerto Rico. Tell us about the advantageous tax laws for Puerto Rico, and if they're going to sunset, they're there for the foreseeable future. So Puerto Rico, depending on how you earn your income, you can potentially reduce your income tax rate from the current 37% rate in the US to 4% yeah, that's basically an agreement with Puerto Rico. Puerto Rico is still the US, but it's got special laws that it's almost like a treaty, right? Even though it's a territory of the US. And what happens is, is that if you set it up properly, you got to live there, by the way, you can't just pretend. You got to live there six months in a day out of the year, over six months a year. And if you do, then you get a 4% tax rate on the income you earn while you're in Puerto Rico. If you earn income while you're in the mainland, you're going to pay tax on the mainland, but the income you earn in Puerto Rico, you're going to pay 4% tax. And there are certain types of income that that works for certain types of income, it doesn't just make sure that this is one where you need a Puerto Rican tax advisor as well as your US tax advisor. Capital Gains also have they have a potential tax rate of zero. So there are obviously details you have to follow again, make sure, before you get into that, know that there are huge tax benefits for living in Puerto Rico. No question. You know, it's the Puerto Rican discount. What can I say? We say in Arizona that California has a beach tax and we have a desert discount. The same was true in Puerto Rico. Puerto Rico has a Puerto Rican discount. That's what it is.

Keith Weinhold 34:24

Yeah, you're going to be getting on a plane a lot in order to go anywhere. I know an awful lot of entrepreneurs that have relocated to Puerto Rico. You do too. Tom, you the listener, probably do as well. It's really important to have the right team before you make such considerations. And before we're done today, Tom and I will talk about how you can connect with him and learn more. But Tom, since we last had you here, you updated your terrific book, which I have on my bookshelf called Tax Free Wealth. Tell us about the updates and changes you made to the book.

Tom Wheelwright 34:56

We do a new edition of tax free wealth every time there's a major change in the tax law. So the second edition was the 2017 tax law, because that was a major change. Since 2017 though we've had six major changes to the tax law, we had a bunch of major tax law changes during COVID And so what we did was we actually took the 2017 and all the new ones, werolled them all into a new edition. By far. This is the best edition of tax free wealth by a long shot. I mean, I think tax free wealth, you know, got good bones to it. It's a good book. Got almost 4005 star reviews on Amazon. This is the one I like the best, by far.

Keith Weinhold 35:18

Tax Free wealth, I read the original edition, and it's not like watching motorcycles jump off ramps, but for a tax book, it's actually really a good read there. He really brings life and some good examples to how you can permanently reduce your taxes. Tom, you and your terrific firm wealth ability have been helping people do that for years. If you the listener, want to Tom's team and Tom's referral network to help you permanently reduce your taxes. We have a resource for you atget rich education.com/taxwe can actually set up a free consultation to confirm if indeed they can help you in your situation. And Tom, why don't you talk to us some more about the importance of having the right tax pro on your team, and how they're not actually an expense, but really they're an incentive to you, because the fastest way to get an ROI is actually by reducing your taxes, because it can be done almost instantly.

Tom Wheelwright 35:36

Yeah, for sure. And what's important is that you have a relationship with a tax advisor that does give you tax advice. That's why it's called a tax advisor. They actually give you tax advice, and they willing to give it to you. And they're not waffling. They're not saying, Well, I don't know, or they're not backing off. They're saying, Well, look, if you do this, this is what you get. You have to choose whether you want to make those changes to your situation, but they're going to give you, you know, what changes you can make to your facts in order to reduce your taxes. I think the most important thing, though, is that you have a partnership with your CPA, that this is a true relationship. And we've actually changed the way we work with clients. We used to charge for projects. We used to charge for tax returns. What we want is a relationship, so we basically charge a monthly fee for the relationship. So that's a recent change in our model, you're going to see more and more CPAs go to that model, because it is a much more comfortable model for both the CPA and for the client. But what we want to do is we want to emphasize the relationship. We don't want you to feel like every time you pick up the phone, you're going to get charged. We don't want you to feel like, well, all that tax return fee is just killing me. No, it's not a tax return fee, it's a monthly fee. It's an annual fee, billed monthly, is what it is. And that way you have something come up, you don't have to worry about them and get a bill for it. You have even an IRS audit come up. Once you're a client with us for a year. After the first year, we'll then allow you to pay a small monthly fee so that when you get audited, you won't pay us for handling the audit. We call that an audit defense plan. I talk about that in tax free wealth. To me, we've been operating this way. So my firm, which I worked with people like Robert Kiyosaki, we've been operating this way for several years, and it is the best way to work with a tax advisor, because you always have that relationship, and you never have to worry. I'm not going to get this big tax bill, this big fee, like you do for an attorney, right? You don't call your attorney, because you can get a big fee, right? Every minute it's going to be a big fee. This is a great way to work with a tax advisor and make sure that you can be proactive, and they can be proactive. It's really a great way to help build the relationship over time, which is something that you're going to want to have over time again. If you want to learn more and have that free consultation, you can start at get rich education.com/tax.

Keith Weinhold 38:56

Tom, it's been valuable as always. Thanks so much for coming back onto the show.

Tom Wheelwright 38:59

Thanks, Keith.

Keith Weinhold 39:06

Nine states don't have an earned income tax. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. And the way to avoid state income tax is clearly to start by living in one of those states. I don't believe that moving to one just for tax reasons, is a good idea, though, like I was saying earlier, do you agree with how your government is spending your tax dollars? If you don't, then you owe it to yourself to reduce your tax burden, otherwise, you are just helping to fuel reckless spending. And when you lower your tax burden, not only do you stop fueling reckless spending, of course, you increase your own personal return on investment. You know in fact. This paying any more tax than you have to fuel a kleptocracy. I think it's at least worth asking the question then, because this is get rich education, little learning moments, some vocab rehab. Here, you can think of a kleptocracy as being synonymous with a fevocracy. The strict definition of a kleptocracy is a government whose corrupt leaders use political power to expropriate the wealth of the people and land they govern, typically by embezzling or expropriating government funds at the expense of the wider population. All right, well, is that a little too strong for the behavior of our elected leaders or not? I'll let you decide that. But see, most of the 1000s of pages of the US tax code does not outline the taxes that you have to pay. Did you realize that the vast majority of the IRS Code is a guidebook to help you reduce your taxes that are in those tax tables. Well, now my own tax return is hundreds of pages long, and a lot of it outlines how my taxes have been reduced for that tax year. Well, Tom's excellent book called tax free wealth is sort of a digestible way to make the reading more fun than any psycho that would read the entire IRS tax code, but to make it even easier than that, it's really a good opportunity to connect with Tom's team and see exactly how they can help you reduce your tax In your specific situation, and is especially helpful for real estate investors and business owners. You know that I often like to leave you with something actionable. You can book a free consult at getrich education.com/tax that's get richeducation.com/tax.

Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 42:06

Keith Weinhold 42:34

The preceding program was brought to you by your home for wealth building. Get rich education.com you

524: How is Your Tenant Doing? and Creative Deal Structuring with Zero Down Payment Oct 21, 2024

Join our upcoming GRE live event right here! - ‘New Turnkey Properties with ZERO Money Down’ on Thursday 10/24.

Keith discusses the financial health of tenants, noting that 75% of new renters earn over $75,000 annually. He is joined by GRE Investment Coach Naresh Vissa to highlight the incentives offered by new build property providers, including interest rates in the 4's and up to $30,000 in immediate equity.

New build homes now cost only 1% more than resale homes.

Rent-to-income ratios remain stable at 31%, despite wage growth outpacing rent growth.

Current market conditions offer a unique opportunity to build wealth through real estate.

Attend the live online event on Thursday, October 24 at 8pm Eastern to learn more about the new build property incentives.

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 0:01

Welcome to GRE. I'm your host. Keith Weinhold, we check in on the health of your tenant. How are they doing financially? Learn why new build homes now cost about the same as existing homes. Then learn about creative financing and how to put zero money down on an income property today on Get Rich Education.

Speaker 1 0:26

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold, writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show. Guess who keep top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit get rich education.com

Corey Coates 1:11

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 1:27

Welcome to GRE from Lewiston, Maine to Lewiston, Idaho and across 488 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education. Don't live below your means. Grow Your means, you need a proven wealth building vehicle that pays you multiple ways, like real estate or a business, because in order to build legacy wealth, otherwise, how many Papa John's coupons are you going to have to collect that's living below your means, something that's not sustainable long term, not where you want to be. And you know something your first million that takes a while for you to reach a net worth of a million dollars, that can take over 30 years, like the first 30 plus years of your life. Let's say then you are age 32 until you reach the million dollar mark. Well, your next million Okay, so a $2 million net worth, that's not going to take you another 32 years, but maybe, if your sole source of income is trading your time for dollars at a job, you won't hit the $2 million net worth Mark until age 40 to 45 but instead, if you've got leveraged rental property, ah, now you've got other people's money working for you, and a 5x multiplier on your skin in the game, and that's something that a 401K is never going to give you. And instead of hitting 2 million at age 40 or 45 like the day job worker, well, you can hit a four or $5 million net worth mark at that age, setting you up for an early retirement, or at least that option to do so your life is going to feel different when working is An option, not an obligation, and all that sure can happen even sooner. If you think you are behind, from what I was just talking about, there, you find yourself behind those net worth figures. Well, the vehicle of real estate pays five ways. Is what's going to allow you to catch up, and you might be simultaneously measuring your wealth in cash flow as much or more than in net worth terms. Anyway, chances are you do, though, have more wealth today than you have ever had in your entire life, and that's because here in late 2024 we're at a time when just about every asset imaginable is at or near all time highs, real estate, stocks, gold, Bitcoin, and perhaps the number one traded commodity in the world, oil, is one of the few substantial outliers where that is not true. Well, now that we've checked in on how your wealth building is progressing. How about the financial health of your tenant? That's important because you want them to have the ability to pay your mortgages and your operating expenses for you. Well, there seems to be a weird narrative that tenants, you know, like they're always these jilted wannabe homeowners, or like they're auditioning for a season of Survivor, barely living above the poverty line, destitute and eating macaroni and cheese three times a day. Now, there are some of those cases, for sure, but 75% of new rent. Have incomes above $75,000 well, then maybe they eat at the Cheesecake Factory monthly. Even the wealthiest Americans are turning into forever renters. We have seen the rise of the millionaire renter. More than 11% of renters have an annual income over $750,000 that is pretty Wall Street Journal. Gosh, I guess that caviar and truffles are in the home. And what are they doing for cheese? Forget Kraft Singles. My guess for them is that only artisanal cheeses are eaten off of little wooden boards. The census itself recently published research declaring this headline, incomes are keeping up with rent increases. Now you might find it really surprising that tenant rent to income ratios haven't materially changed over the last dozen years. Last year, US renters shelled out a 31% share of their income on rent, and that is actually much like they have for a long time. In fact, between 30 and 32% every year since 2011 that's what the figure's been and to be clear, what we're talking about here again is the rent to income ratio. It's simple. It's just the proportion of your tenants income that goes toward rent. 31% or you might think, Well, wait, how can this be? Because there sure are a lot of headlines around rent burdened households. And for a while there previously, we had wage growth lagging rent growth, although wage growth is ahead of CPI now, and it has been for quite a few months. All right. Well, here's what's happening. Really, it's three things, renter incomes are growing faster than homeowner incomes. Secondly, the struggle is real for low income renters. And thirdly, new construction units. In recent years, they tend to be created for middle and upper income households. All right, so let's break this down. The first phenomenon occurring, renter incomes are growing faster than homeowner incomes. Yes, younger Americans, they're more often renters, and they have more income growth than older generations do. Secondly, like I was saying, the struggle really is a thing for low income renters, they tend to rent apartments more often than single family homes, and census stats show the rent burden household growth in those is occurring with those that make under 75k a year. That's where their distress is, and of course, it's especially bad among those making under 50k a year, and many of them don't receive rental assistance, and inflation has affected that group worse. And then the third reason for these stable rent to income ratios are that new construction units in recent years, they tended to be created for middle and upper income households, so we haven't built nearly enough affordable housing driving demand and rent prices, and again, that crushes those lower income households. And hey, I do want to credit terrific rental housing economist Jay Parsons for bringing some of this to light. The bottom line here and what you've learned about the financial health of renters today, actually, you didn't learn anything. All I did was talk about cheese, really, though, the lesson is that Rental Affordability has become more bifurcated. It's worsened for the lowest income households, but overall, rent to income ratios are still steady near 31% I mean, really, who knew that stability could be so predictable? Now there's another sort of misconception, or I guess anomaly really, in today's real estate market, and that is the fact that new build homes don't cost much more than older resale homes. In fact, today, the median new bill home sells for 421k That's not much more than that of an existing home at 417k that's only about a 1% difference. It's really an unusually small disparity, just a 1% premium for a new home today over a resale home. All right. Well, what is going on here? One reason for this is the very well documented interest rate lock in effect existing homeowners aren't giving up their property. Another is that the new build properties are smaller than they were in years past. Helping keep their prices in check. And a third reason for why new build homes cost almost the same as existing homes today, weirdly, is that home builders they are giving buyers incentives to purchase new build homes today because buyers often need down payment and closing cost help in order to get in. And we're going to talk about one especially good new build incentive program for these brand new properties later in the show today, and what you can do with creative financing there. The real lesson here is, if you can, you want to give more consideration to owning more new build income property today than you might have in years past, because they're down to about the same price as resale properties, only costing 1% more, on average, and this is all based on data from the census, HUD and the NAR. So again, just about 421k for new builds and 417k for resale single family homes today, they are the median prices

you can follow get rich education at all the usual places on social, Facebook, Instagram, Tiktok X and YouTube. To highlight one of those, you will find particular value in the get rich education YouTube channel that is me over there, video of me speaking directly to you and showing you things there visually on YouTube that I cannot do here on an audio podcast. Also, if you have a particular thought, comment, question or concern, understand, we can't personally respond to them all, but you can go ahead and write in or leave voice communication at getricheducation.com/contact we do read and listen to them all that's getricheducation.com/contact in order to reach us. And thank you so much for all of the sincere congratulations and wishes that you left over there for us on the GRE podcast, hitting 10 years of contribution to real estate investors, serving you every single week without fail and never playing any repeat episodes, always serving you with a fresh episode. Much more. Next, I'm Keith Weinhold. You're listening to get rich education.

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Robert Helms 13:57

Hey everybody, it's Robert Helms of the real estate guys radio program. So glad you found Keith Weinhold in get rich education. Don't quit your Daydream.

Keith Weinhold 14:19

Well, I'd like to welcome in a GRE investment coach. He's got both the formal credentials, and he's doing the real thing too, holding a master's degree from Duke's business school, and then, before coming to GRE in 2021 he worked at both banks and financial publishing companies, but importantly, for years now, he's been an active real estate investor, just like you and I. Hey, welcome back onto the show. Naresh Vissa.

Naresh Vissa 14:45

Thanks so much for having me back on looking forward to talking real estate. There's a lot going on for sure.

Keith Weinhold 14:51

You know, I always give you an illustrious bio to live up to before you speak, but then you do always live up to it. Well, Naresh. Before we narrow down, let's pull back and take a wide angle view. Give us your take on the direction or trends. What's important in today's market for real estate investors?

Naresh Vissa 15:11

Keith, the market has changed a lot, and it's very much investor friendly right now. The reason is because, and we've talked about this, I think, in my last two or three episodes where we previous saw rising interest rates and stagnant interest rates that were relatively high for let's say a millennial. That's been a hot topic called millennials aren't able to afford home buying what we're seeing now because the Federal Reserve cut interest rates tremendously, significantly and almost unexpected. The First Cut they did was 50 basis points, which I think was a mistake, just like I think it was a mistake for them not to raise rates one more time last year, in 2023 one or two more times to help bring inflation down further, I think they're making a mistake by jumping the gun, and instead of a 25 BPS cut as the first cut, doing a 50 BPS cut. The reason why I bring this up is because mortgage rates are plummeting. They have plummeted, and they continue to plummet. So as a home buyer, where the economy still isn't we're not at peak employment. In fact, the unemployment rate is still in the fours, so the economy isn't the greatest which means home values aren't at peak levels. Per se, some people are making the case that we could see home values could be coming down while interest rates come down. So right now, what that means is, when you have falling interest rates and either stagnant home values or maybe even some declining real estate values in some areas of the country, that markets that we focus on other markets we don't focus on, when you combine all that, this is that inflection point where it's actually a really, really good time to jump in. There is a little bit of political uncertainty in that we don't know who's going to win the election. We don't know who's going to win Congress. What's even more important than who becomes president is Congress. Which party wins the house, which party wins the Senate? Because you've written about it in your newsletter, Keith, the Democrats and the Republicans have very different housing policies, and we could do an entire episode on each party and what their housing policy is. I will keep it simple. Here's the cliff note version. If we have the same party in all the chambers of the government the same political party, then we'll see a tremendous impact in the real estate market. I think if the Democrats sweep then you're going to see real estate home values go back up, inflation go back up. Because Kamala Harris is, she is a main proponent of giving basically a $25,000 off coupon to first time homebuyers. So that's across the board all 50 states. Basically you got $25,000 off. What I've learned with coupons, I'm sure you know this, Keith, most coupons actually are a terrible deal. You get something in the mail that's a coupon. You either spend it or you call the service provider and they jack up the price. So you think you're getting a good deal, but they end up jacking up the price even more than what market value is, and that's what's going to happen to housing where you're going to have so many young like I said, millennials, Gen Zers, who are looking to buy their first home, they think they're getting such a great deal because of this $25,000 off coupon, when, in reality, after about three months of this program, you're going to see we're going to be back to 2021, end of 2021, beginning of 2022, all over again, where homes will enter into bidding wars. Now, if there's a split, President is one party and Congress has split, then there's actually going to be almost no change, which could be a good thing. We're not going to see much change at all. It's just going to be the mostly the status quo. Really the only change is going to be on tariffs, If Trump were to win, or foreign policy, those are going to be the two main issues, regardless of which party wins, if there's a split. So the bottom line is that right now, despite this uncertainty, I've heard from a lot of GRE clients, oh, I don't want to do anything because of this election. I've asked for the logic and like, the election, should it really change? Because right now is still an excellent time, like I said, with stagnant home values with plummeting interest rates, really through the end of the year, and as the Fed keeps cutting rates, which I think they're going to engage in a prolonged rate cut cycle for quite a while, and rates are only going to keep going down. So that's my general view of the current state of mortgage rates, the Federal risk. Reserve the election housing markets?

Keith Weinhold 20:03

Yes, Naresh is talking about a newsletter that I sent to you last month where I basically show that, historically, presidential elections really don't affect the real estate market price appreciation much at all. They might affect stocks in the short term, though, which are more volatile and Naresh, do you want to tell me a bit more about why you seem to be rather bullish this year for real estate investors, of course, things change. Last year you were more bearish. You had more negative sentiment about the investor environment. So are there any other reasons why you see more positivity today, other than lower interest rates?

Naresh Vissa 20:37

Yeah. Well, last year, like I said, where I touched on, we saw peak interest rates. So the Fed stopped raising around the end of last summer. I want to say maybe July of 2023 it was, yes, the interest rates stayed high. There was almost no movement until relatively recently, let's say over the last three months, when it was factored into the market that the Fed was going to begin its rate cutting cycle. So the reason why I don't want to say I was bearish on real estate last year, because we have some providers, for example, partners of ours, who offered really, really good and they still are offering really, really good incentives, which help offset the high interest rates this time around, like I said, with the unemployment situation, we're in the force in more layoffs. Archive, the media isn't talking enough about layoffs, large companies, large tech companies, manufacturing jobs. Layoffs have been rampant for the past two years. This is not a recent phenomena, and it's finally showing up in the unemployment data. And if you look at real unemployment data at a website like shadow stats, it's really more than 4% and the number of people are working multiple jobs. That's not really factored into the unemployed. You know, one person working three jobs, for example, you gotta have a way to factor that in, which government hasn't figured out lately. So the point that I'm making here is that if you have a job right now, if you're making cash flow, if you have a job, then you're going to find this as an opportunity with the lower interest rates, with knowing that home values have somewhat declined recently, this is a good opportunity to jump in and get good cash flowing real estate. Now, I did touch on the previous question about Kamala Harris's real estate plan, $25,000 coupon, which will certainly lead to real estate. You can call it real estate appreciation. You can call it inflation. But one thing that I should talk about the other side, which is if Trump and the Republicans were to sweep, then we're going to see mass deportations of undocumented immigrants, illegal immigrants, and that's going to affect the housing market tremendously. And how is it going to do that? Because it's estimated that at least 8 million people are going to be deported over the four year period. Those 8 million people right now are all renters. Close to 100% of them are renters. I think that would actually be somewhat deflationary, at least in the rental market, maybe not in the housing market per se, because a lot of these people aren't necessarily home buyers, but in the rental market, we could likely see a stagnation of rental growth mixed in that's making the assumption that building picks up, and Trump has already said. Both Trump and Harris have said that they're going to incentivize home builders to build more multifamily, build more apartments, build more. In Trump's case, he did these opportunity zones, which he wants to do more of, build more single family housing. It's definitely a supply side issue more so than a demand issue, but both supply and demand always contribute to the equation as a whole. So what does all this mean? Again? Forget about the election. Forget about November 5, which is election day. Right now is a really good time, because interest rates are plummeting. Home values have remained stagnant. In some cases, home values have come down. And the best part, we work with providers who are still offering really amazing incentives. And on october 24 at 8pm we are hosting a webinar to share what I think is our best incentive program yet. That's Thursday, October 24 where you can get class, a new build of properties with interest rates in the 4's that's with that you're not even buying down the interest rate, the interest with special deals, special incentives, special financing, interest rates in the fours, up to $30,000 in immediate equity because of these incentives. And the best part, we even have an option that's zero money down, zero money down there are incentives that are giving back cash at closing. So it's, you buy a property, you as a buyer, get cash back at closing. There are just too many incentives to name here. I've named, I think, five different ones. And this is not a case of you pick one out of the five. In some cases, you might qualify for all five. So october 24 it's before the election. It's live. I'm going to be on live with a special guest who is a very well known, seasoned real estate investor and licensed real estate broker, one of the most well known real estate personalities in the country. So I highly recommend our file go to GREwebinars.com GREwebinars.com to register for that free special event.

Keith Weinhold 25:46

Now you, as a real estate investor, are probably encouraged by this environment of lower and lower interest rates as well you should be, but sometimes it can help to ask yourself the question, okay, how do lower interest rates affect who I'm purchasing a property from. In this case, with the event narration I are talking about, it's new build properties and home builders. They see more competition now coming from the resale market due to the fact that interest rates have fallen so interest rates are thawing out the locked up resale market thawing out this lock in effect, and that's because existing home sellers, well, they're a little bit more willing to sell because the replacement home no longer has an interest rate that's as high over there in the resale market, and lower rates also, of course, mean that more buyers qualify to buy resale homes. So see new home builders, they now have more competition from the resale market, so consequently they're more willing to give you a strong incentive to buy from them. So take advantage of what Naresh and I are talking about coming up in just three days here on Thursday.

Naresh Vissa 26:53

Yes, and I want to reiterate, GREwebinars.com GREwebinars.com this is a online special event. We've done several of these in the past. I've done, I think this is maybe my fifth online special event. Again, I've never seen incentives like what our provider is going to be sharing on this webinar. And you can only get these incentives by attending the webinar, or registering for the webinar, watching the replay after we're talking the rates in the 4's, they will buy down the rate for you. So it's a great deal to have somebody else buy down your rate. You'll get money back at closing if you opt for that. So that's basically a rebate that you'll be getting as the home buyer. Just really, really good overall incentives being offered. And like I said, we set this up because this is a perfect time. We are in a situation, the first time since 2020 since the pandemic, where we're seeing plummeting interest rates, stagnation of home values, kind of uncertainty, because we're in this time of purgatory, just like we were in 2020 before the election. Just think about how many investors, most real estate investors, say right now, they say, Oh, I wish I bought everything in 2020, right? Well, we're in a similar situation now, where, again, home values, interest rates, and this state of purgatory of what's going to happen. We're in a very similar situation. And just think about that emotion, because I hear it almost every day, or when I tell people, Hey, I own real estate myself, and I bought most of my properties before 2021 the last property I bought was in 2020 and they say, Oh, wow. Like, you're a genius. You're so smart. Like, how did you know to buy man and again, similar environment, even 2009 2010 2011 even 2012 similar environment where interest rates were very low. 2009 was when they were plummeting. And you think back of I was too young back then, but I know, Keith, you were an investor back then, but you bought in 2009 you did even better than buying in 2020

Keith Weinhold 29:00

That's right. And in fact, in all the years that I've been buying real estate, I have never bought a property with incentives as good as what you and your co host are going to be talking about at GRE's live event coming up on Thursday night, just starting with a full 10% of the purchase price in credit back to the buyer, and there's more to it. You'll learn all about it again on GRE 's live event for new build, turnkey income properties with zero money down potentially. It is co hosted by Naresh in the guest that I had here last week, Zach. Again, it is on Thursday, October 24 at 8pm Eastern. You can register now at GREwebinars.com and you will be hearing more from Naresh then. Naresh has been great having you back on the show.

Naresh Vissa 29:49

Thank you, Keith and I'll see everyone on october 24 GRE webinars.com to register. Thanks.

Keith Weinhold 30:01

yes, you'll hear more from Naresh and co host Zach on Thursday's live event each year, homebuyers often take a step back in the fall, this time of year. Understand though, that year over year, they are up about 4% per the NAR as of this time. And when it comes to the political effect on housing. You already know what I think. I don't put much emphasis there. Today, I am better off than I was four years ago, and it has nothing to do with who the President was or was in Congress, and in the preceding four years, I became better off during that time period too, because what happens in my house and what happens in your house is more important than what happens in the White House. As Naresh and I are talking about new build property here, and you're hearing about extremely attractive incentives. Hey, let's not let the point be lost. New build properties can be profitable for you over time due to lower maintenance costs. New builds have lower insurance premiums, and that's on top of how we discussed you could get low interest rates in in southeastern high growth path of progress markets in our upcoming live online event, and at the least, you will learn about creative deal structuring, and you know, when it comes to zero money down like that very concept, there was a time in my life where I thought, yeah, that sounds about as real as athletic brand beer, or about as real as lab grown meat, but all three actually exist. Here's what's exciting, we have partnered with major builders that are sitting on excess new build inventory right now, like Lennar and DR Horton, to help bring you institutional level pricing. Your name does not have to be BlackRock. And this is something we've never done before here at GRE these new build properties in those fast growing areas of the southeast, they're often single family rentals. And yes, you know what I like to say about single family rentals. Stainless steel appliances are great, as long as you or your tenant never touch them. But to be clear, there are two levels of incentives we've been promised. So we've got to have this event now before they vanish. You can potentially use both, first, up to a 10% credit at closing, so yes, on a 250k market value property, as much as a 25k credit and then secondly, a 5% down payment we've paired with credit unions in local markets that make Portfolio loans to investors, and that is up to five properties max. And to get that 5% down, you must qualify, just like you would for most any mortgage loan. And by the way, do you know what a portfolio loan means? That means when the bank or credit union makes the loan, it'll go sell that off to a secondary market and have it packaged into a mortgage backed security. What the bank or the credit union does is they keep that in their own portfolio. A portfolio loan does not mean that the lender makes a loan against your existing properties in your portfolio. That's what I used to think when I was a new investor, but that is a misnomer. That's not what a portfolio loan is. Well, with these incentives, if you get a 10% credit and only spend a 5% down payment plus four to 5% on closing costs, hey, there you are. You are in with zero down payment. It's a chance for you to get your fit together. Yes, what fits you is zero down right for you. I mean, you know that I am a staunch leverage proponent, but if that's not right for you, you can use your 10% cash back discount elsewhere, like buying down your mortgage rate to about 4% maybe even three point something percent. And see right here, this is exactly where the deal structuring gets fun incentives like this don't last. When the inventory is gone, it's gone show up live, and that way you can also have any of your questions answered if you have them, yes, our online event is an even bigger deal in fantasy football. Well, I trust that you learned something useful today on this week's episode of the get rich education podcast, to review, it's how tenant rent to income ratios are actually stable near 31% on why new build properties only cost about 1% more than existing properties today. And all about creative deal structuring, where you can own brand new new build income properties potentially with as little as 5% down and perhaps zero down payment. It's a really good opportunity. We sure have mentioned it before, but one last time, all the action takes place Thursday, October 24 at 8pm eastern at GREwebinars.com. Until next week, I'm your host, Keith weinhold, don't quit with your Daydream

Speaker 2 35:27

Keith Weinhold 35:55

The preceding program was brought to you by your home for wealth building Getricheducation.com.

523: How to Vet a Property Manager Oct 14, 2024

Join our upcoming GRE live event right here! - ‘New Turnkey Properties with ZERO Money Down’ on Thursday 10/24.

On this week's episode, Keith shares how to vet and onboard a property manager, emphasizing the importance of their role in tenant relations and net operating income. He is also joined by our guest, seasoned investor and turnkey expert, to highlight the benefits of new construction properties with zero money down, leveraging builder incentives and portfolio loans.

Learn the key qualifications to look for in a property manager, typical management fee structures and questions to ask.

Hear about the benefits of new construction homes, including consistent income, quality tenants, and growth potential.

We discuss the potential for 10% builder credits and 5% down portfolio loans.

Show Notes:

GetRichEducation.com/523

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:01

Welcome to GRE. I'm your host. Keith Weinhold, how do you vet a property manager and maintain an onboarding relationship with them over time? I just hired one, and I'll tell you how I did it. Then there's a trend to exploit in today's real estate market, with the opportunity to place zero money down on brand new build property today on Get Rich Education.

00:27

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show, guess who? Top Selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit get rich education.com

Corey Coates 01:12

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 01:29

Welcome to GRE Yeah. This is get rich education, the voice of real estate investing for more than 10 years now. This is episode 523, and I'm your host, Keith Weinhold, let's talk about how to vet a property manager. After all, they are what make your real estate investment mostly passive. I recently hired a new property manager. Of course, I have one in each geographic area where I own property. Now, instead, you can self manage from a distance, but sooner or later, you probably won't feel that's the highest and best use of your time. As friend of GRE and host of the real estate guys radio show, Robert Helms says, Life is too short for property management. And you know, when it comes to managing your property, still today, you can't just have an AI do that, and to be your property manager is the most important piece of your team, because they're the ones that handle all the tenant relations, collect your rent, and They control your occupancy rate too. I think you can make the case that a property manager is even more important in larger apartment buildings than they are in, say, single family rentals up to fourplexes, and that's for a few reasons. Number one, because managers drive your net operating income your noi in apartments. Okay, so that doesn't just drive your income. That drives the very valuation of the property, since apartments are the NOI divided by the cap rate. And secondly, one bad or noisy tenant can make other apartment tenants miserable. Yet if there's one noisy single family home tenant, well others might not even know about it or hear them. So a manager is more important in large apartments than smaller units. But let's not let the point be missed. They are crucial, just vital either way. And when it comes to qualifying a property manager, you know, before you reach out to that manager, do some research on your own. First, like first, I like to see if I have any friends that use that management company, and I like to get feedback from them. Also like to read reviews and see what current investors that use that property manager say about them in forums. And you know from real world experience, if you've been an investor for any period of time, it's a little sad to say, but getting reviews that are merely adequate or average, that might be good enough. There are many places in life where I accept mediocrity, although property management is probably one of them, because it's just a tough job where that manager has to adjudicate, use their judgment and walk a line between two antagonistic parties, and those parties are you and Your tenants. So adequate is good enough. Management is just one of those industries. It's kind of like airlines always seem to get bad reviews too. If there's a rating system out there for umpires and referees, it would probably be the same users only comment when there's a problem. Well. So when vetting a property manager next, I like to know how long they've been in business. I also like to know how many properties that manager currently manages, how many units they have in their management portfolio. And with this latest manager that I just recently hired, it happened to be 325 properties. That's a good number. And this manager also happens to be one in a network of a nationwide management franchise. So there are some systems and some economies of scale that I'm getting, and there are a lot of mom and pop managers too, and they can often do a good job as well of scaling and automation. A lot of managers, for example, they leverage a software like app folio, where you as an investor, you can log in and see your investor activity and your owner draws there. So this particular new manager that I hire, they have those 325, properties that they manage. But speaking to geography, I learned that their brick and mortar presence, their main office, it's a full 45 minutes away from where I have my properties all clustered. That's not ideal to have my properties far flung from their hub, because you want your properties to get adequate attention. And you can imagine, if your properties are too far for where most of their operations are. Well, then your properties might not get enough attention, but I learned that they already have 20 properties in the immediate area of mine, and that their maintenance man also happens to live near my property, so in this case, 45 minutes from the satellite office. Although it's not ideal, it did work for me. This new manager that I hired has the tenants rent be due on the first of the month, but they have a grace period to pay until the fifth and then the owner draws. They're made around the 10th of the month and the owner draws. That means when the manager makes their payment, to me, the investor, which is after they collected all the rents, minus their management fees and maintenance expenses. All right. Well, all that stuff is pretty typical, and let me tell you now about their management fee structure. And again, this is pretty typical. And by the way, I don't try to negotiate fees with managers in most cases, maybe, unless I have an awful lot of properties with them, they have a monthly management fee of 8% now 10% that's a pretty common fee out there as well, meaning that if rent is $2,000 they take $160 each month in a management fee. That's that 8% and then additionally their leasing fee is one half month, meaning that when they screen and place a new tenant for me, they get $1,000 at that time again, on this example of a $2,000 rent, and I pay a $150 re leasing fee, meaning If they release the unit to that same tenant after, say, their first year or two lease expires, ask your manager if they do markups on maintenance bills. For example, if they subcontract a plumber, and those plumber charges are $500 over to the manager. Does a manager tack on, say, 10% to that charge and then charge you $550 or not? Preferably, the answer is no markups like that can be another profit center for property management companies. However, what this manager does is instead, they have a trip charge of $55 for when their maintenance guy visits the property, and I was okay with that. That's reasonable. Also ask your property manager, if they do regular inspections of your properties, that means that they physically go inside the unit from time to time to confirm that everything is on right, that your tenant is trading a property with respect and that there aren't any deferred maintenance items cropping up, like delaminated flooring or some kind of water leak that needs attention. And this particular manager that I just decided to hire, they charge $75 a year for two of these annual inspections, so they physically go inside the unit every six months for a comprehensive check, which is a really good idea. And I love that they do that. Another tactic that I take when vetting a property manager is to ask them, you know, just a detailed question or two, really feel out their operations. It can be a good idea for you to do something like this. For example, I told this new manager that you know, in the past with other management companies or ones I still use, you know, I've seen managers they try to charge me for clearing a clogged sink drain. Well, I've let managers know I shouldn't. Not be seeing charges like that at all. In almost every instance, clearing clogs that should be charged to the tenant, not me. I mean, obstructions don't float up from water and septic systems. So in most cases, that is what's happening. So you know, the tenant is at fault for getting something clogged in there in almost every case. Now, one exception might be that, I don't know, tree roots encroach on plumbing or something like that. Okay? But the point is, when you ask about something like that, you're showing your property manager that you're savvy and you can't be taken advantage of. Okay? They have got to be the ones that pushes back on the tenant, sometimes not pushing on you every time, just because they feel like you're the one that can afford the expense more than the tenant. So that sets some expectations for the ongoing relationship. Also talk to your property manager about your communication preferences over time. Now, for me personally, I don't want an intrusive text message unless it's something that's pretty urgent. I prefer email communication, and the manager does not need to email me every time they need approval of expenses less than, say, $300 now, when you get more faith in your manager later, you might want to bump that number up to $500 or whatever your number is. Now, at times I do like to call my property manager on the phone. Sometimes you'll just get more information from them. This way, a better feel when I called a different property manager that I currently have, you know, one thing that they mentioned to be on the phone, they were like, oh, Keith, I've been meaning to call you. You've had a vacant unit for weeks, and we should probably lower the asking rent 50 to $100 All right. Well, I agree that we should do that, but I feel like the vacancy would have lingered longer at the higher asking rent had I not called. So really, this is the sort of light touch that you should give your properties over time, and it's the reason that why, even with professional property management, it's not completely passive. Instead, it's a little contact. And I also like to tell my property manager that I have mortgages on my properties. I have every property mortgaged, and always have. You can choose to have your manager pay your mortgage for you, or you can pay it yourself, and that's a bit about vetting and managing your property manager. And I hope some of those ideas go a long way toward helping you, really, they're the frameworks about what's important and establishing expectations with them. Up front this week a great guest and I will discuss trends in today's real estate investment market, and then we'll tell you about an event that you can join and how to specifically exploit an especially promising real estate opportunity that I have never seen before. That's next. I'm Keith Weinhold. You're listening to get rich education. Hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS, 420056, they provided our listeners with more loans than any provider in the entire nation, because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at Ridgelendinggroup.com that's Ridgelendinggroup.com. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund to help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest, year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too. Earn 8% hundreds of others are text FAMILY to 66866, learn more about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text FAMILY to 66866.

Rick Sharga 14:46

this is Rick Sharga, a housing market intelligence analyst. Listen to get rich education with Keith Weinhold and don't quit your Daydream.

Keith Weinhold 15:11

This week, we've got the privilege of hearing from a seasoned real estate investor. He himself is in single family, multifamily and commercial. He's also a licensed optometrist, and he practices on a volunteer basis, giving away his time and expertise there. In fact, he started investing in real estate while working as an optometrist and captain for the US Air Force, and that on the side, real estate investing allowed him to retire early from medicine, and today, he's an industry expert in real estate market analytics and how to use real estate as a means to create the lifestyle that you, the listener, desire for your family. Hey, welcome to GRE Zach Lemaster.

Zack Lemaster 15:54

Thanks so much for having me on again. It's good to be back, and always a pleasure to you know, talk real estate, I learn a lot from you in the content you put out. So I'm a big fan, and I appreciate you having me on.

Keith Weinhold 16:06

Well, thanks for saying that will. I'm sure we're going to learn from you today too. You've got such a great take and feel for the pulse of the residential real estate market. Tell us about your take, whether that's price, direction, rents, occupancy rates, supply, interest rates, demographics, whatever you think is important, tell us about what a real estate investor really needs to know in this era, Zach.

Zack Lemaster 16:30

man, and this could probably be a whole day conversation, Keith, I think you've done an excellent job covering this every time you put out information, so we won't belabor the point. But I guess my general take is that, you know, we're moving into a section in the the market cycle, I believe, where we'll probably start to see a little bit more of a normalization of a real estate market. I mean, it's just been so strange, right, to pull data points over the past two years, and actually, really four or five years of like, there's really some unique things happening, and there's a lot of people that have projections around how housing prices are changing and things like that. The only really thing, I think the big takeaway from the past two years is that home sales have plundered it. People talk about real estate crashes, real estate prices really didn't change that so much. And actually in a lot of the markets, like where we focused on they went up because, you know, supply and demand. These are areas where there's a huge discrepancy and there's an undersupply of housing, and those are kind of the areas you want to be in the path of progress. But one thing that we did see over the past few years is that there's a plummet in home sales, and that's both with less buyers because of the interest rates and less sellers holding on to their low interest rates. People are less likely to move in those scenarios. So I think we're going to see more of that as we start to see interest rates coming down over time, and we'll probably see more inventory hit the market, but also a new influx of buyers. So I don't know if there's going to be much of a change in terms of pricing, but generally speaking, I think there's from the investor side. A lot of what we talk about is retail, but with the investor mindset, which is your audience, I think what we will likely see is that there's probably a lot of people that were sitting on the sidelines that will jump into the market. There's going to be more buyer competition, of course, that drives prices. And one thing we know for a fact that we'll dive in deeper today about Keith, is that there are builders, because a lot of what we do is in the new construction, build to rent industry. And we could talk about why that is, but that's just a solid asset class to maintain consistent income, quality, tenants, growth and potential in both home appreciation and rents. But I think what we're likely to see is that over the past year, there's been a lot of builders giving out these crazy incentives because they've had excess inventory and they've had a slowdown on the retail sales, and it's been a really unique opportunity for investors to come in acquire good assets at with these crazy incentives of below market pricing, which we'll talk about, that is likely going to disappear over time, as they move more into the retail sales, and those channels start to open up more because there's more buyers and so in the niche that we work in, that's kind of the takeaway that I think is developing, really over the next, you know, A few months here.

Keith Weinhold 19:00

yes, this reduction in sales volume that we've had like you touched on which lower interest rates could help thaw. Almost everyone agrees that interest rates are going to fall more slowly than they spiked in rows in 2022 and you know what's funny, Zach, I can be in the front of a room talking about the condition of the economy in the real estate market, and I can say to the audience act, I can say, if you think there's uncertainty right now, a substantial amount of uncertainty, raise your hand. Adversely. Everyone raises their hand. But you know what? They did the same thing two years ago, and they did the same thing five years ago. So my point is, yeah, investors invest through the uncertainty. Because uncertainty always exists. It just shifts around as to where the uncertainty is. The listener might be trying to validate sort of one thing in their mind and get it to balance out right now. Zach, when we talk about this lowering of sales volume, and you mentioned builders that are sitting on some inventory yet we have a lack. Of supply. Can you balance that out for us and tell us how that is that some builders have inventory that they're sitting on that's supply, and yet we have an overall lack of supply.

Zack Lemaster 20:10

yeah, and I think the other key piece into that is lack of affordability, right? And so all those things kind of play together, just to tie up your last point. There's always uncertainty in real estate, but there's also the fundamentals of real estate. Keith, you know, this is a long time investor, investing all across the country, as long as you stay focused on the fundamentals, which, at the end of the day, is really investing in good locations with good teams, where you have positive cash flow, right? And you likely have a positive outlook from an economic standpoint for that market, to keep the house rent in to keep rents going up. Like that's really all there is to this to be successful long term that can exist in any market cycle. So I just encourage people to stay focused on that. But ultimately, your question about inventory supply, we talked about big things of like lack of inventory. I mean, we have a deficit of I think the last stat I saw was seven and a half million houses, you know, deficit or something like that, but that's really on the global economic picture for the US, right when we break it down to the kind of the micro economic scale with each individual regional market, because we work with regional builders as well as national builders, and we're also builder. We also put up our own houses as well to a somewhat small scale, but a lot of those builders started the houses that are now completed, you know, at this point, sometimes six months ago, more likely 12 to 18 months ago. And they had anticipation as the Fed was talking about interest rates lowering, you know, they maybe were planning an X amount of sales for those exact houses. However, from the retail standpoint, there really hasn't been that movement. So we still have a lack of homes that we need, but we also have a lack of people that can buy those houses, because there's a lack of affordability, right? And all these builders also have X amount of houses that they sell to institutional buyers, the blackrocks and some of these buyers that will come in in and we'll talk about why that's relevant to us and how we've pioneered our way into operating like one of those for the individual investor and bringing those same buying incentives to the everyday investor. But there's also been a large decrease on investor activity from an institutional level buying. So just because we have a reduction in inventory and we have a low supply does not necessarily mean that we're just gonna, you know, builders can just sell all their homes because of that. There's a lot that plays into that, and you need to look at each geographic market. But ultimately, if you're looking at the fundamentals of investing in real estate, where you can still be, and we try to be below the meeting house price point, below that $400,000 price point, again, that's where we have the largest demographic big affordability issues right now. I think that's a safe place to be, right? Because you don't see the fluctuations that you do on the more expensive homes, the more expensive markets. I think you have the large, large demographics for both renters and retail buyers, and you also have more runway, right? More runway for prices to go up. So that's kind of our the niche area that we're when I'm talking about excess supply. That's the area that we're really focusing on.

Keith Weinhold 23:03

Oh, that was beautifully explained in how to tie that supply story together there. Zach, of course, there are so many ways to divide up the real estate market, one of those being that price tier. And typically for us as cash flow real estate investors, we look at a single family home. Yeah, it's going to be under 400k in order to generate income, I have an announcement to make here to you the listener on Thursday, October 24 one of our GRE investment coaches, along with Zach here, are co hosting GRE 's live event for new build turnkey income properties with zero money down. Yes, I'm stealing some of your thunder there. Zach, zero money down. Registration is now open at GREwebinars.com and the momentum has been building for this event that you can attend from the comfort of your own home. Tell us about what you'll be covering at our live event. Zach.

Zack Lemaster 23:58

yeah, and I'm very excited to do that. Keith, I appreciate you having me. Han, again, I think all the investors, if you're interested in new construction or just creative finance and some ways to make some unique deals happen, like you have to attend this webinar just to at least learn. First, we'll talk about different markets right now where we see the best opportunity. So if nothing else, you learn about some of the best markets to invest in. But really what we're going to unveil is how someone, regardless of where you live, geographically or your investing experience, how you can make a creative deal happen on a turnkey deal that you can get below market value and possibly buy with zero money down, or at least have a good portion of your down payment cover to really skyrocket your ROI. So this is a scenario, Keith, we really get to have your cake and eat it too, because you get a brand new constructed house. It's turnkey, where everything is done for you in a great market that has appreciation book on rents and prices. But you can also buy it with low to no money down and really be a creative investor. And I know that we're going to talk about all the details with that.

Keith Weinhold 24:58

Yes, let's talk more about. Out the potential for zero money down here. I mean, I think that's the most compelling value proposition with what we're doing next Thursday.

Zack Lemaster 25:08

sure. So we'll just go through a numeric example so people can kind of wrap their head around like what this entails. We already set the stage for you know why builders may have excess inventory. And what we do with our business is we partner with both regional and national builders, some of the largest national builders as well as as I mentioned, we build our own homes as well, but we partner with some of these national builders that have excess inventory in markets that we know are productive investment opportunities. A lot of these happen to be in the southeast, because that's where the population is growing, and we're seeing that's where favorable landlord legislation is and federal taxes and growth potential, all the things right, positive cash flow, but we focus on those areas. And we can go to these national builders, because as a group, you know, we buy hundreds of houses every single year, and we can basically approach them like an institutional buyer and say, we want the same access to those wholesale deals that you would sell to BlackRock, but we want that for ourselves, and we can pass that on to the individual investor. That's kind of the value add. But specifically, what we're talking about is a scenario where some of these builders will offer up to a 10% credit at closing. That is huge. And just to I mean, for someone that is just new, the real estate game is kind of learning about this is I've been investing personally for 15 years now, I've never seen things like this in any market cycle that's through multiple different market cycles, but I've never seen anything this attractive. So this is not normal. I want to say that's to start. But essentially, you can get up to 10% of a credit on a house that you can use however you want to. And so there's a few different ways that you can use this key. So if you're buying a $300,000 turnkey new construction home, you could, in theory, get $30,000 off and buy that at 270 of $30,000 of immediate equity. That might be a good strategy if you're looking to lower the mortgage payment on that or if you're looking to, say, refinance that property or sell it quicker, you have that immediate equity in that house, right? The other thing you could do with that 10% is you could use it to buy your interest rate down we have and that will get you below 4% you could literally buy your rates down into 3% with that much, if you want to put that much money into it, it'll cover your closing costs and buy the rate down significantly. So no matter what the Fed lowers, the rate to you are back actually down to one, 821, rates by buying your way there with that huge credit that obviously causes, you know, cash flow to skyrocket near ROI, to go way up. The third option that you can do is you can actually take that money, just get it back as a credit at closing. So if you're buying a house, say a $300,000 house, you're putting 20% down, which would be $60,000 on that house, you get $30,000 immediately back. That means you're into the house for 10% or half your down payment. That also skyrockets your ROI. So the point is, is there's a lot of creative things that you can do with these type of exciting credits, and they vary between five to 10% based on inventory, but they go up to 10% on some of these new construction inventory options. One last thing here, Keith, and this is hopefully I haven't lost anyone, but this is where things get really creative. As a company, we also work with different lenders throughout the country to bring the best financing options to investors. And we have a group of credit unions. They're all local to that geographic area that have Portfolio loans. Meaning these are not Fannie, Mae, Freddie Mac loans. These are loans they hold in house. These are true investor loans. You still have to qualify for them, but if you qualify, you can put as little as 5% down, meaning the they will finance up to 95% of your property. We have tons of investors doing this consistently, and you can do this on up to five properties, five investment properties, if you qualify. And so that means, in theory, you could buy a brand new construction house with a 5% down loan. You get a 10% credit back at closing that covers your down payment, your closing costs, and likely puts money back in your pocket. So that's not only buying a new construction, turnkey house with no money down it's actually getting paid to do so now there's a lot of economics to understand and cash flow, you know, with a high leverage and things like that, but that's a concept, and it's very exciting.

Keith Weinhold 29:09

Yes, that last option that you mentioned seems to be the most compelling. I know. You've got investors that are learning about this and have already taken advantage of that, and again, that last option is getting the 10% credit that you're getting from the builder, coupling that with a 5% down portfolio loan from a local lender, which effectively would give you 5% cash back at the closing table. However, your closing cost of prepaids might be something like 4% so really, in a best case scenario, not only are you zero money down, you're getting about 1% of the purchase price, or $3,000 in this example back at the closing table. Now, of course that's going to affect your cash flow, but you got to think about what's important to you. So when one thinks about what's important to them, as an investor, with some of those options that you laid out there, Zach, I really highlighted the last one. What are some of the trade offs, the pros and cons of choosing these different incentives that the builders are getting right now?

Zack Lemaster 30:05

I'm so glad you asked this, Keith, because someone could be very excited about the idea of no money down, but that may not actually be the most strategic benefit to them. The nice thing is that there's so much incentive to buy right now with these type of, you know, kickbacks, these these incentives that, like you can structure a deal that's specific to you in your goals. But I would really encourage the audience to understand what is your exit strategy, or what is the next three to five years? Why are you buying this property, and how to strategically apply that? And if you don't know, if you need some guidance through that, let us help you kind of understand the different scenarios, but I want to work backwards first and mention one more thing, the no money down option would be really attractive because cash flow is going to be limited. In that scenario, you still have a loan that's covering 95% of the house, right? You would expect it, and you don't have to only put 5% down, right? You can put six, 7% down. So it's, you know, maybe break even cash flow. It's up to you. But the investors that really like that option, including myself, is the people that want to grow and scale their portfolio and stretch their capital the furthest. They maybe don't care so much about cash flow right now at this moment, they know that cash flow will increase over time. But if you're someone who really takes advantage of the tax benefits of real estate, this is way to, like, honestly, without any money out of your pocket, just taking some action, you can create this huge tax benefit, right? Because if you're buying five properties with virtually no money down, and let's say those are each $200,000 properties, you could essentially buy a million dollars worth of real estate that you own and control 100% of and you get the huge, immense tax benefit. So if you're doing things like Cost Segregation studies, like we do, you can create hundreds of 1000s of dollars of tax deductions without any money out of your pocket, just being strategic this way. But let's talk about some of these other options, because that was a real question. Where would it make sense for people? So again, if you say that 10% on a $300,000 house, that's 30k if you wanted to take that as a price reduction right out of the gates, that would obviously lower your mortgage, that's going to lower the mortgage payment amount to allow you to cash flow more. But I think the real the strategy, or the play there, is that you have built in equity in a house. This means that if your plan is to maybe put a HELOC on the house, do a cash out refinance in a few short years, as that House continues to appreciate again, because it's in a growth market, you're just going to cut that time in half because you have built in equity or if you plan to sell it. I mean, there are some scenarios where you could turn around and almost like, flip this in theory. You could do it. If you really run the economics, they want to be hugely profitable. But theory could be profitable if you sold the house with, you know, even immediately, because these builders are still selling these houses at retail, setting comps at full market value. So if you have 10% and you're paying a realtor 5% commission, they're still closing costs. But you could, you know, net some capital, but better scenarios, probably, if you're holding it for two or three years again, letting it continue to appreciate, your option is to sell it, then you're into capital gains, or again, 1031 exchange it. You know that might be good option to have built in equity. Or if this is going to be a long term hold for you, and you're just like, I love this area where I'm investing, I want to maximize cash flow. I want to have a long term loan that has a really low interest rate, then actually applying the majority of that capital to buy your rate down. That's going to obviously maximize cash flow, and that's also going to lock you in on a 30 year fixed loan at a really low rate, maybe you want to buy the rate down. So that's really the two options. We see most investors either taking the capital back and using the zero money down option, or buying the rate down, because that's going to allow them to really cash flow well, and they're just going to hold that property for a long period of time and let real estate do what it does. Those are kind of the different scenarios. I think that makes sense for different investors and understanding where to apply this incentive. Sure, if you go for a high loan, to value loan at 95% or even 100% you really then pursue the infinite return strategy, have maximum leverage, or complete leverage in the property, have all the inflation profiting benefits magnified because you're borrowing more, but that scenario is going to reduce your cash flow. So it's all about what's important to you as a real estate investor, was that before you go, just tell us a little bit more. I think the listener is going to learn more on next Thursday's webinar, but just give us a bit more on property types, whatever else one might want to know. certainly. So this is mainly in the southeast, okay, so these would be markets like Texas, Alabama, Carolinas, Florida. We have some stuff in Tennessee, but, I mean, this is really the growth markets right where we have landlord friendly legislation, low taxes, we have affordability, but we have huge population trends moving to these areas. Those are the areas we want to be. Those are the areas where builders are building in because supply and demand. Those are areas where we're positioned for strong growth over time. Overall, our average rental increase is 6% year per year, and that's going back on data over the past decade. He's really good then, yeah, usually double national average there. So those are because we're specifically positioning ourselves in areas where. Where there's increase in rental demand and in population and economic growth, average home prices. I mean, we have new construction homes as low as 200,000 by the way. Side caveat, we also have some rehab homes that are in that 131 50 range that you can still use the low money down. Those don't have as high up incentives as the new construction do. But average price for new construction, two to 300,000 give or take. I mean, just buying them, if we're buying them with a conventional loan, with 20% down, you know, you're still looking at eight to 12% cash on cash returns. Let's just talk about the cash flow. So they're really good properties that cash flow well, which is hard to find today, and they're in good locations. I think that's really the main point I want to drive home as we finish up here is, these are single family residencies in good locations. You guys, I've invested, as you mentioned, in the nice century gave me, I mean, real estate allowed my wife and I to retire from our career paths as optometrist through investing. That did not happen overnight, but it did happen over a period of time, and it did take a lifetime, either, though, that's the thing I want to mention, over a short few years of intentional, dedicated investing, we learned that really focusing on growth markets and new construction houses allow for the best quality tenants, the most predictable returns and the best growth and rents and appreciation of the houses over time. To build equity, those are the kind of assets that we want to hold long term and will help you build wealth in a short period of time. So that's kind of been the direction of our business model. Is focusing on quality inventory in good locations with good teams that still have cash, good cash flow. But you mix in some of these incentives, Keith, and it's just like, it's a no brainer. And I do think this is the biggest thing, is sense of urgency here. This is unlimited inventory. This is not something that's normal, as I mentioned, and this buying opportunity that we're so excited about is not going to last forever, as we started this conversation, talking about the market shifting as interest rates continue to come down over time, that will continue to bring more buyers into the market and just less motivation from builders to offer these incentives. So guys, now is the time to take action and make really good investments now that will set you up for success for many years.

Keith Weinhold 37:03

The time is now. This is one of the best deals I've really learned about here in the recent past at all this could be of any benefit to it all. You really want to jump in on this, because, like Zach said, this won't last forever. Well, Zach, before I ask you for your closing thoughts again, for you to listen or be sure to sign up for GRE 's live event. This is for new build, turnkey income properties, potentially with zero money down. It is Thursday, October 24 at 8pm Eastern. Register at GREwebinars.com any last thoughts? Zach

Zack Lemaster 37:03

Keith, I just appreciate all the information you're putting out there, we are all thrilled about real estate as an asset class. It's been an interesting past few years. But again, just going back to the fundamentals, guys invest in good properties and good locations with good teams. And I promise you, if you do that consistently over time, you will reach financial independence or whatever financial goals you are striving to achieve. There's more millionaires or main real estate than the other asset class, and it's the most predictable Path to Wealth. There's no secret about that, but it does take consistency in any market cycle. So Keith, thanks so much again for having me on.

Keith Weinhold 38:12

Oh, those are great parting words, and you the listener, are going to get to talk more with Zach and one of our investment coaches. Next Thursday, it is live at the end, you will have a chance to have your questions answered in real time, in case you want to talk to Zach more. Hey, it's been great having you here. There's something in the market cycle there that we can really take advantage of. Builders have some excess inventory and see the money that they have tied up in them is something that they're paying a fairly high interest rate on to. And we have now partnered with some of the biggest builders, Lennar DR Horton and others, to get you this institutional grade buying power buying at scale for lower prices and better incentives, like Zach and I said, new builds in the southeastern US for purchase prices of 200 to 300k offering you up to a 10% credit at closing. So in a 300k rental single family home, you can then use as much as 30k and choose what you want to do with that. You could buy your interest rate down to 3% that's probably better if you're going to hold it long term or use on your closing costs and have some to use toward your interest rate. Or alternatively, you could just take it as a price reduction. A 300k property is now 270k maybe you can even enjoy the discount and sell it in the next, say, two to three years for a profit. You're likely not going to be immensely profitable that way, but you don't know what the market will do over time. All right, so it'll typically be a five to 10% credit, and that depends on the property that you seek here. All right, so that is the builder credit bucket there. And then, in addition to that, if you qualify, you have some good, say, credit and assets where you can get a financing option through local credit unions, and that is local to the area that your property is in that will extend you a portfolio loan. If you qualify, you'll learn about how to do this. And this means you could put as little as 5% down, and you can do that on up to five investment properties. Okay, so with those buckets, or those two incentives combined, you could then get a 5% down loan with a 10% builder credit so that 5% bank could cover your closing costs and even just put a little money in your pocket. You should sort of think of all of that as a best case scenario. You might be pretty excited about no money down, and you probably should, but, you know, attend the event and weigh the pros and cons and see if that is the right avenue for you. A lot of it comes down to what do you want to optimize your cash flow or your leveraged equity? This is an action taking time for you to get a good chance at being set up for financial success for years. I mean, it is opportunities just like this. I mean, you learn about these concepts on the benefits of real estate investing here on the show. And now here's something really tangible where you can get ahead. I mean, personally, for me as an investor, I've never had an opportunity like what we're talking about here. Before. If you so desire, you can own new build property and learn how to get it tied up at the event. Make sure to sign up and put it on your calendar. That is next Thursday, the 24th from the comfort of your own home, GRE 's live online event for new build properties in growth markets, potentially with zero money down. It is free to register, and as of now, there are spots available at GREwebinars.com Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

42:10

Keith Weinhold 42:38

The preceding program was brought to you by your home for wealth, building, get richeducation.com.

522: A Wealth Mindset in Real Estate Investing with Garrett Gunderson Oct 07, 2024

Firebrand speaker and author of “Killing Sacred Cows”, Garrett Gunderson, joins us to discuss wealth mindset and value creation. Also, Keith touches on the impact of falling interest rates on various loans and the economy noting that lower rates can benefit savers and investors.

Historical data shows that home prices have only fallen 6 times in the last 83 years, signaling the rarity of significant price declines.

Learn about the Rockefeller method, which involves using trusts and whole life insurance to preserve and grow wealth.

Garrett advocates for investing in real estate, businesses, and intellectual property rather than mutual funds or ETFs.

DM Garrett on Instagram to receive a free copy of his book on the Rockefeller method.

Resources:

GarrettGunderson.com or

Alon Instagram @garrettbgunderson

Join our upcoming GRE live event right here! - ‘New Turnkey Properties with ZERO Money Down’ on Thursday 10/24.

Show Notes:

GetRichEducation.com/522

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GREmarketplace.com

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RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:01

Welcome to GRE. I'm your host. Keith Weinhold, talking about what falling interest rates really mean to you. 10 years of the GRE podcast, politics are overrated. How often do home prices fall? The latest in AI generated podcasting and then wealth mindset and wealth preservation all today on get rich education.

00:27

Corey Coates 01:12

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 01:28

Welcome to GRE from Evansville, Indiana to Victorville, California and across 488 nations worldwide for an entire decade of your life now, this is Get Rich Education. I'm your host. Keith Weinhold, what does it mean that we're in an era of falling interest rates from the recent peaks, rates of all types have fallen. Mortgage rates have fallen. The Fed funds rate has fallen, and that prime rate has fallen too. I mean the prime rate that you pay, that's basically the Fed funds rate plus 3% and why the prime rate matters to you is that can affect credit cards, home equity loans, automobile loans and small business loans, every one of them down, down, down. So to any savvy investor that knows what's going on in the 21st century? This can mean celebration for your wallet, for your finances. And look in old days, lower rates, that would be bad news, not good news. And why is this? Well, in olden days, and some people still have an outdated mindset, lower rates are bad because savings accounts used to make sense back in the day, and lower interest rates means lower rates for savers on their bank, savings accounts. Yeah, those 5% online only savings accounts are going to four and a half with the Fed's half point rate cut last month. Well, 100 years ago, you could be a saver. That made some sense, because their interest rates could reliably beat inflation over time, but not today. Today, since inflation transfers wealth from lenders to borrowers and inflation redistributes wealth from savers to debtors. For those like us that understand this and act accordingly, we are indeed the beneficiaries of lower interest rates. Now, there are other effects out there in the economy. Cheaper loans could lead to more m&a activity, more mergers and acquisitions that can benefit investment banks like your Goldman Sachs that facilitates those transactions. Well, what happens to real estate prices amidst lower interest rates? What happens is that they tend to rise now here on the show, you remember that since 2022 I have discussed what has surprised a lot of people. Amidst rising interest rates, the environment that we used to have, home prices tend to rise. And it has happened again. When mortgage rates tripled, prices kept right on rising. So you might wonder, well, wait a second, which is it or I'm confused, amidst rising interest rates, home prices rise and amidst falling interest rates, home prices rise too. And the answer is yes, look at history over hunches. To our newsletter readers, I recently sent you that great chart, a table, I guess it showed the national home price, rate of appreciation or depreciation for every single year, going back to World War Two and from 1942 until today, those 83 years, how many times do you think that home prices fell over the last 83 years? There were exactly six, six of the last 83 years, only six where home prices fell. Paradoxically, interest rates don't have much to do with home prices, and this is all per Case Shiller statistics. Over the last 83 years, there were only six down years. 72 were up. Five were even. And of those six down years in the last 83 five of the six down years were tied up in a once. I mean, it took a once in several generations confluence, a cataclysm of events to occur during the global financial crisis, 2007 to 2011 all at once. Back then, it was a housing supply, surplus, disgustingly lawless mortgage market, cheap credit and a preponderance of debt in the banking system since World War 2, 83 years ago, there was only one other year when home prices fell, that was 1990 when they fell by 1%. If you're waiting for Home prices to fall substantially, it is super unlikely that that is going to happen. Just look at history, and today's market has more than the housing shortage in loads of protective homeowner equity, which means low delinquency rates, and we have permanently inflated higher prices baked into replacement costs of all kinds, land, architecture, engineering, permitting, regulation, labor, building, equipment, construction materials all over the place, but us, you know, as real estate investors, we might be more interested in rent appreciation than prices just four years ago, you know, just then to pay $2,000 to rent a single family home. I mean, that was quite a nice place in the Midwest and South. And today I have modest single family rentals built 50 years ago that are about 1200 square feet, and now they rent for $2,000 $2,000 a month's rent that is common today, and we are rooting for rents to appreciate faster than home prices. And if you want to get our newsletter, you're probably on that list by now, and reading it, I just send some of the best charts in real estate maps to you. You can sign up free right now. Just do it while it's on your mind. Text GRE to 66866, that's text GRE to 66866, for our Don't quit your Daydream Letter. Political season is heating up. We are at a time where we are one month from a general election, and that means we're electing a new president, vice president, 1/3 of the Senate, the entire house of representatives and various state and local officials. Yes, politics matter. Politics affect real estate. So why don't I discuss this more here on the show. Well, I explained that to you a while ago. It gets divisive, and it rarely affects people as much as they think. And as you know, I avoid even using words like Democrat, Republican, left, right, conservative and liberal. And why do I do that? Because they are divisive terms. The problem isn't so much politics. It's when people get infected with the partisan mind virus. Yes, they put party over country. For example, a partisan political instigator will swear to god that the economy is great now, but as soon as, say, a different party wins an election, even if the economy is the same, although now say that that same economy is awful. In fact, a couple years ago, I quit my job as a writer for a publication that you've heard of before. I no longer contribute to them. They put party before country, in my opinion, I wrote an article for them about two years ago, and my article made it sound like an eminent recession was a question, not a foregone conclusion. Well, the editor let me know that their consensus of writers feels like a recession is eminent and that I need to change my article to reflect that that's because they don't like the administration that's in power, so I quit rather than edit my article. I mean, if you just ask an American the question, this question, do you wish that America were less divided? Well. Any sane person would answer that question, yes. Well, then why would you go attach divisive labels to the other side and attack them? It makes no sense. That's where the division comes from. So really, it ought to be about solutions and ideologies and not political parties. So this is another reason why, during political season, I don't play those games, and we stick to investing the economy and wealth mindset. I mean, virtually no other country in the world drags out their presidential election cycle this long. I mean, it's like a year and a half. Remember all those debates last year and names like Nikki Haley and Vivek Ramaswamy that were in the news all the time. I mean, other countries get this entire process over with in six weeks. Let's take a page from them, and that way we can have more constructive things in our news cycle. Well, I am coming to you from the makeshift mobile GRE studio today, like I do some weeks, because this morning, I woke up in reading Pennsylvania. Reading is, in fact, my birthplace, and besides being the pretzel capital of the United States, one way that you know about reading is from the Reading Railroad property in the board game Monopoly. Yeah, it's one of the properties that you can buy and, I guess, collect rent on. And, you know, here we are a real estate show. So maybe it's appropriate that the namesake of my birthplace is immortalized as a property on America's best known real estate game. And it also might be appropriate that I'm back here because the 10th anniversary of the launch of this show is nigh this coming Thursday, on October 10, 1010, it will be 10 years since episode one of this show. And yes, the math, I suppose, checks out, because there are about 52 weeks in a year, and you are listening to episode 522, right now. Well, listen to this. This could blow your mind. Have you heard an AI generated podcast? And I don't just mean sort of where a robot reads a blog in monotone and then you listen to that audio file that's embedded in the article. No, that's not what I'm talking about. Here's what I mean. A few weeks ago, I learned that macroeconomist Richard Duncan, who was the first ever guest on this show back in 2014 Gosh, all these tie ins to GRE 's origins today? Well, Richard published some PDF charts, and he uploaded them to notebooklm.google.com, that's how you find this. And he clicked generate audio overview, and within three minutes, it had created a podcast with two virtual people having this pretty intelligent, engaging and even humorous conversation about his presentation on interest rates. I mean, wow, just listen to the first minute or minute and a half of this AI generated podcast here. And again, this is from about a month ago. So they're talking about the upcoming Fed rate cut that did indeed happen.

13:23

All right, ready to dive in. Today, we're tackling the big question everyone wants to know, will the Fed actually cut rates on September 18? It's the question on everyone's mind, for sure, and more importantly, for our listeners, what's it going to mean for them to help us unpack this whole thing. We're looking at this report. It's by economist Richard Duncan, called why the Fed will cut September 12, 2024. Duncan always brings unique perspective. He cuts right to the chase, which I appreciate. right! So let's jump right in. Duncan starts by talking about inflation, which, let's face it, we've all been feeling the heat from this past year. Yeah, it's been a wild ride. Inflation hit a pretty brutal 9% last year. I think my grocery bills are still recovering. Oh yeah, tell me about it. But the latest number shows down to 2.5% that's both by the CPI and importantly, the PCE Price Index, right? And that PCE is the one the Fed really keeps their eye on, exactly, which is why I wanted to ask you about that. Why is the PCE like the golden child for the Fed, why not just stick with the CPI? Everyone knows that one. well, It's all about getting the most accurate picture of inflation. Think of it like this. The CPI is like taking a quick glance at prices. You know, just a snapshot in time. Okay with you, but the PCE, that's more like a movie. It captures how our spending habits change as prices change, and that gives the fed a better look at those underlying trends driving inflation. So it's like the CPI with a little bit of a crystal ball. It's trying to anticipate what's going to happen. It's got it okay? So inflation seems to be cooling down, which is good news, right?

Keith Weinhold 14:56

Gosh, that's just really good, a totally realistic sounding AI generated podcast just from some PDF files. The macro economist Richard Duncan uploaded remarkable and you know that the quality of that is only going to get better. That's probably about as bad as it's ever going to be right there. And in fact, in another 10 years, listeners could find it rather cute or quaint that we find this remarkable today. A big thanks to Richard Duncan for allowing us to play that and also expect Richard to be back here with us on the show again before the year ends, and here on the 10th anniversary week of the GRE podcast, you know, it makes me wonder how expendable my job as podcast host is going to be. I hope that I'm here with you in another 10 years, and I completely plan to be. Well episode number one of the get rich education podcast back from 2014 is called your abundance mindset. So it's apropos to visit a mindset topic today I'm going to do that with firebrand Speaker This week's guest, Garrett Gunderson. Here shortly, do you want to live a life that is small and safe and sheltered? I doubt that you really do, but you know, safe decision after safe decision, that's what most people end up doing. Do you want your kids to live a small, safe, sheltered life? I mean, most parents want safety for their children, but they're going to have an outsized impact on others when they study and then take the right risks. We're discussing those types of wealth creation mindsets with Garrett. He's a really talented guy. He was last with us six years ago. He's done some stand up comedy. Many have remarked that Garrett looks like Jesus Christ. He's the author of some popular books, including killing sacred cows. Let's talk to Garrett. This week's guest is a pretty well known author and speaker. He helps you make, keep and grow your money to help you live your best life. He's an especially dynamic speaker, public speaker, and I'm confident that you'll be able to hear that on the show today, because he has a great knowledge base, and he speaks with this conviction on topics that make him so compelling. Hey, it's been a few years. Welcome back to GRE Garrett Gunderson.

Garrett Gunderson 17:38

good to be back. I thought that was a very honest, like, pretty well known, like, I'm not really well known pretty well. That's just enough to annoy my wife. Like, I'll be going through an airport and someone come over and talk to me, and she's like, ah, but I love it, dude. I love conversations with people that I don't know, and I just get to meet because if they engage in my work, it gives us a chance to connect. And sometimes it makes me look cool to my kids, which is always a good thing. You know what I'm saying, like my son will be with me and someone say, hey, love killing sacred cows, or, Hey, are you that guy on YouTube? I'm like, it could be me, or you might be thinking, I'm Jesus. You know what I'm saying. I look familiar, though.

Keith Weinhold 18:14

Yeah. Now you can tell your kids that I said you are pretty well known. And you know, Garrett, you're also a really keen and perceptive person. You can tell if somebody's poor within 60 seconds of what they say. Tell us about that.

Garrett Gunderson 18:31

Oh, man, that video has so much hate. Man. I put that out like it was my son's filming, and I'm just sitting in our kitchen, and I was just thinking about a conversation I had earlier that day, and in the conversation, it was like, more about complaining about the world, saying that they couldn't afford things, saying they didn't have the time, blaming everyone for their situation. And I was like, man, it's pretty easy to tell. And 60 seconds, I mean, I guess maybe is a rash statement, because maybe it takes three minutes or 300 seconds, like five minutes, and get deep enough, but you just find that there's a certain language to poverty, and whether that's just poor in spirit, whether it's poor in mind, or whether it's poor in the bank account, typically it's devoid of personal responsibility. It's leading the levels of inspiration. And this isn't to say that if you're wealthy, that you only speak inspiring conversations. I mean, I complain sometimes that happens. I get frustrated. I get disappointed in myself for not being nicer to a customer service person and like, have to really manage that sometimes. But ultimately, it's this language that is almost like a Marxist type of language, you know, that comes from a place of like, I want this. I'm owed that we deserve this. And I'm like, wait, wait, wait, like, who's going to produce that? And so it's something that's a fairly easy thing to detect with just a few questions. Like, if I'm given one question, I can tell in 60 seconds for sure.

Keith Weinhold 19:57

Yeah. I think a lot of times people start complaining. About something. People find money a scarce resource when they start, you know, complaining about gas prices or something like that, I think that's just really a classic one. It tells me where they're coming from. I mean, it tells me what their mind is occupying.

Garrett Gunderson 20:12

Right. And if we're not excited about our future, if we're not developing our skill sets, if we're not really engaged in the world of value creation, it's easy to get frustrated about tax it's easier to get frustrated about inflation. It's easier to get complaining about interest rates or loan rates and all those kind of things. But what I find is the best way to outpace inflation is through skill set, and if we truly invest in ourselves and invest in other people so that we increase our quality of life and our enjoyment of it along the way, we increase all the skill sets that matter. You've mentioned that I'm a decent public speaker and that I'm articulate. That comes from going through writing courses and hiring speaking coaches and just getting the reps and doing comedy and the things that will help me to become a more effective communicator. And then it's really about becoming a better cash flow investor. I know that you teach people a lot around, you know, real estate and investing, and that's one of the big three assets in my mind, that helps people generate and create cash flow. But most people are trapped in this indoctrination where they set money aside and forget it. They wait for 30 years and hope for the best. They're very one dimensional of just paying off a loan and then hoping the retirement plan is going to get them there. And that's why they end up in this mindset where they're like, oh, I don't feel in control, because the outcome of my income is something that's dictated by the economy and not my own willpower, not my own skill set, not my own value creation. And I think that's why retirement is such a bad and faulty notion. My main statement in life is create the life you don't want to retire from. Now, I get it. In the industrial age, people need to retire because they were being worked to death and they weren't living for very long. It was an immensely valuable concept back then, a blue to collar world back then? Yeah, right. But in today's world, what if people just invested more time in selecting your career that mattered or had enough faith and took a leap on themselves to start becoming a better investor or start a business or be an entrepreneur where they get upside potential, instead of just begging for safety and security, instead of just wanting the entitlement of benefits, instead of just trading time for money, like that's an industrial age concept that we watched, whether it's our parents or grandparents, go through trading time for money, but we're in a world where that's not required any longer, because we do have technology, we do have artificial intelligence, we do have these things that are starting to displace The jobs that no one really wants to do because it beats down the body, and there's a lot of opportunity for those that are willing to grasp it and go for it, but it comes down to one key thing, value creation. And if we're going to be devoid of value creation, it's easy to tell in 60 seconds whether someone's poor because value creation was not part of their concept or their purview.

Keith Weinhold 22:40

And value creation is about expanding that upside. And a lot of poverty mindsets just complain about the downside their expenses. And you can't really do that much about your expenses. You can only lower them so much. Anytime you do, you're probably diminishing your quality of life anyway. And really, I think a lot of this mindset of lack Garrett comes back to the fact that, simply, most believe that money itself is a scarce resource. I probably believe that at one time, when I was younger, maybe you did too. And as I like to say, although I wasn't the first person that said it, the only place that you get money is from other people. So most people, which tend to be employees, think their way to increase their income is only if their employer gives them a raise, or maybe if they find a new employer that pays them maybe 10% more, or something like that. So they're limiting their upside over there because they think money's a scarce resource, because it's got to come from an employer. Somehow they're not thinking about, why don't you really expand your upside and start an Amazon business, or rent cars through Turo or Airbnb rentals, or what we do here at get risk education, help people with long term housing rentals. So it just kind of comes back to the fact that, you know, people's mind is closed off, and they just simply want to believe that money is a scarce resource.

Garrett Gunderson 23:57

They're adding to computer screens as we talk about this, you know, I mean, there's never been more money in the world than there is today. It's the most money there's ever been. We keep adding it. There's, you know, so much of it out there. But even if they stopped printing it, or they stopped adding it to balance sheets, there's an infinite number of times they can exchange hands. So if we use it to buy computers and clothes or food and shelter or entertainment like comedy and concerts, the more times money exchanges hands, the more values created. It's exchange that facilitates and creates wealth in the way that we create exchanges, serving others, solving problems and adding value. And here's the deal, we can have two parties do exchange with one another and both end up wealthier. It doesn't need to be a win, lose transaction. As a matter of fact, when people transact, they agree that what they bought was worth more than their money, or if they sold it, they agree that the money was more than what they sold. Otherwise they would have kept it. We don't do equal exchange. I wouldn't give you $1 for $1 right? There's no reason to exchange. It's unequal, which means, if you can provide something more efficiently than. I can for myself. I can pay you, which frees up my time to do what I most efficiently and effectively can do. I did triathlons because I was an idiot back in the day. Sorry for those triathletes, which is like a lot of work, man. And I don't love swimming, but I remember going to buy a triathlon bike. I just bought, like, a road bike. It was a big upgrade from having a huffy from Walmart, you know, like, oh, this $4,700 this is a while back, but it was carbon fiber. It was, like, amazing. And I thought, you know, I could never build this. So this $4,700 is actually really cheap, because I'm giving him $4,700 to build something that I can then go build something like write a book or do some consulting or do a speech that can inspire someone. And so that exchange was valuable. It's like if you bought killing cigarette cows. For me, you're saying that it was worth more than $20 I'm saying it was worth less because I already have the knowledge in my head, and so we both can end up wealthier. Unequal exchange is what facilitates wealth. What it lets us do is tap into our best abilities and tap into other people's best abilities. And that exchange ends up growing over time, and the more times money circulates because of Good Services and experiences, the more output there is. So look at today. Hundreds of years ago, if you wanted to listen to music, you had to hire a quartet. Now it's free for almost anyone, if you have any device of any sort, if you're willing to listen to a commercial here or there, you can listen to anything that you want. For the most part, you don't even have to pay for it. So think about that advancement. If you want to be anywhere in the world, you could be there in almost 24 hours or less, back in the day, that would have taken, you know, years for that matter. I mean, we have so much more wealth because we keep building upon previous wealth, previous ideas, and those blueprints we continue to grow from with new innovation and ingenuity. Therefore, the quality of life for someone that's middle class today is infinitely more than the middle class of hundreds of years ago, the amount of people that are hungry today versus years ago, even though we have more than 8 billion people on the planet, has gone down as a percentage, not up as a percentage. That's because of velocity and exchange. It's because of this notion that money's not scarce and resources have the way to be replenished, as long as we're stewards. Now, if the bison, if we kill too many of them, then they can't replenish, right? But if we manage that properly, you could actually eat the bison, use the skins, do all that kind of stuff, and still have that exist in the future. These people that don't believe in that believe that there's like a finite pie, that if one thing's gone, it's gone forever, not understanding value exchange, reproduction, apparently, and basic science either. And again, we can overdo those things and damage an ecosystem. So there is a balance.

Keith Weinhold 27:36

Yeah, that's right, when you talk about value creation, then you're really not talking about a person going out and trying to get their piece of the pie. Really more accurately what you're talking about. Here are ideas for expanding the entire pie.

Garrett Gunderson 27:51

Spam the pie. Expand your means you can budget and reduce. You said it eloquently. You said, Hey, there's only so much you can do in reduction of expenses before it just starts infringing and taking away from things that you value in life. There's a finite game there, but the expansion gain through co creation, through collaboration, instead of through competition, is absolutely an infinite pie that continues to grow as we add more value, as we serve more people, as we solve bigger problems, as we more deeply impact the people that we impact as we reach more people, these are things that can lead to more dollars. So I have this thing called the value equation. It's our mental capital, ideas, knowledge, wisdom, insights, strategies and tools multiplied by our relationship capital, people, networks, organizations, communities, friends, family, mentors, equals our financial capital. So financial capital is a byproduct of our stewardship of our mental and relationship capital. And the bridge between mental relationship capital is what we call business, or we call investing. So ultimately, Money Follows value. How do we add more value? Have a better idea. Impact more people. More more deeply. Impact the people you currently serve. Collaborate and offer more like it's an infinite pie and an infinite game. If we play it that way. We're talking with speaker and author Garrett Gunderson, about the mindset of wealth creation. More. We come back with Garrett. I'm your host. Keith Weinhold.

Keith Weinhold 29:01

hey, you can get your mortgage loans at the same place where I get mine at Ridge lending group NMLS, 42056, they've provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at ridgelendinggroup.com That's ridgelendinggroup.com. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings if your money isn't making 4% Percent, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work. With minimum risk, your cash generates up to an 8% return with compound interest, year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too. Earn 8% hundreds of others are text family 266, 866, learn more about freedom. Family investments, liquidity fund, on your journey to financial freedom through passive income. Text, family 266, 866,

Hal Elrod 30:54

this is Hal Elrod author of The Miracle Morning and listen to get it rich. Education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 31:10

welcome back to get rich education. We're talking with firebrand speaker and author Garrett Gunderson. You can learn more about him at Garrettgunderson.com. Garrett before the break, we were talking about the mindset in opening up one in order to create more wealth over time. Here, a lot of times, one way we talk about that is, don't just get your money to work for you. Get other people's money to work for you. You could actually use other people's money ethically three ways at the same time, in real estate, using the tenant's money for the income stream the government's money for generous tax incentives, and then the bank's money for the leverage, which is actually a greater wealth building force than compound interest. That's one example of how we do that here. But when one has become successful, oftentimes they want to make sure that that's lasting. They want to build a legacy, something that they can carry on. And I know you articulate that through the Rockefeller method. So do you want to tell us more about that?

Garrett Gunderson 32:05

I wrote this book. What would the Rockefellers do back in 2016 this study between really wealthy families versus their wealth lasted, versus wealthy families that decimated it, and the best study was really the Vanderbilt because they had more money than the US Treasury. One the railroad family, yeah, transportation. And you know what? They destroyed that Cornelius died, and then his eldest son doubled the estate nine years and then he died, and that was the last time their estate grew. It started to decrease after that. And 54 years later, the first Vanderbilt died broke, and so the last Vanderbilt family union didn't have any millionaires at it. I know everybody knows about like Vanderbilt University. They donated like, a million dollars to get that started. But, you know, that was pretty inconsequential compared to their overall net worth. But they didn't have a formula or format to create sustainable wealth. They own 10 mansions in in Manhattan. They don't own those anymore. They own the breakers in Rhode Island. The state of Rhode Island owns that now. So they lost this massive amount of wealth where the Rockefellers are just entering their seventh generation of passing on, well, seven generations, wow. And people that worked for the rock bellers, like the executives, they're still passing on, well, for this generation after generation. And most people don't make it past the third generation. And we could look at, you know, people like Walt Disney. We could look at people like JCPenney. We could look at people, you know, like the the Kennedy family and so many others that have used these two things to really create sustainable wealth. Number one is they use trust. The Rockefellers coined the term own nothing and control everything, whether that's a revocable living trust for people who are just starting out and don't have a substantial amount of wealth, or a domestic asset protection trust for those that have a decent amount of wealth, those are the two main popular ones. There are some offshore trusts. It gets onerous and complicated once you go offshore, but it does protect your assets. The second piece is using whole life insurance, so they have this death benefit that's on the insured, and they put that on their heirs, so that every time an heir dies, it replenishes the trust, and potentially even grows it, because there's these threats to the family wealth, there's taxes, there's inflation, there's interest rate fluctuations or market, you know, economic turmoil. So what they're doing is they're creating that level of stability, and they give them preferred interest rates to borrow from the trust versus a bank. So now your family can actually earn interest instead of paying interest. And yes, if your family is paying interest, they're paying it back to their future generation at Preferred rates. And so you could be one generation away from never needing a bank again and actually being able to capitalize on deals a whole lot faster. Specifically, we use whole life, because it transfers the risk to the insurance company. There's six or seven companies that are participating, mutual companies that have been around for over 150 years, always paid dividends. It protects your cash value from taxes. It protects it from liability and bankruptcy in over 40 states, fully and partially in every state. So what happens is, for an asset allocation decision. You can start moving some of your fixed income portfolio to this and have a better, more robust benefits type of situation, and then actually start to implement this Rockefeller method so that you can create generational wealth.

Keith Weinhold 35:12

All right, so the Rockefeller method using trusts and whole life insurance to preserve and grow your wealth, so as one's building their portfolio, amassing wealth, increasing income streams as they go along in their investor journey. Is there anything that they should keep in mind as they try to integrate some of these things from the Rockefellers?

Garrett Gunderson 35:12

Yeah, a lot of other insurance people try to sell these index universal life policies, but those won't work because they have too many levers of risk, and especially when you're building cash value, you might use that cash value to buy real estate. Then you might use the rental income to put the money back into the policy so you can buy more real estate in the future. So it becomes like a medium storage shed or unit for your cash that's protected, but now it comes with the death benefit, which, here's one example, for a real estate investor, instead of just, you know, rolling it over to the next property and rolling it over to the next property when you eventually sell, you can use a charitable trust. And a charitable trust, you can donate that highly appreciated piece of real estate, get a partial tax deduction, sell it and fund the trust and pay zero tax on your gains. No matter what your basis is, there's no tax on the gains. You're the first beneficiary of the trust, meaning you can take an income between 5% and 50% from the trust while you're alive, depending on the underlying assets, and then when you die, the charity keeps whatever's left over. But if you have a life insurance policy that will replenish what that donation was, therefore giving you 20 30% or more increased cash flow with an asset by making a synergistic allocation. Now, that's a lot of information in a short period of time, but it's more about planting seeds. And don't worry, I'll give everybody a copy of the book at no charge, so they can kind of read it at their own pace, or you can listen to it at their own pace, versus me condensing it into just a couple minutes.

Keith Weinhold 36:56

Oh, thanks. All right, well, we'll learn more about that resource at the end that sounds like that can be really helpful to a lot of people. And I guess Garrett, even though you're not as real estate ish as me, as we wind down here, you know, I think the place that you and I find the most common ground is we often say and help people with the things that sort of fly in the face of conventional guidance. I mean, you really just don't have to think about it that much more than if you just do normal stuff, average, mediocre stuff, you're only going to have a normal, average, mediocre outcome. So can you tell us about any last things that can help get people thinking differently and debunk some of this conventional guidance that really will never help get you much above lower middle class?

Garrett Gunderson 37:40

Yeah, if you're putting your money in mutual funds and ETFs, you're making a bunch of other people money. I mean, the big three is you want to focus on generating cash flow so you can create financial independence. Because if you have enough cash flow from assets to cover your expenses, every active dollar can build more assets. That's an exponential benefit to you. So now that you don't have to be forced to work, you've got a lot more freedom. And the big three for me are real estate businesses or intellectual property, which is kind of, you know, something that is part of business to a degree, but I consider a different asset class. Those are the big three. I have no money in the stock market. I have money in my businesses. I invest in myself. I invest in my vision. I invest in a team, instead of investing in things that I have no control over and I don't get cash flow from and that the economy can change, or that Wall Street's making money on whether I make money or not. So that's just one notion that I think we could probably, you know, agree, flies in the face of what everybody's teaching. That's the masses. But when you look at the wealthiest people, it's how they're implementing and what they're doing.

Keith Weinhold 38:39

And I think another place that conventional guidance really tells people to prioritize is paying down debt or paying off debt. I mean, making your debt free scream at age 34 you know, maybe that's not so bad, but maybe not. I mean, did paying down low to moderate interest rate debt and making that priority sacrifice your lifestyle and your family's lifestyle the entire time while you were doing it, and did it have a steeper opportunity cost, because you were not investing those dollars in things that can earn a greater return than their interest rates were they're using some of the vehicles that you talked about. So, you know, I guess what I'm getting at Garrett philosophically, one way I said it, is that the risk of delayed gratification is denied gratification?

Garrett Gunderson 39:23

Yeah, I mean, if we become sacrifice, how do we ever overcome that habit? I'm I'm scrimping, I'm sacrificing, yeah, I'm deferring. And then one day, what you're supposed to flip the switch be like, Okay, now I'm abundant. I'm gonna enjoy this money that doesn't happen. So that habitual notion of reduce, cut, eliminate, no one shrinks their way to wealth. It's a game of expansion and production. Yes, be efficient, be intelligent, be a steward, but don't become a miser, because misers, no matter how much money they have, never get to feel what it's like to live their richest life. It's always about elimination. Instead of enjoyment and utilization.

Keith Weinhold 40:02

Oh, that is just beautifully stated. I really can't say it any better than that, and that really brings it back full circle as to the best personal finance is probably growing your means rather than practicing living below your means for decades, and then you'll never get that time back. Well, Garrett, you've generated so many good educational resources. Why you've been the successful author and speaker. Tell us more about that.

Garrett Gunderson 40:26

Garrettgunderson.com is where a lot of those resources are. I write a blog like it's 2006 because I love to write and just get information out there. I've created a money persona quiz. So if you go forward slash tools on Garrettgunderson.com you can figure out what's the success or sabotage that happens subconsciously with how you deal with money. It's very informative and useful. I've written 10 books. I offered that if people DM me on Instagram, Garrett B, Gunderson, two R's, two T's, middle initial B and just say, Keith, get rich. Keith get rich. So I know it was on this program, I'll hook you up with the audio and a PDF of the book on me, so that you can hopefully just understand this Rockefeller method and improve your life and start building a legacy right now. Because if you're already doing real estate, that's great, let's make sure to preserve, protect and even perpetuate that wealth with some of the structures that could be integrated.

Keith Weinhold 41:17

Well Garrett, yeah, you have a lot of great resources and just a really wide spectrum of understanding of concepts all across a personal finance field. Is there any last thing you'd like to let our audience know about?

Garrett Gunderson 41:28

Just create the life you don't want to retire from. Design a life that you love. Create enough cash flow from assets to have that economic independence so you have choice and freedom daily of what you do and swing for the fences in that purpose, you know, that's probably the best advice that I could give.

Keith Weinhold 41:43

Why would you want to live your life any other way? Garrett Gunderson, it's been valuable as expected. Thanks so much for coming on to the show.

Garrett Gunderson 41:51

Thanks for having me.

Keith Weinhold 41:58

Yeah, a lot on both mindset and long term wealth preservation with Garrett Gunderson today, now, 15 weeks ago, on episode 507 you'll remember that episode called compound interest is weak, where I made a takedown about how compound Interest actually is not serving people. Leverage does serve people. Garrett also makes a takedown and critiques this myth about how people think compound interest builds wealth. A little review. There some comprehension from 15 weeks ago, compound interest has most people counting on the average annual return when they should be focused on the compound annual growth rate. A little review. Remember the average annual return means if you're up 10% one year and then down 10% next year that you broke even. That's the arithmetic thing. But that is a lie. The reality is in this CAGR, the compound annual growth rate, it reflects, if you're up 10% one year and then down 10% the next year, you're at minus 1% the geometric thing. And that's the reality, and that makes a retirement lifestyles worth of difference, and a retirement ages worth of difference like I thoroughly broke down for you in episode 507 coming up on the show here in future weeks, a familiar name like Tom wheelwright returns, and then new guests, like a former NFL player here on the show, if you want to reach out to Garrett Gunderson on Instagram for his best free resources, even the audio and pdf of his Rockefeller method of generational wealth preservation, again on Instagram, you can DM him at Garrett B Gunderson, he let me know later, all you have to do is send him my first name, Keith, and he will hook you up there. I'm your host, Keith Weinhold, and I am supremely grateful and even in awe of your devoted listenership for an entire decade of your life and mine, here's to another 10 years. Don't quit your Daydream.

44:21

Keith Weinhold 44:49

The preceding program was brought to you by your home for wealth. Building, get rich, education.com, you.

521: Terrible Predictions, "End the Fed" and Capitalism with Mises Institute President Dr. Thomas DiLorenzo Sep 30, 2024

President of the Mises Institute and author of “How Capitalism Saved America”, Dr. Thomas DiLorenzo joins us to uncover the current state of capitalism and if it still exists in America.

Earlier in the episode, Keith discusses the inaccuracy of economic predictions, citing examples like the 2023 recession that never happened, the negative impact of misinformed predictions on investment decisions and business growth.

Persistent housing price crash predictions have been consistently wrong despite global pandemics and higher mortgage rates.

Dr. DiLorenzo advocates for #EndTheFed to reduce inflation and restore free market principles.

Learn how voluntary exchange between buyer and seller through market prices communicates information and influences production.

Resources:

Learn more about Austrian economics and Ludwig von Mises through visiting mises.org

Show Notes:

GetRichEducation.com/521

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:00

Keith, welcome to GRE. I'm your host. Keith Weinhold, reviewing some terrible economic predictions and why it matters to you. Then the President of the Mises Institute joins us. Does capitalism still exist in the US and what would happen if we ended the Fed, today on get rich education.

00:24

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, who delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show. Guess who? Top Selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit getricheducation.com

Corey Coates 01:09

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 01:25

welcome to GRE from Syracuse, Sicily to Syracuse, New York, and across 188 nations worldwide, you're listening to one of the longest running and most listened to shows on real estate investing. This is Get Rich Education. I'm your host, Keith Weinhold, now a lot of media companies and pundits and influencers like to make predictions. Listeners like learning about predictions and by engaging just a little of that each of the past few years on one of the last episodes of the year. Here, I forecast the national home price appreciation rate for the following year, many media outlets, pundits and influencers have made terrible, just absolutely terrible, predictions about interest rates and other financial forecasts. Last year, a majority of Pro prognosticators firmly forecast six or eight Fed rate cuts this year, for example, well, we're going to have far fewer, and that's because high inflation kept hanging around. Then there's the 2023 recession that never happened, yet both Bloomberg and the economist actually published some rather ignominious headlines, as it turned out, they published these in the fall of 2022 Bloomberg, big headline was forecast for us, recession within year hits 100% in blow to Biden, well, That was false. That didn't come true. I mean, 100% that doesn't leave you any room for an out. And then also published in the fall of 2022 The Economist ran this headline why a global recession is inevitable in 2023 All right, well, they both believed in a recession, and they believed in it so deeply that it got fossilized. Well, an economic archeologist like me dug it up.

Dr Thomas DiLorenzo 03:31

We are going to die

Keith Weinhold 03:35

well, but I didn't risk my life like Indiana Jones did there. This archeology, it only involves some Google searches. Well, here's the thing. What's remarkable about America staving off a mammoth recession and leaving all the other g7 nations in the economic dust is the fact that merely predicting a recession often makes it come true. Just predicting one often turns a recession into a self fulfilling prophecy. Yeah, recession forecast headlines alone, they can spook employers from making new hires and slow down manufacturing, and it can also disillusion real estate investors from expanding their portfolios. Well, the US economy grew anyway, besides the farcical prognostications about myriad interest rate cuts in a quote, unquote definite 2023 recession that never happened. You know, there's also a third forecast that so many got wrong. And you probably know what I'm gonna say. I've brought it up before, because this hits our world, those erstwhile and well still ever present housing price crash predictions. I mean this facet of the gloom boom really ramped up from 2020 One until today, even a global pandemic, new wars and a triplicate mortgage rates couldn't stop the housing price surge and the rent surge. A lot of doomsdayers just couldn't see, or they didn't even want to see that a housing shortage would keep prices afloat. They didn't want to see it because they get more clicks when they talk about the gloom government stimulus programs also buoyed prices, and deep homeowner equity cushions will still keep prices afloat. Ever since 2021 here on the show, I've used that rationale and more to explain that home prices would keep appreciating, but that the rate of appreciation would slow down, and it has slowed down since 2021 see YouTubers tick tockers. They notoriously use woe begone housing crash headlines, because that gets more clicks and then some of the rationale behind this. The reasoning is just dreadful, like, what goes up must come down, all right? Well, this is like, why does it matter? Who cares about wrong predictions anyway? What's the point? Well, people become misinformed. People waste their time on these things and see no one loses money on dismal economic predictions. But the damage is done, because when investors don't act well, then they didn't get the gain that they should have had. Businesses didn't get the gain that they should have had when they could have made new investment and hired new employees sooner. And of course, a recession is going to happen sometime. They occur, on average, every five to six years. It is just a normal part of the business cycle will collectively these three faulty economic predictions, rate cuts, a recession and a housing price crash. I think if you bundle them all up combined, it could be as bad as one doomsday prediction about worldwide starvation or the Mayan apocalypse. Remember that the wide to K bug, the acid rain, even that the internet is just a fad that ran a buck 30 years ago. World War Three is eminent, robots overtaking humans, or how about running out of crude oil. I mean, we're definitely all supposed to have jet packs in flying cars by now, right? But yet, did anyone have the clairvoyance to predict the stock market crash of 1929 or September 11 terrorist attacks, or Trump's surprise, 2016 presidency or Bitcoin hitting 70k A while back, or the coronavirus. So really, overall, the bottom line here with predictions is that no one knows the future. Control what you can maintain equanimity, add good properties, gradually raise rent, reduce expenses, create leverage and expect inflation truly the best way to predict the future is to create it in just that way. Well is the USA capitalistic nation today. That's what we'll discuss later with this week's guest. When Chuck Todd hosted the show Meet the Press, he interviewed AOC about this. Yes, I'm talking about us. House Rep from New York, Alexandria Ocasio Cortez, what she say? You

08:34

have said you are democratic socialist. Can you be a Democratic socialist and a capitalist? Well, I think it depends on your interpretation. So there are some Democratic socialists that would say, Absolutely not. There are other people that are democratic socialists that would say, I think it's possible. What are you? I think it's possible. I think you say to yourself, I'm a capitalist, but I don't say that. You know, if anything, I would say, I'm I believe in a democratic economy, but.

Keith Weinhold 09:03

okay, well, I'm not sure if that clears it up at all. And I've listened to more of that clip, and it just makes things more confusing. But I think that most people have trouble drawing a line between capitalism and neighboring economic systems. Where exactly do you draw that line? I don't know exactly where to draw it. When I think of capitalism, I think of things though, like removal of interventionist central planning and allowing the free market to run with few guardrails. And then there's an issue like labor unionization. I don't really know about something like that. This is a real estate show. I'm still forming an opinion on a topic like that. In you know, some of this gets political, and that's beyond the scope of get rich education. The Fed was created in 1913 that central planning, its central banking from 1987 to. 2006 Alan Greenspan reigned as Fed chair. Those were his years, and he became even more interventionist. And then his successor, Ben Bernanke, maybe even more so with quantitative easing and such. Let's talk about, should they end the Fed and capitalism with this week's expert guest. You very well may have heard of the late, famed Austrian American economist Ludwig von Mises today, the Mises Institute carries on his legacy, and this week's guest is none other than the President of the Mises Institute. He's also the number one best selling author of how capitalism saved America and his newer book with a title that I love, The Politically Incorrect Guide to Economics. Hey, it's great to have you here. It is. Dr Thomas DiLorenzo.

Dr Thomas DiLorenzo 11:00

pleased to be with you. Thanks for having me.Th

Keith Weinhold 11:02

Well, Dr DiLorenzo, for those that don't know, just tell us a bit in an overview about Austrian economics and what Ludwig von Mises stood for.

Dr Thomas DiLorenzo 11:02

Well, Ludwig von Mises was the preeminent critic of socialism and fascism in Europe, and in his day, he fled the Nazis literally hours before the Gestapo broke into his apartment in Geneva, because he was the preeminent critic of fascism and socialism, and he was also Jewish, and so he had to get out of town. And he miraculously ended up after wandering through Europe with his wife in New York City, and he taught at New York University for many years, until he died in 1973 and but the Austrian School of Economics is a school of thought. It has nothing to do with, necessarily, with the Government of Austria, the country of Austria, just this the founder of a man named Carl Menger happened to be from Austria, but probably the most famous or well known among Americans would be Friedrich Hayek, who won the Nobel Prize in 1970s he was a student of Ludwig von Mises and critics of interventionism, critics of socialism. We teach about free markets, of how markets actually work and how governments don't work. And that's in a nutshell, that's what it's about. And you could check out our website, mises.org, M, I, S, E, S.org, you can get a great economic education. We have a lot of free books to download. Some of them are downloaded 30 or 40,000 times a month. Still, it's even Mises old books like human action, first published in the 1960s and so you can get a great education just by reading our website.

Keith Weinhold 12:42

Well, congratulations, that's proof that you're doing an excellent job of carrying on the Mises legacy into the present day, a lot of which is championing capitalism. Do we have capitalism in the United States today?

Dr Thomas DiLorenzo 12:59

I was an economics professor from 40 years before I got this job as President of the Mises Institute. And I used to say we had islands of socialism in a sea of capitalism at the beginning of my career. But now I'd say it's the opposite, that we have islands of capitalism in a sea of socialism. And socialism, this data is not defined anymore as government ownership. That was, you know, about 100 years ago, the socialism. It's basically government control of industry and in addition to government ownership. So the instruments of the welfare state, the income tax and the regulatory state, is our version of socialism, or central planning, if you will. And it's the Federal Reserve the Fed, which is a government agency that orchestrates the whole thing, really, it's a big, massive central planning industry that controls, regulates basically every aspect of any kind of financial transaction imaginable. They list in their publications over 100 different functions of the Federal Reserve. It's not just monetary policy. It's a big regulatory behemoth, and so that's that's what the Fed is. That's what I think we have today. A friend of mine, Robert Higgs, a well known economic historian, says our system is what he calls participatory fascism. And fascism was a system where private enterprise was permitted, but it was so heavily regulated and regimented by the government that industry had to do what government wanted to do, not what its customers wanted it to do, so much, and a large part of our economic system is just like that, and we get to vote still, so that's where the participatory and comes in, and the pin of Robert Hinz.

Keith Weinhold 14:41

yeah, maybe at best, I can think of today's system as capitalism with guardrails on but the guardrails keep getting taller. And I think of guardrails as being, for example, regulatory agencies like the Fed in FINRA. In the FDA.

Dr Thomas DiLorenzo 15:01

It is the beginning of my career. You know, I studied economics and a PhD in economics, and there was a big literature on what's called regulatory capture. And it was sort of a big secret among US economic academics. There was all this research going on and how the big regulatory agencies created by the federal government in the late 19th, early 20th centuries, were captured by the industries that they were supposed to be regulating. Right? The theory was they would regulate these industries in the public's best interests. But what has happened from the very beginning is they were captured by the industries, and they benefit the industry at the expense of the public. But today, that's caught on thanks to people like Robert Kennedy Jr, frankly, has been a very popular author. He sold a gazillion copies of his book on Anthony Fauci, and in it, he explains in tremendous detail how the Food and Drug Administration was long ago captured by the pharmaceutical companies. And he's not the only one. I think that that is being more and more recognized by people outside of academic economics, like me, and that's a good thing, and that's sort of the worst example of crony capitalism. It's not real capitalism, but crony capitalism making money through government connections, rather than producing better products, cheaper products and so forth.

Keith Weinhold 16:21

I watched RFK Jr speak in person recently, and I was actually disappointed when he effectively dropped out of the upcoming presidential race. And I do want to talk more with you about the Fed shortly, but with all these regulatory agencies and how I liken them to guard rails. You know, I sort of think of it as a watchdog system that's failing. You mentioned the FDA. I know RFK Jr brought them up an awful lot, the Food and Drug Administration that are supposed to help regulate what we put inside our own bodies in our diet. But these systems are failing. We have regulatory agencies in industry, industry in regulatory agencies. I mean, look at the obesity rate. Look at all the ultra processed food that's allowed. Look at all the seed oils that are allowed in food that people actually think are healthy for them. So this system of capitalism with guardrails is failing almost everywhere you look.

Dr Thomas DiLorenzo 16:22

I wouldn't call it capitalism. I wouldn't use the word capitalism at all, other than crony capitalism, people can relate to that. You know, a lot of these regulatory agencies were lobbied for in the first place by industry. That while the very first one was the Interstate Commerce Commission, it was in the 1880s it was meant to regulate the railroad companies. The first president was the president of a Railroad Corporation, the head of the Interstate Commerce Commission. So talk about the fox guarding the hen house. That was from the very beginning. And so in a sense, this word capture theory of regulation, which Kennedy has used, they weren't really captured. They always were created by the government. The same is true of all the so called Public Utilities. It was the corporations, the electric power companies, the water supply companies, that lobbied for governments to give them a monopoly, a legal monopoly, in electricity, water supply and all these things that were called natural monopolies, but there was nothing natural about them. There was vigorous competition in the early 20th century in telephone, electricity, water supply, and that was all set aside by government regulation, creating monopolies. For example, in electric power, there's an economist named Walter primo who wrote a book some years ago showing that always have been several dozen cities in America that never went this way, that always allowed direct competition between electric power companies. And what do you know, better service and lower prices. As a result, they did dozens of statistical studies to demonstrate this in his book.

Keith Weinhold 18:58

Okay, well, that's a great case study. Why don't we talk about what things would look like if we took down one of these agencies? We're a real estate investing in finance show. Sometimes it's a popular meme or hashtag to say, end the Fed. What would it look like if we ended the Fed?

Dr Thomas DiLorenzo 19:18

Well, the Fed was created in 1913 in the same era, with all these other regulatory captured agencies were created, right? And it was created basically to cartelize and create a cartel for the banking industry to make it almost impossible to go bankrupt. They've been bailing out foolish bankers for 111 years. And of course, the biggest example was that as the crash of 08 after they they handed Goldman Sachs and other big investment banks billions of dollars. That was a direct assault on capitalism itself, because capitalism, as you know, is a profit and loss system. It's not a I keep the profits. You pay for my losses system. You're the taxpayer. But that's what happened with that. So the Fed would. Fall into that the Fed is actually the fourth central bank in America. We had three other ones. First one was called Bank of North America. Its currency was so unreliable, nobody trusted it went out of business in a year and a half. And then we created something called the Bank of the United States in 1791 same thing. It created boom and bust cycles, high unemployment, price inflation, corrupted politics. It was defunded after 20 years, and then it was brought back to fund the debt from the war of 1812 and so we had a Second Bank of the United States. It did the same thing, boom and bust cycles, price inflation, corrupted politics. Benefited special interest, but not the general interest, and President Andrew Jackson defunded it, and so we went without a central bank from roughly 1840 until 1913 so we've had experience of that. And what we had been was competing currencies, and that would be sort of a stepping stone. If we got rid of the fed, we wouldn't have to abolish the Fed altogether. We could amend the charter to the Fed to say you're no longer permitted to buy bonds. Can't buy government bonds anymore. That's how they inflate the money supply, right? By buying bonds. That's totally unnecessary. And we could just just that would be a great step forward, and we would sort of whittle away our $80 trillion debt, if you count again upon count the unfunded liabilities of the federal government,

Keith Weinhold 21:26

if we did end the Fed, what would the price of money? Which are interest rates really look like? Would a new market rate be sent by individuals and companies on the free market like Bank of America, with a customer or borrower settling on an interest rate that they both agree to.

Dr Thomas DiLorenzo 21:44

You know, the Fed uses sort of Soviet style economics, price control. The economists and are all getting all over Kamala Harris for recommendations for price controls on rent and other things. Well, the Fed price control. They control the price of money. That's what they do. And so there's a big, kind of a comical thing that here you have all these economists, if they were to teach economics in the week one, they would teach about the bad effects of price controls, and then they get a job at the Fed, and they spend their whole career enforcing price controls on money, and the interest rate would be determined by supply and demand for credit and inflationary expectations. That's what the market does. And you wouldn't have these bureaucrats at the Fed tinkering around with interest rates, creating tremendous arbitrage opportunities for Wall Street investors. With all the movements and interest rates, you'd have much more stable interest rates, and and you wouldn't have this ridiculous system where the Fed says we need to always have forever at least 2% inflation. And of course, they never meet that, and they lie about it. I don't believe for one minute that the price inflation right now is 3% or under 3% that's ridiculous, right? And so things should be getting cheaper. Everything should be getting cheaper because of all the technology we have. My first PC I bought in the early 80s for $4,000 and it was a piece of prehistoric junk compared to my cell phone today, that almost for free. Almost everything should be like that agriculture, but the reason it isn't is the Fed keeps pumping so much money in circulation, that it pumps up the demand for goods and services, and that's what creates price inflation. And by its own admission, that's what it does, even though it's charter, it's original charter said they're supposed to fight inflation. All of a sudden, about 10 years ago or so, they announced, south of blue, we always have to have at least 2% inflation. Congress had nothing to do with that. President had nothing to do with that, and the people of America had nothing to do with that. It was dictators like Alan Greenspan and Ben Bernanke that just make these announcements. And where does that come from when we live under the dictatorship of the Fed? And of course, the people who are hurt the most by the Fed are elderly people are living on relatively fixed incomes and are forced to become Wall Street speculators they want to make any more money other than their fixed income, where, you know, during the days of Greenspan, when they're pursuing zero interest rates, maybe the mortgage industry like that, but the people on retirement income were starving as a result of that. So it's been sort of an economic war on the retired population.

Keith Weinhold 24:24

Things should get faster and cheaper to produce, like you said. However, there's definitely one thing that's not getting faster to produce, that's housing build times. Housing build times have actually gone up, which is sort of another discussion unto itself. But we talk about the Fed and then setting prices. People wouldn't stand for setting the price or having price controls on oil or lumber or bananas, but yet we set the price of money itself. People have just become accustomed to that. Yet it's that money itself that we use to buy oil and lumber and bananas the fed with that dual mandate of stable prices and maximum employment. If we did abolish the Fed, what would happen to the rate of inflation?

Dr Thomas DiLorenzo 25:12

Well, we would have less inflation. It's supposed to what we replace it with. There's some system would be a replacement, but we wouldn't have the boom and bust cycles that we have now. There's been research in the past 100 years or so of the Fed, and what the academic researchers have concluded is that the Fed has made the economy in general more unstable than it was before we had the Fed and price inflation. That's a joke. The dollar is worth maybe three cents of what it was in the year 1913 right when the Fed was created. So it has failed on all accounts. And so if we got rid of it, we would reverse that. The idea would be to start out with a competing money system. And I'll tell you a quick story is, you know the word Dixie from the south, you know land of Dixie that was named after a currency by a New Orleans bank called the Dix D, I x 10 in French, and it was 100% gold reserve. It was backed by something real and valuable, and it was so popular as even used in Minnesota. But that's why the whole south, the states in the South, were using this currency, because it was so reliable. But during the Civil War, the national currency acts imposed taxes on the competing currencies and taxed them out of business and established the greenback dollar, as it was called, as the Monopoly money of the country. We didn't get a central bank during the Civil War, but we got that. And so that's the kind of system that we would have. Friedrich Hayek wrote a whole book about this, about competing currencies, called the denationalization of money. He poses that as a good stepping stone to a freer market in money. And like you said, Money is the most important thing. Is most more important than bananas or shoes or any of these other things that we might have price controls on.

Keith Weinhold 27:01

All right, so we're talking about the case for ending the Fed. What is the counter argument? I mean, other than the government wanting control, is there a valid, or any academic counter argument for keeping the Fed in place?

Dr Thomas DiLorenzo 27:16

The Fed has an army. I call it the Fed's Praetorian Guard of academics. There was a research article published by an economist named Larry White at George Mason University several years ago, and he found that 75% of all the articles in the academic journals regarding money, monetary policy and so forth, are by people who are basically paid by the Fed, one way or the other. Either they're fed economists, or they've been invited to a conference by the Fed, or they're an intern some relationship with the Fed. The late Milton Friedman once said, If you want a career as a monetary economist, it's not a good idea to criticize the biggest employer in your field. So there's a lot of nonsense about that. And so yes, you'll have all sorts of rationales, but it basically comes down to this, that we think we can do central planning better than the Russians did under communism, because the Fed is basically an economic central planning agency, and there's no reason to believe Americans are better at it than the Russians or anybody else. And it basically comes down to that, you know, studying the past 111 years that's showing Well, yeah, they've been trying that for 111 years. They've made the economy more unstable, and they have failed miserably to control inflation. And why should we give them another chance? Why should we continue along this road? We shouldn't So, yeah, there'll be all kind of excuses the late Murray Rothbard, who was one of the founders of the Mises, who once answered this question by saying, It's as though people said, Well, say the government always made shoes. 100 years ago they took over the shoe industry. People would be saying, who will make shoes if the government doesn't make shoes? The government has always made shoes, right? But the government has not always monopolized the money supply. It's only like I said, we abolished three Feds in our history. In American history, they weren't called the Fed, but they were central banks. And the Fed is called a central bank, and we've done that three times. We've abolished more central banks than we have kept in American history.

Keith Weinhold 29:17

We're talking with Dr Thomas D Lorenzo. He is the president of the Mises Institute. About, is there really any capitalism left more when we come back, this is Get Rich Education. I'm your host. Keith Weinhold, hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group and MLS 42056, they provided our listeners with more loans than any provider in the entire nation, because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start now while it's on your mind at RidgeLendingGroup.com, that's Ridgelendinggroup.com. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too. Earn 8% hundreds of others are text family to 66866, learn more about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text, family to 66866.

Kristen Tate 31:11

This is author Kristen Tate. Listen to Get Rich Education with Keith Weinhold, and Don't quit Your Daydream.

Keith Weinhold 31:27

welcome back to get rich education. We're talking with Dr Thomas DiLorenzo. He is the president of the Mises Institute. You can learn more about them @mises.org and Dr DiLorenzo. Frederick Hayek, an economist that you mentioned very well known and a student of Ludwig von Mises, he believed that prices are a communication mechanism between a buyer and a seller. Say, for example, there's a new style of single family rental home that everyone wants to rent. So therefore the rent price goes up when other builders see that the rent price goes up, that brings in more builder competition, and with more competition, that brings rent prices down, and then the world is filled with abundant housing, rather than a scarcity of housing. So that's how I think of a free market system within capitalism as working, as defined through Hayek.

Dr Thomas DiLorenzo 32:22

You know, the consumer is king. Von Mises once wrote about the same point where he said that people mistakenly believe that it's the bankers and the CEOs and the businesses that control what gets produced and so forth, but it's really the consumer. You build a housing development then people don't want those houses. You'll find out real fast who's in charge. It's not the mortgage brokers. It's not the bankers. It's not you, it's the consumer. That's the free market system, and if you do without it, and not using the free market system, whether it's for money or anything else, is kind of like trying to find your way around a strange city with no street signs, and the prices are the street signs that tell us what to do, exactly like you said, if there's strong demand for a certain type of housing, that'll drive the price up, and that'll tell the home builders, we can make money building more of these. And they will do that. Nobody tells them. The Chairman of the Fed doesn't have to tell them that the President doesn't have to tell them that Congress doesn't have to issue a declaration telling them to do that. That was the Soviet Union where they tried that. And that's the great thing about the market, is that the consumer can tell the richest man in the world like Elon Musk, go play in the traffic. Elon Musk, if they don't like his cars or whatever he's producing, even though he's the richest man in the world. And he understands that he's a pretty successful businessman, I would say, and so so he understands that the consumer is his boss.

Keith Weinhold 33:53

Well, what else do we need to know? You have published a lot of celebrated books, from how capitalism saved America to the politically incorrect guide to economics. What else might a real estate investor or an economic enthusiast need to know today? Oh,

Dr Thomas DiLorenzo 34:10

well, I think everybody needs to be their own economist. You can listen to the talking heads on TV and on podcasts and all that, but educate yourself and become your own economist. Because a lot of the people on TV, as you might see on the news, they have an ax to grind, or they have a sort of a hidden financial interest beyond what they're saying, Be your own economist. And that's why I'm selling my website, which is everything on it, it's for free, mises.org, and there are quite a few others too. You don't have to go to school, you don't have to get a degree. You can get a good economic education, for example, on money. We're in the middle of giving away 100,000 copies of a book called What has government done to our money. I'm Murray rothbar. You go to our website, scroll down to the bottom, and you can fill out a form online, and we'll send you free books and. You can educate yourself that way. And so just in general, I think that's what people need to do. I taught MBA students for many years who are people in their 30s or maybe even early 40s, who didn't have economics degrees, but they were really into it, and for the first time in their careers, they decided maybe I should understand how the economic world that I live in and work in every day operates rather than going through your life and your career without you. Might know all about real estate sales, but it's also useful to know about the economy in general and how things work.

Keith Weinhold 35:35

And when one becomes their own economic student and they take that on, I think it's important for them, like you touched on to not just consume the economic news that's on CNBC or other major media, because that doesn't really tell you how to create wealth. It might inform you, but it doesn't necessarily tell you how to take action. For example, on this show an educational channel, you might learn about a story about rising inflation like we had starting three or four years ago. And here we talk about how, okay, if inflation is going to be a long term economic force, you may or may not like what the Fed is doing, but rather than save money, borrow money, outsource that debt service to the tenant on a cash flowing asset like a single family home or an apartment building. And that inflation that you're learning about on CNBC will actually benefit you and debase your debt with prudent leverage on a property, for example, so not just consuming the news, but learning and educating yourself and acting.

Dr Thomas DiLorenzo 36:34

Oh, sure, well It just so happens that last night, I was talking to a friend of mine who's a real estate professional. They're all talking about, Oh, are we going to have a slight drop in interest rates? And I reminded them that there will be a part of the market if they see it, if we do have a slight drop in interest rates, we'll look at that and say, well, maybe this is a new trend. And so I'll sit back and I'll wait. I'm not going to buy now, because I think the interest rates are going to go down even further in the next six months there were, there would be some segment of the market that thinks that way. And so that's just one little thing. Another thing I would mention is that one of the basic tenets of free market economics is that voluntary trade is mutually beneficial. People buy and sell from each other, because both sides benefit. And that's very important for any business person to keep in mind as you structure business deals, because you know about business deal that is successful is basically, I will give you what you want, and you give me what I want, and we're both happy. And that's that's one of the main tenets of how the market works. Voluntary exchange is mutually beneficial. So think about how to make it mutually beneficial, and you'll succeed in making a deal.

Keith Weinhold 37:45

Well, it's been an excellent discussion on Is there any capitalism left, and how would it look like if we turned the course and created more capitalism here in the United States? It's been great having you on the show.

Dr Thomas DiLorenzo 37:58

Thank you.

Keith Weinhold 38:05

Yeah , again, Learn more @mises.org or look up books by Dr Thomas DiLorenzo. His viewpoint is that there are now merely islands of capitalism in a sea of socialism where those conditions were inverted last century. We've got to end the complex between the government and corporations that these watchdogs are basically powerless when the fox is guarding the henhouse. Dr dilorezzo says we could change the Fed charter so that they couldn't buy bonds, which should reduce inflation. So he does offer a way forward there, a solution. In capitalism, he consumer is king. This is a good thing. You yourself are empowered because you get to vote with your dollars. So therefore what you buy more of society will see and make more of but a prosperous, progressive economy that should be able to produce goods and services that are constantly cheaper because they get more and more efficient to make with innovation, but centrally planned inflation makes them more expensive, at least in dollar denominated terms. So progress should make things cheaper? Well, then everything should take fewer dollars to buy, homes, oil, bananas, grapes, but it doesn't, and it won't anytime soon, like I mentioned in the interview, there single family build times are taking even longer. That's not more efficient, and they're sure not getting cheaper. In fact, the National Association of Home Builders tells us that from permit to completion in 2015 it took 7.2 months to build a single family home. By 2019 it was up to 8.1 months and then. Last year, the time required to build a single family home from permit to completion was 10.1 months. That's not the side of an efficient economy. So basically, therefore, in the last eight, nine years, the time to build a home has gone from 7.2 months up to 10.1 months. That is a drastic increase in a short period of time. Just amazing. And we now have data after covid as well, broken down by region. The longest build time, by the way, is in New England, where it is 13.9 months to build a home from permit to completion. Gosh, such inefficiency. But despite all that stuff that you might find discouraging like that, I want to go out on a good news note here some encouraging sentiment for you, if you champion free markets, then invest in us rental property down the road, there is no centrally controlled ceiling on what you can sell your property for. Most places don't have rent control. In fact, there's been no federal rent control on private property since World War Two. And somewhat ironically, you benefit. You actually benefit from government backed loans at these low fixed rates, and now they're moderate fixed rates. You often get these through Fannie Freddie or the FHA. See you benefit from that particular government backing as a savvy borrower for rental property. And on top of this, you use the GRE inflation triple crown to flip over that not so capitalistic inflationary force. You flip it upside down and use it to your benefit, profiting fantastically from inflation. So you know how to take the situation you're given and use it to your advantage rather than your detriment. Big thanks to Dr Thomas DiLorenzo today, longtime econ professor and current Mises Institute president, more ways to build Real Estate Wealth coming up here for you on the show in future weeks, as always, with the dash of economics and wealth mindset. Until then, I'm your host. Keith Weinhold, Don't Quit Your Daydream.

42:28

Keith Weinhold 42:56

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520: How to Use Other People’s Money for Your Rental Property Loan Sep 23, 2024

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Complete episode transcript:

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Keith Weinhold 00:01

Keith, welcome to GRE. I'm your host. Keith Weinhold, I'll discuss when I was an employee with a scarcity mindset, the real estate shock wave coming that no one's talking about, then, how you can ethically use other people's money to build wealth for yourself before you even own a property today, on get rich education.

00:24

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold rights for both Forbes and Rich Dad advisors, who delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests include top selling personal finance author Robert Kiyosaki. Get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast, or visit get rich education.com

Corey Coates 01:09

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 01:25

welcome to GRE from Springfield Ohio to Springfield, Missouri and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education. It's great to have you back for another week, and I genuinely appreciate your listenership, and I am grateful to have such a large audience. I've got to tell you, admittedly, coming out of college and in my first couple full time jobs, I wasn't always a good employee. I guess I had somewhat of an entitlement mentality. I'm not sure where that came from. I don't know that I can blame anyone else on planning it inside me. I don't know where I got this notion. It sure wasn't from my parents, but I kind of felt like somebody owed me a job just because I have a college degree and I'm good at showing up on time, yeah, like, I'm just a good representative for your company. I mean, now I can see that no one owed me a doggone thing. In fact, I owed my employer value. An employer actually takes a big risk on you when they hire you, paying you to train you until you're productive there. I mean, the hiring process itself is even expensive. Well, though I felt like someone owed me a job just out of college, somewhat Oppositely, I never expected any sort of high income at all, and I had quite a modest income in my first couple years out of college, just like a lot of recent college grads do, until it grew into something more. But my humble geography degree, it conditioned me to think lower income. I knew that going to college in Pennsylvania for geography in what interested me, I mean, that's what I went with, what interested me not what I could make money in well, then I couldn't find a job in my geography field at all. No one would really pay me to describe Asia's mountain ranges to them. So what I ended up doing is working under engineers at a construction and engineering firm, a few of them, one engineering firm really liked me and designated me as their new marketing person. Of all things, they wanted me to call prospective clients on the phone and meet them cold in person, because they just thought somehow, when they met me, that I could win new business for the engineering firm, just I guess, based on how I communicated with other people at other engineering companies, even though I couldn't even talk the language of engineering. Well, anyway, these disciplines engineering, and really it was construction inspection that I did for a while. You know, that stuff, even the marketing stuff, it just didn't fill my soul. And you must have felt this way at your job before. If you don't feel it perpetually, you aren't aligned with your purpose on this earth, and you're spending so many of your faculties and so much of your waking conscious life at that job. Well, motivation to escape that is what got me reading about wealth mindset and real estate investing. Since anyone can do it, no degree needed, no certification, zero formal qualification. And now I think I mentioned this to you before, but it's worth bringing up here again, a turning point is when I read one life changing sentence, just one little what is it? A. Five word sentence in a rich dad book, that pivotal paradigm shifting, course correcting sentence was, being wealthy is a choice. And when I first read being wealthy is a choice, I just didn't believe it. I thought that Robert Kiyosaki, the author, was wrong. Well now I know that he was right. I had thought that being rich is unobtainable. You had to be born into it, so unless you won the lottery, you can't achieve more than middle class. Well, I was wrong about that. Now I can't really say something like, oh, well, a college professor said that rich people are bad or, you know, I don't have that story. I can't blame anyone else for growing up with a limited, scarcity mindset, really, other than myself in the context that was created around me. I mean, growing up in Pennsylvania, I just knew that the carts family and the domileskeys, they had more than us. And that's just the way it would always be. It's sort of preordained, and other families had less than us, and these family trajectories were just cast in stone as to how it had to be. But the good news is that it's not, and this is still what makes America great, the fact that it takes zero formal training, zero risk parents, and not even a high salary for you to do something like get a three and a half percent down payment loan for owner occupied FHA fourplex or 20% down for a single family rental that produces income from day one in The Southeast or Midwest, you can plant that seed that get other people's money working for you seed in just that way, even if you're interested in something as unprofitable as geography. Now, a huge reason that people disparage the wealthy is rooted in jealousy and envy, and that is not good. There's no goodness in those emotions, and that is because people don't think it's obtainable for them. It's obtainable for almost anybody. Learning that it is within your reach that completely breaks down your resentment of the rich. Yes, indeed, being wealthy is a choice. Well, people are obtaining wealth in today's real estate market. Here, Redfin reported that through the latest quarter ended real estate investors bought fully one in four of the nation's most affordable homes. That's up 3% year over year. And as Redfin puts it, it's a sign that investor activity is stabilizing, and as homeownership remains out of reach for many Americans, real estate investors are coming out of hibernation to take advantage of robust demand from renters. So investors are buying a greater proportion of affordable homes, some of them through our marketplace, GRE marketplace. Now over the long term, let's think about how US housing is going to be positioned for sustainable demand. Demography is destiny. That's a quote attributed to 19th century philosopher Auguste coon Tay, it means that the size and structure of a population will influence its future. So then all we need to do is track the age of a population over time to sharpen and give clarity to a forecast. It is axiomatic that in 10 years, a 25 year old will be 35 No kidding. Well, what's important about the age of 35 is that is the average age of today's first time homebuyer. It's between 35 and 36 All right. Well, the US is peak birth year occurred in 2007 we know that just look at demographics. Well, then add 35 to it. Add 35 years to 2007 This means that, on average, they will buy their first home in the early 2040s a lot of people are going to be forming their first household, whether it's rent or buy around the year 2040, I mean, the peak in all of American history, a lot more people will need homes. In fact, more than 13,000 Americans are turning age 35 every single day for the foreseeable future for more than a decade. This year is the first year where we've ever had over 13,000 Americans turning 35 every single day. And that is projected to continue to happen every single year through 2035 and that's as late as the Census Bureau projection that I have goes on. On that stat this baked in demographic housing demand. Hey, if we don't get serious about building more housing fast, and it's likely that we won't, this will be analogous to a demographic shock wave that hits the housing market. The population aging into homeownership is projected to exceed the population aging out, as in the death rate for a long time. This will pump housing demand, and that's not all. I've only talked domestically so far. This doesn't even account for additional demand from immigration. And immigrants tend to be younger and are renters for a long duration, or just forever. On top of immigration, the average number of people per household is falling as well. In 1960 3.3, people live per household in 1990 it was down to 2.6 by 2023 it was down to 2.5 this means that more housing is required just in order to shelter the same population. But of course, the population won't stay static. So to keep piling on with the housing demand here, the overall US population is projected to grow as well, from 342 million today to 383 million in 30 years. That's per the CBO. The demographics for senior housing are even more bullish. And of course, when I use the word bullish like this, this bullish sentiment that's from the investor side. If you're looking to buy your first home or find a place to rent, this is all more discouraging than perhaps all of our perpetual struggles to live a balanced life or lose weight. This baked into the cake. Demand is almost perfectly predictable, and it's of seismic importance to the real estate market. And yet, despite that fact, you know, more investors curiously fixate for month after month on something like the Fed's interest rate decision or the next jobs report. I mean, this is both harder to predict and way less significant than the sustainable demographic demand for rental housing that you got right there. So really, to sum up, this segment demographics reveal that housing demand should stay high for decades, long term, then you should expect higher home prices, higher occupancy rates and higher rents. And you can benefit by owning many rental properties. And our guest and I are about to discuss how you can do exactly that own many rental properties, and how to do it efficiently with less cash out of your pocket, including how you can start using other people's money before you even own a property when you're trying to qualify for a loan on a rental property, in some cases, you can Use a portion of the tenant's rent income toward your qualification income. Let's talk with this week's guest. There's one place that's created more financial freedom through real estate than any other lender in the entire nation that's time for a big welcome back to their president, Caeli Ridge.

Caeli Ridge 13:23

Keith Weinhold, my friend, thank you for having me happy to be here, sir.

Keith Weinhold 13:26

Oh, it's so good to have you here. You're a longtime friend of the show and so many of our listeners that you've helped originate investor mortgage loans. Caeli leads Ridge lending group. They're an investor centric lender. She does such a good concise job of explaining specifically what real estate investors need to know in optimizing your loan positions. In fact, on a previous episode, she once broke down every single line of a closing disclosure form for us one by one, detailing each individual closing cost and prepaid item and in there, besides being specific income property loan experts, they're really thorough and helpful that way. Well, Caeli, tell us about the key differences between owner occupied mortgage loans for buying a primary residence and investor mortgage loans for a rental property.

Caeli Ridge 14:17

The key things are that on a rental property, probably the biggest difference is going to be that for a rental property, there's additional incomes that potentially we get to use to help offset that new monthly liability, aka the mortgage payment, p, i, t i, principal, interest, tax and insurance, we have access to income potentially to help offset that. So in the debt to income ratio category, it can be a huge boon or a huge benefit, depending on what the individual's qualifications are. Additionally, in that same theme, we're not just confined to a conventional Fannie Freddie loan for investors. We have things like the DSCR debt service coverage ratio that you would not be able to apply to a primary residence, but also allows for income to help identify whether the property qualifies for financing.

Keith Weinhold 15:04

So for prospective investor borrower is wondering whether we'll have enough income to qualify for that property or not. Is it a certain percentage of the tenants rent income that is used in the investor borrowers qualification income?

Caeli Ridge 15:19

absolutely, so conventional full doc mortgages they are going to receive in the acquisition year formula, because there's two formulas that will be used in underwriting. One is called the acquisition year. The other one is called the Schedule E I'll focus on the acquisition year. This is applicable from the date that they acquire the property and until that tax year's Federal tax return is filed. I needed to find up to in a minute they get up to 75% of the gross rents minus the proposed p, i, t, I, principal, interest, tax and insurance. Now I say up to because it depends on two primary criteria that the borrower must possess in order to get the full 75% so think about it this way. There's three buckets. Okay, the first bucket gets the full 75% of whatever the gross rents are. The easy math example that I give, let's say that the gross rents are $1,000 a month. The PI ti proposed payment is 500 a month. If they're in bucket number one, and they get the full 75% of 1000 they have 750 bucks, right? And from that they're going to subtract out the $500 of mortgage payment. In that example, it would leave them with a gain positive 250 so that individual came to us with a debt to income ratio of x as a result of purchasing this investment property, their DTI is going to go down because they're $250 richer monthly. So 75% is the maximum you can use in the acquisition year. That individual in that bucket has to demonstrate two things. One, they have a primary housing expense, whether that's a mortgage or they rent, either is fine. And then second, they need to be able to demonstrate that they can they've had 12 months of history in owning investment property. So if they have both of those two things, they get the full 75 if they have one or the other, they're in bucket number two, which gives us an offset. They cannot have the full 75% they don't get the full gain, but I can offset. So going back to my example, using $1,000 of income and $500 of mortgage payment, they can't have the 250 gain, but I can give them up to 500 making that a zero, right? It's covered completely the mortgage payment. It's not increased any debt or anything in the example. So DTI would stay exactly the same as where they began, when we started. And then finally, bucket number three would mean that individuals that have neither of those two things, no primary they live rent free, no primary house expense, and they do not have 12 months demonstrated history currently, of being an investor. They get zero of the rental income, so they've got to support the full new payment within their DTI and keep it within that 50% threshold. So that was a long explanation to the question, but I think that that pretty much covers it.

Keith Weinhold 17:56

Now, That's really helpful. Okay, that can help the borrower's debt to income ratio. I guess a lot of cases is going to be helping it out by a small amount. What if, say that investors buying a new build rental property and there is no tenant, hence no rent income there yet.

Caeli Ridge 18:11

I'm so glad you asked. So on a subject property basis, that is the property in which they're purchasing at the moment in time. It's called the subject property. Those properties do not need to be tenant occupied. We can use assumptive rental income from the appraisal on a rental property that will come with some additional forms. It's called a 1007, it's just the number on the page. Those are rental income comps. The appraiser has given us an average of what those rents are going to be, and that's what we're going to use the 75% calculation on.

Keith Weinhold 18:41

Okay, that's really good to know new build or resale rental property, that's going to work the same with either one there. Now I know oftentimes that one wants to qualify. When we look at non order occupied properties, rental properties with conventional conforming loans from Fannie or Freddie, typically, one puts 20% down on those properties we've talked before. I think one can put as little as 15% down, although they would have PMI in that case, or alternatively, rather than putting 20% down, last time I checked, they could put 25% down and get a lower interest rate. So can you talk to us about the interplay of the percent down payment for rental property.

Caeli Ridge 19:21

I'll start by saying, more often than not, when you do the math the capital expenditure, or in this case, the difference between 5% down 80 versus 75% divided by the monthly payment difference, you're going to find that the leverage is going to outperform the higher 80% will outperform the lower 75% but absolutely, to your point, the payment is going to be less for two reasons. At the 75% level, the interest rate will be lower because you've got more skin in the game. The interest rate, loan level, price adjustment for 75% is going to be more attractive than it will be at 20% down. So the rate will be lower. And of course. The loan amount is lower, so both of those combined characteristics are going to create better cash flow, it's true, and a lower monthly payment. However, the math that I always want to promote, that people are doing is looking at it side by side, all you have to do, and it's actually much easier than people, I think, assume. So you figure out the capital expenditure difference. Let's just use 100 grand, okay, because his math is simple. So you've got $5,000 in additional capital that you'd be bringing to the table for the 75% option, right? Versus retaining the five grand, the payment difference is 50 bucks a month. Okay? Whatever the number is, all you're going to do is take the five grand and divide that by the payment difference, and that will give the individual the number of months it takes them to recapture that capital for the savings. Generally, my opinion, per an investment property is that if that number is in excess of 36 months, it's going to take you over 30 or three years to recapture that capital versus the savings. I'd keep my money because I can do one of a few things with it. If I chose to, I could cash flow the 50 bucks myself every month for 100 months, if that was the math. Or I could apply that five grand and use it with some other monies, perhaps, and buy another investment property, or put it in different investment asset class that would provide a return so more often than not, when they do that math, my belief is, when I do it, I'd say even 95% of the time, the higher the leverage is going to be, the better return numbers.

Keith Weinhold 21:27

We're philosophically aligned that way. We're leveraged proponents here, typically the smaller down payment, 20% is going to be better for you long term than 25% even though you'll get a somewhat lower interest rate on a rental property, putting 25% down rather than 20% when we pull back, we look at the interest rate difference between an owner occupied property and a rental property. What is the spread between the interest rate? Of course, you're going to pay higher interest rate on a rental property because it's a lot less likely that the borrower is going to walk away from their own home than they would a rental property.

Caeli Ridge 22:02

exactly and this is a great segue into those LLPAs that I always like that we spend some time talking about. So llpa, loan level, price adjustment. So for the GRE listeners, this is a more complicated concept, so I'm going to try and quickly break it down. Keith loves it when I get so wordy. So llpa is a positive or a negative number that associates with the individual characteristics of the loan transaction. So one of those characteristics, obviously, is occupancy. The loan level price adjustment for a primary residence versus an investment property is quite different, and for the reasons exactly that you described, there's a lot less risk in a primary then there will be in a rental. Because if an individual needs to choose between defaulting on where they live and an investment property, if it came down to that, obviously they're going to maintain, yeah, so they got to choose. So skin in the game, risk, etc, generally speaking. And there's all those other variables too, credit score, loan size, loan to value, property type, purchase versus refi, those are all unique llpas That will have their own unique number. But in general terms, an owner occupied where you live is typically going to price out an interest rate about one percentage point lower than you would find on an investment property, generally, if we're comparing apples to apples.

Keith Weinhold 23:15

talking about that risk difference for the lender, just like in the 20% versus 25% down. Example, there's less risk for the lender when you put 25% skin in the game. Hence the lower interest rate there too. Caeli, tell us about fitting the right mortgage type to the borrower. And of course, there are so many types. There's 30 year versus 15 year, fixed rate mortgages versus Adjustable Rate Mortgages, interest only, DSCR loans like you touched on. So tell us about getting that right fit for that individual borrower.

Caeli Ridge 23:49

This is a bit of a rabbit hole. So what I would start by saying is we do at Ridge take a lot of time on the front end and identifying not only what their needs are, their goals are, but obviously what their qualifications are, and marrying all of those things together and coming up with a roadmap that I like to call it, depending on where the individual is in their journey of real estate investing, as the tax returns may continue to be filed, and how aggressive they want to be with their deductions, maybe some cost segregation. I know I'm getting a little bit technical here, but because we maintain and have all of those products, it's very, very uncommon, or very rare, that we find an investor, potential client, that we do not have some sort of loan product to satisfy what their end game or end goal is. And you know, maybe we continue to graduate them. Let's say that they start in a DSCR because they can't qualify for Fannie Freddie today, but that is their ultimate goal. We're going to provide them with the insight and the background or the feedback that plants the seeds and gets them to that place in six months or a year, or whatever. So I hope I answered the question, depending on their individual needs and goals and qualifications, of course, really will dictate which one of those is going to be applicable.

Keith Weinhold 25:00

We've got a lot more to discuss, including, is it easier to approve w2 incomes from a day job versus 1099 from contract or gig work? And more, we're talking with the nation's foremost expert on income property. She is the president of ridge lending group, Caeli ridge. More, we come back. I'm your host. Keith Weinhold. hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group and MLS, 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage, you can start your pre qualification and chat with President Chaley Ridge personally. Start now while it's on your mind at Ridge lendinggroup.com. That's ridgelendinggroup.com. Your bank is getting rich off of you, the national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor two, earn 8% hundreds of others are text family, 266, 866, learn more about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family, 266, 866

Robert Kiyosaki 27:00

This is Rich Dad, Poor Dad Author Robert Kiyosaki, listen to get rich education with Keith Weinhold, Don't Quit Your Daydream.

Keith Weinhold 27:18

Welcome back to get rich education. We're talking with Ridge lending Group President Chaley ridge. These discussions are great, because debt, through leverage, builds wealth even faster than compound interest, as I've discussed, and Caeli is really the linchpin in her company, and help makes that happen with reliable income property loans and Caeli today, there are a lot more people with sharing economy income, gig economy income, or doing contract work, and they're paid with a 1099 form that shows their income for that year, versus a w2 employee wage job. So can you tell us about whether it's easier to approve those that have a w2 income and that versus the 1099

Caeli Ridge 28:03

I don't know that I would classify it as easier as harder. It's just different. So on the 1099 first and foremost, if you don't have a 24 month history of having that kind of income, you're not going to get a conventional loan. And assuming that we're going to kind of keep on that path of Fannie Freddie's. Because remember, guys, if you can't fit into those boxes. We've got 10 others that we can look to to get the financing for. But if we're in the Fannie Freddie, that's really where this is applicable, the 1099 and the w2 I mean, they're really equal in terms of the overall process. The difference would be that with 1099 you must have that 24 month history. The calculation is that we're going to take an average, it gets a little bit convoluted, like anything else that is leverage or financing related, but a 24 month average of 1099 unless we can show that that individual, let's say that they're self employed and maybe a Schedule C, and they've got their 1099 coming in through that way. If they can show five year history of having license or being self employed that way, that instead of having to use a 24 month average, we'll use a 12 month average, and that may be to their advantage. Let's say that the most recent year filed is in a bit of a decline from the prior year. Let's just use 2022 and 23 let's say 23 is a little bit lower than 22 a 24 month average is not going to be as big a number than if I were to just to be able to take the 12 month average of the most recent year. So if that individual can demonstrate they have five years of being or receiving that kind of income, then instead of being a 24 month average, I get to choose and just do the 12 month average. So that would be one thing about the 1099 that I would say otherwise, yeah, they're just different. I don't know that one is harder than the other. As long as the qualifications are there, they're there.

Keith Weinhold 29:43

When I think about this, I guess it does make sense from the lender perspective. If you're paid and shown income there on your 1099 from sharing economy work, gig economy work, or being self employed, that's more volatile work than having a day job. Um, as an employee.

Caeli Ridge 30:01

Sure, absolutely. And if you can demonstrate that you have that history and you've been able to consistently earn and have those numbers, it's okay, yeah, but without the 24 months, you're not going to get a conventional loan. You're gonna have to look at DSCR or something else.

Keith Weinhold 30:15

We're talking about what it takes to qualify for income property loans today with Ridge lending Group President Caeli Ridge, when we talk about that qualification bar that needs to be met. Caeli, you see so many loan applications in there. You have a team. You look at and deal with so many situations when you're free, you even pick up the phone, sometimes yourself, and you will talk to individual borrowers. So what do you see in there as the top reasons for not qualifying for an income property loan.

Caeli Ridge 30:42

The top reasons for not qualifying for a conventional loan probably is debt to income ratio, yeah, more often than not of the three basic criteria, which are assets, enough cash to close or reserves, credit and then DTI, I would say it's the DTI category that more often than not, is the culprit for qualifying or not. And it may be as simple as how they filed their last year's tax return and saying, Okay, before you file 2024 don't do that until you send Ridge a draft, so that we can get ahead of what you may not have known to look for last time. They could be very simple, little easy fixes. And you know, sometimes maybe it's they don't want to pay the extra taxes, which sometimes that might be required. In which case we say, okay, let's pivot over to the DSCR options. In which case, by the way, just as a quick sidebar, I'm finding that gap is starting to narrow a little bit to the point that it's a lot more affordable in terms of the investment property and what cash flow is expected than it used to be. The differences between a Fannie Freddie rate and a DSCR rate is starting to narrow a little bit. So if you have to be DSCR, I would not shy away from that just because you assume I think it's going to be more reasonable for cash flow properties.

Keith Weinhold 31:52

Yeah, I'll tell you, when I was an employee as a day job worker grinding in my eight by 10 cubicle, as it was back in the day, and I was buying income properties. Yeah, the main thing I would get held up on is that my debt to income ratio, my DTI, was too high, and my salary was pretty strong, although not fantastic, not astronomically high, but I felt like I was a guy that was pretty good, pretty prudent with my finances. And yeah, it didn't feel good to be told hey, Keith, to lower your DTI. You need to pay off your 3% automobile loan that's at a nice fixed interest rate. I didn't want to have to do that, but I was willing to do that to retire the small loan in order to qualify for the big loan.

Caeli Ridge 32:36

That makes sense. I might just offer a comment in that regard. What you may have experienced at that time could have been what we call an overlay in the industry. So, yes, like anything, right? Lenders aren't created equal. Because we're so investor friendly and focused, we are going to go by the purest form of those Fannie Freddie guidelines. It's called a seller's guide. And as an example, let's just say that Fannie Freddie gives you 75% of the subject properties, gross rents, whereas B of A or I'm just picking on B of I don't know why, but some other lender may impose an overlay. It's like layers of risk and saying, No, we're not going to give you any rental income credit whatsoever, even though the guideline says that we can do it, our overlay says, No, we can't. So depending on who you're working with, credit unions are a little notorious for that being a little bit more restrictive in their box of guideline. So it may not always be what you think. So if you've had a lender, tell you DTI wise, you don't qualify, but you feel like this is not quite right. You should double check that, because it may be an overlay.

Keith Weinhold 33:34

Everyone is interested in interest rates. It's been so interesting with what's happened the past few years, ever really, since the covid Emergency cut took place in 2020 and the volatility that we've seen in interest rates, then we saw interest rates max out in this cycle at about 8% almost a year ago. What does this declining interest rate environment mean at a mortgage loan company? And what do you see for the future of rates there?

Caeli Ridge 34:02

Well, rates have been coming down. If you guys are watching the headlines, you're seeing those sound bites. We have started to see some more refinance activity than we were seeing before, certainly additional purchases as we start to see interest rates come down, I am of the opinion that we're going to continue to see some improvement in the rate department, dependent on some of the jobs reports that we'll be getting soon, so we'll see. But My money is on that, we'll continue to see some nice tailwind in the rate department throughout the rest of the year, and who knows what's going to happen? I mean, this is our election year, etc. We'll see how the rest of it plays out.

Keith Weinhold 34:33

How does a prospective borrower get their financial house in order themselves before getting a hold of you and your team there, what are some of those checklist items that they should do themselves at home first?

Caeli Ridge 34:47

like I said a bit ago, so you've got those three primary criteria. If you're wanting to qualify for those conventional full doc loans, think about your credit Do you know what that credit score is? Now, depending on some other variables, it doesn't have to be 800 Credit scores to qualify. I mean, we've got clients as low as 650 that are able to get financing conventionally, because they've got compensating factors, similarly for assets on the investment property side, the down payment and the closing costs and the reserves, none of those things can be borrowed or gifted. And that's very different than if it was an owner occupied, gifted and borrowed funds are okay for an owner occupied, for an investment property, they have to be sourced and seasoned, meaning your own funds over the last 60 days. So think about that. What your down payment is going to be an estimate of closing costs and make sure that you have the appropriate amount of capital. And then finally, that debt to income ratio. That's a slippery or one to try and calculate that for yourselves. But if you think about your minimum payments on your credit report. That's really all that goes into it. Minimum payments, not the debt load. The minimum payments on the credit report divided by the monthly income, gross income, you should be able to come up with a number, and 50% is that threshold. So if you can kind of just take that kind of mental back of the napkin of your own, you should have a pretty good gage on whether or not you think you're going to be in this box, or if getting into the game, or continuing to be in the game, is going to require some alternative loan types.

Keith Weinhold 36:05

Inflation has been such a story for the past three or four years, but some people aren't aware that there's actually been credit score inflation. Last time I checked, the average credit score had been slowly rising in the United States. What's the highest credit score that gets one the lowest rate.

Caeli Ridge 36:22

We're staying in the Fannie Freddie department, 760 and above is all the same bucket, if the individual qualifications are identical, if this one has an 850 credit and this one has a 760 credit, exactly the same in the interest rate department.

Keith Weinhold 36:35

And then, once they've engaged with you, what about locking in their interest rate. What duration did they have prior to closing? Tell us about that timeline.

Caeli Ridge 36:45

So an interest rate can be locked on a 15 day lock, a 30 day lock, a 45 day lock, even a 60 or 90 day lock, typically it's a 30 day lock that's the average. The shorter the period of lock, the better the rate and or points that you would pay. And the longer is the adverse right? The higher the rate of the higher the points. I like to look at locking an interest rate, usually when we get the appraisal back, because an appraisal can be the piece that might delay or there may be some issues. So I generally like to see the appraisal first. We've been in such a volatile area with interest rates and what might be happening in the ups and downs, etc. I've broken that rule quite a few times over the last couple of years, I would say today, floating may be to our advantage, just because we feel like rates are on the run and that they may continue to improve. Keeping in mind, once you lock in your interest rate, it is locked. Ridge does have a policy that if interest rates were to fall five, eight of a percentage point or point 625, you would have a one time automatic float down option. It's highly unlikely, and that's why we can kind of put that in there. But if it happened, we would honor that. Otherwise, when you're locked, you're stuck with that rate. You can't expect that if an eight through a quarter point comes off of or rates come down that much, that you're going to get a different rate. The only way to do that would be to let the existing one expire for 30 days and then relock market, which is not advisable.

Keith Weinhold 37:59

Yeah, you the investor, has to think about how important a lock really is to you in this declining interest rate environment, almost everyone expects mortgage rates to fall more slowly than they rose. They spiked up so fast in 2022 Caeli, how does our audience engage with you? Get Started and go on their path to getting investment property loans.

Caeli Ridge 38:24

Three ways to reach us. Obviously, we've got our website. Please check us out there. There's a lot of good information, ridgelendinggroup.com you can email us at info@ridgelendinggroup.com, and then finally, toll free is 855-747-4343 855-74RIDGE is that easy way to remember, and we'll be here on standby. Thanks, Keith.

Keith Weinhold 38:43

Ridge is the same place where I get my income property loans. It's been great having you back on the show. Thank you. Yeah, strong. Well laid out material from cheyley here, as always, let me give us a perspective on creating value by having a good loan rather than not having the debt. Remember that just four weeks ago, here on Episode 516 it was the episode about is every debt worth paying off? And the short answer is no. I got a couple questions from listeners of that episode basically asking the same thing. Well, just say that interest rates are 6% and basically they're asking, well, if I pay all cash for a property or for a car, it doesn't matter what it is, then I avoid paying 6% interest. So right there is my six points of arbitrage. Well, to that, I say, okay, but look what if you think you can achieve a 12% investment return? Borrowing at six to invested 12 is a 6% spread. That's 6% arbitrage as well. But here's the thing, you've got a big advantage of doing this with the loan rather than the paid off condition. This is because. With the loan, you still have the use of your money. You haven't given it away. You still have your money, plus the six points of arbitrage in the paid off condition. You've got six points of arbitrage and you don't have the use of the money any longer. That's the big difference, and that's the value of having a loan, as long as you can service the payments. Getting back to mortgage loans, in today's episode, there are so many loan types for property, conventional, Fannie, Freddie's, dscrs, Portfolio loans, bridge loans, rehab loans, recourse and non recourse loan types, balloon loans, arms and a lot more. Caeli and I didn't discuss their all in one loan, which is like a big, flexible HELOC that you can put on your property. It's such a good product that can help you. You can ask about their all in one loan. When it comes down to what are the factors you need to be most attentive to? They are your assets, reserves, credit, income and debt to income ratio, unless dependent on the loan type that you want. So much attention is paid to interest rates, and some attention is warranted. They surely matter. Be mindful, though, that a quarter of a percent interest rate change on a 30 year loan per 100k borrowed that is just a difference of about $15 in monthly payment, $15 if you go from, say, 6% down to five and three quarters percent, so it takes a rate drop of a full 1% for a savings of about $60 then once you have some of Your finances in order, you can go ahead and do just what I've done for my own properties. For your next income property loan, you can give them a call or start at Ridgelendinggroup.com Until next week, I'm your host. Keith Weinhold, Don't Quit Your Daydream.

41:58

Keith Weinhold 42:18

The preceding program was brought to you by your home for wealth building, getricheducation.com.

519: Threatening New Taxes You Might Need to Pay. Tom Wheelwright Explains. Sep 16, 2024

Tom Wheelwright is back by popular demand, our most recurring guest in GRE show history. He’s a CPA, an International Authority on Tax, and Best Selling Author of “Tax-Free Wealth” amongst many other titles. We focus on the potential unrealized capital gains tax, which would tax the increase in property value even before sale. Tom explains the implications of this proposal and the broader impact on tax policy.

We cover the Democrats' proposal for capital gains tax at ordinary income rates, capital gains on gifts, and capital gains when you die.

The proposal for a billionaires tax, which would tax unrealized gains at $100 million, could potentially extend to lower net worth individuals over time.

Real estate income can result in a negative tax rate, increasing cash flow after taxes.

Learn about the benefits of working with a knowledgeable tax advisor.

Resources:

GetRichEducation.com/tax

Show Notes:

GetRichEducation.com/519

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RidgeLendingGroup.com or call 855-74-RIDGE

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:01

Welcome to GRE. I'm your host. Keith Weinhold, this week we're talking about the value of the raw land that comes along with your property, the importance of an as built survey in real estate. Then it's tax topics with pro Tom wheelwright, the specter of an unrealized capital gains tax, higher capital gains tax rates, how gambling is taxed, and how to permanently reduce your overall tax burden. Today on get rich education,

00:33

since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Corey Coates 01:18

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 01:34

Welcome to GRE from Essex County England to Essex, Massachusetts and across 188 nations worldwide. I'm Keith Weinhold. You're listening to get rich education before we talk taxes, let's talk about the land, the raw land, the lot that comes along with your property. Investors don't spend much time thinking about it. Yet the land is sometimes worth more than the home or structure that's on it, per the FHFA, land constitutes 32.2% of the value of the average US single family property in a metro area. Now the inexpensive land prices nationally, they are predominantly in what I'm classifying it as three US areas, the Midwest, the southeast and Appalachia well, where you have inexpensive land. Oh, that also happens to be where the cash flow for long term rentals resides. Land costs more by the water because people want water activities, water proximity and water view. So the lower costs are inland, and land also costs more by the water, because coasts and shorelines constrain development, sprawl that limits supply and a limited supply of buoys up prices. Consequently, the highest land values are mostly in the Northeast Corridor, from Boston to DC, Miami, coastal California and Honolulu. Yes, Manhattan values are flat out extortionate for raw land now, Seattle, Madison, Wisconsin and Boulder, Colorado. They are three places with really high land values as well. Seattle and Madison are on geographic isthmus. And isthmus is a narrow strip of land with water on both sides. It's interesting how Nashville's nascent population influx made its land values surge inside a cheap sea of southeastern US land values now costly land areas like these ones that I've been talking about on the coasts, they could work well for short term vacation rentals like Airbnb and VRBO, your classic waterfront and beachfront weekly rentals, but they do not work for long term rental cash flow. Texas Land values are sort of low to medium. Land near the Mississippi River and its major tributaries have low costs because rivers are efficient transportation networks, prohibitively high land costs. That's one reason, actually, why alternative building methods just really aren't as cost effective as some people think. I'm talking about things like 3d printed homes, prefabbed homes, tiny homes and shipping container homes, well, all of them have got to sit on land, just like conventionally build homes do. And there is a land cost. Talk to a tear down specialist, and they'll tell you that in some older homes, 100% of the total value is in the l and. And in practicality, it's actually even more lopsided than that. The structure can have negative value because demolition is not free. So for you to get an idea yourself, your property tax bill, it's going to show you your split. That's where you'll see the assessed values broken out for both your structure and the land. So the bottom line here is that cash flowing properties have low land values, typically 25% or less of the total property value. That's generally what you want to look for. And I swear the only thing that's more barren than raw land is the creative naming process for new developments. There is such a lack of creativity in these development names. I'm talking about names like Willow Creek Estates, stone bridge crossing, or what else do they name a new housing development? How about VISTA, view heights? They all have these idyllic sounding names that somehow just all sound like each other. Well, we're talking about raw land when you get in contract to buy a property, the seller side is expected to provide you with an as built, it often still comes in the form of an old fashioned piece of paper and as built survey, what it is is a plan view, a bird's eye or aerial view of your property. It's not a photograph, but a drawing, and it shows you the dimensions and the placement of structures on your property, and it includes things like fences and other features like easements. Now, lenders don't always require an as built before granting a loan, but it's a good idea to ask to see one before you wrap up your next deal. If you want to in your offer, you can even require that a recent as built be done by a surveying company. All right. Well, what exactly do you look for on an as built once you have one in hand, first see that the house or apartment building that you're buying is properly set back from the property lines to meet zoning requirements. If the six foot side setback is only five feet 10 inches, then you'll have to address that before you buy even if it's five feet 11 inches. Now it's possible that the jurisdiction that you're buying in will grant a letter of non conforming status, but if not, the structure is going to have to be adjusted. Another item to look for on an as built are encroachments. This is where part of a neighbor structure protrudes over the lot line and onto your property. And encroachment is really only acceptable if you're willing to grant the neighbor an easement in perpetuity for their encroachment onto your land. But why would you want to do that? The third thing that I want to mention that you should look for an as built is the existence of easements. An easement that just means that another party has a legal right to come over onto your land and use it. Yeah, and easements are actually quite common. It's not as threatening as it might sound. A common one is that as your as built would show, say, a five foot wide by 60 foot long easement. Is there that a utility company has access to. Well, that's something that makes sense. It's for the common good, but just be mindful that an easement cannot have a structure with a permanent foundation built on top of it, alright, because an electric company or a water company might have to excavate there. Most people think of easements on the raw land, but there are also aerial easements, for example, an overhead power line where the roof eaves are not allowed to intrude on that airspace. So to review what you learned so far today, the best cash flow properties typically have low land values, often about 25% or less of the tolerable property value. And an as built survey is an aerial view drawing of your property and its dimensions on an as built look to see that it meets zoning requirements like setbacks and look for encroachments and easements. It is resale properties where it's more important to look at as builts than it is for new construction properties. As we're about to bring in tax pro Tom Wheelwright shortly, business owners and real estate investors really get so many of the best tax breaks in the US Code. But you've got to know. How to find them, or else work then with a CPA that does know how to find them, that really knows how to navigate their way around the tax code, people that make high salaries pay high taxes, as much as 50% you remember I did that episode a few months ago, high salaries don't create wealth. Taxes are one big reason why, say, for example, a chiropractor makes $1.2 million a year in salary. But if that chiropractor becomes an investor by buying and selling other Chiropractic Clinics or investing in real estate, their tax rate will drop by half or more, and that's because capital gains tax rates are about half of ordinary income tax rates. So see, you don't want to be a super earner. You want to earn enough money to invest and become a super owner, but tax policy could change Tom and I will discuss that first. Then we'll talk about reducing the amount of tax that you pay. Today is a new punishing unrealized capital gains tax coming that you will have to pay. What this means is that if you have a $500,000 home, and it rises in value to $550,000 well, you would have to pay tax on your $50,000 of profit, but you haven't sold your home. So this feels so wrong, because you haven't realized any profit at all. This is what unrealized capital gains tax is. And also, where are you going to get the cash to pay the tax on your 50k of profit just because your home rose in value yet you didn't realize it? I mean, might you have to sell your home in order to get the cash to pay the tax. And then what if you though could pay the tax on your unrealized capital gain so you do pay it, but then the following year, the home goes down in value. Well, would you get a refund then? So the unrealized capital gains tax proposal is a mess. Let's learn about it and more. This week's guest is a best selling author, CPA and an international authority on tax. He's brilliant because he actually makes taxes fun, easy and understandable. He's familiar to you because he's the most recurrent guest in show history. Welcome back to GRE Tom Wheelwright.

Tom Wheelwright 12:48

thanks always good to be on your show.

Keith Weinhold 12:50

Tom probably with more than 30 show appearances here now you are 6% of GRE episodes.

Tom Wheelwright 13:00

That's a little scary. But you know, taxes are your single biggest expense, so why not?

Keith Weinhold 13:05

It's appropriate. And yeah, I guess all these appearances are certainly an endorsement of how much you help our audience. It's also a reflection of how tax and legal are not my strong suit. So it really helps to have you here absolutely the all time, assists leader in GRE history then and Tyler. An awful lot of timely tax topics going on that are probably first and foremost in more people's news feeds than they usually are. As we're here during presidential campaign season, the one that it really seems to revolve around the most is this potential tax proposal on unrealized gains. I've been around long enough where I seem to see this proposal come up more often, but it never seems to go anywhere. So first, why don't you tell us what unrealized gains are?

Tom Wheelwright 13:51

it actually goes beyond that. Interestingly enough, what the Democrats are proposing is, first of all, they're proposing capital gains rates at ordinary income rates. So they're proposing doubling the capital gains rate. That's actually as important as anything else. The second thing is, they're proposing capital gains on gifts. So if you give it, if you give your business to your child, you have a capital gains ordinary income rates. They're proposing capital gains when you die. So not only an estate tax, but also a capital gains tax. So then you get taxed twice when you die. So about 80 to 90% of your estate goes to the government when you die. If you're a business owner, as an example, then they're proposing eliminating the 1031 exchange, which would mean that on a trade of real estate, you'd have a capital gains tax at ordinary income rates. Then they're talking about this unrealized capital gains so if you do nothing but build your business or your real estate, the increase in value is subject to capital gains taxes at ordinary income rates. Now you know their proposal is, we have this tax. Tax when you're over $100 million that is not seem to be in the news feeds right now, but that's what it is. They call it the billionaires tax, and they're calling it an alternative minimum tax on billionaires. But clearly, 100 million is not a billion. That's only a 10th of a billion. And the biggest issue, of course, is if you tax unrealized gains at 100 million, soon you're going to tax them at 10 million, then it's going to be 1 million. Because history. That's the history of our tax law. The history of our tax law. Remember, in 1913 when we passed the 16th Amendment, it was passed because it was only a tax on the rich, right? It would never have passed if it was going to be a tax on the average person. And yet it passed. Because great, we're okay taxing somebody else, as long as it's not our tax. We're okay taxing somebody else. That's pretty much what's going on with this unrealized gains tax is, oh, well, it's on somebody else and they have enough money. It's no big deal. Therefore, I'm okay with that, because why shouldn't they pay more tax? That is what this is about. The challenge is, is, as we saw with the income tax, eventually it will reach the average person, or at least the average entrepreneur, real estate investor. Because think also, let's say that you build your wealth in real estate, and then when you retire, you say, Well, look, I don't want to be doing active real estate anymore. I'm going to trade my single family homes or my apartment building. I'm going to trade for a Walgreens a triple net lease, well under their proposal, that would be taxed because, again, no 1031 exchanges over $500,000 so that means that if you accumulate your wealth through business or real estate, you pay a much higher tax rate than if you accumulate your wealth by investing in Wall Street through a 401k because if you invest in Wall Street through a 401K, you only have to pay tax as you pull that out, you're not going to be paying tax on the value. Now that's assuming that they don't tax the increase in value of your 401K, which is also obviously a possibility. Interesting enough people talk a lot about the constitutionality of this. The challenge with that is that we already have taxes unrealized gains. If you're a dealer in stocks, in securities you do mark to market, that is meaning that you're going to pay tax on unrealized gains. And so there is actually precedent for this, and that's the scary thing, is that they could point to that precedent and say, Well, wait a minute, it's just an income tax, it's not a wealth tax, that's what they're going to say. They're going to say it's an income tax, not a wealth tax, because it's on appreciation, and appreciation is income. That's how they're going to go down this road. Will it start at $100 million Absolutely, that's where it will start. Will it then drift down? Who knows? But likely that's the history of our tax system. Yeah. I mean, we've talked before about the phenomenon of the camel getting its nose under the tent. However, in this case, I didn't realize there's already precedent for unrealized gains, in a sense, as potentially, if this is approved for those with $100 million net worth, and in next it's 10 million net worth, $1 million net worth and so on, like you described there, when you talk about capital gains tax rates being stepped up so that they're at ordinary income tax rates. It's actually somewhat of an interesting philosophical discussion, in a way. It sort of makes sense that a person's gains from investment could or should be taxed at the same rate as one's income when they go to their day job. However, why don't we do that by lowering income taxes rather than doubling capital gains? Wait a minute, no, because it's a double tax. Let's say that you're a business owner. Why does your business increase in value? Well, because you're making income, but you're already being taxed on that income. It's called income tax. What we do in this country, which a lot of countries don't do, by the way, is we tax it a second time. We call that a capital gains tax or a dividends tax. We tax it twice now. Now we're going to have that second tax at the same rate of the original tax. So if you think about it, you're being taxed on the same income twice because it's your income that determines your value, so you're being taxed twice. It's really not the same. It's fine if you're invested in the stock market, and that's where your capital gains are. That's a hard one to argue too much, although it does take liquidity out of the market, because the problem with capital gains tax is being taxed over 28% it's about 28% is that you actually lower the contribution to the Treasury because there will be fewer capital gains. There will be so many fewer capital gains that you actually lose money. The Tax Foundation, taxfoundation.org, I'd refer people to, has done lots of studies on this, and it's very clear. Here that high capital gains rates actually reduce the amount of money that comes to the government. So this is purely political. This has nothing to do with let's generate more revenue, one of the challenges so you have to score this, right? So that means that you're scoring what's the revenue that's going to be produced? You have two types of scoring. One is called static scoring. The other is called dynamic scoring. Static scoring means that we're going to look at the capital gains we already have, and we're just going to, if we double the rate, we're going to double the revenue. So that's assuming that we're going to have the same number and amounts of capital gains as we add at the lower rates, right? Dynamic scoring means that we're going to take into account how people behave motivationally when you double the tax rate. Yeah. Well, let me give you an example. So I'm a business owner. My wealth is in my business primarily. Do you think, really, I'm going to sell that business and take the capital gains immediately and be done with it? But if I have a high capital gains rate, I'm going to sell this over 20 years. So I'm actually going to defer my capital gains as long as I can, because I don't want to pay those high capital gains rates. So that means less money to the government. That's what it means. So it actually reduces on a dynamic scoring if you look at truly how people behave and have behaved in the past. So this isn't a new thing, right? We've had high capital gains rates before. It's not like we don't know. It's not like we haven't seen this before. It's that, for whatever reason, politically, they've decided that, wait a minute, the rich are out of favor. We need to tax the rich more. That's a very popular line, and therefore this is a way to do that, even though it by all calculations that are dynamic, it would actually reduce the amount of funds that come to the Treasury.

Keith Weinhold 22:00

That does make sense about the double taxation. Case in point, with an apartment building, if you increase its noi, you have more income than pay tax that if you increase the noi, therefore you've increased the value of the building. Consequently, the capital gains tax that you might have to pay down the road Tom, maybe current capital gains tax are higher than I thought, is the 28% capital gains tax. Number You mentioned, current or proposed. What is that?

Tom Wheelwright 22:24

Well, right now we have a 24% capital gains tax, okay, we have 20% pure capital gains tax, plus we have a 3.8% net investment income tax. Doesn't apply right now if you're a real estate professional, but applies to everybody else under the Harris proposal formally adopted Biden's plan under the Harris proposal, then you would get a actually 39.6% rate, plus 5% net investment income tax, regardless of whether you're your real estate Professional. So that is 44.6% that's the 45% the 28% number I threw out is that's the number the Tax Foundation says is the maximum you can raise it to without losing revenue.

Keith Weinhold 23:11

That puts things into perspective, as real estate investors, for a long time, we've appreciated substantial tax shelters. What are they being the 1031, tax deferred exchange, like you mentioned, that's been around for more than 100 years. Does that have any realistic shot of being shot down? Of course, Trump shot down substantial parts of the 1031 outside of strict real estate investing.

Tom Wheelwright 23:32

He did, and he actually set the precedent for eliminating it. So by doing that, because he eliminated it on everything except real property, right? I mean, actually, and even before that, there was a time, and there's still ways you can do it with paper assets. But it's not a 1031 exchange. So 1031 exchange has it evolved. It's gotten it's shrunk. It keeps shrinking. Even three or four years ago, no realistic possibility of eliminating 1031 exchange. The challenge, of course, is it would have an impact on the liquidity of the market. However, big deals never do 1031 exchange. Ever you don't see big multifamily developments sold in 1031s. The only time you see that happen is when they've used the Delaware statutory trust. And then you've got some of the investors who use it. And some of them who don't, you can do that in the Delaware statutory trust, but the regular developers, I haven't seen a 1031 done by a syndicator in years. So could they eliminate? Yeah, they could.

Keith Weinhold 24:33

yeah, that would be concerning. Are there any other presidential hopeful proposals that have to do with taxes that are germane, and our audience should know about?

Tom Wheelwright 24:41

my heavens. So the Democrats want to raise taxes by $5 trillion they want those taxes to all be on investors. And the reason I say that is because typically, people who make less than $400,000 which is their threshold, are not major investors. Most of their money goes to spending. Money. If you're making under $400,000 you can easily spend $400,000 a year. Oh, yeah, okay, that's not that hard, especially in today's world. It's a transfer from high net worth individuals who invest their money in long term projects like real estate, like energy, like business, and it's going to be a transfer to people who spend the money and they're going to spend it, my prediction is that if the Democrats get their way, we enter into a long term period of stagflation, high unemployment and high inflation. Because if you transfer $5 trillion from people who aren't spending it in the first place to be able who do spend it. You've got $5 trillion of new money going into the marketplace. Now it could depress asset values. So that could be good for investors, okay? Because you don't have as much cash available to the I'll call it the investor class, to go into real estate. If that's the case, then you have $5 trillion less, right? I mean, it's not a huge portion of the market, but it's big enough. If you take $5 trillion out of investment capital, then that would put a downward pressure on asset prices, which would include real estate.

Keith Weinhold 25:29

we're talking about potential changes to the tax code. It's always a germane discussion, because taxes are the biggest expense in your life. We're talking with Tom wheelwright. We come back, we're going to talk about the real estate tax laws as they are now, for example, how your rent income is taxed differently than your job income, and also, what are taxes like on sports, gambling. You're listening to get rich Education. I'm your host. Keith Weinhold.

Keith Weinhold 26:45

hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at Ridgelendinggroup.com that's Ridgelendinggroup.com

Keith Weinhold 27:16

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Blair Singer 28:29

this is Rich Dad, sales advisor, Blair singer. Listen to get rich education with Keith Weinhold. And above all, Don't Quit Your Daydream.

Keith Weinhold 28:48

welcome back to get rich education. We're talking with tax pro Tom wheelwright. He's been talking to us about some of the proposals that presidential candidates have here in a campaign season, and whether these things become true or not. Sometimes it seems like just the fact that they're proposing. They're proposed, or if they get instituted at a small level years down the road, it can blow up into something bigger. So Tom tell us more about some of the proposals that are on the table.

Tom Wheelwright 29:12

So we talked about the democratic proposals, which also include things like a $6,000 tax credit for babies. It also includes an enhanced Child Tax Credit. Also includes some other there's lots of provisions in there, right? So it's a transfer. It's just a transfer of money from one group of people to another group of people. On the Republican side, we haven't talked about that now they want to extend the 2017 act. They've been very clear, that's what they want to do, which is an estimate $4 trillion so the other direction. So basically, you're talking about a $9 trillion swing between the two parties. We've never seen this before, ever in a presidential election. Now, that big of a difference, one major tax increase, one party proposing major. Tax increases, the other proposing major tax decreases in the same election. It's something that I'm glad people are paying attention to, because it's a little overdue in this election cycle. Because really, when you talk about policy, that's probably the biggest policy difference between the two parties.

Keith Weinhold 30:18

Now one thing we've learned over time from talking with you is these presidential wish lists, if you want to call them that. Well, these tax changes are things that require congressional approval, and we have a divided Congress currently. So what do you think the prospects are of really any of these things becoming new law?

Tom Wheelwright 30:36

First of all, remember, most of the 2017 act expires at the end of 2025 so something will have to be done next year. They don't have a choice, either that or is just expires, and then we're back to what we had. We have smaller standard deductions, we have alternative minimum tax again. We get a deduction for state income taxes, right? That comes back the one. We lose our 20% Small Business deduction, the only thing that stays permanent is the corporate income tax rate that was permanent in the original bill. So there is going to be something, you're right, if there is a divided Congress, and I say that if, because if one party sweeps, then, especially on the Democratic side, the Republicans don't seem to be as cohesive as the Democrats are on these things. And if the Democrats sweep, I would say, remember, we don't have Kyrsten Sinema, we don't have Joe Manchin from happening. And so would the Democrats sweep all these through, not all of them, but you're going to see a major tax increase for sure, on the Republican side, would you see the 2017 act extended? You'll probably see it, but you're right that otherwise, if it's a divided Congress, we're going to have something in between. We thought we would get a divided Congress in 2020 though, remember and we didn't. So I would not count on a divided Congress

Keith Weinhold 31:59

erstwhile 2017 Trump tax cuts in JOBS Act brought the highest marginal income tax bracket from 39.6% under Obama down to 37% as I remember it. Some thought Biden would take it back up to 39.6 but he hasn't and it's just stated 37 All right, so if Republicans stayed in power, presumably that 37% would go ahead and carry on. That's what we think about as our w2 income. Tom, why don't we talk about the taxes that actually exist today? I think a lot of real estate investors just don't understand the difference between how your w2 job income is taxed versus your taxes on real estate rent. Can you talk to us about that?

Tom Wheelwright 32:42

The reason it's confusing is because they're both considered ordinary income, right? The difference is, is that one is business income and one is non business income. Your wages are non business income. You don't get deductions against non business income, but you do get deductions against business income. So your rental income is considered business income for purposes of the Internal Revenue Code. What that means is you get deductions for taxes. You get deductions for interest, you get deductions for maintenance, you get deductions for depreciation. That's why, when you have your income from your rentals. Typically taxed much lower than your income from your salary, because you get no deductions against your salary like you do against the rentals.

Keith Weinhold 33:30

Maybe it would help to introduce an example here. I don't know if this will complicate things too much or not. If a real estate investor has, say, a single family rental property with $2,000 of rent, income, $1,000 mortgage, $800 in operating expenses. How is that tax that leaves them with $200 of cash flow?

Tom Wheelwright 33:50

You have $200 of cash flow, but then you probably have depreciation on top of that, which is a non cash deduction. And so let's say your depreciation is $500 that means you actually have a $300 loss that, in many cases, you can use to offset income from your w2 so you actually have a negative tax rate. In other words, you're making money from taxes. So actually, is that an increase to your cash flow? So it's a way to think of it is, I have $200 of cash flow from my tenant, if I have a $300 loss for tax purposes, let's say I'm in a 33% tax bracket. I have $100 of income from the government. So that means my cash flow is really after tax. Cash flow is $300 not $200 whereas if you have the same $200 of income from your wages. Let's say you have just the net, right? Let's start with the net. You have $200 well, you're going to be taxed. And let's say that again, your 33% tax rate, that means you're after tax, right, is going to be roughly $125,000 okay, under $30 so $130 we're. $300 so it's like twice as much. In fact, all of that difference is because of the tax law.

Keith Weinhold 35:06

Gosh, that was a great breakdown. I'm really glad that I introduced that example, $2,000 in rent, minus $1,000 for the mortgage, at $800 in operating expenses, again, leaving you with $200 in cash flow with that example. There's probably more going on here with taxes. Because, of course, with that $1,000 mortgage amount, some is going to be principal, some is going to be interest. In part of that interest can be tax deductible.

Tom Wheelwright 35:31

I'm assuming it's all interest, because if it were not, we'd have a higher taxable income. Remember, your principal payment is not deductible. So in your example, I was assuming that the $1,000 mortgage payment was all interest. If it was only $800 then you'd have $400 of income before depreciation. You don't have $100 loss, because, remember, your principal's not deductible, so therefore you have to add that back into your taxable income.

Keith Weinhold 35:58

Will you talk to us about how to apply depreciation to this income versus expenses. Example, is there anything else you can speak to when it comes to that $800 of operating expenses in this example, and those expenses include things like property insurance, property tax itself, maintenance repairs and utilities.

Tom Wheelwright 36:19

Right but also, for example, you might run your rental real estate business out of a home office in your home so you could have a home office deduction. You might have your use your car for the rental purposes, and then you get a deduction for your car. So there are additional expenses that aren't even in that $800 that you could pick up that would not otherwise you'd never get a deduction, and you're really not spending any more money. You're just using it for business, and therefore getting a business deduction. So it's really all about what do I get to deduct? Remember that if you own a home for yourself, you don't get to really deduct the taxes. You have a limit on how much you can deduct. So taxes are limited in deduction. Mortgage Interest may or may not be limited. Remember also that if you have a mortgage, you're limited to how much a $750,000 mortgage being deductible, whereas if you it's a rental property, it could be a seven and a half million dollar and mortgage, and you still get the deduction, so you're not limited like you are. On top of that, again, it's a business, so let's say that you put solar panels on your personal home, you'd get a 30% tax credit, but you'd get no depreciation deduction. If you put solar panels on your rental house, you get the same 30% tax credit, but now you also get a depreciation deduction of probably another 30 $40,000 in the first year. So there's always more deductions in a business setting than a personal setting.

Keith Weinhold 37:56

Well, real estate has been around a really long time. Often laugh when people talk about non conventional investments and put real estate investing in their real estate's about the most conventional investment that we can possibly think of. It's been around a long time. We think about a newer thing that people do with their money, but I sure don't call it investing. That's sports gambling, and it's something that you and I haven't talked about before. Here Tom in 2018 the Supreme Court opened the way for states to legalize sports gambling, and at last check, 38 states, plus DC and Puerto Rico have legalized at least some form of sports gambling. So now it's a more germane conversation for you and I to have than it was a few years ago. Can you tell us about sports gambling, taxes and how it's treated.

Tom Wheelwright 38:41

So remember, all income is taxable. So that includes gambling winnings. They are taxable. In fact, you'll get a 1099 just like you would if you rendered services, you'd get a 1099 or you have interest income, you get 1099 you get 1099 from gambling. What you actually have to show is that you actually have gambling losses. So you have to track those gambling losses to show the IRS that you got gambling losses. But your gambling losses can never be more than your gambling winnings. You never get to generate a tax loss on gambling. What that means is, is that if you win $10,000 during the year, and you can prove that you lost $8,000 during the year, you're going to be taxed on $2,000 but if you can't prove the 8000 you're going to be taxed on 10,000

Keith Weinhold 39:33

so you the gambler, have the burden of tracking this, and I guess tracking your losses. I'm not a gambler. How would one track their losses?

Tom Wheelwright 39:42

I would keep detail ledger. Personally, I probably have a separate bank account just for gambling. Gosh, I'm not a gambler either, so that's what I would do. I would have a bank account just for gambling, by the way. It's also a good way to budget your gambling so they, you know, get in trouble, right? So just set up a separate bank account. Don't put whatever money you say, I'm comfortable with this money, I'm going to gamble with this money put in that bank account, and then you have a ledger that shows the money that went in and the money you lost, the money you won, and don't do anything but gambling in that bank account.

Keith Weinhold 40:15

Hey, that separate account's a great way to hide it from your spouse, not that I'm suggesting. Not bad.

Tom Wheelwright 40:22

Interesting. You went there.

Keith Weinhold 40:23

I'm not a gambler at all. Can't even believe I was thinking that far ahead. What are the gambling tax rates like?

Tom Wheelwright 40:31

They're ordinary income tax rate. So gambling winnings are just ordinary income. They're the same as your wages. They don't have social security taxes their income, just like any other kind of income, nothing special. And this all applies to whether it's sports gambling or general gambling, like lotteries and sweepstakes? Just remember, all incomes taxable unless the government says it isn't all income, okay? And then there's some types of income that are taxed at special rates, like capital gains, but gambling has no special rates. By the way, gold also has special rate for when you sell gold, it has its own tax rate. Gambling has no special tax rate, so it's just your ordinary income rates.

Keith Weinhold 41:11

To me, it seems like it's hard to break even with gambling over time, and then when you take the tax adjusted earnings that you get from it, you know, over the long term. I just don't think Harris and Bally's Casino is really incentivized to inform gamblers on how punitive this can be with ordinary income tax rates applied to gambling winnings.

Tom Wheelwright 41:30

No, but they will send you your 10909g I guarantee that, that's for sure.

Keith Weinhold 41:34

Well, Tom has helped business owners and real estate investors permanently reduce their taxes. He does it like virtually no one else in the world does by keeping it simple, by helping you find deductions that other CPAs can't do. You can learn more about how Tom and his team can actually help you. You can get a free consultation. You can do that at getricheducation.com/tax. And Tom tell us more about the importance of a business owner or a real estate investor or anybody else really being connected with the right kind of tax professional that can permanently reduce your taxes.

Tom Wheelwright 42:12

So remember that if you want to change your tax, you have to change your facts. It's that simple. What you have to do is you need to know what facts you need to change. That's where a good tax advisor comes in. Is what facts do you need to change in order to change your tax now good news is, wrote tax through wealth. So you got an idea of what that is, but the tax law is very detailed. You must dot your i's cross your t's, so to speak, so that you make sure that you meet all of the rules, such as documentation, for example, for your business expenses. When you do that, you're going to get a better tax result, especially if your tax advisor is also preparing your tax return. Because really, your tax return is just part just how you implement your tax strategy, right? That's how you do it. So we launched, just recently, a franchise of tax advisors, and now we actually have much, really good control, quality control with our tax advisors, and they use our software system. It's very important that you have somebody, if not us, find somebody who you know you can actually give tax free wealth too, and say what cares make sure that we're doing it this way. But if the easy button is really the getricheducation.com/tax.

Keith Weinhold 43:27

Tom Wheelwright, It's been valuable as always. Thanks so much for coming back onto the show.

Tom Wheelwright 43:33

Thanks, Keith.

Keith Weinhold 43:40

Yeah, key insights from Tom as always, taxes are complicated. Tom's Network helps sort it out for you. We've already covered a lot of ground on this week's episode with raw land values as built, proposed tax plans and how to reduce your tax burden within the existing tax system. Tom and I talked, and he will be back yet again with us later this year for more tax wizardry. Now, just recently here, Kamala Harris proposed a smaller capital gains tax hike than Biden. She's starting to put sort of her own policy spin on things, breaking with the President on the size of a proposed increase on the capital gains tax rate that is a 28% top tax rate when investments are sold for those that make a million dollars plus. So that's more than the current 23.8% top rate, but less than the 39.6% rate that Biden had supported all income is taxable. Therefore it is axiomatic that the fastest way to increase your ROI is to work with a tax advisor that can find you all of the biggest deductions right away. You can read Tom's book Tax Free Wealth, get a good system of documentation going and get connected with Tom's team. At the end of an episode at times, I like to leave you with the most actionable resource on the topic that we covered. You can schedule a free call to see how Tom's team can help you out. At getricheducation.com/tax. That's getricheducation.com/tax. Until next week. I'm your host. Keith Weinhold, Don't Quit Your Daydream.

45:33

Keith Weinhold 46:01

The preceding program was brought to you by your home for wealth, building, getricheducation.com.

518: Is Now the Best Time to Buy Real Estate? Sep 09, 2024

A prominent Florida Builder and #1 Wall Street Journal Best-Selling Author joins us to discuss the benefits of build-to-rent properties, including affordable housing and attractive mortgage rates. He has already done all the work for investors, offering new build income properties that are sometimes rented.

We discuss the importance of median value and affordability index in choosing profitable areas for long-term real estate investments.

Learn about new build income properties with rate buydowns as low as 3.75%.

Important market dynamics and investor strategies, including the trade-offs between cash flow and equity growth.

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Complete episode transcript:

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Keith Weinhold 00:01

Welcome to GRE. I'm your host. Keith Weinhold, a great way to forecast the future of the real estate market is to look at the level of new building. I've got a surprise to reveal there then a focus on one of the hottest in migration states. That's popular because it promises cash flow for real estate investors today on Get Rich Education.

00:24

Since 2014 the powerful Get Rich Education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads in 188 world nations. He has a list show guest top selling personal finance author Robert Kiyosaki. Get Rich Education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the Get Rich Education podcast. Sign up now for the Get Rich Education podcast, or visit getricheducation.com

Corey Coates 01:09

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 01:25

Welcome to GRE from Plains Georgia to White Plains New York and across 188 nations worldwide, you are listening to Get Rich Education. I'm your host. Keith Weinhold, we are an educational platform. And if you haven't yet, I really suggest that you spend 100 hours learning how to invest in real estate. The average person works 2000 hours a year for 40 years. That's 80,000 hours of working for money. I implore you to spend 100 hours learning how to keep it and grow it and leverage it and create income and tax advantages from it. 80,000 hours of lifetime work, 100 hours learning real estate investing. Now, when someone like a presidential candidate produces, still vague talk about building 3 million starter homes in four years. That actually appears just about impossible. Within the existing structure. We would need 2 million housing starts per year from 2025 to 2028, in order to overcome our existing shortfall. And we haven't exceeded 1.8 million in any year in the moderate era, and that's even when demand was extraordinary and interest rates were low. Just you know, look at the reality of what home builders need to actually do, and this is even if they don't have any excessive not in my backyard. Pushback, builders have to procure land, meaning they need to lay out cash far before building, and then they need to jump through zoning and building hoops in counties and cities, in towns, in communities, and sometimes those hoops can reach preposterous levels with substantial delays. Builders need to secure financing, and for most, interest rates are still in the 9% plus range. And then builders need to acquire a whole local network of contractors and subcontractors, and then they need to keep those contractors and subcontractors busy, or else they're gonna lose those workers. So builders have to work to maintain their teams once they found them. And if that's not enough, this is all amidst a historically bad skilled labor shortage, meaning those workers can be enticed to go work for somebody else. As you know, skilled worker demand far exceeds skilled worker supply. So for builders, it takes years of planning and development. In a lot of cases, they sit on land for many years before the market conditions are right for the actual build. Well, look, at least there is finally acknowledgement among our highest elected officials that we do need to address the core problem, but our elected officials proposals aren't really so good, and our country's housing problem is largely a regulatory issue. Later today, we'll talk to a builder that's already done all of this for you, so it's not preconstruction that has new build income properties complete, available sometimes even rented already, and they help you buy down your mortgage rate to a level that's really low. You'll soon learn about it. But first, let's talk more about adding new housing supply in the larger apartment segment. It's something that can help you see the future here, but it isn't getting enough tension outside of multifamily industry circles, and that is the fact that apartment starts are plummeting to 11 year lows. And this is a real surprise to some people, multifamily completions are outpacing starts by the widest margin since 1975 and I mention this because, you know, you probably keep hearing and reading about how apartment construction is at all time highs, but really, that is a story from two years ago. It takes about two years to go from an apartment construction start to a completion. Well, today we're seeing that huge surge of apartment starts two years ago morph into completions. That's the piece to be aware of here. And to give you some idea about the new apartment building, slow down through July, we have completed 314,000 multifamily units, and we started just 193,000 units. That's all according to census stats that year to date. Start total is the nation's lowest since 2013 when we were just building our way out of the global financial crisis. Also a larger share of apartment supply. In this next cycle, it's likely to be affordable housing, because that's where the tax incentives are in the last wave of apartment construction a few years ago, it was more higher end stuff, and the result is today, apartments are oversupplied in a lot of markets, leading to falling apartment rents, or just somewhat stable and frozen apartment rents in heavily overbuilt places like Austin, Texas and a lot of others. But this slowdown in New Starts of larger apartments is why some have bullishness on the multifamily outlook for 2026 and beyond supply is the biggest headwind for apartment investors today. While it is an enormous tailwind for renters, it's good for them, but those dynamics appear likely to shift again. It took an almost perfect storm of variables to push apartment construction to 50 year highs, and it's difficult to see a scenario where construction could re-accelerate back to those peaks. Today's apartment completion levels could mark a high. It's generational. You may never see it again. So to summarize, in the world of large apartments, supply is still up, even outpacing demand in a lot of markets. It all came from a big building wave that began when interest rates were low two years ago. They're mostly upper end places. Apartment syndicators also got hit with higher rates that reset on them, and you've seen the value of some apartment buildings fall 30%. It is bad. But long term, I expect that apartments are going to be fine. New lease ups are absorbing what's out there. The demographics show that renters will continue occupying apartments. Interest rates have already fallen and they're expected to keep falling, and you don't have very many new apartment starts, it's that last piece that a lot of people aren't aware of. So that's the forecast over the next few years for five plus unit apartments. When it comes to the market dynamics for one to four unit properties. I'm going to discuss this with one of the voices of GRE marketplace today. They are a build to rent provider building new construction, single family homes, duplexes and fourplexes for tenants that they sell to investors. Hey, I'd like to welcome in a home builder and property provider serving Florida, basically statewide, known as North America's leading build to rent property developer, and he believes in what he builds and offers others, because he's been a real estate investor himself for more than two decades. Hey, Jim, welcome back onto the show.

Jim Sheils 09:45

Keith, good to be here. Thanks for having me.

Keith Weinhold 09:47

Jim, we have a lot of exciting things to talk about. What you're doing in Florida. You've really helped out a lot of our investors and followers so far. You have some really interesting things to tell us about. Rate buydowns and just how low those rate buydowns are on some new build properties. And I sure want to get to that. But first, why don't we just pull back big picture, and from the 30,000 foot national view, before we talk about Florida, what are some of the important dynamics you see in the real estate market here in late 2024

Jim Sheils 10:16

Yeah, it's been interesting. The media is always late to the party, as you know, Keith, I've seen some interesting stats. You know, affordability nationwide has gone from 480,000 about eight months ago, and now it's down to about 405, so we've already seen the affordability index come down nationwide, and it's hit really well here in Florida. One of the reasons why is there's definitely been some price adjustments on higher priced property in Maine markets, Miami, Orlando, Tampa, areas that we don't build because the numbers didn't work. So that's been really good to see that affordability also, rates are just starting to drop. But here's an interesting thing. A year ago, Keith, the average mortgage payment for the average person buying a home, was 57% of their total income. Now that has dropped to about 44% of their total income. So I'm always looking at affordability and overall median pricing, and that's been a really, really good thing for us. As I had said, second tier markets where you can get affordability, but also great amenities, great lifestyle is where we've always focused on building, and it seems like that is really continuing to have a solid pulse. I love visiting some of those bigger markets, you know, taking my kids to Disney, but I'm glad we stayed out of there, because it seemed a little more temperamental, and we're glad we're in the more second tier markets.

Keith Weinhold 11:39

You cited an affordability index there earlier. Now, affordability still, historically, is not that good, but it's not as bad as it used to be. Tell us more about that index.

Jim Sheils 11:49

Yeah, I always have looked at, you know, the affordability index. Let's just use an example, Orange County, California. I think the median value of a home there is $1.1 million. In Jacksonville it's 305, and so you get a score for based on what is the average family income per price of the home. And it's kind of like your report card. And there's certain areas that have an A, and there's certain areas that have an F. You know, we have lots of investors come to us with you guys too, from New York or Seattle or Orange County. And this is something I look at, what is the affordability index, and just know how they figure out the score on your affordability index. What's the average price of the home in that area, and what is the average family income for that area? And the correlation of those two numbers shows whether you have a good score or bad score.

Keith Weinhold 12:39

And now that we've looked at the national picture somewhat, you mentioned some of the major metro markets in Florida, some of which you specifically stay out of, and that's simply because the numbers don't work for long term rentals. They don't provide cash flow. Tell us more, just in general, about some of the areas that you've chosen and why is there profitable for long term real estate investors?

Jim Sheils 13:03

Yeah, this median value, this affordability index, is so key when we're able to get into home still, you know, Jacksonville is barely over 300,000 as the media now, we're able to cash flow right off the bat. So like Jacksonville is still as the population growth, the economic growth is occurring. It's desirable coastal community, and supply and demand is in our favor. We don't have enough housing, so that's where we focus all of those factors, not only here, but on a smaller scale, in Palm Coast, in Ocala, where we've done a ton with the GRE community. And then southwest Florida. We don't go to Southeast Florida, too expensive, too overbuilt, too high on insurance, but that Greater Fort Myers area, which did experience the highest growth anywhere in the country during the pandemic, which was interesting to watch, we're still seeing a lot of good fundamentals down there. And again, at that affordable range, it makes a big difference when you're buying at a medium priced home is, let's say 320,000 opposed to 580,000 makes a huge difference to whether it will cash flow off the bat or have a negative cash flow. And as you know, Keith, even though we're doing new construction high growth areas, we want to see app cash flow right away.

Keith Weinhold 14:13

Now, you are a builder, you are adding much needed inventory to the national housing supply, where we've had a shortage of millions of units per years, depending on what source you cite in quote there, a lot of the estimates as to the housing shortage really are all over the place. But many sources state that Florida inventory levels just statewide. Here they are back about to pre pandemic levels. So they have recovered. They are back to about 2019 levels. And I think one important thing for people to remember is, well, 2019 was a pretty good, balanced housing market.

Jim Sheils 14:50

It was a normal market. We liked 2019 you know, that was a good market. There was growth, but it was sustainable, more predictable, steady. So I'm happy to be back in 2019. You know, 2020 21 levels there were, there was less than a month's worth of inventory on the MLS that it was dire. Yeah, it was just such a skewed thing. And you've studied this for a long time. So everyone if you say, Oh well, it went from this to this. I love how you talk about 2019 because by all statistics that was a very normal market here in Florida. So we're happy to get back to that, because you have to have a certain amount of inventory level to balance the playing field. We want to see growth, but I'm more of a long term player, as you know, we don't need to see huge spikes, because that can get a little volatile.

Keith Weinhold 15:36

Now, as a builder, talk to us about builder sentiment since, like we talked about before, we are in a falling interest rate environment, mortgage rates are already down about one and a half percent from the recent highs, and the Fed hasn't even begun lowering rates yet. So talk to us more about what those lower rates do to build their sentiment. And we're not just talking about rates for buyers here, which matter, but it's the rate that builders like you that have to pay the typically factory in here too.

Jim Sheils 16:06

Yeah, it's an interesting market right now, Keith, and here's something I want to give great encouragement from as you know, we do build some for the institutions and the larger groups. The little guy, the small investor, has the guerrilla warfare advantage over them right now, because, as you know, we right now have announced financing. We're able to have this builder forward commitment where we're buying large tranches of money for residential mortgages. That means, you know, individuals like we work with all the time, Keith, that buy a few properties, we can get them this incredible financing right now, at 3.75 we're beating the market. You know, you go into a B of A and try to get a duplex finance, you're probably looking at six and three quarters. And we're able to do that because it's residential real estate. Some of our bigger guys, they would buy all of our inventory. But we can't get a institution qualified for these individual investor loans for residential real estate. They have to go to the commercial world. And as you know right now, Keith, the commercial world is screwy. People aren't lending. The rates are really high, and even these big guys have to sharpen their pencils and do their numbers and they go, Gosh, it's not panning out until rates drop. So that means these bigger groups are on the sidelines. And we all hear the complaints, all the big guys are buying all the properties they own 40% well, they're on the sidelines, and our little troopers and investors are building their portfolios in ways they cannot so it's exciting to see now for us too. What's lucky and unlucky is a lot of good builders out there that we're friends with. They can't get financing. The banks have gotten so stringent. So they might even have a good balance sheet and a good track record, but the banks are getting really stringent where Chris and I are. As you know, we were partially acquired by Sumitomo forestry about a year and a half ago. They're a 331 year old company, and when we decided to team up with them, they said, We love Florida and we love build to rent, go, and so now we have zero bank debt, and they've given us a green light to build out all of our inventory. We have five, over 5000 lots in Florida, and we don't have the bank slowdowns. So to find a good builder, you have to make sure they have financing in place, because they're going to be a great builder out there that just can't get the funding to do the job for you. So that's another thing you want to look for.

Keith Weinhold 18:16

Right. And last time I checked, you've got more than 925 current independent income property investors, many of those whom are GRE listeners. Well, we're going to talk more about just how low those rates are. Who participates in the buy down? I already know that most of it's the builder, and just part of it is you, the investor. You're listening to get residuation. We're talking about Florida, build to rent property more when we come back, I'm your host. Keith Weinhold Hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at ridgelendinggroup.com That's ridgelendinggroup.com Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest, year in and year out, instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their. Investors 100% in full and on time. And I would know, because I'm an investor too, earn 8% hundreds of others are text FAMILY to 66866, learn more about Freedom Family investments Liquidity Fund on your journey to financial freedom through passive income. Text, FAMILY to 66866.

Garrett Sutton 20:28

This is Rich Dad advisor, Garret Sutton, to grow your wealth. Listen to the always valuable. Get Rich Education.

Keith Weinhold 20:45

Welcome back to Get Rich Education we're talking about half of progress real estate investing in high growth Florida, with a renowned build to rent provider there. And I think a lot of this really comes down to trust with the fluctuating interest rate environment that we've had, some people don't trust certain builders or that investor to go ahead and put down a deposit on a vacant lot and wait 12 months or more for it to be built. But we're not talking about pre construction here.

Jim Sheils 21:16

No, no. Since we steamed up with Sumitomo, you know a lot of good builders again, they can't even start the project until they have a a buyer with a deposit down. That's the requirement for the bank to give them the money to start building. We don't have bank requirements, so we're building on our own dime, and so we are having properties completed before you even have to make an offer on them. So these are finished properties, sometimes a tenant already in place. I know just this month, there's been a few GRE people very happily stepping into pre rented homes. So you don't have to wait that period. If you're ready to move your money or have a 1031 exchange, we can fulfill those no problem, and close within 30 days Our in house financing, Keith, which I know we're about to go over, I want to make sure people know this is for not only our single families, but our duplexes and our quads as well.

Keith Weinhold 22:02

Tell us more about that in house financing that's something of great interest to people, and especially with these mortgage rate buyouts.

Jim Sheils 22:09

Yeah, everyone says, Oh, I wish I had locked into a mortgage before June of 2022 right? I mean, for every time we heard that, Keith, well, now you can and what we're able to do since we have the balance sheet we have now, with teaming up with this bigger company, banks will allow us to do what's called a builder forward commitment and buy large tranches of money. We're in the money buying business, I guess, now, and we have to commit to large amounts of money, but by doing that, we're able to pay fees upfront to buy down the mortgages. So right now, our most popular rate is 3.75. You as the buyer, and these are called discount points, which I've heard Keith talk about. You're bringing in a little under two discount points to get the 3.75 rate. And you say, Okay, well, Jim, we're bringing in a little less than two points. What are you bringing in? We're not really supposed to talk about that, but here's what I can tell you, do this test, go to one of your mortgage friends, or your B of A or Wells Fargo, and ask it what it will take for you to pay to buy down a rate for 3.75. Now, first of all, they will not allow you to do that much. We are on a more high volume schedule that will allow us to do that, but let's say, if they would, here's what the feedback we've got. If you were to try to do this on your own, Keith, you or I just walking into our bank, you would have to pay anywhere from 12 to 15 points to make this happen. Gosh, and that was the advantage of working as a collective group like we do together, you and I in our investor community, because now that we're able to do volume, it benefits us

Keith Weinhold 23:39

all. No one really knows where interest rates are going to go. I think it's pretty foolish to try to predict them, but very few people think they're ever going to drop to the levels that we saw during the depths of the pandemic, 3.75% if you get locked in there, it's pretty unlikely that the future market is going to meet that down the road at all and tell us more about that product type, the single family homes, duplexes and fourplexes that this is available on. And of course, they're all new build.

Jim Sheils 24:09

Yeah, we do a combination of new build on all of these. We found, Keith, a lot of build to rent. Companies really only focused on the single family home, but we found, you know, to increase rental yield and overall returns. There was really a lack in the market for duplexes in residential areas and quads, again, and those are close to commercial deals, without the commercial financing, they allow more affordable rent in more residential areas that people can afford and want to be in. And we found through the pandemic, these had a greater calling to them than, let's say, a large apartment complex. You know, people want to be a little more spread out, have their own yard, like in a duplex, and they get that there, but they get it at a fraction of the price that a complete single family home would be at. So we found, as you know, most of our investors, our average client, buys three to eight properties with us, and no surprise, they. Buy a mixture of single family duplex and quads. I know we agree on this. Keith, the single family home has had the best history of all of great equity appreciation, and the duplex might lag behind that a little bit, but it's got a better cash flow. So I will always do little trade offs and combo my own portfolio to make up for two of those. And that's what our counselors usually coach our people. I know yours do as well.

Keith Weinhold 25:23

Yeah, the economies of scale for the real estate investor really can be there long term with duplexes and fourplexes, and you're really helping fill a need. Some months ago, I talked about the mmm multi families, missing middle, about how so few duplexes, triplexes and fourplexes are being built today, as compared to when you had about three times as much construction in those property types that you did in the 1980s a lot of that's really gone away. You're really bringing it back. We talk about some of the areas where these are built. You know, Jim years ago? Well, really about 10 years ago, when I began this show, I was often talking about how I want to be invested in Metro statistical areas that have a population of at least 500,000 to 1 million people, in order to get a diversity of economic situations there, because you do need rent paying tenants. But so much has changed since then, starting four to five years ago, with the work from home movement, I'm more open to more outlying areas than I had been previously. So tell us about some of these areas that you choose to build in. In Florida.

Jim Sheils 26:29

yeah, you know our hub market where we started doing rehabs many, many, many years ago was Jacksonville, Florida. Yeah, and we still are headquartered here, but Jacksonville, again, is the most affordable coastal city, I believe, still on the East Coast, which brings great fundamentals. It hits both of your things, Keith, where it is larger, but it has more of a sprawl and that larger population and the fundamentals look really well again, that overall median price is still very low. And we branch down to Palm Coast, which is a little more of a higher end area, but a bedroom community, to Jacksonville, the silent soldier, the one that really surprised us the most. I think you remember, this was Ocala. In fact, when Christopher said, Do you want to go start building Ocala, and this is about a decade ago, I said, Wow, Ocala, isn't there only, like, some horses out there? Yeah, now he's a horse guy. So he laughed, and he said, Oh, sure enough, I put my foot in my mouth. But Ocala, the amount of growth that we've seen out there has been incredible. And Ocala is really well placed because it's just below Gainesville, where the, you know, there's the medical centers, the university, and it's just north of the villages, which is the second largest retirement community and growing. Not only that, it has its own economic infrastructure, but it's really well placed in the difference of a price of a home for a starter family in Ocala compared to like Northern Tampa. There is no comparison. You're talking half. So we like that. And also with rents, it's got a great lifestyle. And then southwest Florida again, Southwest Florida, Keith, we're very lucky that we took some risk there. A lot of builders would like to be building down there, but as you remember, we took some big risks in 2020 we talked to some of our friends and said, this can be really good or really bad for real estate. We went with the really good and we loaded up on, well, a lot, over $20 million worth of land at the pre jump prices. Now we're into land right down there so we can get them built right for you guys still make a margin for ourselves that other people that they're trying to get land today, they just can't do and Southwest Florida has been a really good market for us. Had that hurricane there a few years ago, and all of our new construction properties did well. In fact, of almost 300 properties that were under construction, we had four that needed insurance claims, and those four, Keith, well, we had just put up the freestanding walls. We hadn't been able to tie the roof on before the winds and the winds knocked the walls over, and that's it. But there was no flooding, and that's why you get an insurance break. And all the markets that we're in, we always hear, Oh, you can't get insurance in Florida. And I kind of giggle and say, on which properties? Because there is a very different treatment for a new construction property built 2004 or newer, compared to a property built 1957 on lower ground.

Keith Weinhold 29:02

Yeah this is such an important thing to bring up. Property insurance premiums have been hiked substantially on Florida, existing, older build properties, not the post 2004 ones like Jim is talking about here and yeah, for those that don't know, Ocala, there in Central Florida is known as an equestrian area for horses and your business partner, Chris, that's his big hobby. So yeah, when you first went there, you were with Chris. You were like, are you just trying to get there because you want to be around horses more and what? But now there's actually a good fundamental reason for this, where it makes sense to build there. Well, Jim, why don't you talk about how you've specifically helped one of our listeners, or the typical buyer there in how that process looks, including an approximate timeline to get them from the time where they submit an offer all the way through to closing.

Jim Sheils 29:52

Yeah. Well, you know, our team and your team work together. We want to make sure we set people's goals and expectations. Up front. What are you looking for? What are you trying to get into? If someone says to me, Look, I'm looking to get into a great starter home with the lowest basis and highest cash flow, I'm gonna say, Okay, let's look at Ocala. They say, Look, we're looking more long term. I'm more of an equity growth player. Yeah, I want cash flow. I'm gonna say, Okay, let's look at Palm Coast, or southwest Florida. Together with our teams and our property counselors, we try to assess what are your needs and where are you wanting to go. Now, all of our vehicles will get through there, but some a little better than others, depending on the plan you want to put together. And so once we do do that, what we like to do is go through properties that seem to match what they're most wanting. We'll go through the performance. We'll look up the site maps, we'll go through the different fundamentals of that direct area, and then, if it seems to make sense, first thing we got to do is get you pre qualified with our in house lender. All is that a go? Well, then we can make an offer, get it in. We have a whole onboarding process. You know that we've done hundreds and hundreds and hundreds of time, and now we're over. I know I laugh because we talked recently and you said, I think you're at a 925. Investors, we're over 1000 now, so we're continuing to grow. But again, we've tried to make it fluid, where our people are part of the process, but never alone. We answer the questions on the financing help get you the directionals on the insurance now, you can use whatever insurance company you want. 99% of them use the company that we recommend. We have no financial affiliation with them. But everyone asked years ago when Chris and I started this, well, who do you use for insurance? Who do you use? So we just gave them who we used, and this person usually undercuts and better coverage than most. So all those pieces Keith with going through that and again, this is about a 30 day process of getting qualified, once you pick the property, submitting the contract with your 10% deposit, doing your onboarding for Property Management and Insurance pieces. And then, obviously you don't have to come here to see us for closing. We do all of our traveling closings for you. And most important thing I like to set up with PM is, where do you want the money wired?

Keith Weinhold 31:59

That's a great question. Well, yeah, I mean, this is a great answer for so many of our listeners, those super attractive rate buy downs. And then the big thing is, is, in many cases, you're not waiting and waiting and waiting months for the build to take place. Well, Jim, before I tell our listeners how they can connect with you over there, do you have any last thoughts overall with anything that we did touch on or did not.

Jim Sheils 32:22

I want to encourage people, if they're not looking to get in the next to real estate in the next two to three years, not a big deal. But if you're looking to get in sometime over the next year, then I would really look at what's happening, things you talk about with the rates and the interest, because I do believe that institutional money within the next six months, it'll be interesting when we reconnect, Keith, that are going to start coming in and buying up more residential real estate. However, their hands are tied right now. They cannot get the financing that the smaller guy can. So whether it's with us or someone else, take advantage. Take advantage. David and Goliath, this is a great opportunity where the big guys cannot keep up with you, because they can't get the financing and insurance rates that you can so take advantage.

Keith Weinhold 33:03

Well, I specifically wanted to have you on today because it is an opportunistic time. They serve Florida with new builds. Learn more about their properties and even get some under contract. If you so wish, you can do so by contacting your GRE investment coach. If you don't have one yet, you can do so at GREmarketplace.com it is free or at GREmarketplace.com/florida. Jim, it's been great having you back on the show.

Jim Sheils 33:32

Thanks having me. Keith, good seeing you.

Keith Weinhold 33:39

Yeah, an excellent update on Florida build to rent properties. A lot of our listeners are asking about these new build properties with 3.75% mortgage interest rates, and you are not the majority participant in the rate buy down either. Next week, who I consider the foremost tax authority in the entire world will be back here with us. Tom Wheelwright is going to discuss presidential candidates, tax plans, whether you should be scared about a tax on unrealized gains and a lot more. Also on a future episode, I'm going to talk about the land that is the vacant land that comes along with your rental property, what to look out for and what to avoid. It's really a little discussed subject that we haven't talked about here before. To learn more about Florida, build to rent property with those attractive rate buydowns, start at GRE marketplace.com Until next week, every host, Keith Weinhold, Don't Quit Your Daydream.

34:45

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. Potential for profit or loss. The host is operating on behalf of Get Rich Education LLC, exclusively.

Keith Weinhold 35:13

The preceding program was brought to you by your home for wealth building. Getricheducation.com

517: The Future of Homebuilding with George Gilder Sep 02, 2024

Futurist, Technologist and Author of many titles including the classic “Wealth and Poverty”, George Gilder joins us to discuss supply side economics and the transformative potential of using graphene material in various industries including real estate.

We discuss economic growth measured by time prices, showing that private sector progress is faster than GDP estimates.

Learn about graphene's properties, including its strength and conductivity, and its potential to transform various industries.

Graphene is a single layer of carbon atoms that is 200 times stronger than steel, 1000 times more conductive than copper and the world’s thinnest material.

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getgilder.com

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:01

Welcome to GRE. I'm your host. Keith Weinhold. I'm talking about the various economic scare tactics out there, like the BRICS, the FDIC and the housing crash. What lower interest rates mean? How our nation's $35 trillion debt has gone galactic. Then today's guest is a legend. He's a technologist and futurist. It tells us about today's promise of graphene in real estate 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 in 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, 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 Daydream letter, and it wires your mind for wealth. Make sure you read it. Text GRE to 66866, text GRE to 66866.

Corey Coates 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 01:56

Welcome to GRE from Dunedin, Florida to Dunedin, New Zealand and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education, where real estate investing is our major. That's what we're here for, with minors in real estate economics and wealth mindset. You know, as a consumer of this media type as you are, it's remarkable how often you've probably encountered these de facto scare tactics, like the BRICS are uniting and it will take out the dollar and it's just going to be chaos in the United States. You might know that BRICS, B, R, I, C, S is the acronym for Brazil, Russia, India, China and South Africa. Do you know how hard it is to get off the petro dollar and how hard it is for the BRICS, which is basically more than just those five countries, it's dozens of countries. How hard it is for them to agree on anything with things as various as their different economies, and they'll have different customs and currencies. I mean, sheesh, just for you to get yourself and three friends all to agree to meet at the same coffee shop at the same time, takes, like a Herculean effort, plus a stroke of luck, and all full of you are like minded, so I wouldn't hold your breath on the dollar hyper inflating to worthlessness, although it should slowly debase. What about the scare tactic of the FDIC is going to implode, and this could lead to bank closures and widespread societal panic. Well, the FDIC, which stands for Federal Deposit Insurance Corporation, they're the body that backs all of the US bank deposits, including yours, and it's steered by their systemic resolution Advisory Committee. Well, there are $9 trillion in bank deposits, and is backed by only a few 100 billion in FDIC cash, so there aren't nearly enough dollars to back the deposits. So can you trust your money in the bank? That's a prevalence scare tactic, but my gosh, if nothing else, history has shown that the government will step in to backstop almost any crisis, especially a banking related one, where one failure can have a cascading effect and make other institutions fall. I'm not saying that this is right, but time has proven that the government does and will step in, or the common scare tactic in our core of the world that is the eminent housing price crash. And I define a crash as a loss in value of 20% or more. Do you know how difficult this would be to do anytime soon? Housing demand still outstrips supply. Today's homeowners have loads of protective equity, an all time high of about 300k so they're not walking away from their homes. Inflation has baked higher replacement costs into the real estate cake, and now mortgage rates have fallen one and a half percent from this cycle's highs, and they are poised to fall further, so a housing price crash is super unlikely, and a new scare tactic for media attention seems to be this proposal by a future presidential hopeful about a tax on unrealized gains. Now Tom wheelwright is the tax expert. He's returning to the show with us again soon here, so maybe I'll ask him about it. But a tax on unrealized gains is politically pretty unpopular. It would be a mess to impose, and a lot of others have proposed it in the past as well, and it has not gone anywhere. Plus tax changes need congressional approval, and we have a divided Congress, there's a small chance that attacks on unrealized gains could come to fruition, but it would be tough. It's probably in the category of just another media scare tactic, much like the BRICS and the shaky FDIC banking structure had a housing price crash. I like to keep you informed about these things, and at times we do have guests with a disparate opinion from mine on these things. Good to get a diversity of opinions, but it's best not to go too deep into these scare tactics that are really unlikely to happen any time soon. Well, there was a party going on 10 days ago at what all affectionately dub club fed in Jacksonhole Wyoming, I don't know what the club fed cover charge was, but fortunately, we did not have to watch Janet "Grandma" Yellen dance at Club fed and and share. Jerome Powell, yes, he finally caught a rate cut buzz. He announced that the time has come for interest rate cuts, and as usual, he didn't offer specifics. Total rager. what a party. later this month, he's going to render the long awaited decision, which now seems to be, how much will cut rates by a quarter point or a half point? Did you know that it's been four and a half years since the Fed lowered rates? Yeah, that was March of 2020, at the start of the pandemic. And then we know what happened back in 2022 and 2023 they hiked rates so much that they needed trail mix, a sleeping bag and some Mountain House freeze dried meals to go along with their steady hiking cycle. Interest rates now, though have been untouched for over a year, it's been an interesting year for the Fed and rates many erroneously thought there would be six or more rate cuts this year. And what about Maganomics? Trump recently said that if he becomes president, he should be able to weigh in on fed decisions that would depart from a long time tradition of Fed independence from executive influence. Historically, they've been separated.

Donald Trump 08:26

The Federal Reserve's a very interesting thing, and it's sort of gotten it wrong a lot. And he's tending to be a little bit later on things. He gets a little bit too early and a little bit too late. And, you know, that's very largely a it's a gut feeling. I believe it's really a gut feeling. And I used to have it out with him. I had it out with him a couple of times, very strongly. I fought him very hard. And, you know, we get along fine. We get along fine. But I feel that, I feel the president should have at least say in there. Yeah, I feel that strongly. I think that, in my case, I made a lot of money. Iwas very successful, and I think I have a better instinct than in many cases, people that would be on the Federal Reserve or the chairman.

Keith Weinhold 09:10

Those Trump remarks were just a few weeks ago, and then shortly afterward, he seemed to walk those comments back, but he did say that he would not reappoint. DJ J-pal, to the economic turntables. It's a long standing economic argument as well about whether an outside force like the Fed should set interest rates at all, which is the price of money, rather than allowing the rate to float with the free market as lenders and borrowers negotiate with each other. I mean, no one's out there setting the price of oil or refrigerators or grapes, but it is pretty remarkable that the Fed has signaled that rate cuts are eminent when inflation is still 2.9% well above their 2% target. But let's be mindful about the Fed's twofold mission, what they call their dual mandate. It is stable prices and maximum employment. Well, the Fed's concern is that second one, it's that the labor market has slowed and see the way it works is pretty simple. Lower interest rates boost employment because it's cheaper for businesses to borrow money that encourages them to expand and hire, which is exactly how lower interest rates help the labor market. That's how more people get hired, and this matters because you need a tenant that can pay the rent. So the bottom line here is to expect lower interest rates on savings accounts, HELOCs, credit cards and automobile loans. What this means to real estate investors is that lower mortgage rates are eminent, although the change should be slow. Two years ago, mortgage rates rose faster than they're going to fall. Now, one thing that lower interest rates can do is lower America's own debt. Servicing costs and America's public debt is drastic. Now, between 35 and $36 trillion in fact, to put our debt into perspective, it has gone galactic. And I mean that in an almost literal sense, because look, if you line up dollars, dollar bills, which are about six inches long, if you line those up end to end from Earth, how far do you think that they would reach? How about to the moon? Oh, no, if you line up dollars end to end, they would stretch beyond the moon. Okay, let's see how far we can follow them out through the solar system. They would breeze past Mars, which is 140 million miles away, the next planet out Jupiter. Oh, our trail of dollar bills would extend beyond that. Next up is Saturn and its ring. The dollar bills would reach beyond that. We're getting to the outer planets now, Uranus still going. Neptune, okay, Neptune is about $30 trillion bills away, and we would have to go beyond that then. So our 35 to $36 trillion of national debt would almost reach Pluto that's galactic. That's amazing. That's bad, and it probably means we have to print more dollars in order to pay back the debt, which is, of course, long term inflationary. And I don't know what's stopping us from going from $36 trillion up to say, 100 trillion, gosh. next week here on the show, we're talking about real estate investing in one of the long time best and still hottest real estate investor states, and then later on, we've got brilliant tax wizard Tom wheelwright returning, as we know here at GRE real estate pays five ways, and if you have any Spanish speaking family or friends, I've got a great way for them to consume all five video modules. It's an AI converting my voice to Spanish in these videos, we have a Spanish speaker here on staff at Get Rich Education, and she said the dub is pretty good. Well, the entire package, real estate pays five ways in Espanol is condensed into a powerful one hour total, all five videos a course, all in one wealth building hour. It's free to watch. There's no email address to enter or anything you can tell your Spanish speaking family and friends, or maybe your multilingual and your primary language is Spanish. That is it getricheducation.com/espanolricheducation.com/espanol or a shorter way to get to the same pageis getricheducation.com/espricheducation.com/esp, that's getricheducation.com/esp.richeducation.com/esp. This week's guest is one of the first people I ever heard discussing the blockchain and cryptocurrency 15 years ago, and then he was early on AI. What got my attention is his education about a promising construction material for building new real estate, though, I expect that our discussion will delve outside of real estate today as well. Let's meet the incomparable George Gilder. This week's guest is the co founder at the Discovery Institute, discovery.org original pillar of supply side economics, former speechwriter to both Presidents Reagan and Nixon. And he's the author of the classic book on economics called Wealth and Poverty. Today he's at the forefront of technological breakthroughs. He's a Harvard grad. He wears a lot of stripes. I've only mentioned a few. Hey, welcome to GRE George Gilder.

George Gilder 15:09

right there better here.

Keith Weinhold 15:11

It's so good to host you, George, in both your writings and your influences on people like President Reagan, you champion supply side economics. And I think of supply side economics as things like lower taxes, less regulation and free trade. We had someone in the Reagan administration here with us a few months ago, David Stockman. He championed a lot of those same things. But go ahead and tell us more about supply side economics and what that means and how that's put into practice.

George Gilder 15:43

Well, it really begins with human creativity in the image of your Creator, essence of supply side economics now super abundant. I mean supply side economics triumphs. We had the whole information technology revolution ignited during the Reagan years and now dominates the world economy and gives the United States seven out of the top 10 companies in market cap. 70% of global corporate market cap is American companies because of supply side economics amazing, and that's why it's distressing to see supply side economics, with its promise of super abundance and prosperity and opportunity, Give way to narrow nationalistic calculations and four tenths of war. I mean, all these Jews are at the forefront. Today, in time, we're going to see human creativity once again prevail in my books, Life After Capitalism is my latest book, my new paradigm is graphene. Graphene is a single layer of carbon atoms, two dimensional layer of carbon atoms that is 200 times stronger than steel, 1000 times more conductive than copper. It switches and the terahertz trillions of times a second, rather than the billions of times a second that our current silicon chips which and you mix it with concrete, the concrete comes 35% stronger, just parts per million of graphene mixed with concrete yields some material that's 35% stronger than ordinary concrete. You mix a parts per million of graphene with asphalt, the roads don't get potholes in the winter. It's radically Abate, but it conducts signals so accurately. If you go on YouTube, you can find a mouse and said it's spinal cord severed completely, injected with graphene, the spinal signals transmitted so accurately that the you see the mouse doing cartwheels by the end of the YouTube measure. I mean, it's material that's going to transform all industries, from real estate to medicine to surgery to electronics. Electronics been kind of the spearhead of our economy, of the transformation and electronics may be more significant than any other domain.

Keith Weinhold 18:49

Well, this is a terrific overview of all the contributions you're making to both the economic world and the technology world with what you told us about right there. And I do want to ask you some more about the graphene and the technology later. But you know, if we bring it back to the economics, it was in your classic book, Wealth and Poverty, which sold over a million copies, where you espouse a lot of the same things that you still espouse today in your more recent books, that is, capitalism begins with giving, we can often think of it that way. As a real estate investor is where we need to give tenants a clean, safe, affordable, functional property before we profit. Capitalism begins with giving.

George Gilder 19:32

Absolutely. That's a crucial debate I had with Ayn Rand The Fountainhead and Atlas Shrugged and I say, capitalism is subsist on altruism. I'm concerned for the interests of others, imaginative anticipation of the needs of others. It's an altruistic, generous system, and from that generosity. Stems the amazing manifestations of super abundance that which I've been writing about recently. And super abundance shows, measured by time prices, how many hours a typical worker has to spend to earn the goods and services that sustain its life. Yeah, that's where the real cost has time. Yeah, time is money. Money is time, tokenized time, and measured by time, economic growth has been 50 to just enormously faster than is estimated by any of the GDP numbers. However, measured by time government services or ordinary GDP assumes that every dollar of government spending is worth what it costs. Prices both show that progress in the private sector has been four or five times faster than is estimated by GDP well government time, price of government dominated goods, including, increasingly, healthcare and education, is way less valuable than the cost. It's value subtracted, and certainly trillions of dollars for windmills and solar panels, trillions of dollars of subsidies is a net subtraction of value in the world economy. So I am with Gale Pooley and Tupy, both who wrote a book called Superabundance that I wrote the introduction to, and William Nordhaus, the Nobel laureate from Yale, who really conceived and developed time prices and showed that economic growth is 1000s of times greater than has been estimated by ordinary economic data. This is a time of abundance. It's not a time of scarcity. It's not a time of the dismal science. It's the time of super abundance.

Keith Weinhold 22:17

Yes, 100% a lot of that is just the government getting out of the way and really let people be givers, be that go giver and lead with giving, because I have never heard of a society that's taxed its way to prosperity.

George Gilder 22:34

Yeah. Well, that's absolutely the case. And I've been talking previously about graphene, which is the great new material that has been discovered of the last a couple decades. It originated, a lot of the science originated in Jim Tour's laboratory. James Tour of Rice University, and he's had scores of companies have emerged from his laboratory, and 18 of them got started in Israel. Israel is really become a leading force in the world economy. And when Israel is in jeopardy, our economy is in jeopardy. We have 100,000 Israeli citizens working in companies in Silicon Valley, 100,000 all the leading American tech companies have outposts in Israel, and now we face what I call the Israel test, which is how you respond to people who are really superior in creativity and accomplishment and intellect, and the appropriate thing to do is emulate them and learn from them. But too many people in the world see success and they want to tear it down, or they think it was stolen from someone else, or it was part of a zero sum game where the riches of one person necessarily come at the expense of someone else, which is the opposite of the truth, the riches proliferate opportunities for others. That's how the economy grows through the creativity and the image of your Creator.

Keith Weinhold 24:25

And when you bring up Israel, they're one of many nations that's made strong contributions to society and the economy, and we think about other nations that's been an increasingly relevant conversation these past few years, a lot of that centers on immigration. I'm not an expert on how many people we should let into this country or any of those sort of policy sorts of things, but here is a real estate investing show. I often think about where and how we're going to house all these immigrants, whether they come from Central America or South America or Israel or. Anywhere else. And I know oftentimes you've touted immigrations economic benefits, so I think it's pretty easy for one to see how in the short term, immigrants could be of economic detriment, but tell us more about those long term economic benefits of immigrants coming to the United States.

George Gilder 25:17

Immigrants come to the United States and become Americans and contribute American opportunity and wealth. We won the second world war because of immigration of Jewish scientists from Europe to the United States, who led by people like John von Neumann and Oppenheimer who forged the Manhattan Project, and that's really how we won the Second World War, was by accepting brilliant immigrants who wanted to serve America. Now there is a threat today where immigrants come to the United States not to contribute to the United States, but to exploit the United States, or even destroy it, not to go givers. They are givers, and so we want immigrants who are inclined to commit to America and create opportunities for the world, but immigrants who want to tear down America and who believe that America owes them something tend to be less productive and less valuable immigrants and immigrants who really want to destroy western civilization, and the jihadists that we know about are actually a threat to America. So the immigration problem isn't simple, but when we had a system where legal immigrants could apply and enter our country and revitalize it, that was a wonderful system, but having boards of illegal immigrants just pour over the border is not an intelligent way to deal with the desire of people around the world to share an American prosperity.

Keith Weinhold 27:13

We've seen several cases in the past year or two where immigrants are given free housing. There are really great case studies about this in Massachusetts and some other places, how they're giving housing before oftentimes, our own Americans, including sometimes retired veterans, are provided with housing. This all comes down to the housing crunch and already having a low housing supply. So what are some more your thoughts about just how much of a layup or a handout should we give new immigrants?

George Gilder 27:42

Housing technology is going to be transformed by the material science revolution that is epitomized by graphene, this miracle material I was describing. I think part of the problem is real estate enterprise is over regulated, and there are too many obstacles to the building of innovative new forms of housing. In 20 years, it'll be hard to recognize many of the structures that emerge as a result of real revolution in material science that is epitomized by this graphene age that I've been describing, and that also will transform electronics as well, and part housing can become a kind of computer platform as Elon Musk is transforming the auto business by seeing Tesla is really a new form of computer platform. I believe there's going to be an Elon Musk of real estate who is going to re envisage housing as a new form of building a computer platform that makes intelligent houses of the future that will be both cheaper and more commodious for human life.

Keith Weinhold 29:12

Real estate is rather old and slow moving when we think about technology in real estate, maybe what comes to mind are smart thermostats, smart doorbells, or 3d printed homes. When we come back, we're going to learn more about graphene and what it can do in real estate in the nanocosm revolution. Our guest is George Gilder. We talked about economics. We're coming back to talk about technology. I'm your host. Keith Weinhold.

Keith Weinhold

Hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS, 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with less. Ridge you can start your pre qualification and chat with President Caeli Ridge personally. Start now while it's on your mind at ridgelendinggroup.com That's ridgelendinggroup.com. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest year in and year out, instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too, earn 8% hundreds of others are text FAMILY to 66866, learn more about freedom. Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text FAMILY to 66866.

Dolf Deroos 31:19

This is the king of commercial real estate. Dolph de Roos, listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 31:32

Welcome back to Get Rich Education. We're joined by an illustrious, legendary guest, George Gilder, among being other things, including a prolific writer. He's also the former speechwriter to presidents Reagan and Nixon. He's got a really illustrious and influential career. George, you've been talking about graphene, something that I don't think our audience is very familiar with, and I'm not either. Tell us about graphene promise in real estate.

George Gilder 31:59

Well, back in Manchester, England, in 2004 graphene was first discovered and formulated. It actually was submerged before then, but the Nobel Prizes were awarded to Geim and Novoselov in2010. So this is a new material that all of us know when we use a lead pencil, a lead is graphite, and graphene is a single layer of graphite. And it turns out, many people imagined if you had a single layer of graphite, it would just break up. It would not be useful.

Keith Weinhold 32:42

We're talking super thin, like an atom.

George Gilder 32:45

Yeah, it's an atom thick, but still, it turns out that it has miraculous properties, that it's 200 times stronger than steel. If you put it in a trampoline, you couldn't see the trampoline, but you could bounce on it without go following through it. It can stop bullets. It means you can have invisible and almost impalpable bulletproof vests, and you mix it with concrete, and the concrete is becomes 35% stronger, even parts per million of graphene can transform the tensile strength of concrete, greatly reduce the amount you need, and enable all sorts of new architectural shapes and capabilities. We really are in the beginning of a new technological age, and all depressionary talk you hear is really going to be eclipsed over coming decades by the emergence of whole an array of new technologies, graphene, for instance, as a perfect film on wafer of silicon carbide and enable what's called terahertz electronics, which is trillions of cycles a second like light rather than billions of cycles a second like or Nvidia or L silicon chips, and it really obviates chips, because you what it allows is what's called wafer scale integration of electronics, and today, it the semiconductor industry, and I've written 10 books on semiconductors over the years, but the semiconductor industry functions by 12 inch wafers that get inscribed with all sorts of complex patterns that are a billionth of a meter in diameter. These big wafers and then the way. First get cut up into 1000s of little pieces that each one gets encapsulated in plastic packages and by some remote Asian islands, and then get implanted on printed circuit boards that arrayed in giant data centers that now can on track to consume half the world's energy over the next 20 years, and these new and all this technology is ultimately going to be displaced by wafer scale integration on The wafer itself. You can have a whole data center on a 12 inch wafer with no chips. It's on the wafer itself. And this has been recently announced in a paper from Georgia Tech by a great scientist named Walter de Heere. And it's thrilling revolution that that render as much as Silicon Valley obsolescent and opens up just huge opportunities in in construction and real estate and architecture and medicine and virtually across the range of contemporary industry.

Keith Weinhold 36:20

You wrote a book about blockchain and how we're moving into the post Google world is what you've called it. So is this graphene technology that you're discussing with us here? Is that part of the next thing, which you're calling the nanocosm revolution?

George Gilder 36:36

The microcosm was an earlier book the quantum revolution and economics and technology. I thought I wrote years ago called microcosm.

Keith Weinhold 36:46

Okay, we're getting smaller than microcosm now in nanocosm.

36:49

that was microns, that was millionths of a meter dimensions of the transistors and devices and silicon chips, the nanocosm is a billionth of the meter. It's 1000 times smaller the features and electronics of the future, and we're moving from the microcosm into the nanocosm. New materials like graphene epitomize this transformation. You know, people think that these giant data centers all around the world, which are amazing structures, but half the energy in these data centers are devoted to removing the heat rather than fueling the computation. And I believe these data centers are represent a kind of IBM mainframe of the current era. When I was coming up, people imagined that a few 100 IBM mainframe computers, each weighing about a ton, would satisfy all the world's needs for computation, and that new artificial minds could be created with these new IBM mainframes. And it's the same thing today, only we're talking about data centers, and I believe that the coming era will allow data centers in your pocket and based on graphene electronics, and wait for scale integration, a whole new paradigm that will make the current data centers look like obsolete, old structures that need to be revitalized.

Keith Weinhold 38:37

Around 2007 Americans and much of the world, they got used to how it feels to have the power of a computer in their pocket with devices like the iPhone. How would it change one's everyday life to have effectively a data center in their pocket?

38:54

This means that we no longer would be governments of a few giant companies hearing a singular model of intelligence. That's what's currently envisaged, that Google Brain or Facebook or these giant data setters would sum up all human intelligence and in a particular definition, but there are now 8 billion human beings on earth, and each of our minds is as densely connected as the entire global internet. And while the global Internet consumes error watts, trillions of watts of power, or brains. Each of these 8 billion human minds functions on 12 to 14 watts, or it's billions of times less than these data center systems. On the internet. I believe that technology works to the extent that it expands human capabilities, not to the extent that it displaces human capabilities. The emergence of distributed databases in all our pockets, distributed knowledge and distributed creativity can revitalize the whole world economy and open new horizons that are hard to imagine today, as long as we don't, all of a sudden decide that we live in a material universe where everything is scarce and successes by one person come at the expense of somebody else, as long as that zero sum model doesn't prevail, right? Human opportunities are really unlimited. Most of economics has been based on a false model of scarcity, the only thing that's really scarce is time. Imagination and creativity are really infinite.

Keith Weinhold 41:10

Yes, well, if someone wants to learn more about graphene in the nanocosm revolution, how can you help them? What should they do?

41:18

They can read my newsletters. I have a company with four newsletters. I write the Gilder Technology Report. Much of the time I write, John Schroeder writes moonshots, which is and I have a Gilder Private Reserve that reaches out with our crowd and Israel, and a lot of those graph gene companies in Israel are part of our Private Reserve. And I do Gilders Guide posts, and those are all available getgilder.com.

Keith Weinhold 41:56

if you'd like to learn more about George and his popular newsletter called the Gilder Technology Report. You can learn more about that at get gilder.com George, it's been an enlightening conversation about economics and where society is moving next. Thanks so much for coming on to the show.

George Gilder 42:16

Thank you, Keith. I really appreciate it.

Keith Weinhold 42:24

yeah, a forward looking discussion with the great George Gilder. Forbes said graphene may be the next multi trillion dollar material. George will tell you that you want to get into graphene now, while the biggest gains are still ahead. If it interests you in at least learning more, check out his video resource. It's free. There's also an opportunity for you to be an investor. You can do all of that and more at getgilder.com again getguilder.com until next week. I'm your host. Keith Weinhold. Don't Quit Your Daydream.

43:04

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.

Keith Weinhold 43:32

The preceding program was brought to you by your home for wealth building. GetRichEducation.com

516: Is Every Debt Worth Paying Off? Aug 26, 2024

In this episode Keith shares the survey results on what the highest rising cost for landlords is and what to do about it. He challenges the conventional wisdom that all debts should be paid off.

He talks about how the rising costs of homeowners insurance and property taxes are the most significant expenses for single family landlords

76% of single-family landlords plan to raise rents over the next 12 months, with 35% expecting increases over 4%.

Learn about the concept of debt as leverage and its role in wealth building. The importance of liquidity, interest rate arbitrage, and the ability to outsource debt payments.

How inflation impacts debt.

Understand the benefits of debt in real estate investment, including the ability to own more properties and create arbitrage opportunities.

Show Notes:

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:00

Welcome to GRE. I'm your host. Keith Weinhold. The economy is affecting real estate in some interesting ways. Now, vital trends revealed from a survey of single family landlords. Then the heart of today's show is every debt that you have worth paying off. The answer is no, with some surprising reasons 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, had 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, GRE 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. Make sure you read it. Text GRE to 66866, text GRE to 66866.

Corey Coates 01:34

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 01:51

Welcome to GRE you are listening to the voice of real estate investing since 2014 I'm your host, Keith Weinhold back to help you build your wealth for another week. This is Get Rich Education. That's just one of many things that makes this show different from other shows, or just consuming news stories. Here, you stay updated on important real estate investing trends, but you learn specific strategies to actionably build your wealth. That's the difference, and it's with the most generationally proven medium of real estate, all without you having to be a flipper and often not a landlord either. Now, presidential candidates make lots of promises during their campaigns, that includes with real estate here recently, even if you're listening 10 years from now, I'll tell you how to put something like this into perspective. Kamala Harris unveiled her plan to spur the construction of 3 million more housing units. That's a good thing. America needs more housing. She also wants to give federal assistance, and by the way, that means your money. She wants to give federal assistance in the form of a $25,000 down payment help for first time home buyers. I see that as a bad thing, and see there's no partisan bias here at GRE a lot of media outlets, they will filter something like this is all good or all bad, because they get better ratings when they rile people up, and that results in a divided America. But the problem is that the 25k of down payment help that can be delivered faster than new homes can be built, and that risks pushing up home prices faster, sooner, which arose the very affordability that's trying to be helped here now a presidential candidate, be it Kamala Harris or anyone when they have this enthusiasm to also limit price gouging at grocery stores here, like this candidate does. I mean, that's the beginning of price controls, and when there are price controls, no farmer is going to want to produce cherry tomatoes or Fisher is going to want to produce wild caught salmon if they have a significant price ceiling limiting the supply of those things. Therefore, I mean, when we had price controls in the high inflation 70s, that created shortages. And it's important to keep in mind that presidential campaign promises, they often don't become policies that are enacted even if that person is elected president, and even if they are, much of this still requires congressional approval, and we still have a divided Congress, and any tax changes require the approval of Congress. So really, this stuff is just a presidential wish list, giving you some perspective here. Now on the topic of shortages, there still is not enough available supply of US homes, active listings, those seeking a starter home often get more worn out than your grandpa after two games of checkers. But inventory levels are not as bad as they used to be, we still got a ways to go to claw back close to a more normal, balanced pre pandemic housing supply level nationally, we are still 29% lower. There are now still 29% fewer active listings than there were in pre pandemic times and most individual states still have inventory levels lower than that, too, compared to five years ago, when we break it down by state, some have a more paltry supply than others, though, places with the scarcest inventory, they seem To be those states where maple syrup gets produced, as it turns out, and I sure hope that this doesn't mean people need to sleep in the sugar shack. Connecticut is down 75% that means they have 75% less inventory than five years ago, pre pandemic, Illinois down 66%, New Jersey down 57%, Virginia down 53%, Pennsylvania, Massachusetts and Michigan all with 51% less inventory than they had pre pandemic. Ohio down 43%, California and Missouri each down 31%. The main problem here is that the Northeast and Midwest have not had enough home building in order to keep up with housing demand. I guess what? There were too many snow days in the Northeast and Midwest, or were builders constantly distracted by potholes and cicadas? Conversely, there are three popular investor states where for sale inventory is just a tad higher now than it was five years ago. Texas is up 6%, Florida up 5%, Tennessee up 2% and this doesn't mean that these states are oversupplied with housing, it just means that they have a touch more than they did in 2019 so they're closer to balance. The important overall thing to remember here is, of course, that nationally, buyers still outnumber sellers. So between the lower mortgage rates that we've had in the past year and the low supply, this keeps the environment ripe. There will be more offers and more potential for home prices to increase faster than its current rate of 4.1%. That 4.1% year over year, as per the NAR, it's important for you to understand that there's virtually no way that prices can revert to their pre pandemic levels. Home prices are not going back to where they used to be five years ago. In fact, there is more pressure on them to rise from here not fall, and there are a few reasons why prices cannot go back to where they were. The rate of inflation has slowed. You've seen the price of lumber come down, but wider inflation has been indelibly baked into the pricing cake. Homes now have higher, permanently embedded costs of labor, materials and land that all have more stick-to-itiveness to them than Simone Biles on the balance beam. Prices are not coming down anytime in the near future. You might remember that right here on this show in in our newsletter, back in late December, eight months ago, I forecast that national home prices would rise 4% this year, and I still really like how that looks. I'll get back to the investment side here shortly, but real quick, in light of the new rules about how real estate agents are compensated if you're about to buy a primary residence, you may not have any experience negotiating with a broker. In last week's newsletter, I sent you a template you can use and that can help you simplify the process as a buyer and help you avoid being taken advantage of. I sent you that template last Thursday. Back here on the real estate investor side, after a high tide of inflation, you know, you and I, we have all surely enjoyed the splash of both higher property prices and rents. That looks to continue. But what about your higher property expenses, too? Let's talk about what you've got to do to avoid getting crunched by expenses. A survey of single family landlords was recently conducted by lending one in resi club, and they asked this question, what is your expense that increased the most the past 12 months? The number one answer is fast rising insurance premiums, with half of respondents citing that as their biggest expense increase item. And that's hardly a new development, not surprising. The next biggest expense was property tax, 27% of respondents cited that. That's mostly a reflection of higher property values and their consequent tax assessments. 235 single family landlords completed this survey, by the way. So they were the proportion of landlords that answered about what was their fastest increasing expense. Half of them said insurance, easily the most well, the rate of increase in homeowners insurance costs was roughly 10 to 12% nationally last year. That's according to the Insurance Information Institute, and the top two reasons for this are more severe storms and higher replacement costs. The good news is that further rate increases are cooling off, though, all right, but still, what are you to do as a rental property owner that's stuck with a higher property insurance bill? I've got a great answer for you, and it's so incredibly simple. You pass the expense along to your tenant with a rent increase, and then others can deal with what happens downstream from there. And I'll tell you how to go about doing this shortly, which is also so incredibly simple. But if you're reluctant to pass along the increased insurance expense to your tenant, understand that you and your tenant are just like two ports along a river. As this wave of inflation flows along, it flows from the reinsurer to the insurer, to you, the property owner, to the increased rent, to the hike in the tenant wage, to the employer, and then the employer hikes prices on the consumer. That's how the river flows. No watered down returns for you. Now, of course, this River's headwaters are sourced with the government, because that's where inflation comes from. Inflation means an expansion of the money supply. You and your tenant are really two ports along the river. Don't let the expense water dam up and flood you, and the written reason that you give your tenant for the rent increase is drum roll here, higher insurance costs. Yeah, that's it. It's super simple. There's no need to be inventive here. Honesty is therefore the best river raft. Hey, come on now this remorseless geography degree holder has got to let loose with something like river references from time to time. So that's the greatest expense increase item, what to do about it and how you should go about doing it. Now this same survey of single family landlords, they showed that 76% expect to reach high watermarks and raise the rent over the next 12 months, including 35% of landlords who say the rent increase will be over 4% and planned rent increases of one to 7% are most common. That's the planned rent increase range one to 7%. Look, you didn't get into real estate to subsidize others living expenses. There is nothing unethical about adjusting to market level rent. Rent hikes are like a lock lifting your ship through the Panama Canal. All right, so what do we make of this. I mean, gaging, overall investor sentiment is we head later into the 2020s, decade. What is the landlord temperature? As I see it, expenses are up. Higher. Rents follow. And last quarter, home values increased in almost 90% of us, Metro markets, yes, property values are up in 89% of Metro markets. But how do single family landlords in this same survey feel? Well, 60% of them say they will buy at least one investment property over the next 12 months. So most single family landlords they want to buy more. And when that's broken down by region, the most single family real estate investor optimism is in the Midwest, Northeast and South. And really single family landlords are optimistic in every region except the West. And this makes sense. Cash Flows are less lucrative in the West because prices have long outpaced rents there, the survey really shows that most aren't wildly bullish or excessively bearish on the real estate market. They expect it to stay balanced. Many plan to buy properties raise rents, and the survey shows that they, too, expect a 4% home price appreciation rate. That's what it showed, and they anticipate falling interest rates. Now, personally, I often disagree with what the masses think. I mean, contrarians to the mainstream, they are often the profiteers. But in this case, I guess I'm more agreeable with the survey respondents than a perfectly brewed cup of coffee in the morning. And well, maybe that's because single family landlords, the very people that were surveyed are not mainstream. The housing market is actually pretty normal in most every significant way, except, of course, the ongoing lack of housing inventory and affordability challenges for first time homebuyers. And if you're a newer GRE listener, even normal times can be thrilling for a real estate investor when you achieve a 40% plus total rate of return from how real estate pays you five ways. Yes, if you're new here, I know that sounds like an unachievable return, but 40% plus is actually realistic without high risk when you understand your five simultaneous profit sources with income producing property. In fact, when someone asks why you invest in real estate, you can just hold up five fingers. The broader economy shows a lot of signs of normalcy as well, GDP, growth, consumer spending, unemployment, the inflation rate, but the sad exception here is this widening gap between the wealthy and the poor, so I guess that more people charter yachts and yet others increasingly pour mountain dew on their fruit loops in the morning for breakfast. Now, complete uncertainty never disappears, but after disruptions from covid, high inflation and new wars, a lot of people see calmer times ahead. Elections matter, but some people seem more concerned about who the next President will be than the parent of a Sephora obsessed teen. Presidential elections aren't known to rock the real estate market, and actually, history shows that the more sensitive stock market is only temporarily affected by an election. Sometimes I just ponder and quietly think to myself, hmm, when the liquid death drink brand thrives from Hawking wildly overpriced water in a can, I posit just how bad can the economy really be? The bottom line is that most single family investors are meeting higher insurance expenses with rent increases and they want to buy more income property over the next 12 months.

Hey, if you like this show here, and you get value from it every week, I love it when you just simply tell a friend about the show, it's as easy as having them download our dedicated Get Rich Education mobile app for both iOS and Android. If you think you have any friends that would benefit from the vital episode here, I'd be grateful if you shared the show with them, use the Share button on your podcaster, or even take a screenshot and post it to your social. Straight ahead is any debt worth paying off? I'm Keith Weinhold. You're listening to Get Rich Education.

Hey, you can get your mortgage loans at the same place where I get mine, at Ridge Lending Group NMLS, 42056, they provided our listeners with more loans than any provider in the entire nation, because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start now while it's on your mind at Ridgelendinggroup.com that's Ridgelendinggroup.com.

Keith Weinhold 19:47

Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest, year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25k, you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too, earn 8% hundreds of others are text FAMILY to 66866, learn more about Freedom Family Investments, Liquidity Fund, on your journey to financial freedom through passive income. Text, FAMILY to 66866.

Dani-Lynn Robison 20:49

This is Freedom Family Investments Co-founder, Dani-Lynn Robison, listen to Get Rich Education with Keith Weinhold, and Don't Quit Your Daydream.

Keith Weinhold 20:57

Welcome back to Get Rich Education. I'm your host, Keith Weinhold, you're listening to Episode 516 is every debt that you have worth paying off? The short answer is no. I have held millions of dollars in debt from a young age, and I just keep holding on to more and more. Look what happens to your net worth when you pay down one of your debts, absolutely nothing happens to your net worth. It stays the same. All right. Say that the total value of all of your assets gives you a sum of one and a half million dollars. That's the combined value of any of your real estate, cars, retirement accounts, gold, Bitcoin, all of it, anything of value one and a half million and totaling up all of your debts equals just a half million. That's your mortgages, automobile debt, credit card debt, everything. All right, so you've got one and a half million in assets and 500k in debt. So you've got a million dollar net worth, okay, well, next, say that you decide to pay down 100k of your debt. All right. Well, what's the result? You've got only $1.4 million in assets and just 400k in debt. Well, the result is that your net worth is still a million bucks. You've now got fewer assets and less debt, so you just broke even. But it could be worse than just a break even, because what if, one month after you made this debt pay down. You now need that 100k back for living expenses, but you can no longer get it returned to you because you lost your job, so no one will qualify you for a loan again, or you still have your job. But lending standards have tightened and changed now your 100k is on the other side of a wall that you can't access. So debt pay down isn't just a question of net worth, it's liquidity. And there are some more layers here that we're going to get into paying down mortgage debt. It also builds home equity. Well, that is usually a bad thing, because, as I'm known for saying, home equity is unsafe, illiquid, and its rate of return is always zero. Do you know the crowd that sometimes forgets this and really gets penalized? It is seniors, retirees. All right, what happens when a person is older and they've had a paid off home for a while. People get a reverse mortgage. They need funds for living expenses. Well, reverse mortgages, they have high fees, and also you can't get nearly all of your equity out. You'll often only get up to 60 to 65% loan to value, meaning that 35 to 40% of that hard earned equity that you worked decades for. First it became trapped with no return, and now it's essentially gone. Poof. For all those years, your home is paid off, even if it began as early as your 30s, like it does for some people all that time your equity wasn't earning any rate of return. And the earlier in life you learned that the ROI from home equity is always zero, the better. You didn't see any bill for this loss. You just never saw the gain that you should have had. And that's part of the reason why this myth that home equity is such a great thing perpetuates and carries on for generations. All right, well, we are just getting warmed up here at a key financial question in your life. That question is, is every debt that you have worth paying off?

24:58

Did you know millions of Americans live with debt they cannot control. That's why I developed this unique new program for managing your debt. It's called Don't buy stuff you cannot afford. Let me see that. If you don't have any money, you should not buy anything. hmm sounds interesting, sounds confusing.

Keith Weinhold 25:24

Well, there's a little something to be said for that. But what about interest rate? If that 100k that you paid down was for credit card debt? All right? Well, that was probably a good thing. 44% of American credit card holders carry debt month to month. Now I'm going to guess for you the GRE listener, it's even less likely than that that you carry debt month per month, where you would be subject to credit card finance charges. The average credit card interest rate in America is about 25% today, and it is unsecured debt, meaning that it's a debt type that's not backed by collateral. Now, yes, you can beat a 25% return if you're leveraged in real estate, but your liquid cash flow drain is drastic on credit cards. The other problem with credit cards is that you have to pay your own debt. Later, I'll talk about when others pay your debt for you. And if you have decided that you have some debts worth paying down because its interest rate is too high for goodness sake, pay the one with the highest interest rate first. I know there's a school of thought that says, pay the debt with the lowest balance. First, that is nonsense. Now, sometimes, if you know specifically what you're doing with credit cards, you can play some little games with them. I mean, personally, after I finished college, I kept transferring credit card balances with 0% APR, Intro offers, introductory offers that were for a limited time at 0% and then I kept track of that so that intro rate didn't expire. But this isn't any sort of long term wealth building strategy. Higher balance transfer fees have made that strategy less lucrative. Now too, banks have tightened that up. When it comes to interest rates, it's about that arbitrage. Ask yourself really two questions when it comes to arbitrage, which is just a fancy sounding way of making a profit or a spread. First, you need to ask yourself, how good of an investor Are you? What percent return can you reliably earn from your investments? Say you think it's 15% then if you're plus 15 but the interest rate on your debt is 8, well, then you've got 7 points of arbitrage or profit. So keep the 8% debt. And then secondly on arbitrage plays. Ask yourself, can I afford the cash flow if I keep this debt around? Because if you're 15% return, just say that it's all tied up in the appreciation of a property. Well, that's not very liquid, so you're going to need to have the free cash to make the payments on your 8% interest rate loan. Let's talk about other times not to pay down the debt. Say you're trying to build up an emergency fund of at least three months, or you want to contribute to your employer match in your company's retirement plan, you may very well want to fund those things before you pay down debt too. Now some say, hey, you know something. Just forget about all these numbers like rates of return and interest rates. You know, debt just makes me feel anxiety and feel stress and sleeplessness. There is emotion here, so let me just get it paid off. Or I'm afraid that if I've got some money and I don't pay off my debt, that I'll just lose all of the money to sports gambling, and to that, I say, come on, be an adult. Set some boundaries. Dog ears, some cash for entertainment, and have a firm line. Learn how to use that to your advantage. Debt is like fire. It can burn you if you don't know how to use it, and it can heat your home if you do know how to use it. And if debt gives you sleeplessness. Here, this will help you sleep your debts, principal balance is being debased for you as you sleep, every single one of your debts is being eroded by inflation. Right now, as you listen to me, your principal balance is quietly, debasing and passively, eroding with your say 500k of total debt. We have 10% inflation over a couple years. Well, that erodes its weight down to 450k all without you having to get involved and make any pay downs at all. As wages go higher, and so do prices and rents and salaries, as they all spiral higher, it gets easier to pay back those principal balances. And debt is the most powerful wealth building force that I know of, because debt is leverage. Compound interest is weak. Leverage is powerful. Debt allows you to own and control five times as many properties as you could if they were all paid off. And if you don't understand this, or if your jaw hit the floor, what I just said a minute ago, that compound interest is weak. I just discussed this for you in clear detail nine weeks ago, on Get Rich Education podcast episode 507. So go and check that out. One attribute of real estate debt is that as you get properties where the rent income meets or exceeds the expenses, congratulations, you have reliably outsourced all of your debt payments to tenants. See, most of my debt, personally, virtually all of it, it isn't really going to be paid back by me. It's my tenants, and that is another reason to keep debt in place and only make the minimum payment. Let's talk about another reason to pay down your debt when a payoff or pay down actually does make sense, even if it's at a low interest rate, it's when an outside force kind of makes you pay down your debt. And here's what I'm talking about. Say you're trying to buy a property, whether that's a primary residence or rental, and that you've got say, Oh, just $11,000 left to pay on your car loan at a 5% interest rate, even though you can't outsource the payments. That's a pretty nice low 5% interest rate, you're confident that you can beat that and earn more elsewhere, so you'd rather enjoy the positive arbitrage instead of paying that off. And I'd feel the same way. But here's the twist, your mortgage loan officer says you've got to pay the $11,000 down to zero because your debt to income ratio is too high. So if you want the mortgage, the big loan amount, you've got to pay off the car loan, the little loan amount. Well, that's a case when it makes sense to pay off that automobile loan debt then, and also, when it comes to your credit score, you might need to improve it to qualify for another loan so you can get a low interest rate and 30% of your FICO score is made up of your amounts owed. I'm answering a vital question for you today, and that is, is every one of your debts worth paying off? I'm sharing information, perspective and experience with you here, and this experience was built, just like all experiences, and I didn't always have the experience, of course. Now my parents and I split my college loan costs, 5050, I still had student loan debts for a few years after graduating, and you know, I can't remember what my student loan interest rates were maybe 6% blended because I had a few different student loans, some of which I did transfer onto those 0% intro, APR credit cards, by the way. But after my student loans were paid off, and I started investing in real estate and understanding terms like leverage and arbitrage, you know, I started to wonder if it would be desirable to have those student loans back rather than paying them off so fast I could have owned another property or two sooner, and I'll never know the opportunity cost of not benefiting from the returns on owning more Property sooner. And of course, student loan debt is one of the few debt types that cannot be written off in bankruptcy that tilts back a little toward paying them off sooner than later. What you just heard me talk about here for the last 15 or so minutes is a message that hundreds of millions of people need to hear it's that not every debt is worth paying off or even paying down. So to help give you a summary answer to our question, is every debt worth paying off? The answer is no, and the key considerations are liquidity, interest rate arbitrage inyour ability to outsource the debt. Debt is good when it helps you buy a cash flowing asset or create arbitrage. Debt is probably even good when it helps you buy a home for your family and have a sense of permanency and a mantle to place baseballs and hang Christmas stockings from and build memories. And now this is all because every single one of us either uses debt or we forego the opportunity to use debt. Well, when we forego using debt, we are now subject to a resultant opportunity cost, and this is why a central and enduring mantra here at GRE is that financially free beats debt free. Financially free means that you have enough residual income streams to meet all of your expenses and live just how you want to live. Debt Free means that you don't owe anyone anything, but if you put debt free before financially free, you are going to grind and live below your means and eat dirt and miss opportunities for decades.

And speaking of leveraging your way to financial freedom with assets, the way that we actionably help you here is by recommending income producing providers and properties for you. And you probably noticed over time that GRE marketplace properties here are less expensive than elsewhere. And you might wonder why exactly is this? Well, there's a few reasons. Investor advantage markets have low prices. Also, there is no agent you get to buy directly. Thirdly, providers provide homes in bulk, keeping your costs down. And then finally, there are no owner occupied emotions involved here with buying and owning rental properties, so you don't have sellers that are making unreasonable requests. So this helps answer why GRE marketplace properties are often good deals. Now it seems like states with the best cash flow in real estate are the same ones where people are more likely to wear bib overalls. That's just how it is. In fact. Hey, case in point, I just learned about some brand new, new build single family rentals in southwest Missouri at GRE marketplace. They're available for you to own regardless of where you live. They make ideal rentals, and they come with free property management for the first year. And because they're freshly built. Expect the likelihood of a quality tenant, light maintenance and low repair costs for years. Let me just quickly mention two of them to give you a feel. The first one is in Carthage, Missouri. The single family rental is three bed, two bath. Rent 1550 the price is 206k it's 1200 square feet, built this year. You get a $1,200 rent credit with it. So it's going to take a 51k down payment, and it produces cash flow. The second one is in Carl Junction, Missouri, four bed two bath in this single family rental. The rents $1,875 the price $250,500 1683 square feet built this year. 62k down and produces cash flow. And like I said, both come with free property management for the first year, and we can help set up an entire real estate investment plan for you, whether it's with these properties or others in multiple states, where we help you make it easy on yourself and contact a GRE investment coach. It is truly free always. There aren't going to be any hidden coaching bills that pop up in the mail. We don't have some paid coaching program. We're trying to upsell you. We don't have anything to sell, and our coaches are like advisors, consultants, super connectors and like silent partners on your deals, and they get zero equity in the deal. And our coaches don't wear Bib Overalls either. So they keep it really relatable for you, make it actionable and make a real difference in your life, start at gremarketplace.com. That's where you can contact a GRE investment coach, and we'll see how we can help you out from gremarketplace.com just click on the free investment coaching button. Until next week, I'm your host, Keith Weinhold, and I'll be back to help you build your wealth, Don't Quit Your Daydream.

39:46

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 or investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively.

Keith Weinhold 40:06

The preceding program was brought to you by your home for wealth building. GetRichEducation.com.

515: Unpacking the Myths: How Rent Control Affects Housing Quality and Availability Aug 19, 2024

Independent documentary filmmaker and policy analyst at Reason Foundation, Jen Sidorova, joins us to discuss how rent control impacts tenants, landlords and the housing market. Her latest short film project, “Shabbification: The Story of Rent Control”, reflects how rent control has a direct effect on housing quality.

Almost half of rentals in NYC are rent-stabilized.

We highlight the challenges faced by small property owners and the potential consequences of these regulations on the housing market. Bathtub in your kitchen, anyone? Yes, you read that correctly. In some cases maintenance has been deferred for so long that units have not been updated to code.

Learn about the history of rent control and stabilization laws in New York.

Resources mentioned:

Show Notes:

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You can follow Jen on Instagram @jen_sidorova or check out her writing at reason.org

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 0:01

Welcome to GRE. I discuss the effect that now lower mortgage rates can have how to get a strong return with private lending. Then, for this week's guest, she is a public policy expert with reason.com maker of a new film called Shabbification that spotlights the perils and even horrors of rent control in New York City, and she's a young Russian immigrant that lives in one unit of a Buffalo fourPlex and rents out the other three 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 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, 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 Daydream letter, and it wires your mind for wealth. Make sure you read it. Text GRE to 66866, text GRE to 66866.

Corey Coates 1:40

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 1:56

Welcome to GRE from Ankara,Turkey to Anchorage, Alaska and across 488 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education. Today's guest was one of four panelists at a conference that I attended recently. The panel was named innovative solutions to the housing crisis, and her story struck me as interesting, so I invited her to be on the show today, we'll learn that with rent control in New York City, when landlords cannot go inside their own properties and aren't allowed to sell their own properties, seven states have price ceilings on rents, and I'll tell you here At GRE we avoid investing in these places. Listen closely, California, New York, New Jersey, Maryland, Maine, Oregon, Minnesota and then DC too. Now sometimes rent control isn't too restrictive. For example, you can raise the rent no more than the rate of inflation plus 3% per year, or the rate of inflation plus 5% per year. And also, it's not all parts of those states where it applies. In fact, you typically do not find the policies statewide in those states that I mentioned, although you do in Oregon, it's statewide in Oregon, and there you can still raise the rent 7% plus the rate of inflation each year. And the good news is that 37 states actually have laws against rent control, specifically saying that you cannot enact it. So not only do 37 states not have it, they just wouldn't even allow a law for it. And there is a strong consensus, like I mentioned here on the show before, among economists that rent control, it reduces the quantity and quality of housing. Today, we'll focus on just how dilapidated rental units become under rent stabilization, which is a lot like rent control in New York City. And we'll discuss New York State and Buffalo. And by the way, I find something amazing. I mean, just say you would ask a question of any citizen of the world, no matter where they live, from Indonesia to Japan, to Bangladesh, to Nigeria to the United States. If you would just ask any citizen of the world, what is the capital of the world? I think that the best answer that you could come up with is New York City. I'm in the United States, and there are people right here in this country that have such little understanding of New York City, and what goes on there, and where it even is, it just amazes me. Maybe it's my own bias, because I'm a geography guy, but now, for example, to get from New York City out to Buffalo, that's an almost seven hour drive to the northwest two different parts of New York State. These are two very different places. We'll get into that shortly. But first in the wider real estate world, I did a little research since first mentioning this to you last week here, where mortgage rates have fallen fully one and a half points from the recent high. All right. Well, with every half point drop in mortgage rates, like I learned from First American, that's my source. With every half point drop in mortgage rates, about 1.1 million additional American households can qualify to buy an entry level home that's defined as the bottom 25% priced here. That's the number, and I checked their math. So with a full point drop in mortgage rates, then 2.2 million more American households can qualify to buy an entry level home. So we could very well have more buyers here soon, but yeah, when all these homeowners are still locked into three and 4% mortgage rates, I don't know that you're gonna have that many more sellers. So with demand exceeding supply, look for more upward pressure on home prices, especially higher values for those entry level homes that make the best rentals. Now, I'm talking about borrowing right there. And what happens when rates go down for mortgages, when they go down for borrowing? Well, rates on savings accounts, they typically fall as well. And this is a scenario that a lot of people expect. Now, most of my real estate activity is a borrower. I'm always here touting the virtues of how leverage builds wealth, and I know that I don't want to be a saver. So for my more liquid funds, I am a lender, and I'm reliably paid a stable 8% interest rate. And I think I've told you before that for years now, I make loans to real estate companies, and they use my funds to rehab properties and for other operations. Yes, an 8% return that I'm getting, and it's almost like getting an 8% yield on a savings account, and it's not expected to fall when interest rates fall. Well, the primary difference is that I often have to wait a few months if I want my full principal return, but not years. So it's not as rigid as a bank CD, but it's not as liquid as an old fashioned bank savings account. So the private real estate company that I've long made loans to works pretty diligently to maintain asset value and assure optimal returns. They'll tell you that they've never missed making a payment for their private money lending programs. And I did a little research, and I found that their fund utilization is 99.6% that really means that they deploy almost all of the capital if you want, you can potentially get a high yield at the same place I do. Sometimes you can get more than 8% or less than an 8% return, depending on what liquidity terms you want and what other terms you like. The company is Freedom Family Investments. They are real estate centric. If you want, go right ahead and learn more. You can do that by texting FAMILY to 66866. Remember, you're the lender, they're the borrower. And again, for most investment types, I want to be the borrower, but for liquid funds, and the fact that the rate of inflation is now down, an 8% return has a higher real yield now than it did two years ago and one year ago. And again, I'm happy to share it with you. It's Freedom Family Investments. If you want to learn more, do it now while it's on your mind and text FAMILY to 66866.

This week, our guest is a public policy expert that's also involved with a film called Shabbification, the story of rent control. Hey, welcome to GRE Jen Sidorova.

Jen Sidorova 9:16

Good to be here. Thank you for having me.

Keith Weinhold 9:18

Yeah and congrats. Shabbification screening in a lot of places, like the Anthem Film Festival at Freedom Fest last month and this month in New York City, tell us about the film.

Jen Sidorova 9:31

Yeah, so in Shabbification, I follow small property owners like myself who are subject to regulation, and most of them are owners of rent stabilized properties in the city of New York. Right, I follow three specific landlords. I They take me to their homes, they take me to their properties, and they show me around, and you can visually see what regulation has done to their property. Yeah, one of these properties was occupied by a tenant. From 1969 up until 2021 wow. And the landlord was never allowed to be in the property, so obviously no repairs were made. And you could see visually that the apartment was like from the 60s. It's like a museum, but not in a good way, because it's really falling apart, right? So it's like, almost like a Tenement Museum, or, you know, another museum New York City, where we they actually preserve those dates. But in this case, a private landlord actually owns that space, and they're having a difficult time. And so what my specific Shabbification With my film is about is a very specific regulation in New York City that happened in 2019 that applied to rent stabilized properties. What it did that is that it won't allow landlords to put them properties on the market even if they rent stabilized tenant vacates them. They're no longer allowed to put their properties on the market at all. And more than that, they are also not allowed to raise rent, even if they do repairs. So sometimes the cost of repairs in New York City for one bedroom unit can be 200,000 and they're only allowed to raise the rent by like roughly $90 a month, and only for 15 years. So it will take them, like, 200 years to recoup their investment. And obviously that doesn't make any sense, so stories like that is what my short film is about. I myself am a small property owner, so it was very special for me to go and kind of tell the story of people like me.

Keith Weinhold 11:36

That's amazing. So rent stabilization something that New York City has a history of. I sort of think of that as a genteel term or rent control. And a lot of times when your rent can't be raised above a certain amount, you get these long term tenants, in some cases, for decades, and in this case, over 50 years, with this particular tenant in New York City and landlords don't have much of any incentive to improve property when rent control is in place, because they know they cannot get a commensurate bump in rent.

Speaker 1 12:11

rent control and rent stabilization are a form of government enforced limit on the rents. And in New York we have two laws that govern that we have more but the most prominent ones are the rent control law of 1969 and the Rent Stabilization Act of 1974 so back in the day, there were issues with availability of affordable housing, and the government was trying to fix it, and that fix was supposed to be temporary. It was supposed to eventually run out once the tenants who were currently in place at the time in late 60s and 70s, once they move out, landlords were able to put those properties back on the market. And eventually, that's kind of what was going on up until 2019 when housing stability and Tenant Protection Act made it so that the landlords could no longer put their rent stabilized properties on the market anymore. So essentially, all rent stabilization became permanent in the state of New York, and actually, in the just a couple of weeks after my film, in April of 2024 we had another law. It's called Good Cause Eviction, and that one regulates every landlord or enterprise who owns more than 11 units. So once you own 11 units or more, you're subject to regulation. You can no longer evict your tenant without a good cause. And there's a bunch of other rules that apply, including the limit on how much rent you can raise year to year. So yeah, that's certainly what's going on. That's roughly the landscape all regulation in New York.

Keith Weinhold 13:44

Yeah, some of this is really punitive, because if rent control comes into a market, that's one thing sometimes that landlords want to do. They want to sell their property, and in some cases, there's a roadblock against that. You know, Jen, I looked up the definition of Shabbification. I just simply googled the term. Urban Dictionary had one of the first hits, and fortunately, it was a G rated definition there in urban dictionary, it was defined as the opposite of gentrification. So therefore with Shabbification, it's where a neighborhood goes through deterioration and despair. So tell us about some more of those bad cases of deterioration, in despair, in Shabbification. Just how bad does it get?

Speaker 1 14:30

Well, one of the properties that we went to was basically from 1910 it was in Chinatown, and we saw was that the bathtub was in the kitchen in that property, oh my gosh. And I believe that was a way for them to do renovations fast and cheap, like 100 years ago. And because that property falls under rent stabilization, and there's obviously limits on how much rent you can charge. So. Landlords of those properties never really make renovations. Sometimes you could see cases like the director of photography, who was in the film, he lives in a rent sabilized property, and in his case, he has a shower unit in his kitchen as well. Instead of a tub, he has a shower unit. And it kind of is, as he described as one of those telephone booths, like, you know, red telephone booths from London, and then kind of just sits in the kitchen, and you obviously cannot really have company or friends visiting or dinner or anything if you have something like that. But those are the setups that we frequently see. Also a lot of things like uneven floors or just, you know, the property, if it's not being taken care of, there might be, like, a hole in the wall, a hole in the ceiling, or the ceiling is falling out. And those are really graphic images. And we do, we do capture them on camera a lot in Shabbification, and that comes from, kind of, my attraction to urban decay. I do enjoy, you know, touring older buildings, or maybe buildings that are preserved as a ruin, maybe like an old prison and or like an old mental asylum. I do do that a lot. It's just a hobby when I travel. So I was always attracted to that esthetic, and that does show in my film as well. I think I love studying the tragedy because I love studying how the hope died, because it's fascinating to me. It's very specific to usually a town or a city, and then just is so telling, and it's such a teaching moment for us as a society to kind of revisit those stories and figure out why did that hope die. And you can see a lot of that in the film.

Keith Weinhold 16:41

it's a great way to scratch one's itch for I suppose, seeing real life haunted houses, if you will, in Jen's film Shabbification here. Well, Jen, we've been talking about the conditions of the tenants. Why don't we talk more about how the landlord is portrayed in Shabbification.

Speaker 1 17:00

since this is the story, primary of the landlords, not so much on the tenant. You know, normally in this sort of films and these sort of documentaries, the story falls in tenant, because the tenant is the one who is seen as likable and sympathetic person, and that's how, and that's usually a more preferable framing angle. But in my story, my story is a story of a merchant class, or like a more, like a war on the merchant class, the war on landlords. Because in the state of New York, no matter how small or large of a landlord you are, whether you own one unit or 1000 by a lot of people in New York State Legislature as a landlord, you're seen as evil. They think you've done something wrong and you have to be punished. So that's the attitude to a lot of landlords, and although they're not that many small property owners, and sometimes we're not seen as a sympathetic I think this is the story that we need to tell, because some of them are like me. I am an immigrant to this country. Once I got an opportunity, I got my first rental property in Buffalo, New York, and right away, I've been renting out three units and lived in one, and I still do own it. Five years later, I live alongside with my tenants. When I go on vacations, they feed my cat, and when they go travel for work, I do take care of their properties. I water their plants, do things like that. So we do live as a small community, and this is something that a lot of people do in Buffalo, because it's a working class city. It's very hard to be able to afford a single family home. Right away, what you can do is acquire one of these properties, either a two unit, three or four unit, because when you're four units less, then you can do an FHA loan, which I did, and you can put minimum amount down, which I did, and then day one, right away, the income from the tenants was paying off my mortgage, right? That's kind of how I can build generational wealth. But not only that, that's how I can start my journey of home ownership and hopefully building generational wealth in the future, as I've said. And I also have my own passion for buildings, and we did a lot of renovations with my family on that property. So there's a lot of heart and soul in that space. And laws like rent control and Good Cause Eviction, they put a cap on people like me and how much we can grow. Because, as I've mentioned, the Good Cause Eviction in New York, it puts a cap on how far and how big people like me can grow. Because once you have 11 units, that's my cap. Once I have 11 units, I have subject to regulation, and somebody like me cannot afford having a tenant who would just never move out. So yeah, I think these laws, they intended to protect the needy. They intended to protect the families, but they do just the opposite. They. Just limit how much we can grow, and they also just make an environment within our properties very toxic, because tenants now basically have more rights than we do.

Keith Weinhold 20:09

Yeah, well, you're really humanizing the plight of the landlord here, Jen with your four Plex over there. For those that aren't familiar with the geography in western New York in Buffalo, sort of the opposite end of the state where New York City is. And, yeah, I mean, landlords are usually portrayed in media is these people that are sort of greedy and bumbling and they won't fix the broken air conditioner. And, you know, it's, it's unusual to me, Jen, that a lot of people tend to resent landlords, whom are often small business owners, but yet they champion other small business owners. And talk about how, you know, small business ownership is the very heart of America. I'm trying to figure out why that is, you know, maybe some tenants that just don't really understand how things work. Just think, well, why should I have to pay this landlord. All I'm doing is sort of renting air or renting space. But you know, one group of tenants that does not seem to resent landlords, Jen, in my experience, that is people that were previously homeowners and are now tenants. They don't seem to resent landlords, and that's probably because that tenant that has experience being a homeowner. They've seen bills for property tax and property insurance and mortgage principal and mortgage interest and maintenance and repairs. I think that's what makes the difference.

Jen Sidorova 21:33

Yeah, definitely. It's almost like, you know, when I lived with my parents, I didn't pay attention to the bills, like election bills or water bills or anything. But once you start living on your own, you now see how it gets deducted from your account, and then it changes you, adds you towards consumption, changes right? You now turn off the light when you leave and do just small things like that. And that's a similar psychology that works with people who previously owned their own homes. I think what the dynamic that's happening here with tenants is there's always going to be more tenants than landlords, so tenants have a lot more political power, and we see a lot of that in New York. We have a lot of tenant groups, tenant unions, who are very hold a little, a lot of political power. And it's one side of it, another side of it is that a lot of these policies do benefit large landlords, in a sense that once the small property owner is no longer able to keep up the property and they just foreclose on it, a larger landlord can always pick it up. And for large landlords, these costs of litigating with the tenant, or the cost of fixing a unit, or even the cost of having somebody live without paying for a few months, these are just the costs of running business, whereas for somebody like me, it's a significant chunk of my income, right? So at the moment, I think it's like 25% of my income is coming from the rentals, so it's significant. So I guess what I'm trying to say is, on the other side of political power, I just legislators who do not want to see private rentals. You know, small property owners having rentals and Damn, motivations are something else. It's almost like, if there's one conspiracy theory that I believe in, is that one you know, is that there is a war on the merchant class among some legislators, especially in the state of New York, who really just do not want to see small property owners providing housing to the community, and they would rather see it in in the hands of larger developers, and that's just the nature of how political process works, sometimes.

Keith Weinhold 23:45

in the broad business world, large institutional corporations, they're often pro regulation for just the reason you talked about it helps put smaller operators out of business that can't bear the expense of dealing with the regulation. But yeah, your film Shabbification, it helps underscore the fact that rent control, it stifles the free market in the process of price discovery. I mean really that price discoveries, that is the process of supply versus demand, with the referee being the price and finding that right rent amount, and amidst this low housing supply we have, it's just really bad timing for any jurisdiction to enact rent control. Existing landlords stop improving property. Builders stop building new property, and it can make landlords want to sell, like we touched on earlier. But also I'd like to talk about making the other case, the case for rent control. When we come back, we're talking with public policy expert Jan siderova, the maker of a film called shabbatation, where we come back. I'm your host. Keith Weinhold, hey, you can get your mortgage loans at the same place where I get mine at. Ridge lending group NMLS, 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President changley Ridge personally. Start now, while it's on your mind at Ridge lendinggroup.com that's Ridge lendinggroup.com.

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Caeli Ridge 26:32

This is Ridge Lending Group's president, Caeli Ridge. Listen to get rich education with Keith Weinhold, and remember, don't quit your Daydream.

Keith Weinhold 26:52

Welcome back to Get Rich Education. We're talking with a really interesting guest, Jen Sidorova. She's the maker of a new film called Shabbification. This centers on rent control and dilapidated housing conditions. And Jen, you know, I've talked about here on both this episode and another episode a few weeks ago about the deleterious downstream consequences of rent control. It benefits a small group of people in the short term and ends up with deteriorated neighborhoods in a lot of municipalities, but I like to look at things from the other side. What is the case for rent control?

Jen Sidorova 27:27

So I think the the original story behind the rent control in New York City was that in the 70s, it was just really dire situation, kind of what we're going through right now. Right now in New York we have the housing crisis that's the worst in the last 50 years, so basically right around the 70s again. So the current vacancy rate is like 2% and at the same time, we have between 20 to 60,000 rent stabilized rent control units that are vacant because landlords just do not want to put them in more on the market, because talking just in New York City here, yeah, just New York City. And New York City has roughly 1 million of rent stabilized or rent control properties altogether. But yeah, so what is the case for rent control, right? So in my opinion, what is the most problematic saying about rent control or rent stabilization right now, the way the current laws are in New York City is that the property itself is being stabilized or controlled. It's not the person. It doesn't matter how much money you're making. If you're making half a million dollars, you can still live in an apartment that's like 500 $600 a month, right?

Keith Weinhold 28:38

You can have your second lavish vacation home out in the Hamptons, and it doesn't matter.

Jen Sidorova 28:42

Yeah, you can live in Texas for like, nine months out of a year, and come back to New York City for the summer, and then people do that. That's like, not, I'm not making it up. It's a real thing. People are basically hoarding these rent stabilized rent control units, and they just never let them go. And that definitely pushes out young people out of the city. It pushes immigrants out of the city, because people, yeah, all the newcomers. So that's what's going on. So instead of having a property itself being controlled, what could be done? Maybe like a voucher program, maybe like a housing voucher program, but we can only do this if we let the rent control and rent stabilization laws sunset. So once the current tenants move out, that has to be put back on the market, right? So what we could do is the housing voucher program maybe, so that we will always have people in the society that need a little bit of help, but it shouldn't be in such a way that they it's the landlord who is paying for it, right? So if there's a housing voucher, they can live wherever and however that program works in the sense that whoever picks up the rest of the bill, as long as it's not a landlord directly. Yeah, so that's how I see it. And I think just other things that can be done is better zoning regulation that allow more buildings to be built a lot of New York City. Is like a museum, right? We have a lot of historic buildings, a lot of preservation of all the buildings, but we have to reevaluate that, because we don't necessarily have to have the East Village look like a museum if we don't have enough housing, right? So we have to reassess of how much of those policies we still want to hold on to, and then maybe also building codes. Sometimes it's really hard to expand or have more units within the same building. If I have a four unit property and I want to convert it into five units, I am subject to whole different regulation and a whole different bunch of coding, whereas my square footage remains the same. So I think we have to revisit that, because a lot of these new materials that we work with when building are safe right now. So maybe we could let people do more with their properties, and that way we provide more house.

Keith Weinhold 30:50

Yeah. Well, some of this comes down to, how do you get politicians to say no to rent control, which I believe is part of the motivation of your film?

Jen Sidorova 31:01

Right, So the motivation behind myself was that I bought my property in 2019 I went under contract in 2019 and I fully acquired the rights in March of 2020 and between the August of 2019 and 2020 we had a new law passed that was housing stability and Tenant Protection Act 2019 in New York State, and that kind of put a cap on how much I can raise the rent if the tenant remains the same. And at the time when I found that out, I was like, well, that's kind of quirky, but whatever, what can I do? But then a year from that, like in 2021 we had a new mayoral candidate who was a socialist, openly socialist person, and they were advocating for rent control. And at the time, I had an opportunity to go to do a film workshop, and I was thinking, so what is that I really wanted to write film about? And I was this, definitely rent control, because it's relevant for me. It's the story of my people among small property owners, and that's how I did it. And I really want policy action. The idea behind this film, the goal is policy change, right? But this short film is only the beginning of my project, which is exploration of the topic prevent control in the state of New York and everywhere else in the country, and we keep interviewing more people, more experts, and to convert into a larger film, and then hopefully, like a full feature documentary, in order to educate both policymakers and the public about what rent control can do. And eventually, we do hope for policy change in New York, and hopefully, with this film, no more new rent control can happen, or at least when politicians start those bills, they take a look and talk to me and make some changes.

Keith Weinhold 32:52

Well, you're really doing some good work there. I appreciate that. I mean, rent control is analogous to price controls, and we see what happens when there's price controls per se foods like you've seen in other nations in previous decades, and that's how you end up with bread lines, because producers don't want to produce bread when they would have to take a loss and they can't profit on selling that bread. You see a shortage of housing come up just the same, like you do with bread. Well, tell us some more about Buffalo and its market. You had touched on it previously. I think they have lots of older two to four unit buildings there. It sounds like you found one of the four plexes where you could do the owner occupied thing. FHA, three and a half percent down 12 month owner occupancy period. Minimum credit score only needs to be 580 at last check, which is the same way I began with the four Plex building. But yeah, let's learn more about the buffalo housing market. Just a little bit there with rental properties and then the rising tide against Airbnb, like you touched on last month when we met in person.

Jen Sidorova 33:56

Right, so a lot of those properties, a lot of those older homes, were built around the late 1800s beginning or 1900 and that's how they used to build back in the day. Because what would happen is that a large Victorian home with two primarily stories, with two large floors and then maybe an attic and a basement, but one family would live on one floor and another on the second floor. So they were originally built for two homes, but at that time, both families would own that space, right? So there would be co owned by two families. Mine was also an originally a two family home that was converted into a four unit because the previous owners made an addition a lot of young families, that's how they start when they cannot afford a single family home. That's how they start with home ownership and the money that they make for with the rentals. That's how they pay mortgage partially, or maybe that's how they pay the taxes, depending on where you live in the city, sometimes tax burden can alone be very high. So as I've mentioned, we had some mayoral candidates talking about rent control, but recently we started having Airbnbs being regulated in Buffalo. And so there's a few districts in the city where Airbnb is regulated, and my district does not fall into that, and I actually am on four of my units. One is occupied by me. Two are long term tenants, and one which is the newest and the nicest one. I decided to make Airbnb interesting because I did not want to risk, you know, giving it to a long term tenant, because it's just such a nice unit. It's a lot of investment that went in there, so I didn't want it to be provided by somebody who would never leave, because the, you know, environment is just so toxic. You just don't want to take chances, unless you like, really believe in the time. But I don't know people are out here. So I decided to keep it Airbnb. And so because some of the other parts of the city are regulated, and mine is not. I am the beneficiary of that regulation because I get a lot, all of those clients, right, all those Airbnb client so in that sense, funny enough, I am benefiting from some parts of the city being regulated because my my part is not. So all the clients go to me. I do have an Airbnb right now, but we're definitely at the risk of all of the city being regulated. And I think a lot of people complain, right? People who lived in the city for a long time, allegedly, they started complaining to the city council about not recognizing their neighborhood because of Airbnb. But I think what legislators need to understand is that my generation, millennials and Gen Z. That's how we live our lives. We share our assets, right? It's like a big millennial and Gen Z thing that the Airbnb itself is a millennial thing, that this is just will be recognized, that assets like cars and houses, they can be shared, you don't have to have that many of them, even from the unit in the unit that I live in. When I I went out on a trip to Long Island last week, and I airbnbied my own unit. And so that's just how it is. That's just a little lifestyle. And when I see new people who stay in Airbnb on my street, it doesn't bother me. I kind of enjoy a little bit of a variety. But, you know, sometimes it's almost like a culture clash or a generational shift when it comes to thinking about properties and housing ownership. Yeah, that's just my experience.

Keith Weinhold 37:33

Younger generations embrace the sharing economy, and that is quite the mixed use building that you have there with your four Plex in Buffalo, you've got one unit that's a primary residence, a second unit that's a short term rental, and then two long term rental units. There's some diversification of income and utility, for sure. Well, Jen, tell us more about how our audience can connect with you, and especially how they can watch Shabbification.

Jen Sidorova 38:00

So Shabbification, right now is in the film festival circuit, so it's not available to watch yet. Although, if anyone reaches out directly to me through Instagram, my handle is @Jen_Sidorova, which is my first underscore, my last name, anyone can just reach out directly to me and I will send them a screener, and they can watch the full film. And also on my Instagram page, I do put a lot of like other content about buildings, and a lot of like videos so and some, you know, B roll footage that we haven't used in the film, but you can watch it in my Instagram. So yeah, definitely check it out. I also do write for Reason Foundation, and you can find it on my profile, my policy writing work. You can find it at reason.com and it's just under my name, pretty much Instagram and reason website.

Keith Weinhold 38:51

Jen, thanks so much for your Shabbification project. I really think it's going to help people see an important part of American society in a different light. It's been great having you here on the show.

Jen Sidorova 39:02

Thank you so much.

Keith Weinhold 39:09

I talked to Jen some more outside of our interview. Her buffalo four Plex has a high flying 1.04% rent to price ratio. I crunched it out that is super strong for a four unit building, but it is older, and like she said in the interview, she did make some substantial renovation to it, yeah, rent control is a bad plan. You know, on an episode a few weeks ago, I mentioned to you about last month's White House proposal for a sort of rent control light, that was such a bad plan. I told you that it only applies to property owners of 50 plus units, and rent increases were capped at 5% a year. Well, I dug into that release from the White House briefing room, and it's almost like they know it won't work, because. Oh my gosh, this is almost humorous. Economists and any long term thinkers will tell you that rent control doesn't work because you won't get any new builds. Well, the White House release Wood said it won't apply to new builds. It's almost like someone told them, like, hey, this won't work for that reason. So then they wrote that sentence in there, which just undermines so much of it. And economists will also tell you that what doesn't work because owners don't want to improve property well, yet, the White House release actually said it would not apply to substantially renovated property. I mean, my gosh, with these carve outs and all the other caveats that are in it that I described a few weeks ago, this White House rent control planet has no shot of going anywhere. It is lip service virtue signaling, and also would not get past a divided Congress. Really bad plan. In fact, how doomed to failure is wide scale rent control. Well, don't worry, the federal government hasn't regulated rent on private buildings since World War Two. Yeah, it's been 80 years, and it took World War Two scale conditions to bring it. Thanks again to today's guest, Jen Sidorova, with reason.com. Again, like I mentioned earlier, if you want to deploy some of your more liquid funds for a potential 8% return at the same place where I've been getting an 8% return for years, you can make a loan to a long standing real estate company for their property rehabs and other operations. This might really help you out. You can learn more by texting FAMILY to 66866, lots of great shows coming up here at GRE to actionably build your Real Estate Wealth until next week, I'm your host. Keith Weinhold, don't quit your daydream.

Unknown Speaker 41:53

Keith Weinhold 42:21

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514: Zoning Out: How to Combat the Housing Crisis and Build Wealth Aug 12, 2024

Research Director for California YIMBY, professional city planner and author of Arbitrary Lines, Nolan Gray, joins us to discuss how zoning impacts our communities, affordability of retail and commercial real estate.

Zoning laws contributing to the affordable housing crisis and what we can do about it.

Shifting from NIMBY to YIMBY mindset requires understanding benefits of growth.

How zoning laws prevent new development, causing housing shortages and limiting entrepreneurship.

California's statewide legalization of accessory dwelling units can be seen as a successful zoning reform example.

We discuss how cities like Austin and Minneapolis have seen price stabilization by allowing for more mid-rise multi-family housing near transit and job-rich areas.

Learn how to connect with local policymakers and planners to advocate for policy changes that encourage more housing supply.

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Show Notes:

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You can follow Nolan on X @mnolangray

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Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 00:00

Welcome to GRE. I'm your host. Keith Weinhold, if you don't take the right action, inflation will make you poorer. Then the affordable housing crisis keeps your tenant as your tenant is zoning. What's ruining American cities in keeping starter homes unaffordable or just plain extinct in some areas, how do we get more apartments and more density built 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. Ugh. 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, 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 Daydream Letter, and it wires your mind for wealth. Make sure you read it. Text GRE to 66866, text GRE to 66866.

Corey Coates 01:38

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 01:54

Welcome to GRE from Calgary, Alberta to Tirana Albania and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education. When most investors think about inflation, they get it mostly wrong. Their strategy is inflation hedging. And you know, even if you successfully hedge inflation, you are really missing out. You've really got to get fired up about beating inflation. When did you get your first job? Like your first real job in your life? Let's say you did that when you were age 18. Well, that work that you did when you were 18, that created value for somebody else. And you could have done anything with your valuable youth, but instead, you chose to provide value by focusing your time and your energy to sweep floors or enter data into a spreadsheet for somebody else. You were paid for that work that you did. You were paid in dollars, well, if you just tried to store your finite energy that you expended for that employer into dollars, you will lose. Your value will be coerced away from you by your government that just incessantly and relentlessly debases the dollar that you earned at age 18, because they just keep printing more of them. Well, that money printer, which creates the inflation is then an extraction of your resources. Yeah, they extracted your resources, of your time, energy and ingenuity away from you when you were 18, and even the work that you do today, its value will get extracted away from you too. If you say, store dollars under your mattress, if you instead invest it so that its growth rate keeps up with inflation, well, then all you've done is hedge inflation. My point is, get upset about how the system extracts resources from you. And my other point is, don't hedge. Hedge just means that you're treading water. Position yourself to win instead, because you can when you buy income producing property with a loan, you don't just hedge against the inflation. You win three ways at the same time. You probably know that's called the inflation Triple Crown, a concept that I coined. You can watch the three part video series on net, free. It's now easier than ever to access, learn how to actually profit from inflation, not just hedge yourself against it. You can watch that, and it's friction free. There's no email address to leave or anything. Simply watch learn and maybe even be amazed at how you can do this. Those three videos are available. At getricheducation.com/inflationtriplecrown, that's sort of long, so you can also get there with getricheducation.com/itc. Again, that's getricheducation.com/itc. Before we talk with our guests about how zoning is making the affordable housing crisis, even worse, housing values and rents are really looking stable in today's environment. CoreLogic tells us that single family rents are up 3.2% annually. That's the highest rate in a year. And when it comes to prices, the NAR tells us that existing single family home prices hit a record high of $426,900 and that is an all time high. And note that that's existing homes, not new. So median existing homes are basically 427k now. And what does that really mean? Well, that is up 4.1% year over year, the real estate market continues to be it's sort of this tale of the equity rich versus the affordability challenged. Are you equity rich or are you affordability challenged? Well, the more property that you own, the more equity rich you are feeling, that you're going to feel, and oftentimes you're renting out property to the affordably challenged. Of course, the big buzz and a potential really turning point in the economy here or not, it really began about 10 days ago. That's when America reported weak jobs numbers, and that set the unemployment rate from 4.1% up to 4.3%. Citigroup and JP Morgan are now predicting half point Fed rate cuts in both September and November, not just quarter point cuts anymore. I mean, gosh, if there's one thing that we really know, it's that nobody really knows anything. Starting about two years ago, everyone thought a recession was eminent. Bloomberg even said there was a 100% chance that we'd have one by last year. Wrong, wrong, wrong. Everyone thought there would be six or seven Fed rate cuts this year. Wrong, wrong, wrong. You can't even completely count out of rate cut at the next meeting. I mean, sheesh, before that time, we still have two new CPI reports to come out and another jobs report. So, you know, over the long term, this is just how people act. They tend to get ahead of themselves and overreact, and that's really more of a stock market investor sort of thing. And yeah, despite the volatility, you know, us real estate investors are here more chill than Snoop Dogg was at the Olympics. All this fear, what it does is it pushes money into bonds. And when money goes into bonds, it makes mortgage rates go down, and they recently hit 16 month lows near 6.4% and if rates stay low, millions of additional Americans will be able to qualify to buy property that couldn't before, and that could really put more upward pressure on property prices, more than this 4.1% year over year appreciation that we're currently seeing. We know that lots of investors are buying properties like you, getting equity rich and serving the affordability challenge. In fact, 60% of Home Builders indicated that they sold homes to investors from February through April, while 40% reported that they didn't sell to investors. And investors now represent wholly 25% of both new and resale residential transactions and among builders that sold to investors in the past 90 days, 69% of them sold to mom and pop investors. Mom and pop investors, they're loosely defined as those that own one to 10 rental units. They may very well be you. Institutional investors, those that own 10 plus investment properties in this home builders definition here. Well, those institutional investors, they accounted for just 4% of investor sales nationally. So again, more home builders are selling to small real estate investors, those that own one to 10 units. Well, now in almost 10 years of doing the show here, we've never had a full discussion about zoning, and really this is the time. Okay, this ends today because we describe how it's contributing to the affordable housing crisis and what we can do about it. I mean, anymore you really can't find a brand new build 250k starter home anymore, unless maybe it's a tiny home, which then really isn't a full home, and you sacrifice your lifestyle. Well, zoning is a big reason why the Supreme Court decision that deemed zoning constitutional that occurred in 1926. Yes, that's going to turn 100 in the year 2026 that Supreme Court decision that infamously referred to apartments as parasites. Wow. But yet is some zoning good? I mean, say that you and your family have your nice, quiet, single family home on an idyllic half acre lot. Well, if that's the case, should it be allowed that Bitcoin mining facility with its loud cooling fans is built right next to you I'll ask our guest expert about that, and what about say less offensive transgressions, like a condo board that says that you can't rent your unit out. How much zoning is too much or too little? I mean, is someone just being overly sensitive if a duplex is built next to their single family home and they complain about that? So we'll get into all of that. And it really comes down to limiting this McMansionization risk type of nimbyism, not in my backyardism. That's what it is. Again, you can watch the three free videos on how you can substantially and actionably profit from inflation, not hedge, but profit from inflation. It's the inflation triple crown. Be sure to check out those three videos at getricheducation.com/itc. I learned about this week's guest through reason.com we met in person at last month's Freedom Fest in Las Vegas. He is the research director for California Yimby, yes. Yimby, not NIMBY, that is yes in my backyard. And he's a professional city planner. He's the author of the book Arbitrary Lines, how zoning broke the American city and how to fix it. Welcome to GRE. Nolan Gray,

Nolan Gray 12:24

thanks so much, Keith. It's a pleasure to be with you, Nolan,

Keith Weinhold 12:26

you wrote one article for reason.com with such an interesting title, five words, Abolish Zoning-All of it, you're pretty emphatic there at what you'd like to have happen before we discuss that, why don't you tell us in your words what zoning is?

Nolan Gray 12:44

So for the past 100 years, America's cities have been running a grand experiment and how they're governed. Essentially, what we've done, beginning in the 1920s is we said for every single parcel in the city, we're going to assign an allowed use. So most people, if you've played Sim City, you know this might be residential, commercial, industrial, but it goes into so much more detail than that. Different types of residential might be allowed in different parts of the city, commercial, etc, and the vast majority of most American cities, the only form of residential that's allowed is a detached, single family home, right? So that's one half of it, the second half of what zoning is doing, it's placing arbitrary density limits. So the amount of actual housing or amount of floor area that you can build on any particular lot. And it's important to distinguish this from other forms of land use regulation, because in many cases, these rules aren't actually based on any health or safety concerns, but instead a sort of social project of engineering what a correct city should look like. And as I argue in the book and we can discuss over the course of this conversation, is I argue that these rules have actually had incredible harms for our cities and are at the root of our current housing affordability crisis.

Keith Weinhold 13:45

I think zoning initially, it began in New York City about 100 years ago.

Nolan Gray 13:50

Yeah, so New York City adopted one of the first modern zoning ordinances in 1916 a handful of other cities did so as well. So I'm coming to you from California, Berkeley, California also adopted zoning in this year. And essentially, what happened after New York City adopted it was the federal government put together what's called the standard zoning Enabling Act. They mailed that out to every single state in the country and started putting a lot of pressure on states to adopt zoning and allow local governments to adopt zoning. And then, with the rise of the Federal financial system, as part of the New Deal, housing programs. In many cases, local governments were required or strongly, strongly incentivized to adopt the zoning codes to be eligible for certain federal benefits.

Keith Weinhold 14:29

You know, maybe philosophically, one might think, Nolan, well, America stands for freedom, and I should get to do what I want with my plot of land. But if everyone can do whatever they want with their plot of land. I mean, does that mean that my neighbor then could start a sloppy hog farm, or the neighbor on the other side of me could start a battery factory with smoke stacks? So do those sort of things help make the case for zoning?

Nolan Gray 14:57

Yeah, that's a great question, you know. So before the rise of zoning. And we actually had a lot of rules for these classic nuisances, these classic externalities, things like smoke, smells, noise, or even just lots and lots of traffic generation. We had rules to say, Hey, if you want to operate certain types of uses, you need to be in a certain designated area where we're going to tolerate a much higher level of externalities. Zoning does that, but it also does so much more. And it's those other aspects that I think are ill conceived. So for example, of course, we don't want a slaughterhouse next to a single family home, but zoning might also say, Oh, by the way, you're not allowed to have a duplex next to a single family home. You're not allowed to start a home based business. You're not allowed to operate certain commercial uses out of certain strip malls in certain parts of the city. You're not allowed to build anything unless you have a certain amount of number of off street number of off street parking spaces, which can make adaptive reuse of historic properties very difficult. So I think absolutely there's a core of land use regulation that makes sense, that's focused on neighbors, not imposing costs on each other, but our current system goes so much further than that, in many ways, imposes new and unconceived costs, including increasing housing prices, limiting housing options in many of our neighborhoods, making it harder to start a business or to have neighborhoods serving retail in many of our neighborhoods.

Keith Weinhold 16:09

So perhaps zoning has just simply gone too far, and you touched on it earlier. It seems to me that about three quarters of the area of most cities have zoning restricted only to single family home building, for example, and they ban apartments completely. So maybe, as we try to find the right balance of how much zoning is right, tell us more about really the thesis of your book and why we should ban zoning completely.

Nolan Gray 16:38

Of course, we need certain regulations for externalities and nuisances, and to certain extent that can be resolved through litigation, but ideally you look for it and you say, okay, look, there are certain areas where we're going to tolerate certain nuisances and other places where we will not. But beyond that, I think so much of what our land use regulations do is actually causing harm. It's preventing property owners from using their property in ways that are not in any meaningful sense, harmful to their neighbors. It's created this context where now if you want to build just about anything in the typical American city, you have to go through multiple public hearings, you have to do an environmental report in some states, you have to get the permission of local elected officials, you have to undertake all these actions that heavily politicize every new development. And so what we get is so many of our neighborhoods and so many of our cities are locked in amber. And this is partly why, over the last few years, where we've seen a huge amount of demand flow into housing, we've simply had these extreme shortages because markets could not respond with the supply that many of our communities needed. So for example, a starter home in many US cities today might be a townhouse, it might be a two bedroom condo, it might be a single family home on a 2500 square foot lot, but those are precisely the forms of housing that in many cases, our zoning codes make illegal to build. So we're essentially saying if you can't afford at least a certain level of housing, you're not allowed to live in many parts of the community, if in the community altogether, or the same with businesses, if you want to start a small business that might not necessarily have any impact on your neighbors, you might require a special permit. You might require a hearing. You might require to attend a hearing where your competitors are going to show up and oppose your project, purely on a cynical basis. So what it's done is it's created this incredibly disruptive system that's prevented our cities from being entrepreneurial and adaptive, and I think this is the root of a lot of the problems that we're facing today.

Keith Weinhold 18:17

Oh, you really surface some good points there Nolan, when I think of over zoning, and we talk about how a lot of times you can't build anything more than a single family home, that certainly creates a lot of problems. Gentrification is sort of a bad word, kind of sprucing up community so much, raising the value so much, that one problem is that familial bonds decay when children that grew up in, say, Southern California, can no longer afford to live there, so they have to move to lower cost Las Vegas, a four to five hour drive away. Excessive gentrification. You touch that, it also harms mobility. If you want to move from Atlanta to Boston for a tech job but you can't find housing, you're not going to move there, so therefore, talent doesn't get matched up with opportunity.

Nolan Gray 19:07

That's exactly right. I mean, this is a at the national scale. This is an important piece of the puzzle, which is we've made it hardest to actually move to some of our most productive places. So as you mentioned, places like Los Angeles, San Francisco, Boston, New York City, for all their problems, these are incredibly productive places where folks can move to and get high paying jobs and other good educational opportunities, but in many cases, these are the most expensive cities in our country, and it's in no small part because of the many rules and regulations that make it so hard to build housing in those contexts. So you're exactly right. Folks actually turn down higher paying jobs or better opportunities and move to places simply because the housing is more affordable, and you pick up on a really important piece of this, which is in many cases, this is breaking apart families. So a lot of folks who are born and raised in a place like California, their parents might have been able to buy their home in the 70s or 80s or 90s, but they can't afford a home. They have no long term path to actually staying in the community. And so what you're actually seeing is neighborhoods and communities being ripped apart. If the situation in places like California has actually got to be so bad that many of the people who are in a certain sense, beneficiaries of the status quo, maybe they own their home and they're seeing the value go up and up and up. They're also saying, Oh, my children can't afford to live near me. I don't ever get to see my grandkids. The person who serves me at the hospital or at the supermarket can't afford to live here, and we're having trouble keeping folks on. The crisis got to be so bad in certain places like California that we're starting to see tremors of reform. But one of the things I like to say is, if you want to fall into a California style housing crisis, most parts of the country don't need to do anything the rules you have on the books have you moving in that trajectory, right? But if you want to remain a place where we can build more housing, where folks can buy their own home or buy small apartment buildings and start to build wealth, you have to allow for more supply to come online.

Keith Weinhold 20:42

Sure, zoning so that you can't build anything other than single family homes compounds the affordability crisis. There really just isn't any such thing as a 250k starter home anymore, anywhere. You represent California, yimby and you live there in the state where people think of ground zero for excessive regulation and taxation and zoning too. I do read more about some zoning being relaxed in California, allowing for the building of an adu on a property, for example, to help build the density. But before you talk about some of the cracks that are actually starting to help break this down. Can you give any bad examples that are especially problematic there in your home state, Nolan?

Nolan Gray 21:27

For the past 50 or 60 years, California, has been stuck under a NIMBY paradigm, not in my backyard, right? Every single new project is politically contentious, has to undertake an environmental report, has to undergo multiple public reviews, it takes years and years to get a permit, and that's if the housing is legal to build at all. As you know, in so many parts of California, there's very little to no new construction happening, and that's because of the rules on the books that make it so hard to build. To the extent that we allow new housing to be built, we have a whole bunch of mandates that force the housing to be a lot more expensive, and even if all that pencils again, it can take two years to get fully entitled in a permit. And so of course, the only housing that actually ends up getting built is quite expensive. And some folks say, Well, if we allow new housing to be built in California, it's all expensive. Well, yes, if you only allow a trickle of new housing in a very expensive context, of course the new housing is going to be expensive. But if you look to places like Texas and Florida, for example, that build lots and lots of new housing and don't have all of these costly mandates, they actually can build a lot of new housing, and actually can keep prices relatively under control and create that new supply of what we call missing middle, low rise housing. So as you mentioned, the tide, I think, is turning in California. The silver lining of things getting so bad is that the culture is shifting. And what we've seen is the emergence of this new yimby movement, or yes, in my backyard. And these are folks are saying, hey, not only is not building more, not this horrible threat to my community, but it's actually this enriching opportunity. It's good to have a growing, healthy, affordable community where folks are building, folks are able to move to high opportunity jobs, and folks are able to have choice in the neighborhood they live in.

Keith Weinhold 22:55

We're talking about zoning and how that's made the affordable housing crisis worse in the United States with California, yimbys, Nolan, gray Nolan. Tell us more about just the exact sorts of codes that are problematic. We touched on apartment building bans, but I think we're also looking at things like off street parking requirements. You need to have so many off street parking spaces before you can build. Otherwise you can't build. You need to have a minimum lot size of a half acre or a quarter acre in order to build here. So can you talk more specifically about just some of those exact problems on the tactical level that are compounding here?

Nolan Gray 23:34

Yeah, that's exactly right. So where are the housings illegal to build altogether. In many cases, there are a whole bunch of rules that increase the price of that housing. So in urban context, for example, where you might want to be building apartments, many cases, you might have parking requirements that say, Well, you have to have two parking spaces per unit or one parking space per bedroom. In many cases, that's what consumers might demand, and you would have to build that to lease out those units or to sell those condos. But if you're building in a context where you might be near a transit line, or you might be near a university campus, or you might be near a major job center, many of your renters might say, hey, actually, I would prefer to have a more affordable rental or a more affordable condo, because we know that there's no such thing as free parking. You know, if it requires a structure or excavation work, parking can easily add $50,000 to the price of a new unit, and so some consumers might want to pay for that, eat that cost, have a parking space. But many consumers, when we relax these rules and say, Hey, developers, you have the incentives and the local knowledge needed to decide how much parking to build. In many cases, we find that they share parking with other uses, so commercial during the day and residential at night, or they allow renters to opt into parking and to pay for parking, but what you get for many households is a cheaper unit. Now another rule that you mentioned, which is very important, is minimum loss size rules. This is certainly a lot more relevant. More relevant and suburban and rural context. But what we say is, if you want to be able to have a single family home, you have to be able to afford at least a certain amount of land. Now, when if you have a context where you don't have water and sewer installed, and you're operating on septic and well water, you do need larger lots as a matter of public health, but in most suburban context, these rules essentially serve no function except to increase the price of housing and the ability to determine what type of housing can be built where is the ability to determine who gets to live where. So if we say, well, you're not allowed to live in this neighborhood unless you can afford a 10,000 square foot lot or a 20,000 square foot lot, what we're essentially doing in 2024 where land is a major factor in affordability, is we're saying that a whole bunch of middle working class households are not allowed to live in these neighborhoods, or they're not allowed to ever become homeowners and start building wealth in the same way that past generations did. And you look at places like Houston, for example, where they don't have zoning, but they have a lot of zoning-like rules. In 1998 they reduced their minimum lot sizes from 5000 square feet citywide to 1400 square feet citywide. And what this did was this kicked off a townhouse and small lot single family home building boom that has helped to keep cities like Houston affordable a whole new supply of starter homes that again, offered that first step on the ladder of home ownership and wealth building.

Keith Weinhold 25:52

Over the decades, home prices have outpaced incomes. There are a few reasons for that. One of them is inflation, with wages not keeping up with the real rate of inflation, but the other are barriers to development. We're talking more about that with Nolan gray. When we come back, you're listening to Get Rich Education. I'm your host, Keith Weinhold. Hey, you can get your mortgage loans at the same place where I get mine at Ridge Lending Group NMLS, 42056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Chaley Ridge personally. Start Now while it's on your mind at ridgelendinggroup.com. That's RidgeLendingGroup.com. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4% you're losing your hard earned cash to inflation, let the Liquidity Fund help you put your money to work with minimum risk, your cash generates up to an 8% return with compound interest, year in and year out. Instead of earning less than 1% sitting in your bank account. The minimum investment is just 25k you keep getting paid until you decide you want your money back. Their decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor too. Earn 8% hundreds of others are text FAMILY to 66866, learn more about Freedom Family Investments, Liquidity Fund, on your journey to financial freedom through passive income. Text, FAMILY to 66866.

Robert Kiyosaki 27:50

This is our Rich Dad, Poor Dad author, Robert Kiyosaki. Listen to Get Rich Education with Keith Weinhold, and the reason I respect Keith, he's a very strong, smart, bright young man.

Keith Weinhold 28:14

Welcome back to Get Rich Education . We're talking with California, yimbys Nolan gray about zoning and how these barriers to development are compounding the affordable housing crisis, and there sure are a number of barriers to multi family production. I really think that's what wild it comes down to. You touched on it earlier, and it's something that I spoke about with our audience a month or two ago. Nolan, and that is, mmm, multi families, missing middle these two to four unit properties, duplexes to fourplexes, where they're only constructing about 40% as many of those here in recent years than they did 20 to 30 years ago. The way I think of it is when you lift barriers to multifamily production, of course, you incentivize builders. If a developer buys an acre of land for, say, $90,000 and they had planned to build one unit on that All right? Well, there's one set of inputs in income that a developer can look at. But instead, if you allow them to go from building one unit on this plot of land to two units on it, it increases their profit potential, and it incentivizes developers from that side as well.

Nolan Gray 29:23

Yeah, absolutely. I mean, so there's been some great work by some friends over at the American Enterprise Institute. What they've done is they've created a nationwide map of mcmassionization risk. So when we have these conversations, we say, hey, let's allow for a range of housing typologies in more neighborhoods, duplexes, triplexes, small, low rise, multi family buildings, townhouses, the types of things that were commonly built in a range of neighborhoods before the rise of zoning. Every city in America has a neighborhood like this. That's a mixture of housing typologies. It would be illegal to build that today, but in many cases, we subject it to preservation requirements because we value it so much that we want to keep it. In any case, what happens when you don't allow that type of gradual incremental infill that keeps our communities affordable. What you get instead is the existing single family homes are converted into much larger, much more expensive single family homes. Now, again, there's nothing wrong with that. Many people might want to buy a smaller 19 fizzies bungalow and turn it into a much larger, 2500 square foot single family home, and God bless them if they want to do it. But what we have is rules on the books that say housing can only get more expensive, it can never get more affordable, or you can never unlock the wealth that's tied up in your land by building an adu or by building a duplex, or by creating more housing options for a range of households. And so that's really, really key. You know, the choice is not between, do we want our communities to change or not? The question is, do we want our communities to remain affordable and maybe change and have some more buildings built and more growth and more development. Or do we want our communities to change in the sense of they become more expensive? Folks retire and they move away, the neighborhood gradually becomes significantly more exclusionary, and young folks who moved grew up in the community can no longer afford to stay. That's the option facing many of our communities. And I think the yimby response to this is more housing construction is good and it's healthy and it's part of a thriving community.

Keith Weinhold 31:02

Yeah, Nolan, when we come at this from the familial perspective, like I brought up earlier, it seems like the more zoning there is, the more it benefits seniors and incumbents, the more it benefits the silent generation, the baby boomer generation, and maybe Gen Xers, and it disadvantages millennials and Gen Zers that really don't have their place yet.

Nolan Gray 31:24

Yeah, you know, it's tough. I would say it even hurts seniors, right? I mean, if they want their young adult children to be able to live near them, or, many cases, seniors like the option to be able to build an accessory dwelling unit in their backyard and maybe rent that out to friends or family, or maybe even you move into the adu and allow young adult children to move into the primary residence, or even just rent it out and have an additional source of income to supplement fixed incomes. There's reasons why folks, I think, at all different stages of their life, benefit for more flexibility in the rules that govern what can be built.

Keith Weinhold 31:52

Psychologically, how do we turn one's mindset from a NIMBY mindset to a yimby mindset? I mean, if someone's got their single family ranch home that they want to live in in their senior years, and they want to see its value appreciate, so they don't want duplexes and fourplexes built next to them, rather than them saying no to turn them into saying yes. I mean, how do you get those people to understand that? Well, like this is the way for the next generation, for you to be able to live near your children and grandchildren?

Nolan Gray 32:21

Yeah, that's a great point. You know, I think when you go to these public hearings around projects, you hear relentlessly about the cost of new development, right? Folks speculating about traffic and runoff and other factors parking. We get that perspective. We get bombarded with that perspective. But what we don't get is the alternative perspective of the benefits of a community, remaining relatively affordable, remaining a place where teachers and nurses and firefighters can still afford to be able to own a home and live places, allowing for the kids who grew up in a neighborhood or a city to remain there. And in fact, even just the selfish appeal to the homeowner, there's not actually any evidence that new development happening around you necessarily reduces the price of your single family home, and in some cases, it could actually signal to the market, hey, there's actually development potential on this so when you do decide to maybe sell and move on, your land is potentially going to be more valuable because it has more development potential than it might under a strict exclusionary zoning scenario. So you know, of course, you try to make the altruistic case to people. Hey, think about future generations. Think about folks who maybe want to move to this community or stay in this community, but aren't going to be able to if we don't build housing. But even so, I think there's selfish reasons. If you want to have somebody who's going to check you out at the supermarket or serve you at a restaurant or be a home care nurse, eventually you got to have housing for folks like that. In many cases, new development happening around you is going to increase your land value. Now I would just try the rage of appeals and work people through it. And in many cases, you know, I think people will understand, yeah, okay, I understand we got to have some growth. They might have a perspective on what it should look like, and that's okay. But as long as we can get some consensus that we got to have some growth to accommodate demand the form it takes, we can have a healthy discussion over.

Keith Weinhold 33:57

Yeah, real community is the integration of all different types of people, and not school teachers living an hour away where they need to make a two hour round trip drive every day. Well, Nolan, as we're winding down here, can you give us any more successful zoning reform examples that maybe other communities can look to you touched on the success stories in Houston a bit. Are there some other ones?

Nolan Gray 34:21

Absolutely. Yeah. So one of the most successful things we've done in California has been statewide legalization of accessory dwelling units. Yeah, that's been key. That started in 2017 and that took a lot of legislation to get us to a place where we are today, but that's resulted in something like 80,00 ADU's permitted, since 2017. That's powerful stuff, right? That's 80,000 households that might have a home, or might be able to rent out a unit to young adult child or an aging parent. Really, really powerful. So I would suggest that folks look into that. That's the lowest of the low hanging fruit. Empower homeowners to add additional units to their properties, and by the way, we also allow you use to be added to multifamily properties, and we're seeing a lot of that happen as well. At other contexts, many cities, dozens of cities across the country. Have removed their minimum parking requirements, acknowledging that, hey, this is a huge cost that we're imposing on projects, developers who are close to consumers, who have, they have the incentives and local knowledge to get this question right. Let them decide. So that's been, I think, a big success. You know, certain cities like Austin and Minneapolis, for example, they've actually sort of kept their markets back under control amid all the chaos of the pandemic real estate market fluctuations by allowing for a lot more mid rise multi family on their commercial corridors and in Job rich areas and in places near transit, that's where we have a huge shortage, is these studios and one bedrooms. So young professionals who, if they can't find that unit, they're going to go bid up the price of a two or three bedroom unit, they're going to roommate up and be living in potentially overcrowded conditions. So Austin, Minneapolis, we, relative to peers, they built a lot of housing and have seen prices stabilize as a result. So there's a lot of different success stories, you know, I would say, if you're at all interested in this, talk to your neighbors about this issue. See what sorts of solutions might make sense for your community. You know, in a suburban or a rural community, ADUs or minimum loss size reform might make sense. And an urban community, removing your parking mandates, allowing for more multifamily, allowing for missing middle, make more sense.

Keith Weinhold 36:06

There sure are some encouraging signs. There was there any last thing that a person should know, especially a real estate investor type audience that's interested in buying a property and renting it out to a tenant for the production of income? Is there anything that our group really ought to know about zoning and the direction that things are moving, what to look for and what to be careful of?

Nolan Gray 36:28

Well, as your audience probably knows, you know that first essential step for your mom and pop local real estate investor is often a duplex, a triplex, a four Plex, historically, that was an absolutely essential source of middle class wealth building. Yeah, right. And you can see these in so many historic neighborhoods. And to the extent that we've made those exact typologies so incredibly hard to build, we've cut off this very valuable source of democratic, decentralized wealth building that we need to actually encourage as real estate investors and professionals, in many cases, you're an authority figure with your local policymakers and your local planners, and you can say to them, Hey, here's my perspective on what's happening in the market. You know, we have a shortage of a certain type of small scale multifamily or making this case. You know, I talked to a lot of elected officials, and when I say starter home, I think they still think of the bungalow on the 5000 square foot lot with the two car garage. But a starter home in 2024 might be a townhouse, two bedroom condo, a small lot, single family home. These are the types of stories that real estate investors and professionals are trusted advocates on, and you can make that case and explain to local policymakers. Hey, here's the change that we need or explaining. Hey, I wanted to add an additional unit to a property that I own, or I wanted to redevelop a property I own to add a lot more housing. And these were the barriers that I faced that's incredibly valuable information for your local policymakers and planners. And I would say, you know, look around many US, cities and states now have very active yimby or, Yes, in my backyard groups. Go connect up with them. You could be a valuable, trusted expert for them, somebody that they can learn more about the situation with real estate markets, and they can be more effective advocates for policy that I think a lot of us would like to see.

Keith Weinhold 37:58

And when it comes to changing NIMBY people to yimby people, and we look at esthetics and adu in the back, that really doesn't change aesthetics on the street front. And I've seen very smart, careful designs of duplexes, triplexes and fourplexes that really look just like single family homes from the Street View level. So there really are some ways around this. You've given us some really good ideas today. Nolan, hey, well, someone wants to learn more about you and your work and zoning. What's the best way for them to do that?

Nolan Gray 38:30

Well, I'm on the platform formerly known as Twitter. I'm @mnolangray, M, N, O, L, E, N, G, R, A, y, so feel free to find me there and reach out. And I have a book Arbitrary Lines, how zoning broke the American city and how to fix it. Check that out. If you're at all interested in this, always reach out. Love to hear from folks. Thanks so much for having me, by the way.

Keith Weinhold 38:50

All right, well, I hope our audience didn't zone out. It's been great. Chat with you. Nolan, thanks so much for coming on to the show. Yeah, a thought provoking discussion with California yimbys Nolan Gray there it's essentially illegal to build affordable housing in a lot of areas with the way that these zoning laws are written, allowing for more dense building that can limit this ugly urban sprawl, and this makes me think about an Instagram account that I follow. It's called how cars ruined our cities, or some names similar to that. It shows, for example, a picture of how a highway interchange in sprawling Houston has an area so large that you could fit an entire Italian town inside of it. And these sprawl problems compound when a lot size must be, say, at least a quarter acre or a half acre. The tide is turning toward allowing more dense building in some places like we touched on, but it's too bad that it took a. Visible housing crisis to make this happen. I mean, visible like more homeless people out on the street. It took that almost for municipalities to start doing something about all of this. Our guest has quite a following on X. Again, you can find his handle there @mnolangray on X and the image on his account cover it shows someone holding up a sign that reads, zoning kills dreams. Hmm, big thanks to the terrific Nolan gray today until next Monday, when I'll be back here to help you actionably build your Real Estate Wealth. I'm Keith Weinhold. Don't quit your Daydream.

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513: Finding Hidden Opportunities in Beaten-Down Commercial Real Estate with Dolf de Roos Aug 05, 2024

The King of Commercial Real Estate joins us to discuss office, hotels, apartments, retail, industrial and warehouse real estate.

Many office building values are down 80%+. Is it headed straight to purgatory? According to Moody’s, the national office vacancy rate is 20%.

Offices have the double-whammy of higher interest rates and lower demand.

Learn how feasible office to residential conversions are.

For two years now, momentum has swung from Airbnbs to hotels.

More apartment syndications will blow up from forthcoming interest rate resets.

Commercial real estate often has higher prices than residential. Learn from our guest, Dolf de Roos, on creative ways to make low down payments.

Learn how to vet commercial tenants.

We discuss adding carports to residential RE.

Rich people are often vilified. They’re called “filthy rich” or “stinking rich”.

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RidgeLendingGroup.com or call 855-74-RIDGE

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Complete episode transcript:

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Keith Weinhold 00:00:01 Welcome to GRE! I'm your host, Keith Weinhold. There are many commercial real estate sectors. Large apartments, office, hotel, hospitality, retail, warehouse, industrial. Well, what's thriving? What's been beaten up so bad and is never coming back? And what's in a dip that's ripe for opportunity? Also creative deal structuring if you don't have a lot of money. It's the debut of the King of Commercial real estate here 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.

Keith Weinhold 00:01:13 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. Make sure you read it. Text gray to 66866. Text gray 266866.

Corey Coates 00:01:41 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 What does your read? From Tuscarora, Pennsylvania, to Tuscaloosa, Alabama, and across 188 nations worldwide. I'm Keith Whitehill, and you're listening to get Rich education. Today's guest, the king of commercial real estate, is talented, dynamic, global, articulate, has both a wide range of knowledge and an expansive palette of creative strategies in both commercial and residential, where you can buy with little out of pocket. And he's going to share that with us today. That's coming up here shortly. Now, when we think about residential real estate, of course, that is a really wide world in itself.

Keith Weinhold 00:02:38 From condos to single family homes to tiny studio apartments. You could also divide it into short term and mid-term and long term rentals. And then you could also parse it by all of the geographic markets. Well, of course, the commercial real estate world has a ton of segments too, one of which is office, which I want to talk about because it's probably been the most downtrodden and beleaguered since 2020. But there are still some things that are misunderstood within office and even dividing things up that much. Let's take care not to broad brush stroke office real estate itself some smaller segments of office might be in decent shape today. Other office segments are in real trouble. Like we're talking about tall concrete and glass, office towers and a lot of business parks, too. Yeah, business park, sort of a campus like areas, like maybe what the comedy The Office had. He had Dunder Mifflin was in a business park.

Steve Carell 00:03:43 I'm just helping you invest in your future, my friend.

Oscar Nunez 00:03:46 It sounds like a get rich quick scheme.

Steve Carell 00:03:48 Yes. Thank you. You will get rich quick. We all will.

Keith Weinhold 00:03:52 yeah. I guess that's what Steve Carell's character. What Michael Scott from The Office says about prudent investing. Let's talk about office real estate and how that intersects with the housing market. And really a lot of this comes down to the office vacancy rate. Moody's tells us that 1 in 5 office spaces in this economy are empty. And that is the highest ever. And a lot of people think that it's going to go higher right now. Dayton, Ohio is the highest in the nation at 28%. These are office vacancy rates. Charleston, West Virginia's 27. Tulsa, Oklahoma 26. And Houston, Dallas and Austin are all in the top ten for the worst office vacancy rates. Now, a lot of city officials, they want to turn that into housing, and they want government funding in order to make that transition happen from office to residential. This is most attractive to cities if you can partially convert a building to have housing on upper floors, and then you just maintain some offices on lower floors and see that mix right there, that makes for a vibrant, lively downtown community, because that way you don't have downtowns that go quiet at 5:00.

Keith Weinhold 00:05:10 But a lot of these renovations, they just aren't that feasible. They call them ritzy conversions. That's kind of what this is known as. So office to residential. I mean that means you often got to deal with huge floor plates, overhaul mechanical systems, and you've even got to consider things like the fact that windows don't open in office buildings. And they've often got to for resin conversions. Well, with this prolonged high vacancy in offices. Well, where do these people that would have been in offices spend their time instead? Well, of course at home in their residential real estate. And oftentimes it is a one for one. You have one less person occupying an office for lots of that waking day, and that means one more person occupying their home. Well, that's one reason that people are increasingly willing to spend and pay more for homes because they're spending more time than ever there. And ever since the work from home movement and zoom from home movement, if you will, since that became commonplace for urban workers coming off the pandemic, you soon saw the hashtag auto.

Keith Weinhold 00:06:27 The return to office movement that began is where you've got to come into the office 2 to 3 days a week, and then a lot of companies try to ramp it up to 4 to 5 days per week. Some companies even said, yeah, come on in here. You've got to in order to be eligible for promotions. Well, a lot of people don't want to come into the office. We found that out now, especially younger workers. In fact. Did you ever hear of the term coffee bagging? Yes. Some workers are trying to game the system. Coffee bagging. That is the art of returning to the office to a quick hit. Just have a quick hit. You only badge in, get coffee, chat and peace out of there. Well, more people are doing this or they're staying at home than what you're often led to believe. So despite the RTL movement that you hear about the share of employed persons that work their average day from home, last year it rose to 35%, up from 34%, and that's per the BLS.

Keith Weinhold 00:07:31 Well, that's a little interesting to know, but it all comes down to that office vacancy rate, which is, like I said, a stubbornly high all time record 20% nationally, and it could go higher. If you're going to invest in office real estate today, I mean, you've really got to have some insider knowledge and invest smart.

Donald Trump 00:07:55 Did you use the word smart? so you said you went to Delaware State, but you forgot the name of your college. You didn't go to Delaware State. You graduated either the lowest or almost the lowest in your class. Don't ever use the word smart with me. Don't ever use that word. Oh, give me a break. Because you know what? There's nothing smart about you, Joe.

Keith Weinhold 00:08:16 oh, dear. Oh, one of those two men is our current president, and the other could be our next president. Oh, well, love him or hate him, I guess the Trump. Hey, he is the Art of the deal author. And when you think about the Trump name, you should think about seeing those letters on tall office buildings in hotels coming up on the show here in future weeks.

Keith Weinhold 00:08:39 We are stacked with great guests an NFL All-Pro, the president of the Mississippi Institute, the return of the tax free wealth author Tom Wheelwright, and also the incomparable financial firepower of Garrett Gunderson. That's all coming up here in future shows. Let's talk to the king of commercial real estate. This week's guest is a former high tech engineer turned real estate mogul and New York Times best selling author of the book Real Estate Riches. He is globally renowned for his ginormous real estate ventures and his mentorship. But his approach to real estate isn't just transactional, it's about strategic creativity and leveraging property investment for financial independence. Known as the King of commercial real estate. Hey, welcome here for your great debut. Joining us from Malta today. It stopped the roost.

Dolf de Roos 00:09:38 Thank you very much. It's my absolute pleasure to be here.

Keith Weinhold 00:09:41 Oh it's great to finally speak here on the show. And I know that a good segment of our international audience has been anticipating this episode. And often we think about commercial real estate today. Problems come to mind immediately, like the large apartment space with interest rates blowing things up over there, and then the office sector, which just seems to be dying and never coming back.

Keith Weinhold 00:10:03 So first of all, why don't you give us an overview on how various commercial sectors are doing today?

Dolf de Roos 00:10:09 There's always the things that you see on the surface, what you read in the newspapers and what you lead yourself to believe just on the sheer balance of probability. And then there's the reality of what is truly going on. And I'm always amused at the chasm between them. There's a big difference. And in fact, your ability to do well in real estate is largely dependent on the arbitrage between the markets perception of where things are at and the reality. Now, if we all follow the trends, you know, real estate doesn't go up linearly as mathematicians would say. It goes up in fits and starts with each peak a bit higher than the previous peak and each trough a bit higher than the previous trough. But in addition to that, real estate markets always overshoot so that when things are going well, when the public perception is that things are going well, Interest rates are low. There's good capital growth.

Dolf de Roos 00:10:59 People think it's going to go on forever. It will never end and they pay way too much for properties. We have the greater fool theory where no matter how big a fool you are to pay too much for a property, it doesn't matter, because next year they'll be an even bigger fool to pay even more for it. So everyone jumps into the market, overshoots, and then there's a strong correction. A bit like the 2008 GFC. It was on the cards. It was. The writing was on the wall, as they say, and then it corrects. But instead of correcting back to where it should be, it overshoots on the downside as well. And in Phoenix, where I'm based, at one stage we had 90,000 homes into foreclosure simultaneously, and they were selling them on the courthouse steps at the rate of one every 56 seconds for initially 20,020 5000, and people thought, why are these fools buying these properties? The market's crashed. It will never recover. And yet when you live long enough, which unfortunately I have to say, I've done now like I've been around a while, I've seen a few cycles.

Dolf de Roos 00:11:59 No, I'm serious though, Keith, because when you experience your first downturn, you think it's the end of the world. But when you've been through three and you've seen that despite all the bad press and saying it's doomsday to never recover, it not only recovers, but it actually far exceeds where it was before it crashed last time, then you know that the time to take action is when everyone else is panicking. You have to be countercyclical when everyone else is jumping on the bandwagon and paying too much for properties. That's when you should get on a plane and read some good books on a beach somewhere, preferably in a foreign location. Why a foreign location and being disloyal to the home country? Note just explore something. Expand your mind. And you know, I know I'm waving around a bit from topic to topic, but one of the great things about reading books on foreign beaches is that you get to see different ideas of real estate that you can bring back home. So when you bring back these ideas that can help correct the market, then you almost you don't wish for a crash, but you think when it happens, well, there's got to be some good aspect to this and you can actually find some stunning deals from people who are too scared to think it might recover well.

Keith Weinhold 00:13:05 So those places where you might find stunning deals are in some of those commercial real estate sectors that are suffering today. Tell us a bit more about some of those sectors in their health. We're talking about five plus in the department's office, hotel, hospitality, retail, warehouse, industrial. Let us know what's going on with some of those sectors.

Dolf de Roos 00:13:27 In a state of flux. And it's a very good question. Let's talk about hotels for a moment. When the pandemic set in, we were all told to do this thing called to be socially distant. We've almost blissfully forgotten that expression. But social distancing was the thing. So hotels fell out of favor because you're in a foyer with a concierge and a reception area and hundreds of other hotel guests checking in and checking out. So Airbnbs became very popular and the value of hotels plummeted. Many couldn't meet their mortgage obligations because their revenue from room sales did not cover their own loan commitments, so they were being sold off at ridiculously cheap prices. I know of one hotel in the Atlanta area, admittedly a very old hotel.

Dolf de Roos 00:14:09 It was converted into a storage facility. When you think about it, hotels are all compartmentalized and have good little cubicles for story. Yeah, and Airbnbs took off. And we all know people, and people wrote books about it and had courses on it. I know in Phoenix, one statistic in a 12 month period from July 22nd to July 23rd, the availability of Airbnb's went up by 23% and all would have been good and well if demand had kept on escalating. But as the pandemic sort of wound down and people realized they did need to be socially distant anymore. And what's more, when you went to an Airbnb, what you found is that there was a long laundry list of items you had to do, but the sheets through the washing machine no more than one bed at a time. Well, four beds worth of sheets is going to take you three hours and do this and do that. People thought hotels are much easier, so there was a massive swing by tenants of rooms back to hotels, and the value of hotels went back up.

Dolf de Roos 00:15:04 And in the meantime, the value of houses used as Airbnb's, it sort of peaked a bit and it's going down rapidly. How far it will go down? I'm not so sure. So my point is, with hotels in a very short period of time, like three years, the values plummeted and then they came back up again. Office space is suffering a bit of a longer cycle downturn. It's fair to say, I think, that offices are in a very dire straits. Something like $785 billion of mortgages secured against commercial office space that is coming up for renewal, and there's not enough revenue to cover them. There is a pair of hotels on Union Square in San Francisco, for instance, the park Renaissance and the Renaissance itself. They had $745 million of mortgage funding, and the operators of those hotels handed the keys back to the bank and said, we can't make this cash flow. There's a lot of commercial space that is being sold off a ridiculously cheap prices. So there are two ways of looking at this, Keith.

Dolf de Roos 00:16:02 One is if you happen to own office space right now, unless it's boutique space, I've got quite a bit of office space, but it's a very much a boutique classification, and they'll always be demand for boutique office space from unique operators like interior decorators and people like that. But for the general concrete and glass office towers, demand for that has plummeted. The values have gone down and I know of one building in Chicago. It's sold for 315 million. It's on the market at 60 and dropping, and there's not a buyer in sight. And you might say, well, it's got to be a bargain. But no. Here's the challenge. With commercial real estate. Unlike residential, residential is valued on the basis of comps. We all know that if you have a four bedroom, three bathroom home, certain age, certain size, certain condition in a certain suburb, then and if it's sold for, say, $480,000, then a similar sized and aged house up the road, down the street around the corner is going to sell for about the same amount.

Dolf de Roos 00:17:02 Whether it's tenanted or not, that doesn't even matter. But when it comes to commercial real estate, the value of a commercial property is literally a multiple of its rental income. Technically, is the rental income divided by the cap rate? Which cap rate is short for capitalization rate? It literally means the rate at which you capitalize the rental to arrive at the value. So if we can figure out a way of doubling the rental, then we've doubled the value. And by the same token, of course, if you lose the tenant and you have your rental, then you have the value. And that's why the value of so many of these commercial office buildings has plummeted, because there are no tenants for them.

Keith Weinhold 00:17:40 Yeah, well, there's a lot there. And back to the Airbnb thing. Yeah. About two years ago, there seemed to be this well well-documented Airbnb bust. And my gosh, I personally had awful Airbnb experiences recently, including checking into an Airbnb where it hadn't been turned over, it hadn't been cleaned yet, and that I can never unsee what I saw.

Keith Weinhold 00:18:00 Then I had to stay there. That was really rough. I think what you're getting at here is once you hit a bottom, that's where the opportunity is. So there are going to be some of those opportunities somewhere in the commercial real estate sector, commercial real estate syndicators, many of them imploded from high rates. So when we talk about finding the bottom link with these large apartment buildings, how many more apartment syndicator implosions do we expect from the higher mortgage rates?

Dolf de Roos 00:18:27 Many. I'm indifferent to it. I'm not saying I don't have sympathy for the people who own them, and I'm not gleeful for those who buy a bargain. But here's why I'm indifferent. I think it's fair to say that I've made most of my money in real estate by finding either vacant or semi vacant buildings, and that goes against the grain. Most people think they need to look for a building with a good tenant, because it's the tenant that pays the rent, and that's not incorrect. That's accurate. And then if you've got a building that you buy and say 8% return and your mortgage interest is 7%, hopefully that 1% margin covers your property taxes and your insurance and your maintenance.

Dolf de Roos 00:19:05 And then you just wait for time to do this thing where slowly, over time, the rents creep up and the property value creeps up. I don't have the luxury of waiting that long, and I never had the cash to buy properties like that, so I literally sought out semi vacant or even vacant buildings. Now, I didn't buy them because if I bought a vacant building, I still have to pay property tax and insurance. But what I would do before buying it is see if I can find a tenant, and I can give you a specific example. I came across a vacant building that was a funeral parlor, and most people don't like to think of what goes on in a funeral parlor. But they have these stainless steel trays where they put the product of their business on, and they insert these hollow stainless steel tubes and suck up the blood and replace it with formaldehyde and all kinds of things we don't want to think about.

Keith Weinhold 00:19:52 That's even worse than my Airbnb experience.

Dolf de Roos 00:19:55 No one knew what to do with it.

Dolf de Roos 00:19:57 So I found it. And it was being sold for a song because it was vacant. And what I did is I employed someone at the then going hourly rate of $8 an hour to phone every funeral director, going further and further from this place until she found someone who said, oh my gosh, I've always wanted to operate there. And I was just open and honest. And I said, well, there's a funeral parlour premise for sale. Go and check it out if you want to buy it, buy it. Why would I offer it to him, Keith, when I really wanted to buy it? Because the last thing I want is a tenant to be gracious. The fact that the only reason he's paying me rent is that I'd beat him to it. But I knew that in all probability, he didn't want to buy real estate. That's not his gig. And he said, no, I don't have the money or the inclination he had to look at. He said, listen, I love it.

Dolf de Roos 00:20:40 I want to operate there. What would it take? And I said, well, if you're willing to sign up a heads of agreement, an alloy, we're subject to me buying it. You will become the tenant, then I'll have a crack at buying it. And his response was, were not so fast, I need you. I'll only do it if you give me a long term lease. Well, that's exactly what I want. So I'd found a tenant by adding the tenant to this otherwise vacant building. The value of it doubled. And when I went to the bank to apply for a mortgage, they said, well, we're only going to give you 50%. Well, guess what? 50% of double the value was the purchase price. They lent me all but the last $10,000 to buy that property. So the magic sauce here is finding the tenant. Could anyone else have gone through at the time? This is before the internet, the Yellow pages and phoned every funeral director going for. Of course they could, but no one thought of doing it.

Dolf de Roos 00:21:33 And that comes to part of what you had in your title, that this is all about creative real estate. The thing I love about real estate is it's about the only investment vehicle where you can actually use your creativity. I mean, if you're a really creative person and you buy a portfolio of stock, IBM stock and Microsoft and biotech, what.

Keith Weinhold 00:21:53 Can you do to improve it?

Dolf de Roos 00:21:54 Can you deploy your creativity? How can you deploy what you've seen in your travels to make your stock portfolio worth more? Zero. Absolutely nothing. Not with stocks, not with bonds, not with futures. Options, certificates of deposit, Treasury bills, nothing. But with real estate, the sky's the limit, I love that.

Keith Weinhold 00:22:13 Well, you talked about getting into commercial real estate sectors with little or none of your own money. That's part of the creativity. A lot of our audience is interested in investing in residential property, a single family home. You might still be able to get one for 150 K now, 20 to 25% down payment on that 30 K plus.

Keith Weinhold 00:22:34 I mean, that's still pretty manageable for a lot of people, but many are somewhat intimidated by commercial real estate. I think one of the first things they think about is how do I come up with the money? So we talk about creativity in funding that down payment. Tell us more about some good strategies for doing that, and kind of overcoming that daunting feeling of higher commercial real estate prices.

Dolf de Roos 00:22:52 You're absolutely right. Most people think commercial real estate is more expensive, where you might be able to buy a home in a cheaper market, a cheaper price point at one 20,000, say the commercial property is going to be half a million, or if homes are $1 million and a fancy suburb and the commercial properties at 3 million. That's true, but not all properties are like that. My smallest commercial building was a little corner shop. It was a wet fish supply shop, so they sold fish but not cooked fish. And it was a horrible looking thing. But I paid all of $79,000 for it and it's been rented on a full commercial lease from the day I bought it, so it needn't be liked.

Dolf de Roos 00:23:31 In fact, we tend to only notice the big ones for the For Sale sign. You're in the downtown of some city and you see a big one of the big firms, CB Richard Ellis or Jones Lang LaSalle or something for lease or for sale sign, that's for sure. And you don't tend to notice the small ones. The trick in finding good value real estate. Be it commercial or residential, again, has to do with the fact that it's not an automated market like the stock market. You buy stocks through computers on a share market. Everyone pays the same price. But when it comes to real estate, the seller may choose to go through a real estate agency. It might be a national one, and then it's vetted by many agents. But we have a thing known as fizzbuzz or for sale by owner. And why would a seller choose to circumvent a real estate agent? Well, probably because he's hoping to save on the 6% commission. By the way, that's the highest in the world.

Dolf de Roos 00:24:21 And the rest of the orders? 2 or 1 and a half or 3%, it soon to be lowered in the States. But even so, they want to save on that commission and more sinisterly. Perhaps some of them think, why should I entrust my property, the sale of my property to some snooty, nosed 22 year old kid just out of school who doesn't even live in the suburb. I have lived here for 59 years or whatever, he says. And I know what it's worth. And in pricing it, he's either way too high or way too low. Now, if he's way too high, you and I aren't going to buy it because it's just way too high. We know that. But what if it's 100,000 below market value? It happens every day of the week, and if we stumble across one of those, then we might just make 100,000 that day. Not in terms of cash, not in terms of folding hard cash, but in terms of equity. And we could sell it the next day for a hundred thousand more.

Dolf de Roos 00:25:08 But we don't because we want to invest in it. And these things are real key. These happen. That's why I encourage people don't take the same route home from work every day. If you've finished work, get in your car, take a different route, keep your eyes peeled, look for visible signs of a sale by owner, or look for abandoned properties, ones where the grass is a bit high in this litter blown up against the fence and the windows are a bit grimy, and then do some research to find out who owns it.

Keith Weinhold 00:25:34 Sometimes the greater the crisis, the greater the opportunity. But often we talk about, say, if one has overcome the money in the down payment thing, you know, in effect, when we go ahead and get a loan, whatever sector we're investing in, the bank underwrites either us or the bank underwrites the property. But in a sense, us as the investor is we're sort of underwriting the tenant that's in there. Now, when we buy a residential building, you know, we can look at the tennis credit scores and their work history.

Keith Weinhold 00:26:00 You know, we know that the residential tenant is going to pay us to live there. We have a good sense of faith about that. But when it comes to commercial real estate investing, say, I want to buy a plaza with eight businesses in it. I think a lot of investors feel overwhelmed because they're like, oh my gosh, like, how do I study the validity of these eight businesses? And how do I know that they're going to be solvent and sustainable going forward? And do I need to understand all this, or can you speak to that and help break that down for us a bit? Basically the investor underwriting the tenant.

Dolf de Roos 00:26:31 That's all true. And yet there isn't that much to learn. Because if we take your imaginary shopping plaza with eight tenants. Yeah, I think we'd all agree that if one of those tenants was a Gloria Bean coffee and tea or whatever it's called, or Seattle's Best or Peet's Coffee, not to mention Starbucks, that's a global change, but one of those lesser brands.

Dolf de Roos 00:26:51 I think we would be pretty comfortable that they can pay the rent every month. And similarly, the bank underwriting that loan was like, well, a Peet's Coffee or Gloria, that they're a good tenant And, you know, just to name others at random rosters for less, that's a nationwide chain store. I think if we had them as a tenant, that would all go well. And you might get a couple of independents, but they would have a track record. They've leased those same premises for the previous eight years, and they moved there from other premises, which ended up being too small for them. That means they're expanding where they were for 12 years, things like that. Give a picture to any novice in this game to say, wow, they're probably going to be here for the long haul. And beyond that, what happens when you develop the skills to attract new tenants? You don't worry about that even because you know that when you lose a tenant, it's easy to get one lesson.

Dolf de Roos 00:27:42 I've got 101 ways of getting tenants for buildings, and I'm blown away that people don't deploy even one of them. And I'll give you an example from last week. I was with a client in the UK in Bournemouth, which is way in the south of the country, and we were looking at a commercial office building there and it had been vacant for 18 months. And I said to the agent what seems to be the trouble with getting a tenant? And he shrugged his shoulders and said, well, I don't know. It's been on the market for 18 months. And I said, has it ever occurred to you to put a sign outside the property? A big canvas sign hanging on the side of the building signs, and the grass verge saying, this building is for lease. Enquire within or go to this website. And he was stupefied by that thought. He said, what an amazingly good idea. You have to let people know. They think that they're going to go to their office because they're looking for office space.

Dolf de Roos 00:28:34 So now, would they be guaranteed to get a tenant within a week by putting a canvas sign on the building? Of course not. But I know we won't reduce the chances. And that's why if I can find a tenant before committing to buy the building, I'm pretty confident we'll get there. And I've got all these other techniques, Keith, of doing it like one that I really love is, let's say you've got a vacant warehouse and it's an ugly, horrible warehouse in a sea of similarly ugly and vacant warehouses. If you and I bought that, I would hesitate to suggest that we would have a tenant within a month. And here's how we'd do it. We would spend no more than $10,000, and we would go to the manager's office, because ultimately, the person who decides whether to lease our warehouse as opposed to another one, is not the CEO and the head office in New York or LA or wherever. It's not the cleaning lady or man who's going to sweep the floor. It's going to be the manager is going to manage it.

Dolf de Roos 00:29:28 So I get rid of the linoleum and I put in commercial grade carpet. I put in triple glazed or dual glazed windows. Keeps the noise out and the warmth in. I replace the fluorescent tubes with LED lights and replace the locks with electronic locks so he can never forget his keys. I put on an 80 inch LCD screen and tell him it's good for corporate training videos. We know he's never going to watch corporate training videos on it, but those TVs you can buy for $500 now, I put on a little coffee machine and make sure it's brewing when it looks, and have a fridge for end of week drinks, celebrations, and our unsuspecting manager, who's looked at seven ugly warehouses so far that day when he comes to our ugly warehouse and he opens that door to the manager's office subconsciously, or maybe consciously, he thinks, oh my gosh, if I lease this one, this is where I'm going to be packed for 40 hours a week for Lord knows how many years. He says I'll take it.

Dolf de Roos 00:30:17 And he hasn't even asked the rental. You might say that's bribery and corruption, but I think it's just offering a better product than the competition. No one else does this.

Keith Weinhold 00:30:27 Oh well. This is another brilliant example of using creativity in real estate investing. We're talking with the king of commercial real estate, Dolph Thomas More. We come back including some of his psychology and insights from the rich. This is general education. I'm your host, Keith Whitehall. Hey, you can get your mortgage loans at the same place where I get mine at Ridge Lending Group Nmls 42056. They provided our listeners with more loans than any provider in the entire nation. Because they specialize in income properties, they help you build a long term plan for growing your real estate empire. With leverage, you can start your prequalification and chat with President Ridge personally. Start now while it's on your mind at Ridge Lending group.com. That's Ridge Lending group.com. And your bank is getting rich off of you. The national average bank account pays less than 1% on your savings.

Keith Weinhold 00:31:31 If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just $25. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%. Hundreds of others are. Text. Family 266866. Learn more about Freedom Family Investments Liquidity Fund. On your journey to financial freedom through passive income. Text family to 66866. What's up everyone? This is HGTV Star Kombucha. Listen to get Rich education with Keith Wine hold and don't quit your day dream. Welcome back to Get Syndication. You're listening to episode 513 of the show that's created more passive income for busy people just like you than nearly any show in the world.

Keith Weinhold 00:32:55 I'm your host, Keith Whitehall. We're at the king of commercial real estate, Dolph Durst. Just like he has a lot of creative, proven types of things that you can do to improve commercial real estate. He also has a lot of those ideas for residential because he's been around the game for so long. So tell us about some more of those creative ways to add value to residential real estate.

Dolf de Roos 00:33:17 Well, probably. Like most people who end up focusing on commercial real estate, I got started in residential and that's where I first deployed some of my creativity. And I noticed, for instance, that I'd have a rental property that had no garage and no carport. And when you think about it, a tenant's biggest asset because it's not their home, it tends to be their car. One could argue that because they waste money on expensive cars every two years, that's why they can't afford to buy a home. But we won't go there. So if it's their car, if there's no carport and no garage, that means their biggest asset is in the rain.

Dolf de Roos 00:33:49 The sleet, the sun, the shine, the hail, you name it. So by building a carport, we can protect their biggest asset and it's worth a lot more to them by any means. If you have a carport on a house, that house will rent for about $80 a month extra. An 80 a month times 12 is 960. Call it $1,000 extra, a rent in a year. And Keith, I can build a carport for $1,000 easily. It's simply for one in each corner and then a roof with a bit of a slope. Why the slope? Well, if it rains, the rain falls off. If you're really cheap, you can get away with three posts. It still stands, you know. But no. And I'm being silly, but we sometimes make them with two posts and cantilever them. They're a bit more expensive, but then there are no posts out front so I can build a carport for $1,000, and then I get $1,000 extra a year coming in. And when you think about it again, which other investment can you think of that once you've consummated the deal, once you own it, you can spend an extra thousand dollars and then get 100% return on that money.

Dolf de Roos 00:34:49 And as they say in the infomercials. But wait, it gets even better. Because think about it. Let's say we have that carport built, but we haven't paid for it yet. And so we've got our thousand dollars a year extra of rental coming in. We go back to the appraiser and say, we want a new appraisal With an extra $1,000 coming in, he's likely to appraise it at $10,000 more. With that increased appraisal of 10,000, we go back to the bank and say, Mr. Bank manager, remember I got a 70 or 80% more. I've got now got an appraisal for 10,000 more. Will you give me a modest 70% loan on that? Well, banks are in the game of lending money and making a profit. So they say yes. So you get 7000 from the bank. Let's use 1000 of that 7000 to pay for the carport. It's now paid for. That leaves us with $6,000 cash. And the question is, is it earned income? And the answer is no, it's not earned income.

Dolf de Roos 00:35:42 There's no income tax on it. Is that the sale of something? Nope. Didn't sell it. No sales tax, no capital gains. It's tax free money. And you might say but hang on, you've now borrowed $7,000 that you have to be interested. Even at a ridiculously high 10%, that would only cost 700 a year. But we're collecting an extra thousand a year. So when you build this carport, you have two choices. One is pay cash for it and get 100% return on your money. Or the second one is don't pay any money for it, but $6,000 of tax free money in your pocket and get $300 a year surplus cash flow index for inflation for the rest of your life. Like, why would you not do that?

Keith Weinhold 00:36:25 Well, and it's a terrific example of how to accidentally improve the property. And it's so interesting that you bring this up, Dolph, because just a few weeks ago here on the show, I talked about garage real estate. I mentioned how adding a carport can often be more cost effective for a landlord from an ROI standpoint, than constructing a garage.

Keith Weinhold 00:36:43 I also talked about the future with autonomous cars. If people are going to need garages as much as they will, but that's into the future, and that's another subject in itself. All for one really important thing. I know that probably even more important than the actual investing is getting people in the right mindset to do this in the first place. You've studied this in really unexpected psychology behind wealth creation. I think a lot of it is counterintuitive, but it kind of makes sense because if you come from a scarcity and conventional mindset and you just do mediocre stuff, you're only going to get a mediocre outcome. So why don't you talk to us more about breaking down that psychology that most Americans and most residents of everywhere in the world really struggle with?

Dolf de Roos 00:37:28 Well, my pleasure. I had been teaching real estate for about 15 years and I decided why? I don't know, but I decided to run a survey to find out how many of my students became a millionaire within 18 months. That was my expected time frame of reasonableness.

Keith Weinhold 00:37:43 Is that I was actually wealthy.

Dolf de Roos 00:37:45 Right? And I was pretty confident. But when the results came in, I was devastated because it was fewer than 4%. And in my mind, 4% wasn't even statistically significant. Meaning if you take a thousand people, a random 4% are going to become millionaires. One's going to marry into money, one's going to win the lottery, one's going to win at a casino, and the fourth one's going to fall over a paper bag and looks inside. And we just believe that there's a million bucks there. So I vowed to stop teaching until I'd cracked the nut, because my dilemma was, how is it that when you give people all the tools you think they need to become fabulously wealthy, they still don't do it right? And what I found is that it had nothing to do with my rate of speech or my accent. Not that I have one, of course, or the content of my information or the sequencing of it. It had everything to do with the subconscious mind of the student, the fear.

Dolf de Roos 00:38:38 And he has that stance. You're a young kid and you say, hey, mom or dad, I want a bicycle. And they say, well, what do you think, kiddo? That money grows on trees and I know where the parents coming from. Hey, money's not that easy to come by. Temper your expectations of what you'll get for your bet. But this kid is. Our money doesn't grow on trees. Meaning money's hard to come by. And how often have we been told money can't buy you happiness. And money is the root of all evil. And when I say that, someone always points out no, the full saying in the Bible is for the love of money is the root of all evil. There's a big difference. And I'll say, yes, there is a big difference. But to the subconscious mind, it's still here's money and evil in the same sentence, and it's unconsciously makes that association. And the religious even say that it is easier to get a camel through the eye of a needle than for a rich man to get to heaven.

Dolf de Roos 00:39:24 In other words, if you're rich, you're condemned to hell. And that's a nice, strong belief system to take on board, even subconsciously. And by the way, most people don't know what the eye of the needle is. The eye of the needle was the entrance to East Jerusalem and even camels. And I've been there. I've said the camel said to get down on their knees as a sign of respect before they could enter. So there's a reason behind all these things, but the subconscious mind takes aboard. Money can buy you happiness. Money's hard to come by if you work hard for it. You don't deserve that money's root of lever. You won't get to heaven. You condemned to hell. And how do we describe the rich kids? We say they are so rich. That filthy rich. They're so rich. That stinking rich we associate being rich with filth and stench. So that is why in the United States and every Western nation, when someone wins the lottery and we no longer win 10 or $20,000, it's 300 million or 800 million or 1.2 billion when people win the lottery within five years of winning, 80% of the winners are back to where they were before they won.

Dolf de Roos 00:40:25 Right? And why is that? I discovered that it's because subconsciously, even though they're happy they won it and they going to tell their boss they're going to quit and they're going to buy their parents a nice home and they're going to get a new car. But subconsciously they feel they don't deserve it because they haven't worked hard for it. They're not going to be happy. They're now evil people. They're not going to go to heaven, and they're filthy and they stink. And the only way to overcome that is to get rid of the source of the problem, which is the money. And you'll see it happen again and again and again. So what we do is we dissolve what's in the subconscious mind, all these things that we've been saying without realizing it over and over and over again and replace them with more empowering beliefs. And the great thing about the subconscious mind is, initially, you don't even have to believe the thing that you're going to say over and over again to replace those old ones, but it could be something as simple as money is good or a bit more sophisticated.

Dolf de Roos 00:41:18 My poverty helps no one, but my wealth can help a lot of people.

Keith Weinhold 00:41:22 The more you have, the more you can give.

Dolf de Roos 00:41:24 Exactly as the reverend says, I'm a magnet for money. And so when we get into this mode of thinking differently, then all of a sudden people find that the money starts flowing and we give people specific exercises to do. And it's you think by how is that going to make difference? But it does. And so what I found when I introduced these concepts into my real estate teaching, the success went from under 4% to over 80%. And if that's not evidence enough that this works, I don't know what is.

Keith Weinhold 00:41:56 Yes, it really takes changing that mindset to break down these old stereotypes and have the confidence to say and act upon things like financially free beats debt free. But if you raise to think that money is a scarce resource, you think that retiring debt is a good thing, or don't focus on getting your money to work for you. Focus on getting other people's money to work for you.

Keith Weinhold 00:42:17 A lot of people don't even know what that means. But yeah, it takes breaking down some of these simple things that we all began to learn when we were age five or something like that. Golf is we're winding down here. You operate globally. You play globally. That intimidates a lot of people. They don't really know how to do that. But it's giving you this wherewithal to say that real estate is the only profession that can truly be played globally. Tell us about that.

Dolf de Roos 00:42:44 Well, when you think about it, if you study to become, say, an attorney, you can't just up and leave the US and go to Germany or Peru or Kuala Lumpur, Malaysia to practice, you've got to study their local laws and set the bar exam. If you're a physician, you can't just go to another country and conduct frontal lobotomies on patients. You've got to study and hit the bar exam. I had a friend who was a dermatologist, a skin doctor from Austria. He moved to Australia after eight years of study to get his qualifications.

Dolf de Roos 00:43:13 They wouldn't accept them here to start all over again. And he said that's ridiculous. And he became a farmer and was very happy doing that. But when you think about it, not only our real estate investors welcomed all over the world, but they think that you're going to bring money with you. You don't have to, of course. In fact, if you're going to invest as a US citizen in another country, I would not recommend bringing U.S. dollars with you. I'd recommend borrowing locally, because if you bring U.S. dollars with you, then you're subject to exchange rate fluctuations. So just borrow locally and then you've got no risk from that at all. But despite the fact that the other countries, the host countries think that you're an investor, you're going to bring money. So they welcome you with open arms. I think it's the only profession where you are never discriminated against. Your welcomed. You're made to feel welcome. They want more of you. They encourage you to come with delegations of other investors.

Dolf de Roos 00:44:05 It's kind of good gig to be on.

Keith Weinhold 00:44:08 Make the World Yours. The UN recognizes 193 world nations. Get out and see them and invest outside your own home country if you have the ability to. Well, Duff, you've got this interesting combination of commercial real estate focus, a great grasp of the mindset and how to help people with the wealth mindset. And then thirdly, you also operate globally. So it's been really interesting to speak with you. You help people in so many ways with a lot of your teaching resources. So why don't you let our audience know how they can engage with that?

Dolf de Roos 00:44:41 We have a lot of programs that we run from time to time. I mentioned I saw a client in the UK. He was an example of someone we did a fly out for. I'd spend three days just with that one client to help him with his portfolio. But the thing I've got coming up is a live training and people can get a free seat to attend and learn more at my website called Dolf Live.

Dolf de Roos 00:45:03 So Dorfman and Dolf and then live Live.com golf Dolph Live.com. You can see what we've got coming up there. It's entirely free to attend. And then, you know, once that event's gone, I'm sure we'll post other things there, but that's the best way of staying informed with what I've got going. Part of my passion, Keith, is sharing it. You know, it's pretty boring doing it on your own. And one of the biggest thrills I get is when you get feedback by email or however, from someone who said, well, when I heard this or saw that or read this, I wasn't even sure if it would work and I certainly wasn't sure if it would work for me. But look at what I've done since then, and that gives you a feeling that you can't describe in words. That's pretty cool. You change someone's life and you don't even really know who they are, then that's kind of that's fun stuff.

Keith Weinhold 00:45:48 The ruse has been helpful to me in our audience today. The King of Commercial Real Estate, thanks so much for coming on to the show.

Dolf de Roos 00:45:55 Hey, thank you so much for the opportunity. I really enjoyed it.

Keith Weinhold 00:46:04 Check out Dolph Live.com. It looks like he's got a live event coming up this Thursday night, and if you missed that more afterward, like I was saying earlier, a ton of great episodes coming up here on the get Rich education podcast, just stacked. As always, you'll get lessons from me when I'm going to break down. Is any debt worth paying off? Which debts are which are not and why? That's going to help you know what to do with every debt for the rest of your life. And that's besides what I mentioned earlier, both new guests and very popular returning guests. I hope that you learned something today. I'll run it back next week when we meet again. Until then, I'm your host, Keith Weintraub. Don't quit your daydream.

Speaker 8 00:46:54 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.

Speaker 8 00:47:05 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 00:47:22 The preceding program was brought to you by your home for wealth building. Get Rich education.com.

512: Rent Control is a Bad Plan, Own Land in a New Micronation with Liberland President Vit Jedlicka Jul 29, 2024

Wealthy business owners and landlords are vilified. Yet, wealthy actors, athletes, and singers are praised.

This makes zero sense.

Businesses and landlords provide essential services; entertainers don’t.

The White House recently published a “rent control light” plan. It’s a bad idea and has almost zero chance of passing a divided Congress. I critique it.

Hear my in-person sit-down interview the Liberland President, Vit Jedlicka. Liberland is a micronation in Eastern Europe, between Serbia and Croatia.

It calls itself: “The freest sovereign state in the world, powered by the blockchain.”

Learn about Liberland’s: reason for existing, population, infrastructure, real estate, currency, geography, language, culture, problems, and more. You can purchase merits and become a citizen at Liberland.org.

Resources mentioned:

Learn more about the freest nation in the world, Liberland:

Liberland.org

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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Complete episode transcript:

Keith Weinhold 00:00:01 Welcome to GRE. I'm your host, Keith Weinhold. Why do people vilify wealthy business owners and landlords but praise wealthy actors and athletes? Rent control plans must be killed where the real opportunity is in today's real estate market. Then my in-person sit down interview with the president of the micro nation of Levelland today and get rich education.

Robert Syslo 00:00:27 Since 2014, the powerful Get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Reinhold writes for both Forbes and Rich Dad Advisors, and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus has had its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast.

Robert Syslo 00:01:05 Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates 00:01:13 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 00:01:29 Welcome to Greece. From Dubrovnik, Croatia, to Dublin, Ohio, and across 188 nations worldwide. I'm Keith Weinhold than you are inside episode 512 of get Rich education. You can set up your life so that you stop using your time to make money. Use the bank's money to make money. People come from scarcity families, just like I did with a scarcity mindset to think all debt is bad. Hang off debt won't make you wealthy. You don't build wealth. So by the time you reach age 62, you think, hey, I just paid off my last debt and now I can retire. It doesn't work that way. Well, why couldn't you retire sooner? Sheesh. So what do people mistakenly do? They end up working their whole life for people that have debt. Successful business owners and real estate investors carry debt.

Keith Weinhold 00:02:29 That's how they can own so much productivity and so many assets. And you know what's interesting here? Business owners and real estate moguls, they're the ones that often seem to be vilified, criticized, ridiculed for obtaining wealth when they took risks, took out loans and provided jobs or housing for others, yet Yet at the same time, somehow actors, athletes and singers are all praised for obtaining wealth as a performing artist. That makes zero sense. Why would you criticize a successful business owner like Amazon founder Jeff Bezos? Bezos probably made your life distinctly better by offering you convenient shopping for anything. Protein bars with a few clicks, free shipping, and pioneering drone delivery. A landlord is often vilified. Most landlords are mom and pop types that aren't even that wealthy. But even if they were, as long as they're not a slumlord, I mean, they took on risk debt, operating expenses, and being on call 24 over seven in order to provide others with housing. So with Bezos types and landlords, we're talking about taking risk to provide society with essentials like food and housing.

Keith Weinhold 00:03:58 And while the business owners get vilified baselessly performing artists like actors, athletes and singers do not. Yet they merely provide entertainment to society. Now I like entertainment and I follow sports to the NFL. Major League Baseball, the NBA. But their services are not essential. Take a movie actor. They get paid well for pretending to be somebody else. Consider how absurd that sounds. And yet they're praised for obtaining wealth from doing that. So this is really backwards. And, you know, I think that a lot of this resentment for business owners is that you can't really see what they do for you. Like, you can a performer that's on the front stage, like Beyonce or Lizzo or Taylor Swift, Business owners, real estate investors, they're on the back stage. And what an entertainer does front stage that is highly visible. I mean, that's my best guess about why this is. And a lot of the time it just comes back to these primordial human emotions like resentment and jealousy and envy. There is no reason to criticize the rich just solely for being wealthy Because deep down, it's all where we want to be.

Keith Weinhold 00:05:21 Anyway, how is Bezos bad and Lizzo good? I don't get it, but it's been that way for a while now. When you look at surveys of institutions that are most trusted over time, and it's been pretty much the same these past few decades, what's at the top of the polls are small businesses. People say that they're trusting of small businesses in your rental property. Business surely counts here. Small businesses trusted more than institutions like the media or politicians. So I encourage you on social media and wherever else to support small businesses. And it's kind of funny how friends they often might not put a like on your small business, though they say that they trust them and that they resent large businesses, you know? Then that friend turns right around and supports Apple, Coca-Cola, and Starbucks. people say they trust small business, but so often then they go patronize large businesses. Nothing wrong with patronizing large businesses, but you're just not doing what you're saying. So my point is, don't resent anyone just for financial success and consider outwardly supporting small businesses.

Keith Weinhold 00:06:40 If you indeed put a lot of trust in them yourself, just like much of America says that they do. Now, is there a movement afoot to disenfranchise big wealthy business owners or big landlords. I mean, we're talking about these very people that are resented. Well, one way is with rent control, that is capping the amount of rent that landlords can charge. Now, since Covid hit in March of 2020. Apartment rents are up 18% and single family rents are up 25%. Okay. Those are cumulative figures over this four plus year stretch. And that's actually not that much. It's about 5% a year. And now sure, political news has been like galactic big this month with the Trump shooting and the Biden drop out and the Kamala Harris endorsement as a Democratic frontrunner. And we rarely talk politics here for a few reasons. Number one, it's divisive. People lose their minds. Secondly, speculation is cheap. So much of politics is speculating on what might happen in the future. Well, there's one known here.

Keith Weinhold 00:08:01 Whether you like it or not, expect six more months of President Biden. And thirdly, politics is overblown. Its importance is inflated. A president rarely changes your life. But the good news in this is that you can your autonomy, your freedom, your decisions. You can change your life. So to put the politics aside, let's stick to a one issue subject. The white House revealed published what I call a rent control lite plan earlier this month. And to give some credit first, this the same plan it also repurposes publicly and to build more affordable housing. I sent you a link to the whole thing in our newsletter last week. Well, this rent control lite thing has almost zero chance of becoming law. VP Kamala Harris endorsed it on ex. President Trump would kill it even if it's revived under the next president. It has no realistic shot of passing a divided Congress. But let's look at this anyway. What was proposed is that if a property owner increases rent more than 5% annually, it would reduce tax incentives for large landlords.

Keith Weinhold 00:09:23 I'll tell you what large landlords are in a moment. Now, you could still increase rent by more than 5%. It would just reduce the federal tax breaks and it would have lasted for only two years. And the reason the white House put this proposal together for just two years is as a bridge to a time when more homes are expected to be built. I mean, that's the real intent here. And importantly, this all would have only applied to owners of 50 plus units. So that's mostly for apartment owners. Single family rental owners would be largely untouched, but consider how apartment owners could have lost their accelerated depreciation benefit, also known as their cost segregation. And note that I'm already talking about this rent control light proposal in the past tense, not the present tense, because this whole thing, it's just a bunch of virtue signaling to try to show that something is being done to rein in housing inflation. Well, this is really odd and awkward since the inflation came from the government in the first place.

Keith Weinhold 00:10:30 I mean, sheesh, this is like shooting someone in the foot and then trying to get praise for bandaging the victim that you just shot. Well, the federal government, they just don't do rent control on this level at all. They haven't. In fact, the feds haven't regulated rents on private buildings since World War two. So this really isn't a thing, but it just brings to light that rent control is a bad idea. It puts a cap on risk. Time after time after time. History shows us that it makes developers stop building. Now, the white House plan did have a carve out for new builds. Also, what this does is that landlords have no incentive to improve property. That's why it reduces housing supply, which is already low, and it creates long term dilapidated living conditions, like I touched on here just a couple episodes ago. But how weird to even make such an ill advised proposal. I mean, look, if government puts a price cap of $2 on a gallon of milk, then dairies will stop producing milk.

Keith Weinhold 00:11:41 Milk shelves are going to be empty. It's like in communist countries. This is why you saw photos of bread lines. When there are price controls, then manufacturers don't produce. And just the same, landlords would stop providing housing. If I didn't put a fine enough point on this yet. President Obama's top economist, Jason Furman. He probably said it best in the Washington Post. Furman says, quote, rent control has been about as disgraced as any economic policy in the toolkit. The idea that we'd be reviving and expanding it will ultimately make our housing supply problems worse, not better. End quote from President Obama's top economist 94% of economists agreed that rent control reduces quality and quantity of housing available. It is the most effective way to destroy a city. Aside from bombing it, what an ill conceived plan to regulate rents. That's rent control, but the most dangerous drinking game of 2024 that is still sipping at every mention of the interest rate lock in effect on a real estate or economics podcast. Though it's been two plus years since they made their dramatic rise.

Keith Weinhold 00:13:05 Many are still transfixed on mortgage rates. They recently hit a five month low below 7%, and a lot of people still expect mortgage rates to fall between today and next year, since inflation has now plunged from a high of 9.1% two years ago, down to 3% now, the Federal Reserve has held rates steady for more than a year now, and most don't expect any change either when they meet in two days. But be ready. Be prepared when mortgage rates fall substantially. Millions more buyers will qualify to buy a home, and this could substantially stoke housing demand and lift housing prices further. Now last week on the show, you heard gray investment coach narration. I discuss Libre land libre, land libre land. Earlier this month, I visited the exhibit hall at an event called FreedomFest. I saw the library and booth and I recognized their name, and I congratulated the people there in the booth. On that, the fact that I have heard of Liberland before, that's somewhat of a compliment to them. It shows me that they're doing something right, liberal, and is a small piece of land between Serbia and Croatia in Eastern Europe, and it apparently hasn't been claimed by any other nation for decades.

Keith Weinhold 00:14:32 The name Liberland, and I think it's easy to remember because it sounds like liberty. So that's how you pronounce it. Well, I got to talking to some of their representatives at the exhibit hall. They're all smart people, but there was no one person that had all the answers I was looking for. So I requested to speak with the president of Liberland. And about two hours later we made that happen. So today, shortly you will hear Liberland President Vit Jedlicka and I together. Now, the United Nations doesn't yet recognize Libya and all. Ask the president if other nations recognize it. Wikipedia calls liberal and a micro nation. It is seven square kilometers. That's almost three square miles. It's mostly forested. I don't believe there are any mountains there that I can see in the photos. It has Danube river frontage and just a few people there. The Danube river frontage is key because it contains an island that belongs to Leon, and also the Danube is key because it also connects to the Black Sea.

Keith Weinhold 00:15:40 And we'll see if it can be a tax free haven, which is apparently the intent. You might be able to see this working when you compare it to micro nations like Monaco and Liechtenstein. Some journalists have been skeptical about libre land. You'll see how I approach it with the president shortly. He champions laissez faire capitalism. Laissez faire means a minimal government. They're also making the new nation's laws transparent on the blockchain and an economy based on cryptocurrency. As for liberalized population, by March of this year, liberalism had 1200 registered citizens who had paid up to $10,000 for labor and passports, but fewer actually living in the nation now, working on it and building it. Neighbouring Croatia has at times been hostile and blocked off access to libre land. These past few years, you will hear some background noise in President Witte and his upcoming interview. So I ask for your attention and patience there and for all. We are in an exhibit hall at a conference. I'll just call him whit in the interview. And what does his day to day look like? He travels globally a lot, often trying to get into international diplomatic and friendship agreements.

Keith Weinhold 00:17:01 But how do you just adopt statehood out of nothing? That's what's interesting here. Now, when he describes libre land to me, you can't see it here in the audio only. But he often points to Liberty Island, an island on the Danube river that's part of Liberty. And does having a free nation mean that you have the freedom to do whatever you want on your land, or they're soon going to be hos there? I'll ask him that very question, literally. President and I coming up here shortly. First, as for more, I suppose, a familiar land here in the US. You can't make any money from the rental property that you don't own. We are here to help get you started being profitable that way. And it's free. Get some of those. Real estate pays five ways properties. Then we have access to a good number of them here at great a good variety, different property types, different geographies. But at times I'm asked where is the real estate opportunity today in this real estate market, with higher prices, higher rents normalize interest rates, higher operating expenses and low housing supply? Really the opportunity is in affordable housing.

Keith Weinhold 00:18:25 If I could just put two words to it. That's the short answer of affordable housing. Like I often say, provide housing that's clean, safe, affordable and functional in today's market really emphasizes the affordable. That's where the sustainable demand is. Since so many want to be first time homebuyers are priced out of the market currently, it's like a dam that's waiting to break once interest rates go lower compared to a year ago, America has a lower proportion of homeowners and more renters, and the renter numbers just look to keep increasing due to that low affordability. And also this surge of immigrants from the past year or so. That is why you want to own affordable rental housing now. Affordable housing really that can mean a few things in a physical form. That could mean mobile home parks, single family homes, duplexes to fourplex or larger apartment buildings, but in any case, an income producing asset. Do you know what that does for you? That's like an employee that's working for you 24 over seven and without the personality problems, and they never call in sick.

Keith Weinhold 00:19:40 And when you're looking for a property, it's easier to screen properties that it is higher in screen employees. We can help set up an entire real estate investment plan for you with properties like a couple properties. I'll detail for you here shortly. And I also sent you these property details in the second section of last week's newsletter. You also got to see a photo of one of them. And by the way, you can get our wealth building newsletter by texting GR 266866. Just do it right now. What's on your mind for our free? Don't quit your daydream letter. Text GR 266866. And what's been in our newsletter lately? I showed you exactly where I think home prices are going to go by the year 2028. I loved writing about that and researching that for you in the Don't quit Your Daydream letter. Also, in recent letters, you got need to know details about our banks in real trouble now. The Wolf of Airbnb sentenced to prison y new homes will keep getting smaller. Why you can't blame investors for pricier housing.

Keith Weinhold 00:20:54 Why prioritizing property is a huge mistake, and the ten cities where you will regret buying property. And if those stories don't interest you, if getting the first crack at profitable income property does not interest you, then you won't want to subscribe. But if it sounds like those details interest you again, you can get the don't quit your day dream letter by texting gray to 266866 available properties we've had at Gray Marketplace lately that our investment coach can help me with are these two brand new single family homes that make great rentals. The first one is in Prairie Grove, Arkansas. These are the places where the numbers work, and Arkansas has been named the most landlord friendly of all 50 states. It is four bed, two bath purchase price of 288 K and a rent of $2,200. Good numbers for a new build there. It's 1500 and 50ft². The second property, also a new build, is in Pinson, Alabama that's just northeast of Birmingham. And this single family rental is three bed, two bath. The purchase price is 303 K, the rent is $2,000, it's 1400 and eight square feet.

Keith Weinhold 00:22:14 And that rent to price ratio that's not as good as the first one in Arkansas. But of course, Alabama's got those ultra low property tax rates that you get to pay. Yet you can own it and reside in any state or nation. We can help set up an entire real estate investment plan for you, whether it's with properties like these or others, with our investment coaching and it is free for you. Yes, it is just this free as sun, fresh air and hugs. If you think you're ready to buy some real estate pays five ways property. Book a time to chat at Gray marketplace.com/coach to help connect you with a marketplace of income properties. That's grey marketplace.com/coach liberal and president what you'd like and I straight ahead you're listening to get rich education. Hey you can get your mortgage loans at the same place where I get mine at Ridge lending group Nmls 42056. They provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire.

Keith Weinhold 00:23:32 With leverage, you can start your prequalification and chat with President Ridge personally. Start now while it's on your mind at Ridge Lending group.com, that's Ridge Lending group.com. And your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know because I'm an investor, to earn 8%. Hundreds of others are text family 266866. Learn more about Freedom Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text family to 66866.

Robert Helms 00:24:54 Everybody it's Robert Elms with the Real Estate Guys radio program.

Robert Helms 00:24:57 So glad you found Keith wine old and get rich education. Don't quit your day dream.

Keith Weinhold 00:25:11 Hey. Welcome back to get rich action. We're talking with someone that's going to explain a different subject to us. We're talking about starting up and the potential new nation. I was the president of that nation called Libre, Leon, I was there. President Witt, welcome in. Good to meet you. It's so good to have you here. And, you know, interestingly, we met at an event called Freedom Fest. So this is potentially so parallel with that as you're looking to develop your own nation now at a place like Freedom Fest, I think we have a lot of people that have a certain set of opinions, and a lot of people at a place like Freedom Fest, where you champion ideals, would probably love to tell you how they would like changes to be made in the United States. But I think if you ask that same person, okay, what if you begin with a clean slate? How would you begin a nation anew, but you're actually trying to do that? So tell us about Libber Land.

Keith Weinhold 00:26:04 It's pretty.

Vit Jedlicka 00:26:05 Exciting to.

Robert Helms 00:26:06 Hear Kennedy.

Vit Jedlicka 00:26:07 The candidate for president, talking about his plans to utilize blockchain to make the country transparent and or functioning. Libra is, I would say, at least 5 to 10 years ahead of any other nation states. And utilizing that, we are combining the best technology that is out there with the best ideas, ideology that is out there, which is, of course, libertarianism, making sure that the society as free as possible within some framework of basic rules. So this is exactly what we're doing. And we were looking for a piece of land to manifest that in physical world. And here we go. It's so liberal and it's a beautiful piece of land between Russia and Serbia that was not claimed by any other country for more than 35 years. We came there, we struggled with like we actually took nine years to even get inside of it properly. And now we're building and living there for more than a year.

Keith Weinhold 00:26:58 So this seven square kilometer plot of land between Croatia and Serbia, that is on the Danube floodplain, you've got frontage on the Danube river, even an island and the Danube river here in this Start-Up nation, if you will, of libre land.

Keith Weinhold 00:27:14 Really, as I've come to understand it, one real goal of liberalism is just to have any nation in the world recognize it as its own sovereign nation.

Vit Jedlicka 00:27:25 We actually got a couple countries to write or sign a regular deals, like with other states. We started with Somaliland, which was at the time unrecognized country. It's fully functional. Interesting story. It's actually former Peace of Somalia, which got independence like 25 years ago. And they're fairly finally prosperous and functioning, even without any recognition by any other country in the world. Now, they got recently recognized by Ethiopia. We followed up with Haiti agreement. We were signing a couple more agreements. Right now, I'm actually heading to one of the African countries to sign some friendship agreement. So it's not that the other countries don't recognize us now. We're working hard on diplomacy. You know, we have diplomatic relations with places like El Salvador, where we were on official diplomatic visits. So, of course, traditional form of recognition is one of our priorities.

Vit Jedlicka 00:28:13 But it's not the number one priority, really. Our number one priority is to finish a very close, a whole model of statehood and utilize the 745,000 people that applied for citizenship, for really real building of the country itself and the nation.

Keith Weinhold 00:28:31 Some recognition is coming slowly, but pulling back a bigger picture. Why do this? Why take this on? Why start your own nation?

Vit Jedlicka 00:28:39 Why not? I think leading by a good example is the best way to do things like talking about liberty. I did a lot of educational work on explaining people why liberty works, but it's much better to do things in the practical terms.

Keith Weinhold 00:28:53 Now, what's interesting is, you know, we've talked about freedom and the ideals of freedom earlier. This freedom mean freedom to do whatever you want.

Vit Jedlicka 00:29:03 You know, within some boundaries, of course, as long as you don't breach other people's freedoms and you have to find the right set up. And but right now, the problem with the current society is that there are so many regulations, you don't even know what you're reaching, and you're usually not reaching anybody's property or anybody.

Vit Jedlicka 00:29:20 It's just a bunch of stupid regulations that make your life tough. You cannot do business. You cannot even help your community. It's funny what kind of stuff we are dealing with in Croatia right now. There is a mosquito calamity in the neighborhood around Libre land and the local municipality don't have money to fix it. And they also don't let us to fix it because you have to have special license for fixing it. So everybody is suffering under the mosquito calamity, which is California.

Keith Weinhold 00:29:47 Okay, so that's an example of overregulation, potentially too many laws. You just brought up one of the limits of freedom, potentially. Well, we don't want people to be able to do anything or therefore they might be.

Vit Jedlicka 00:29:57 Able to hurt or to.

Keith Weinhold 00:29:58 Harm another person, but therefore that would be some sort of of law. And then there would be some need to sort of enforce that. So how does a start up country that wants to be a free nation, you know, how do you meet needs like laws and enforcement and perhaps a judicial process.

Vit Jedlicka 00:30:16 Or do you have a standard framework for the country? There is now a newly elected Congress. It's still a test election, but it has been already elected according to all the principles that the blockchain is bringing full transparency, immutability. It happens within the split of second of the very minimal cost. So all these things are actually already happening, and the Congress will now take all the laws that were prepared by the Preparatory Committee. And only if we have the whole framework of the laws necessary to run a state. I have 250 pages of regulations, very simple framework, which already allows a society to function quite well. And I would like to keep it that way. You know, keep the Constitution at the, let's say, the 20 pages and another 230 pages of different laws that define the the ways that the society should work. And anybody basically allowed to read all the regulations in the country within one day. It's not like here, right in the US.

Keith Weinhold 00:31:10 Yes. But its population grows, is the infrastructure grows, is more complicated, needs must be met.

Keith Weinhold 00:31:16 The size of government invariably and inevitably seems to expand with all existing nations in the world. I think the UN recognizes 193 sovereign nations currently. How do you keep the size of government from expanding over the long term in Libya?

Vit Jedlicka 00:31:32 It's a challenge. Of course, but the way we keep it is the way that there is only one institution that can make new laws, and it's kind of a corporate governance of liberalism. But that governance is in check by three other institutions that can get rid of the laws. The first and most important one is public veto. So majority of citizens can veto any law or regulations that they don't like. Second one is the Constitutional Court. So the Constitutional Court looks into the law if it basically is only focused on security and justice or diplomacy, so that the state shouldn't legislate on other things, really let other things to the private sector. So the Constitutional Court strictly looks if it adheres to that. That's another important institution. Then there is something like House of Lords of liberal minded, who can also veto the laws that the corporate governance the Congress actually creates.

Vit Jedlicka 00:32:23 So one institution to make laws and three institutions to get rid of it.

Keith Weinhold 00:32:28 Else about what's there now, the natural resources, the population and the infrastructure.

Vit Jedlicka 00:32:33 Well, that's the beautiful territory with the island next to liberal land. This is part of liberal land. It's called Liberty Island. It's a long, beautiful sandy beach. Right now, the under construction, there is 24, three houses in this area. So it will be one of the third thing will be the tourism. And we need to be able to host the visitors. We are planning two major music festivals and conferences in the summer, which will take place in August and in September. Of course, you're very well invited. We want to promote the tourism in Berlin, but also in the whole region. The biggest resorts. And it's like that with any country that is prosperous around the world. Be it Hong Kong or Singapore, is not the natural resources. It's the capacity of people to freely make, trade and do business.

Keith Weinhold 00:33:20 You're right.

Keith Weinhold 00:33:20 In fact, a place like yes, Hong Kong or Singapore or even Japan itself have been exemplary of that. A place can be prosperous without having many natural resources. It's truly about the ingenuity of the people we talk about. The people tell us more about the population.

Vit Jedlicka 00:33:35 The population. Right now we've got 800,000 people, almost that sign up for citizenship, which is a huge pipeline. I think the reasonable like ideal population of Liberal would be around 140,000. So we cannot even accept everybody to physically live in liberal land because we would be so overpopulated. Right now we've got some thousand citizens and 6500 residents that basically went through the pipeline, and there is a couple dozens of people living on the territory of liberal lands and working and building stuff. So it's kind of fun to see that initial development. very early into the development. There is still a quite a bit of obstacles to really speed up the development of the brand, mainly installed by Croatia, but we're very happy that after all these years we're able to actually be there physically and develop stuff.

Vit Jedlicka 00:34:23 So we're building a small hospital. There are seven construction workers that take care of it. We're also building the Treehouse resort. There is another ten guys working on that, and that there is a bunch of people that came to settle and they're helping with some stuff for the site. And then there is around 150 people that live around Liberal and that are connected and are supporting the movement. Well.

Keith Weinhold 00:34:44 Now we're a real estate platform. We're going to have both public land and privately.

Vit Jedlicka 00:34:50 Every land is private, in a sense. In labor land. The deal is that right now, people can actually come to the land and claim piece of land if they have enough merit. There is are the the shares of liberal land and can actually not even exchange them if they just have them. They have the right to settle things for fun, which is kind of exciting even though there are all these obstacles. But we're helping people to get over them and get the development of the country going as fast as possible.

Keith Weinhold 00:35:16 Can a person purchase merits or purchase land in labor land right now?

Vit Jedlicka 00:35:21 Anybody that donates to Libre land on the website gets the merits.

Keith Weinhold 00:35:26 Are there going to be things like Hoa's in Libre land? Is that something that you foresee? What is actually homeowners associations where you have neighborhoods and boards in those neighborhoods where you know they need to approve of things like, hey, you can only paint your home for different colors, and you need to mow your grass within every two weeks.

Vit Jedlicka 00:35:46 Well, that surely there will be different types of associations and liberal. We're not going to force one or the other type. This property development here on Liberty Island, the three houses and this area will be kind of association of sort. We want to have 24 people that that invest into the tree house, and they would act as a community. They will help each other, but they will also have the place to visitors. To really make sure that we have a good initial settlement for the permanent population. And I would like every single one of these guys to like some nice story behind how they came to live and then why they're building a house there. We want to make a reality TV show out of it as soon as possible as well.

Keith Weinhold 00:36:28 What about currency? The euro is used in the area. But you mentioned blockchain earlier, and I don't think you plan on using the euro in liberally. Tell us about that. We don't do.

Vit Jedlicka 00:36:38 That. We use liberal and dolar. We use liberal and merit. Those are the main currencies that are tied with our blockchain. And the pound dollar was launched on exchanges three months ago, reading quite nicely, steadily at 2 USD per $1 billion. So this is like also demanded currency by our suppliers.

Keith Weinhold 00:36:56 Is it a cryptocurrency? Yes.

Vit Jedlicka 00:36:58 It's just my own currency of our blockchain. Our blockchain is standalone. It's not depending on any other blockchain. Our citizens are the one ones that securely network and run the network. They run the servers. Every single citizen in Lebanon has the right to run the run the network. That's kind of all we know. We're not really being dependent on any other network like Ethereum or Polkadot. We are simply running our own thing with its own main token. The main token is liberal dollar, but the main political token is liberal and varied, and that also comes with the political voting rights.

Keith Weinhold 00:37:32 Do you foresee there being a future rental property market on libre land?

Vit Jedlicka 00:37:39 Oh, of course, of all these, all these three houses are meant to be for rental for bigger events or team building. So this is something that is happening right now, and I wish we could have at least, you know, 50 bedrooms there by the end of summer.

Keith Weinhold 00:37:54 You know, we talked about how society might work on liberally, and why don't we pull back a bit more and talk about that physical geography, because you chose an area that's basically on the Danube floodplain. So it's probably pretty fertile and it's near some other populated nations. But of course, there are some areas of the world that no one else is claiming. Tell us about how you chose this area over. All the others in the.

Vit Jedlicka 00:38:16 Area was in the most reasonable place, I would say, between the two countries that had war, and they learned to sort out things in a peaceful way. And, you know, Antarctica is also on claim, but you don't want to stay there.

Vit Jedlicka 00:38:27 It's for freezing, right? This particular place is heart shaped. It's seven square kilometers. It was a culturally similar environment to where I was born, so I was considering it as a perfect place to start. And you can fit.

Keith Weinhold 00:38:39 You can get all four seasons in Libre land. What else should one know about Libre land that they come approach you with questions about what do people really want to hear about?

Vit Jedlicka 00:38:50 They of course are interested in the sport. They want to see how what kind of utility does it have? They're a bunch of countries where you can use it to get in and out, which is kind of cool. But the main utility for Americans, for example, is that they use it on crypto exchanges, or they use it with different financial institutions as a second passport. If the US passport is not good for that, it's a great membership club, you know, in the country that is just being born. And and it's a great social gathering. Think about this. 35,000 Americans that sign up for citizenship as well.

Vit Jedlicka 00:39:22 We've got a small consulate in every bigger state, or at least a representative person. The branch, for example, here is representing liberals in Washington, D.C. so we've got a nice network of nice guys all around the place, and then a potential big supportive network with all of these people that sign up for citizenship.

Keith Weinhold 00:39:41 Now, how do you get the word out about libertarians so that people can get interested? Of course, we are an example of this right now, as our audience is learning about liberal land and the pros and cons of this concept of a potential condition. How do others learn about it?

Vit Jedlicka 00:39:55 There were articles written in Liberal, and I believe in more than 40,000 different medias actually, so we were pretty heavily covered in past. I believe more than 1 or 2 billion people learned about it through the media outreach, but the word is also spreading from person to person. Like people like it. They get on board their friends, their families. It's kind of exciting to see that.

Keith Weinhold 00:40:18 What about the language in the culture that you see developing here? Will it feel European just based on its geographic proximity? Is that what you foresee, or does it have more to do with where the inhabitants come from?

Vit Jedlicka 00:40:31 The English, of course, is number one language, but we are also developing liberal English out of all the mistakes that we make in English, that makes the language a little bit difficult to learn and understand.

Keith Weinhold 00:40:41 Americans have to learn English.

Vit Jedlicka 00:40:43 We've got a quite nice culture there, which is, of course mixture of the local Slavic culture with this international make sense nowadays, people, a lot of people from Scandinavia that are moving in. I think we've got a very good German group now coming. There is quite a few Americans that are being involved. It's quite difficult, for example, for Americans to stay liberal. And right now we have to improve our relationship with Croatia because Americans are being banned from actually, for some strange reason.

Keith Weinhold 00:41:15 Okay, still some antagonism with your neighbor Croatia. That's kind of.

Vit Jedlicka 00:41:20 The situation.

Keith Weinhold 00:41:20 In Croatia has created some access problems as well. Tell us about that.

Vit Jedlicka 00:41:25 Well, there's been solved. Last year we when we we we came in to liberalize with more than 60 people at the same time. So they had no means of preventing that access. And since that time actually have free entry in an hour of liberalized. We have a small border crossing there with the with the Croatian police and kind of agreement that we can pass in and out, which is nice.

Keith Weinhold 00:41:46 Try to keep things smooth with Croatia there on the one side of Liberal and here this new Start-Up nation. And we're talking with president Vit here of Liberal. And are there any last things that people need to know about liberalism before I ask how they can go to your website and learn more? Are there any just other last things I think we should know?

Vit Jedlicka 00:42:05 It's a great opportunity to visit now with these two festivals. Those are nice social gatherings. It's the floating metal festival in August. That's the way.

Keith Weinhold 00:42:14 Man. Like the Burning Man.

Vit Jedlicka 00:42:15 Yeah, about the float. That's floating, man. Because we're on Danube. And then there is the Liverpool Echo, which is a major international festival that has moved on this year, which is based on an article, a famous Mexican festival that will be a probably the biggest cultural event this year.

Keith Weinhold 00:42:33 Well, literally. And be a success if it is a net exporter rather than a net importer, because it's difficult to have sectors for everything from industry to agriculture in Beyblade.

Vit Jedlicka 00:42:46 Well, our biggest export is freedom. Ideas like it's like Chile spreading like wildfire. think about it. Like for two months we had the biggest immigration in the world. We go to the United States, where there was more people applying for citizenship of liberal. And then there were applicants for green cards in the United States. The idea itself, it's something that the time has come. There is amazing interest in building new countries, building free countries. And right now I can see that we are on the right track when people like Canada are pushing for transparency through blockchain, because we know what they are talking about. We have already done it and we are applying it in the real world.

Keith Weinhold 00:43:24 Well, it's an interesting experiment in this way. You, the listener of the viewer, you can follow it as an experiment, as an example of what to not do or what to do as live land develops. Why don't you let our audience know how they can learn more about it?

Vit Jedlicka 00:43:42 Fairly easy to apply for citizenship.

Vit Jedlicka 00:43:44 You can first become your resident and then come and help some different means. Or you just directly go for the citizenship. It's an investment of $10,000 or donation of $10,000. And you become a member of of our community with the passport and with the right contacts to the right people. That will really help you to get the best out of the community.

Keith Weinhold 00:44:04 Well, I don't have a great chat with a national president every day, but I sure did today. Thanks so much for your time. It's been interesting learning about liberalism. Thank you very much.

Vit Jedlicka 00:44:15 Made me think UK and I hope to see you a liberal one.

Keith Weinhold 00:44:17 Maybe you will. It sounds like a donation of ten K gets you a liberal and passport. Like I said earlier, as of March 1200 people had paid up to that amount for the passport. Music festivals and conferences in Libya. In the next few months, that could be a way to check it out. Now, it's certainly something I'd need to know more about before I could either endorse it or reject it.

Keith Weinhold 00:44:48 Citizenship in Libya planned to get more of the skeptic side. The criticism I would visit the Libyan Wikipedia page and get ready for some dismissal of its diplomatic recognition there. Then you can visit Libre Land Oregon, learn more about citizenship status, the passport actually helping with the construction of the territory and earning libre land merits, which is a cryptocurrency. If you find it interesting, it's a matter for you to do some deep due diligence on next week. The King of Commercial Real Estate will be here with us. Until then, host Keith Wendell. Don't quit your day, Adrian.

Speaker 6 00:45:31 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 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 00:45:59 The preceding program was brought to you by your home for wealth building. Get rich education.com.

511: Freedom, Liberty, and Real Estate Investing Jul 22, 2024

Coming to you from FreedomFest in Las Vegas, I talk with Founder Mark Skousen. He’s been named one of the World’s Top 20 Living Economists.

Also, an event summary with GRE Investment Coach, Naresh.

Learn about the deleterious consequences of rent control. President Joe Biden supports it (somewhat).

If four tenants live in identical fourplex units, it actually makes sense for them to pay different rent amounts. I explain.

We can construct more housing by relaxing zoning requirements in the right way—reduce off-street parking requirements, increase ADUs, no rent control, reduce minimum lawn sizes.

There’s higher homelessness in L.A., San Francisco, and Austin than Houston. Houston has a lower-cost market, few zoning requirements, and less NIMBY mindset.

Politicians run on platforms like immigration, abortion, and inflation. But they don’t run on reducing the debt because they don’t see it as a problem that they created.

At FreedomFest, I attended a presidential debate between the current candidates of the Libertarian Party, Green Party, and Constitution Party. Most or all agreed that the Fed should be abolished.

The common theme at FreedomFest was: “Government, get out of the way.”

Resources mentioned:

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Complete episode transcript:

Keith Weinhold** ((00:00:01)) - - Welcome to GRE. I'm Keith Weinhold. I'm here at the world's largest gathering of free minds. It's a conference called Freedom Fest where I talk to the conference founder. He's been named one of the top 20 living economists in the world today, as well as a talk with one of our great investment coaches to learn what my conference takeaways are and more. Freedom, life, liberty and the pursuit of real estate and investing today. And get rich education.

Robert Syslo** ((00:00:36)) - - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Weinhold writes for both Forbes and Rich Dad Advisors advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus has had its own dedicated Apple and Android listener.

Robert Syslo** ((00:01:10)) - - Phone apps build wealth on the go with the get Rich education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates** ((00:01:21)) - - 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** ((00:01:37)) - - We're gonna go from Oswego, New York to Lake Oswego, Oregon, and across 188 nations worldwide. I'm Keith, while you are inside, get rich education. I'm attending a free office live and in person in Las Vegas today. One key economic freedom and what makes a free market free is that ability for producers and suppliers and landlords to set prices based on what the market will bear, whether that's a high price or a low price. Now, what's wrong with rent control, which is a law that puts a ceiling on the amount of rent that you're allowed to charge? Well, that sounds like a nice thing to do for one set of people in the short term. Well, rent control has the same effect as price controls on consumer goods.

Keith Weinhold** ((00:02:30)) - - If the government thinks that cars are becoming too expensive, and they set up a new law that says that you can't charge more than $20,000 if you want to sell a new car, well, then those manufacturers will stop producing cars and soon enough, you, the consumer, cannot buy a car. You'd no longer have an automobile market at all. And the consumer suffers under no choice and even austerity. Put price controls on beef jerky and companies will stop making beef jerky. Put price controls on rent called rent control, and landlords have zero incentive to provide property, no motivation to improve property. And there is a raft just reams of evidence and studies out there that show that rent control, that is a surefire way to then reduce the supply of functional housing, just like the supply of cars or beef jerky would get cut. That's especially not a good solution in today's real estate supply constrained world. And, you know, here's what's interesting. The government created the inflation in the first place. That led to the high price problem that they think they can cure through rent control.

Keith Weinhold** ((00:03:52)) - - I mean, government keeps trying to solve a problem that they created. Well, just take a new course, a new direction and stop the inflation. In that way, you'll cure the higher prices long term and then near term. What you can do is relax zoning requirements in order to create more housing. I mean, in three cases here, less government cures the problems, no inflation, no rent control, and thirdly, no stringent zoning. Knock down all three of those walls and instead, now what have you done? You've encouraged a bunch of builders to come into a market. You've encouraged competition. And what does competition do? It increases quality and it yeah, lowers prices. So cure the problem by knocking down the walls. You know, you as a landlord, I don't even think that there should be laws that say that you have got to charge every ten at the same rent amount. Yeah, and that is even if each one of your tenants has seemingly an identical unit, say, in a fourplex building.

Keith Weinhold** ((00:05:04)) - - Now I'm on different fourplex buildings and I have most everyone like throughout history, I've had just about every tenant paid different rent amounts in the same building, even though all of the units were built at the same time and had the same square footage. Now a real estate investing newcomer, you know, they might think that that sounds unfair, that these tenants with basically identical units paying different rent amounts. But we all know how it works in practice, in real life. I mean, one of those four tenants might have the front unit with the best views, while the tenant with the best view. Well, of course they're going to be willing to pay more for that unit. Well, that right there, that's free market supply and demand. The fourplex unit with the best view will rent out faster and for more. But instead of that arrangement, if it's mandated, say, by the government that everyone in the building must pay the same rent, say that each of the four units must pay exactly $2,000.

Keith Weinhold** ((00:06:07)) - - Oh, well, then the tenant with the worst view, which then has less benefit to living there, has to subsidize the tenant with the best view that already has the best benefit of living there, because they must all pay exactly $2,000. And then what about things like several months from now? Say you have a vacancy at Christmas. Well, it's hard to get a tenant to move at Christmas to get them in there. So you'll charge a low rent just to get someone in there then. Versus how you charge more now in summertime, because tenants demand units, a lot of them want to get settled in during the summer before the school year starts. What about a tenants living in your fourplex or rental single family home for five years, and their unit hasn't been painted or renovated in a while, and the tenant has seen you already. Well, they're probably going to pay less then a new tenant will in there say freshly painted unit. So my point is that even making every tenant of one individual fourplex building have to pay the same rent amount.

Keith Weinhold** ((00:07:10)) - - Well, that is a form of rent control and that is actually unfair if they all have to pay the same rent amount. The free market is what's fair and enables a system of rent price discovery, instead of being confined and oppressed under rent control. Now here, the Freedom Fest in Las Vegas and we'll discuss the conference more. Today I attended one panel discussion. It was called How the Government Created the Housing Crisis and what we can do to Fix it, And it really gave specific solutions to provide more housing. This includes things like stop mandating a minimum square area for parking spaces. Stop mandating such large lawns. Instead, people can share a public park and relax the requirements that have so many easements out of property. Well, all that stuff is zoning in its stifles development and it leads to higher housing prices. Now, I maintain that not all zoning is bad. I don't think that you want a housing development surrounded by factories with smokestacks. So it's about relaxing zoning in the right way and promoting the right policies, like the benefits of a yimby movement.

Keith Weinhold** ((00:08:27)) - - Yes, in my backyard. Removing off street parking mandates altogether and allowing more ADUs allow Single-Family homes on smaller lot sizes. And we've already seen some of that. We're seeing home builders do more of that. They're building single family homes closer together, smaller lot sizes. But a lot of the wrong strategies exist out there. And once people get the benefits, like the beneficiaries of these wrong strategies, I mean, they don't want to give them up. Like New York's rent stabilization program that gives rent breaks to wealthy New Yorkers that also have a pricey home out in the Hamptons. Well, that's not the right policy. That's not helping the people that need it most. And you know, when the wrong policies infiltrate a market, the reaction can be amazingly rapid. I mean, how rapid? Like, do you think you would see a construction project literally halt mid construction? Yeah. You actually can like construction cranes just stop swinging. In Saint Paul, Minnesota, you saw construction cranes stop mid-air mid construction.

Keith Weinhold** ((00:09:38)) - - When Saint Paul moved toward a rent control of no more than 3% annual rent increases. Well, that's a form of rent control. When that happens, building stops because the developer knows that people don't want to buy those units or invest in those units or rent those units. And I've got more to discuss on housing shortly, but let's bring in the very founder, host and producer of Freedom Fest here. He has been named as one of the top 20 living economists in the world. Doctor Mark Skosan and you will hear some background noise in these conference interviews. We are at a conference at times. We're in the exhibit hall now. Interestingly, here with Mark, I bring up with him how much I dislike these political labels that just divide the nation. I mean, don't you agree that it would be great if the nation were less divided? Yes, we all would. Well, we can do our part by avoiding saying words like red and blue and oh, you know, I can't stand those maps.

Keith Weinhold** ((00:10:44)) - - Then you see, I've mentioned this to you before. You see these maps in political season that show where the red states are and where the blue states are. I mean, how divisive and polarizing that is not unifying in the United States of America. The fact that this conference has a non divisive founder like Mark Skosan is what attracted me here. Sure enough, here you'll hear me tell him how much I appreciate this. This was prescient because the very next day after this interview that you're about to hear, that was the assassination attempt on former President Donald Trump. Hey, it's Keith Reinhold here. I'm at Freedom Fest with Freedom Fest host and founder Mark Scott. And thanks for having us here. Yeah. My pleasure, my pleasure. Thank you for coming. Well, I've got to tell you one reason that attracted me to this conference. I was concerned that it was going to be too politically partisan. And I respect you so much, because I know you have said that in most of all the books you've read, you've avoided these labels like liberal, conservative, left, right, red, blue, yes, progressive, conservative and all that.

Keith Weinhold** ((00:11:58)) - - So that's what I'd like hearing when we talk about this conference championing principles of freedom and liberty. What does an American really need to know about freedom and liberty that's under attack today?

Mark Skousen** ((00:12:09)) - - I think what we've tried to preach is the Adam Smith model, which you call the system of natural liberty. And what that meant was under the rule of law and justice and a robust competitive model. You've maximized the freedom of choice, freedom to choose your own work, your own business, how much salary you're going to charge or wages you're going to pay, whether you can hire or fire people. So within those rules, within those guidelines, you have maximum security. But in today's world, more and more everything, it's either being prohibited or mandated. So we're being squeezed from both sides. The idea of freedom of best to maximize freedom is for us to come together and find out what are the best solutions to improve our lives is the idea. So we talk philosophy, history, science and technology, healthy living, economics, politics.

Mark Skousen** ((00:13:05)) - - It's all part of the program here. But it's not just a political conference.

Keith Weinhold** ((00:13:08)) - - Part of this is lowering the guardrails and promoting free markets. The only thing that we've all seen happen in free markets is inflation, oftentimes ironically, created by some of those forces that put guardrails in place. So what does an investor there are a lot of investors here. Oh yeah. What does an investor need to know with regard to inflation today. How can the everyday person respond.

Mark Skousen** ((00:13:33)) - - So one thing is we have a whole section on financial freedom because without financial freedom you're limited in what you can do and your influence that you can have. So this is very important. We live in an era of permanent inflation. Since World War two we've had permanent inflation. We didn't used to, but now we do because we're off the gold standard. We've adopted Keynesian economics, which means deficit spending all the time. We have adopted the dollar rather than gold. So we've lost that discipline. The fed is the engine of inflation. And they even have a policy of a minimum of at least 2% inflation rate.

Mark Skousen** ((00:14:10)) - - We had a whole session. Actually Steve Forbes wasn't there, but Nathan Lewis is co-author of in the book inflation. We had a big session on what are the best inflation hedges. So we talk about gold and silver. The stock market, Bitcoin rallies, high bonds, real estate. We had all of those discussion. And that was the great thing about Freedom Fest is that you really do get answers and best solutions. At our conference, I attended that particular. Oh you did? Yeah.

Keith Weinhold** ((00:14:38)) - - From Freedom Fest.

Mark Skousen** ((00:14:39)) - - I've really.

Keith Weinhold** ((00:14:40)) - - Enjoyed this.

Mark Skousen** ((00:14:41)) - - So far. We have an exhibit hall.

Keith Weinhold** ((00:14:42)) - - Which happens to be right. Oh yeah, we have breakout sessions that attendees can go to for the sessions that particularly interest. There are then a big general session where I've enjoyed presentations from Robert Kiyosaki to Ice-T. What is the future potential for getting Fest attendees? What would you like to tell them about what this conference entails? What they can.

Mark Skousen** ((00:15:03)) - - Expect in the.

Keith Weinhold** ((00:15:03)) - - Bank that they can.

Mark Skousen** ((00:15:04)) - - Get? Well, one of the things is just the wonderful camaraderie that you feel, the buzz that you feel the meeting of like minded people who are all trying to seek best solutions rather than labels and attacking people.

Mark Skousen** ((00:15:18)) - - And, we have the presidential debate here, for example. Well, we have all the third parties come together libertarians, the Constitution Party, the Green Party. We have RFK coming. The two major parties decided not to come. So, so much for their belief in democracy. But the idea is there's a there's something for everybody here. You want to improve your lifestyle, you want to prove your financial situation. You want to have better clarity on what is the proper role of government. Read about this A conference for you. This is an annual event that we usually have in the summer in Las Vegas and then other cities, and it's only 3 or 4. You know, we live busy lives, so can we come together once a year to learn to network, to socialize and celebrate liberty? I think we can if we plan ahead. When we.

Keith Weinhold** ((00:16:06)) - - Drop these labels, we can get a clear download of sorts, remove filters.

Mark Skousen** ((00:16:11)) - - And think.

Keith Weinhold** ((00:16:12)) - - Clearly. And this is a largest gathering.

Mark Skousen** ((00:16:15)) - - Of.

Keith Weinhold** ((00:16:15)) - - Free minds. So for Mark Skelton I'm Keith Weigel. You heard Mark Skelton mentioned the presidential debate at Freedom Fest. I watched quite a bit of that. More on it later. Gray Investment coach narration is here in person with me at Freedom Fest. Coming up, he and I give you a download of some policy and real estate investing highlights that you can learn from. That's straight ahead. I'm Keith Reinhold, you're listening to get Rich education. Hey, you can get your mortgage loans at the same place where I get mine at Ridge Lending Group Nmls 42056. They provided our listeners with more loans than any provider in the entire nation because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your prequalification and chat with President Ridge personally. Start now while it's on your mind at Ridge Lending Group. Com that's Ridge Lending group.com. And Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings.

Keith Weinhold** ((00:17:28)) - - If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out, instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%. Hundreds of others are. Text. Family to 66866. Learn more about Freedom Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text family to 66866.

T. Harv Eker** ((00:18:23)) - - This is the millionaire mind trick. You're listening to the powerful get Rich education with Keith Weingarten.

Speaker UU** ((00:18:29)) - - Don't quit your day dream.

Keith Weinhold** ((00:18:39)) - - Hey, we're here talking about Freedom Fest, and I'm doing that alongside gray investment coach. The race. Hey, welcome in the race. Hey, Keith.

Keith Weinhold** ((00:18:47)) - - We are here in real life at Freedom Fest in Las Vegas, Nevada. And what Freedom Fest does is it promotes and champions the ideals of freedom in the United States, and it includes a bunch of guest speakers that have made appearances here that you got to see in person, from Ice-T to Robert Kiyosaki to a bunch of presidential candidates as well, sometimes not championing principles of things like freedom and tolerance and liberty and tyranny. And I think anyone can agree to freedom on a this basis. But when you think it through and where the discussion really begins is, oh, well, if you have freedom, does that mean you should be free to do anything at all that you want? Probably not. And that's quite a discussion or tolerance. That's an ideal. That sounds good, but oh does that mean you should tolerate absolutely anything? No probably not. So that's where a lot of the interesting policy decisions and a lot of the interesting debates come in here in the race. And I attended some of these presentations together and other ones separately.

Keith Weinhold** ((00:19:53)) - - So we have some different perspectives on what we've learned here at Freedom Fest. Grace, why don't you tell us about some of the good takeaways that you had? I had a lot of good takeaways, Keith.

Mark Skousen** ((00:20:03)) - - This is not just about freedom in the United States. It's about freedom around the world. And you even interviewed and I believe we're playing that interview soon. If you haven't already played it yet, you interviewed probably the freest nation in the world. It's a brand new nation and it's called liberalism, like liberty, land libre land in Europe. And it touts itself as the freest nation in the world. So there have been all sorts of topics happening or talked about from business, finance, economics, real estate, crypto, bitcoin, gold to non-business and financial topics, which I actually found more interesting simply because.

Keith Weinhold** ((00:20:46)) - - Most of what I listen to and what.

Mark Skousen** ((00:20:48)) - - Is business finance econ. I wanted something a little bit different, especially as a father of two young boys. There were topics on gender and sexuality.

Keith Weinhold** ((00:21:01)) - - And.

Mark Skousen** ((00:21:02)) - - Vaccinations being the vaccinated versus unvaccinated. Robert F Kennedy was the keynote speaker at this conference, and he's a major presidential candidate.

Keith Weinhold** ((00:21:12)) - - RL Jr RFK.

Mark Skousen** ((00:21:14)) - - Jr. Even though he's not part of a major party, he's probably the most popular third party candidate over the last 30 years, so he's a candidate. There were lectures on healthcare.

Keith Weinhold** ((00:21:28)) - - And.

Mark Skousen** ((00:21:29)) - - How to be a better patient. And hold your doctor and hold the healthcare system accountable. The other aspect of this conference is there are some heavy hitters just walking around freely. Like I met Matt Ridley easily, I met Robert Kiyosaki, just he was dressed in very casual clothing to where people didn't even recognize them. And I did and told him how much I appreciated him. You know, you and the great podcast and huge inspiration for me. Yeah, people like Kiyosaki walking around freely, presidential candidates walking around freely, many third party candidates, not just RFK. He wasn't walking around as freely. He was in and out pretty quickly with really heavy security.

Mark Skousen** ((00:22:09)) - - But you had other third party candidates, like the Libertarian Party candidate and the Green Party candidate walking around freely. I ran into Vivek Ramaswamy, his campaign manager, while getting pizza. We are both standing in line getting pizza. We ended up having about almost a two hour lunch. One day talking finance business Vivek's policies his future. So overall this conference very educational, inside the classroom, very beneficial outside the classroom. We're going to bring some guests on the great podcast. We met at this conference, publicists who we met at this conference who represent good guests, some business development opportunities, maybe some not just good guests, but people who we would recommend their newsletters, maybe even outside of the real estate industry, people, contacts within the real estate industry. So it's not all about what you learn in the classroom. It's also about who you meet, the networking, the business development. Overall, just a really, really successful experience. There were a few.

Keith Weinhold** ((00:23:11)) - - Shows that snagged me as a guest while here as well.

Keith Weinhold** ((00:23:15)) - - I'm talking about American freedom here chiefly. But you did mention Lebanon, a startup nation between Croatia and Serbia. That's seven square kilometers in area. You know, I think there are a lot of people at a conference like this and just anywhere in society where if you ask them, well, hey, if you think you could run the nation better if you were starting it all over again, how would you start a nation from a clean slate and actually got an opportunity to do that? Well, I'll be interviewing the president of Lebanon here, where this country is trying to seek recognition from any nation. They want to start their own country, and they want to do freedom and really begin a country of their rights.

Mark Skousen** ((00:23:55)) - - And see is, is is.

Keith Weinhold** ((00:23:57)) - - Is is.

Mark Skousen** ((00:23:57)) - - Bitcoin I think not just crypto but it's bitcoin. And it's interesting because you hear a lot of times you don't like the country that you live in, go somewhere else. These people took it to a whole new level and said, well, we're just going to start our own country.

Mark Skousen** ((00:24:10)) - - And and it's about three square miles. So it's about the size of the area that I lived in. Tampa, not even Tampa, just almost the neighborhood that I live in, Tampa. So it's not a huge country, but it's interesting talking to them. And as you'll hear in the interview, hearing about what it's like to start a new country and there's a lot that you have to go, you know, there's a lot of fundraising if you want to call it that, that you have to do. It's it's a lot it's bigger than the business.

Keith Weinhold** ((00:24:37)) - - You'll learn more about that on an upcoming episode of the show with the nation of Berlin. I attended a presentation called A Forgotten Solution to the Housing Crunch. Most people think of real estate development is either single family homes or multifamily properties. This espoused the building of light touch density of 2 to 4 unit properties, and how that increases the density. But it maintains character. And they showed an awful lot of photos in the presentation where from a street, a four unit building can actually like a single family home when it has the right design and therefore you don't get this NIMBYism pushback.

Keith Weinhold** ((00:25:16)) - - I saw a number of smart design examples of that. And you know what this does? Will this help keep the cost of housing down in an area? What it allows for in a society is it allows the children who grew up in an area to afford the housing there without being priced out. Also called this multifamily missing middle 2 to 4 unit housing. You don't have the NIMBYism pushback that you do with multifamily housing. There are an awful lot of opinions here about people that want to avoid rent control, about how that's typically the bad policy. And many likened rent control to bombing American cities over time because landlords don't have an incentive to improve anything. So rent control is not a good solution to increasing the housing supply. And a lot of the discussion was how you get politicians to say no to rent control, sharing with them. Cato Institute studies on how the free market really makes for a higher housing supply, because that makes developers want to come into the market. And it was noted in one of the panel discussions about rent control and about providing more affordable housing.

Keith Weinhold** ((00:26:27)) - - But if there's a four unit building of owners of all four units of that building, how that's deemed as less threatening than if there's a four unit building of renters.

Mark Skousen** ((00:26:38)) - - So question for you, the housing panels that you attended were these people, were they private investors or they worked for private equity companies? I think maybe a documentary filmmaker who does real estate documentary, what was their background?

Keith Weinhold** ((00:26:50)) - - Think tanks and yes, a documentary filmmaker of a film called Shabbat Vacation. And I did not get to see the film about the perils and ills of rent control on Shabbat vacation. But I talked with one of the people that worked on the project and basically that movie. It does glorify the landlord that was brought up. And typically in popular culture, you don't glorify the landlord. I mean, the landlord is kind of the beleaguered party in this, and it was critical of rent control there. And so it's helping to spread an awareness of how that really doesn't help the housing supply. Quantity work quality over time. I attended another presentation.

Keith Weinhold** ((00:27:33)) - - It was called Homelessness California versus Texas and Homelessness. Of course, it's a multifaceted problem. There are a number of reasons that it occurs, but they really brought up that it often results from the loss of family connection a lot more often than what some people think. And it really brought to light that Houston has a lower proportion of homelessness in L.A. and San Francisco does. What are the reason this that that is the case. And that is because Houston has a lower proportion of homelessness, because it's a lower cost to build there, and Houston has way fewer zoning requirements, you see, almost like a hodgepodge of building across Houston. You have substantially less NIMBYism in Houston. You just have a culture there that doesn't push back on buildings. So those are really some of the key parallels between why the homelessness crisis is worse in California than it is in Texas. In most places, Austin actually has policies that are so agricultural to the rest of Texas, giving Austin a somewhat higher homelessness rate.

Mark Skousen** ((00:28:38)) - - Wow, that's a lot of real estate content that you got there.

Mark Skousen** ((00:28:42)) - - Anything else? Keith?

Keith Weinhold** ((00:28:44)) - - Another presentation I attended was called Permanent Rising Prices. What are the best inflation hedges? And, you know, for a while they didn't even put real estate up there as one of them. And I was almost foaming at the mouth getting ready to ask a question. But they did bring in real estate at the end. When it comes to inflation. Many of them brought up the fact that we have multi-trillion dollar deficits even when we're in good times. I had never thought of it that way before. If most people would look at the history of the world and what's happening with the nation while they're running multi-trillion dollar deficits, they probably think that they're trending toward poverty and austerity. But that's not the case. This is what's happening in good times. And politicians, they really don't run on a platform of reducing our debt. You notice that none of the politicians do that. Instead, you see politicians run on platforms like immigration or the housing shortage or abortion. But, you know, politicians, they don't run on a platform of reducing our debt.

Keith Weinhold** ((00:29:42)) - - And that's because they all see it as a problem that they didn't create, and they don't really want to work their way out of it either. So that's why it doesn't come up. Also, with the best inflation hedges, they showed the rank of asset performance for the last 200 years of five items stocks, bonds, treasury bills, gold and the dollar. And really it was coming down to two guys debating on whether stocks or gold were better. They both made their case either way. And they didn't bring in real estate until the end. But when they brought in real estate, they broad brushstroke and do what so many do, and they just looked at it as an asset class in what is its capital appreciation over time. Yeah. And you know, they didn't separate out income property as its own class like we would. But some of the panelists, they did not like real estate. They talked about how it's not liquid, about how you have to borrow funds, about how there's a maintenance burden and a repair burden with real estate, and you have tenants and management and some things like that.

Mark Skousen** ((00:30:40)) - - Fair, all fair.

Keith Weinhold** ((00:30:41)) - - All fair points. And one panelist brought up that gold has outperformed the gold mining stocks just historically over time. So those are some of the inflation hedges and some of the other issues with inflation that you don't think about very much as you have policy advocates and politicians addressing.

Mark Skousen** ((00:30:57)) - - Well, I'll say gold mining stocks and most traders will tell you traders by gold mining stocks, not investors. So gold mining stocks are meant to be held over the short term. They are not meant to be held over a long period of time like physical tangible gold is. So for people to say, oh yeah, gold outperforms gold stocks over a 30 year period. That's true. But most people are buying gold stocks Like gold mining, stocks are only holding over a short period of time.

Keith Weinhold** ((00:31:29)) - - Well, housing and inflation were such widespread themes here since it has been such a problem, much of it wrought by the pandemic. As we wind down here summarizing what we've experienced at our first Freedom Fest, for each of us, have any last thoughts with respect to housing and inflation since they were such overarching themes?

Mark Skousen** ((00:31:49)) - - Well, the common theme here at Freedom Fest was government got out of the way because if you let the free market work itself out, if you let people be, people work themselves out.

Mark Skousen** ((00:32:01)) - - But the onus on people to take personal responsibility, that in and of itself solves the inflation problem because you don't have government restrictions, government mandates, and And this was a major topic and that was the lockdowns of 2020. The mandatory vaccine mandates of 2021, those were all inflationary because when you have people fired from their jobs or dropping out, quitting their jobs because they didn't want to take this job, that means prices are higher and lower. Workforce means you have to pay the whoever is there higher wages. And that's what ended up happening. So it's not just about dollars and cents. It's something as simple as getting a job caused inflation. And ultimately when inflation goes up, of course that's going to affect rents, that's going to affect housing. There was a major savings rate, which I'm sure you covered in 2020, where people were saving money, being locked down at home. And once things started opening up, that money was spent and that created inflation. And people, as soon as they could get out of their house said, hey, I want to move to Florida, or I want to move to Texas or Utah or where we are here in Nevada.

Mark Skousen** ((00:33:10)) - - And that's why housing values exploded. So the inflation was caused by government. It wasn't just the government spending. It was actual psychological and physical things that the government or the policies of the government did that created an inflation. The government spending, the low Federal Reserve interest rates are just a piece of the pie, or they're just a couple of pieces to the pie. And so it was interesting to learn that all these other areas, all these other, like I said, policies that the government enacted. And that's what Robert F Kennedy Jr, RFK, talked about in his keynote speech. All of these policies affected the purchasing power of our dollar.

Keith Weinhold** ((00:33:53)) - - We have all had more dollars chasing fewer goods and services, one of those being housing itself. Hey, it's been great to meet up here in real life at Freedom Fest this year in a race. I appreciate you sharing your thoughts. Thank you Keith. I'm great. Yeah. Narration I enjoying freedom Fest here. Oh, there's such a wide variety of vendors and viewpoints all around this concept of free thinking, typically with getting government out of the way.

Keith Weinhold** ((00:34:29)) - - In fact, in the exhibit hall, which is right across from where the speaker discussions are, there are booths for gold, real estate, cryptocurrency stocks, a dating app for unvaccinated people, self-directed IRAs, a program for teaching capitalism to school children. There is even a book that espouses biblical capitalist virtues. And then elsewhere in the exhibit hall, atheist virtues. There was also a promoter of a currency called the Nevada Gold Back, and what it is is 1/1000 of an ounce of 24 karat gold. And it is physical like gold back. It looks sort of like a dollar bill, just much, much more in the exhibit hall. Now, one concept that I did not hear any criticism about was Trump tariffs. Tariffs are not free market. In fact, it's akin to erecting a trade wall. And maybe there is a session about it. But there are many sessions going on concurrently and I can't attend them all. And in other sessions I was asked to be a speaker and was interviewed. Like you heard.

Keith Weinhold** ((00:35:45)) - - Doctor Scholes had mentioned there was a presidential debate here. Now the two major party candidates didn't attend. I watched RFK Jr speak here, an independent candidate, and he was not in the presidential debate, though he spoke separately in the security for RFK Jr was formidable, even though he spoke the day before the Trump shooting. The presidential debate was among three different parties. It was Jill Stein at the Green Party, Randall Terry of the Constitution Party, and Libertarian Party candidate Chase Oliver, who is a particularly bright, articulate guy, and most or all of those candidates, they agree that we should end the Federal Reserve. And the presidential debate, interestingly, was moderated by Congressman Thomas Massie, who has more formally proposed ending the fed outside of the presidential debate. I also attended a different session. It was a Bitcoin debate called Will the Bitcoin bubble ever burst? And you had two guys promoting and talking about the virtues of Bitcoin. And then you had two guys criticizing Bitcoin. And one of the two bitcoin critics was Whole Foods founder John Mackey.

Keith Weinhold** ((00:36:58)) - - So this really got interesting. Now I like a lot of the benefits of Bitcoin personally, but I must say in this particular debate the Bitcoin critics decide that Maggie was on. Oh they won this. The proponents best points were the people back in the day said electricity in the internet word feasible. They weren't going to last, but electricity and the internet won and Bitcoin will to the pro camp also espouses that Bitcoin is the first time we've had absolute digital scarcity. You cannot copy and paste bitcoin, but yeah, the critics did a better job. They said that Bitcoin is always made future promises, but it falls short like its awful acceptance rate as a currency. Still today its price levels are dreadfully volatile, just miserably volatile. You can't count on it then as a store of value. John Mackey said that Bitcoin produces no goods, no services and no cash flow. The Bitcoin critics also asked more than once this question how has Bitcoin made anyone's life simpler, easier or better? There really weren't any good answers to that question, and they even critiqued that with its fixed supply at 21 million will, then it cannot grow with the economy.

Keith Weinhold** ((00:38:21)) - - And then what this can do is create deflation and depression. And I would like to adhere myself that each Bitcoin is already divided into 100 million tiny pieces called satoshis. And it might be able to be divided smaller than that eventually. But yeah, the Bitcoin critics won. It is quite a win for bitcoin, in my opinion, that this nascent digital asset that was only worth a few pennies 15 years ago when it came out, I mean, it was something that only cryptographers and digital geeks understood. Well, today you've got presidents discussing bitcoin. So it's certainly had some success just in branding and name recognition alone. That is just about a wrap from Freedom Fest this year here in Las Vegas, there were record breaking temperatures outside in the Mojave Desert in the middle of summer. Inside, it was a celebration of ideals like life, liberty, prosperity, and of course, freedom. Until next week, I'm your host, Keith Wendel. Don't quit your day, dream.

Speaker 6** ((00:39:35)) - - Nothing on this show should be considered specific, personal or professional advice.

Speaker 6** ((00:39:39)) - - 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** ((00:40:03)) - - The preceding program was brought to you by your home for wealth building. Get rich education.com.

510: Garage Real Estate, Minted Not Printed Jul 15, 2024

Learn how garages and parking areas add value to property. Find out how to earn more rent for your garage space.

Adding a garage to a rental doesn’t fetch much more rent income. But you will rent your place faster and tenants stay longer.

To get more rent for a detached garage, rent it to an off-site tenant.

The future of parking and garages is positioned to be shaken by autonomous cars. Fewer people will need to own or park cars.

Meet me in-person at the next New Orleans Investment Conference. It’s November 20th - 23rd, 2024. Register here.

Brien Lundin joins us. He is the host of the world’s longest-running investment conference, the New Orleans Investment Conference. He’s also editor of Gold Newsletter.

He & I discuss inflation, interest rates, real estate, and gold.

Gold is up 20%+ annually. This is because foreign nations, like China, are beginning to prefer to own gold rather than US debt.

There’s a case for interest rates to go higher, another case for them to go lower.

Brien tells us why he believes the gold price will keep rising.

Increasingly, asset values are positively correlated—real estate, stocks, gold, crypto, oil, and even collectibles.

Personally, though I don’t see evidence that gold builds wealth, history shows that it’s a good place to store wealth.

Meet me in-person at the next New Orleans Investment Conference. It’s November 20th - 23rd, 2024. Register here.

Resources mentioned:

Meet me in-person at the next New Orleans Investment Conference. It’s November 20th - 23rd, 2024.

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

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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold. Learn about garage real estate, how garages and parking add value to your property, and how to get more rent for the garage. Then we go from micro to macro. As we talk about the enduring value of a real asset that's minted, not printed, and another chance to meet me in person today and Get Rich Education.

Robert Syslo (00:00:27) - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Weinhold, who writes for both Forbes and Rich Dad Advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener.

Robert Syslo (00:01:01) - Phone apps build wealth on the go with the get Rich education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Keith Weinhold (00:01:29) - Welcome to GRE! From Saint Augustine, Florida, to Saint Paul, Minnesota, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to get Rich education as we cover a component of property that's a little talked about, garages and we're a real estate investing show. You learn about ways to optimize the rent income that a garage can produce for you, too. Now, if the home that you currently live in has a garage, it could be the entrance to the home that you use even more often than your own front door. That's how important and useful it's become. And understand that garages on homes, they didn't even exist until about 100 years ago, because that's when cars began to become popular. The emergence of the garage in American real estate is one reason for the downfall of the big front porch. You rarely see big porches on modern homes.

Keith Weinhold (00:02:26) - Interestingly, some of America's most successful companies began in garages, places where you have workbenches and can tinker around with things. Google and Nike were launched in garages, and it's also where people store lots of things, sometimes so many things that they can't even get their car in there anymore. In fact, the word garage comes from the French garage. Spell that g a r e r meaning to store. But yeah, when cars became more popular in the 1920s and 1930s, that's when you begin to see garages. And then as cars got larger, garages got larger. And by the 1960s, as families began to own not just one car but 2 or 3 cars, garages became larger again, and a three car garage is pretty common today in a single family home, though it's rarely that big in a property that you're going to rent out. Now, if you've got a single family home and it does not have a garage and you want to make a garage addition. Well, you can only expect to recoup 65 to 80% of what you've spent.

Keith Weinhold (00:03:40) - So it is a money loser. Then it really doesn't make sense to add one to a rental, perhaps only your primary residence, since you get the benefit of using it yourself that way. And if you add a garage to a rental, you know you just really can't get that much more in rent for it. It's usually not worth it, although the financials can look better for a carport addition instead. Now, if you've got a rental with the garage rather than without one, it actually can help you get your place rented out faster. But a tenants really not going to pay you even as much as 10% more in overall rent in most every case. Yet see, what happens is that a tenant, they tend to fill up the garage with stuff, and therefore they tend to stay longer than if there were no garage. A garage is one reason that single family rentals see longer tenant durations then apartments. Now, if your property though, if it's in a built up area and there's little on street parking, oh well then the addition of a garage that could have more of an impact on the value of your property than it would out in the suburbs.

Keith Weinhold (00:04:53) - The garage does not count toward the square footage of a property because that's considered unfinished space. And your prospective tenant? They might not know that fact about the square footage. So that's something for you to keep in mind when you're advertising a home with a garage for rent. Now, older houses, they're more likely to have a detached garage is its own separate standalone structure that's built near the house. But you would have to walk outdoors in order to get from the house to the detached garage. In fact, the home that I grew up in and that my parents still live in in Pennsylvania has a detached garage. Their home was built around the year 1915, so more than 100 years ago, and my parent's garage also didn't have an automatic garage door opener for most of my life. I remember the big yank up that you'd have to make on the heavy door. So when my mom was about to back out of the garage when she was going to take me somewhere, what I would do is I would stand outdoors until she backed out so that I could open and then close the door by hand and then get in the car.

Keith Weinhold (00:06:06) - Gotta get those legs under it and enjoy one deep squat there, Well, one reason that old houses have garages often detached from the rest of the home is for risk of gasoline explosion. That's because back 100 years ago, gas was stored in the garage because gas stations were yet to be invented. So you've got this trail of detached garages left behind in older neighborhoods, and some people still prefer a detached garage. Now there's a way for you to get more rent income if you're renting out a single family home with a detached garage, and this isn't always going to be feasible based on how the property's set up. But the way to do it is for you to get an off site tenant to rent your garage. Oftentimes, the renter of your single family home, you know, they just don't have as high of an income as someone does that lives in an upper crust neighborhood that might have a lot of toys to store their, be it a boat or an antique car, or even an RV, perhaps.

Keith Weinhold (00:07:13) - Well, that off site renter in the better neighborhood, you know they're going to pay you to store their cars or their other stuff in your detached garage In that case, your rental home and garage would have two separate tenants, and you will enjoy more overall rent income than if one tenant was renting both the home and the detached garage. So what you really want to learn is you do your research though, is what laws cover the renting of a garage or a storage space because they typically fall outside the jurisdiction of landlord and tenant laws. But you need to verify that depending on your state or your area. Sometimes running a garage is the equivalent of renting a warehouse space, and the rules can be different when it comes to payment issues or other problems. And when you realize that some garages can even have dirt floors, you can see how different it is than a living space. Now, even if you're thinking about renting your garage to an offsite tenant. Most of the time making garage upgrades, it's just really not worth it.

Keith Weinhold (00:08:19) - But note that I said most of the time. On the other hand, if you can make it marketable, maybe you need to do something smaller, like add an automatic garage door opener if it doesn't have one, and then you'll have to run the numbers to see if that is worth it. Now, one mistake that I made out of property, it wasn't that first ever seminal fourplex that I owned, but the second fourplex that I owned there in that building, each tenant had a small, simple one car attached garage, and then as each four plex unit went vacant, I went in and painted the inside the walls and ceiling of all four garages with a fresh coat of paint, and I would learn later that was not a good use of my time. It didn't help me get any more in rent. No tenant is really even going to stay longer for fresh garage paint, but frankly, I'm just not a handyman. I don't know how to fix anything. So one of the few ways that I knew how to add value, I thought was rolling a paintbrush over the inside of garage walls like I know how to paint and not much else replacing a faucet.

Keith Weinhold (00:09:29) - Whoa, that right there. We're getting into, like, intimidating territory. Okay for me. In any case, duplexes in fourplex, they can often have garages, especially newer ones. And I think I mentioned to you here on the show before that I once owned an eight plex. It was a little quirky. It had a small single attached garage that was kind of on the end of the building. So eight units and just a one car garage. And actually this is a good example because those tenants, they paid about $1,500 for their unit, so none of them could really swing it. None of them could afford to pay an extra $400 for the garage. So again, the way to solve that is rent to a more affluent off site tenant. That's what I did. And I got 400 bucks. Now, understand something. When you're driving a neighborhood or you're looking on Google Maps, at times it can look like a home has a two car garage because you're only looking at the widths of the garage door.

Keith Weinhold (00:10:29) - But that can really be a three car garage because on one side, the garage bay goes two cars deep, so you can't always tell how many cars a garage can hold just by looking at the width of the garage door. One reason that developers in Hoa's actually like garages that are too deep is that way. The driveway is more narrow. When driveways are more narrow, that means there's less asphalt and more green space in neighborhoods. Now, in some places, it doesn't matter too much if the garage is full of stuff and you have to park in the driveway, but in a cold, snowy place, it really helps to park cars inside the garage. So garages are typically more valuable to residents in areas that have real winters. In an apartment building, it can help to have assigned spaces for tenants. When I bought apartments, I've always loved it to my property manager to figure out the space assignments and rental property. Upgrading and resurfacing parking areas is another money loser. Now, we don't want to be slumlords, but the truth is repaving and re striping a parking lot that might look nice.

Keith Weinhold (00:11:44) - You might do that. but the reality is that it will get you practically zero extra rent. Not a good ROI. Well, that's a take on garage's past and present. What about the future of garages and parking areas when it comes to the future? And this harkens back to episode 13 of this show. Yes, that's when I discussed driverless cars, also known as autonomous cars. Back in January of 2015, nine and a half years ago. Well, when autonomous cars become popular, which many expect will still happen, it's likely that fewer people are going to own cars at all. They will just have a car subscription. The autonomous car will pick you up and drop you off, and more people will convert their garages into living space like another bedroom. If that does indeed eventually happen. But autonomous car adoption has hit roadblocks since episode 13 of this show back in 2015, and that's generally because autonomous cars keep having accidents. Although Waymo is perhaps the one company that's made more headway lately, you're seeing their autonomous taxis in use in some cities right now.

Keith Weinhold (00:13:03) - Currently, a car spends 95% of its life being parked, but garages, parking lots, and parking garages are all poised to be less useful when fewer people own a car. Instead, these autonomous cars are just going to drop you off, pick you up, and then constantly stay moving. Stay out on the road rather than park at all. EVs are a factor here to electric vehicles. They can be thousands of pounds heavier than the average gas powered vehicle, and experts out there are warning that the extra weight from EVs that could cause older parking garages to collapse unless steps are taken to buttress those structures. I mean, that's a problem. If geotechnical and structural engineers didn't design EVs on older parking garages decades and decades ago parking lots, they have definitely fallen out of favor among some, but they are still building lots of them. Critics say that to have to build minimum parking spaces on new projects, well, that hinders new housing construction, and also encourages people to drive rather than take public transit parking lot.

Keith Weinhold (00:14:18) - Critics. They also argue that parking lots and garages, they fill up precious urban real estate with these sort of soulless, concrete eyesores, making cities more sprawling and less convenient. And you tend to see this more in cities west of the Mississippi River. In the east, you have more cities on gridded street patterns that are more dense because they were laid out and developed before cars took over and sprawled so many cities, but with as many changes that autonomous vehicles could bring to the parking world and make things like car ownership less important and car parking less important, I sure would ask a lot of questions before I invested in any sort of parking related real estate. Today we've been talking about real estate in the micro so far today. Garages and parking surely will pivot to the macro as we discuss an asset that's minted not printed. That's next. I'm Keith Weinhold, you're listening to episode 510 of get Rich education. Listen to this. Hey, you can get your mortgage loans at the same place where I get mine at Ridge Lending Group Nmls 42056.

Keith Weinhold (00:15:36) - They provided our listeners with more loans than any provider in the entire nation. Because they specialize in income properties, they help you build a long term plan for growing your real estate empire. With leverage, you can start your prequalification and chat with President Ridge personally. Start now while it's on your mind at Ridge Lending group.com. That's Ridge Lending group.com. And your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%.

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Robert Kiyosaki (00:17:08) - This is our rich dad, poor dad author Robert Kiyosaki. Listen to get Rich education with Keith wine old and there is I respect Kate is a very strong, smart, bright young man.

Keith Weinhold (00:17:26) - It's terrific to welcome into the show a man with decades of investment analysis experience that we can learn from. He's the executive editor of Gold Newsletter, and you might know him as host of America's longest running investment conference, the famed New Orleans Investment Conference. Hey, we haven't shedded in a minute. Welcome in Brien Lundin.

Brien Lundin (00:17:48) - Right? To be able to keep it has been a while too long.

Keith Weinhold (00:17:51) - That's right. And now you and I each span the real asset world. I'm a real estate guy. You spend a lot of your work in teaching over there on the gold side. And we both intersect with the general economy. And, you know, Brian, I think of the general economy is having a number of abnormalities.

Keith Weinhold (00:18:11) - Is it always does, but actually many normality to I mean, I've commented that there's actually relative normalcy in the fed funds rate and even mortgage rate levels. If you look at it historically, also home price appreciation rates, in rent appreciation rates, they're all close to historic norms, although the aberrations are probably more interesting to talk about. What are your thoughts on the economy's general direction?

Brien Lundin (00:18:37) - Yeah, you know, it really is weird. We think about today's interest rates and how high they are. And throughout human history, the natural level of interest rates have hovered around 6%. That's kind of what it's always been for thousands of years. So what we went through over the last 16 years or so was a really abnormal period, and even going back a decade or so before that. So yeah, it looks seems like interest rates are at normal levels. What is at abnormal levels, however, is the level of debt that we have today. And and that's been created after over four decades of ever easier money, ever since Volcker killed off inflation in the 1970s and started lowering rates, we see that whenever there was a recession, the Federal Reserve had the same prescription every time it lowered interest rates, and then it would try to raise them back, but could never get past the midpoint of the previous range before another recession would come back, or the markets would throw some kind of a fit in.

Brien Lundin (00:19:40) - The fed would then start easing again. And if you look over time, if you plot or draw a line at the bottom of every one of those interest cutting cycles, see that those bottoms of the cycles get progressively lower and lower. Till 2008, they hit zero. And then they tried to normalize it got up to 2.5% on the Fed's funds fund rate, and then had to go right back to zero at Covid. So the lesson to me is that things might seem normal if you look at the grand sweep of history, but they're anything but normal right now, and the debt loads that we have are so high they preclude anything resembling a normal interest rate. And in fact, my contention is that interest rates have to be below the rate of inflation. In other words, the currency has to depreciate at a faster rate than you're paying interest on these debts, or the whole house of cards collapses. So that's actually, while not good for the fiscal health of the US or other developed economies, it's actually good for the kind of tangible assets, real assets we are talking about real estate, gold, silver, monetary metals, even commodities.

Brien Lundin (00:20:52) - And, you know, everything across the board as far as tangible assets.

Keith Weinhold (00:20:56) - Yeah, we look at the long term history of interest rates 5 to 6% if If you go back hundreds of years or even thousands of years is a historic norm. The fed funds rate is now at about 5.3%. But yeah, I think what you're talking about is we seem to have a decreasing tolerance for what are really normal rates. Nothing abnormal about the rate. All that was abnormal was the rate of increase. And you know, one thing that I think about with the economy, Brian, that maybe people don't talk about enough. Is this labor shortage that we have? I mean, it is difficult to do get anyone to do my landscaping. Last year I stayed in a hotel where when I checked in, there was no human being at the check in desk. It was automated checking. Then last month, I stayed at a hotel where there was a human at the front desk, but they told me that there was not going to be any housekeeping during my state.

Keith Weinhold (00:21:46) - So the reason that I bring this up is that a chronic labor shortage that spells entrenched upward pressure on inflation, because you have to offer higher wages to lure in workers and higher wages paid mean higher consumer prices, higher rents, more inflation and persistently high rates to combat that.

Brien Lundin (00:22:07) - Yeah, absolutely. And you bring up a whole nother factor that very few people consider as demographics. You know, the fertility rate in the US is below the replacement rate. It's about 1.7 now, and it would have to be like 2.1. And as they say, demographics is destiny. We're not the only ones by any means. Japan went over the demographic cliff long ago. We're following all the other developed nations are as well. And in 20 or 30 years the global population will be falling. That brings about a lot of other pressures and real estate. Obviously you have, you know, the baby boomers are going to be downsizing if they can find something to move into. Besides a retirement home, had a decent mortgage rate.

Brien Lundin (00:22:50) - You know, we have so much overhang in real estate that's sitting out there and locked up by the current interest rate. So yeah, it's an interesting dynamic we're in right now. And personally I think it's all just a result of the Federal Reserve and all these other monetary mavens whose PhDs I want to pull all these levers on the economy. And they have unintended consequences in every one of the policies that they undertake. And we're in one right now.

Keith Weinhold (00:23:20) - We've got both inflation and a scarce supply of property that just keeps floating property values higher despite higher mortgage rates. And one place that the high inflation is often reflected is in the price of gold. Gold is up more than 20% year over year. And one thing I want to ask you about here, with regard to gold and the fact that we have this debt that you brought up earlier, Brian, is a real problem. When we look outside the US, the world's biggest economy is by far China. China has been dumping US treasuries, meaning basically that they're no longer buying our US IOUs so they no longer want our debt.

Keith Weinhold (00:23:59) - And instead, China and other nations are increasingly parking it in gold. Now, is that one of the reasons that gold has surged?

Brien Lundin (00:24:07) - Yeah, it is the primary reason. Or, you know, one of the primary factors why gold has surged this year in particular. And it's a weird mix of buying. This year. We saw the gold price start taking off like the 1st of March. And it was for the first six weeks or so. It was literally a relentless rise, not a down day. Setting new price records every day. And it took us a while to try and figure out or to figure out where the buying was coming from. And as it turns out, it was the result of continued buying by central banks renewed buying to an even greater degree by the people's Bank of China, and also some domestic demand from China. And that's something we had never seen before. We'd never seen Chinese investors and savers buying gold on the way up in a price trend. They usually bought on a price downtrend trying to get a bargain, but now they were following the price up.

Brien Lundin (00:25:06) - So that contributed to everything and the factor that we had expected that did not come about in the first half of the year was a fed pivot. You know, if you look back in December, yeah, the markets are pricing in 5 or 6 fed rate cuts in 2024. And that kept getting postponed. And that was expected. I expected in most of the other analysts expected the beginning of fed rate cuts to really drive the price up higher, but it kept getting postponed. That big factor is still ahead of us. I think the markets are going to start pricing that in in a couple of months. And so what all that central bank buying and Chinese buying is done is while we were waiting for the fed to pivot in that big factor, it went ahead and added $300 to the gold price and got us into a new trading range so that when the fed pivot does hit, we're lifting off from a much higher level. So it's a good time, I think, to be an investor in gold and related assets.

Brien Lundin (00:26:07) - I think it's also a good time to be involved in real estate and a lot of other tangible and real assets, as.

Keith Weinhold (00:26:13) - Well as real estate investors we are interested in that interest rate direction. And, you know, if the US is continually finding themselves in a position where they're wondering, well, hey, if not China and others will, then who in the heck is going to buy our debt? And now you? I think the listener you can ask yourself in the same way, if you're trying to get your friends to give you a loan, How do you entice your friends to give you a loan? You would offer them a higher interest rate in order for them to give you a loan. So with that in mind, Brian, is that what the US has to do in order to entice foreign bondholders in the same way, meaning then debt rates would tend to be held high?

Brien Lundin (00:27:01) - Very interesting point there, Keith, because getting back what I was saying, how these PhD economists are pulling all the levers on the economy, the lever they're about to pull is to start lowering rates again, because they recognize these debt loads, they recognize the possibility of a recession, and that if there is a recession and tax receipts fall, then the debt load is going to accelerate even further.

Brien Lundin (00:27:26) - So they feel that policy right now is very restrictive. And they're going to start lowering rates at some point. They have to. But the debt loads being what they are, however you have on the other hand, the bondholders are, which you would hope would be the buyers of the Treasury securities, and they will look and see the potential economic slowdowns. They had the potential for higher inflation and start demanding higher returns on their yields. So there is a tension there. We saw that develop last October, November timeframe and a few months ago when we saw Treasury yields rise at the same time that the dollar index rose versus other currencies and gold was rising, which was a weird kind of strange bedfellows there that typically gold does not rise when interest rates are rising and the dollar is strengthening. But they were all going up together, and that happened a bit last fall as well. To my mind, that is a reflection of safe haven buying. You know, typically we think Treasury yields fall when they're safe haven buying because everybody's going into treasuries.

Brien Lundin (00:28:36) - To me that was reflective of safe haven buying because the markets were really concerned about the fiscal future for the US and other developed countries. So they were going to the safety of the dollar, the safety of gold and demanding higher yields on treasuries. That would be more commensurate with the kind of inflation rate that they saw ahead. But it's been a weird mix of buying a weird mix of economic developments, and I think it all argues toward big money getting more and more into gold because of the uncertainty that lies ahead, and the really the extraordinary nature of the current economic situation to the world we find ourselves in now.

Keith Weinhold (00:29:21) - I did not realize that there is less sensitivity to higher gold prices until I just learned that from you a few minutes ago. So that's really interesting about potential momentum in the future price of gold. And we talk about the future price of gold. We think of that through a supply and demand lens, much like we think about what's moving real estate prices today. Have we hit peak gold, meaning that there's less and less of it to pull out of the ground?

Brien Lundin (00:29:49) - All of the trends in that respect actually favor gold and that we have reached peak gold production as around 32,300 tonnes a year.

Brien Lundin (00:30:00) - Interestingly, a third of that level is being purchased now by China between the people's Bank of China and Chinese citizens. So a good bit of that is taken off. But I'm not a big proponent for the validity or the impact of supply and demand for gold, because it is monetary demand that really drives the price of gold. It has no utility, virtually no utility and industry. It is purely a monetary metal. So when people are concerned about the future purchasing power of the currency, they buy gold and they drive the price up, and that buying on the margin really sets the price of gold. And I think we're about to enter one of those periods where gold really plays catch up for long sweeps of time. You'll see the gold price doesn't do much until something happens. Things get bad to a certain degree where people really start to worry about their purchasing power, and then gold makes a huge catch up move. Really, in the early stages of that kind of a catch up ketchup move, I believe.

Brien Lundin (00:31:06) - I think we're entering a period that would be akin to the 1970s and the 2000, where the price of gold has historically gone up anywhere between five and a half and eight and a half times over during these kinds of secular bull markets. And I think we're in one of those periods right now.

Keith Weinhold (00:31:25) - Five and a half to eight x.

Brien Lundin (00:31:27) - Yeah. If you look at the fact that there's only been three bull markets in gold since 1971, when it actually became, you know, an investable asset or commodity and not money. So 1970 to 75 was a bull market of 76 to 1980 with a bull market. And really, 2000 to 2011 was another bull market run. And each of those instances, each of those three bull markets, gold went up from 25.6 to 8.2 times from the lows. And this market we're in now, the low is about $1,040. So if the price of gold goes up trading 5.6 and 8.2 times, you're talking about 6 to $8000 gold price at the end of this cycle, wherever and whenever that takes us.

Brien Lundin (00:32:17) - And of course, you know, we're up around 2300 and change right now. So that's a good move ahead. Lots of potential. And it's not just where the price of gold goes, but all the associated assets worth it, like mining stocks and the like are going to do, I think, very well over the next few years.

Keith Weinhold (00:32:36) - Yeah. People know gold is the classic inflation hedge. But to your point, it has a lot to do with catching a wave. If you think the real long term diminished purchasing power of the dollar is 3 or 4% over time. Well, you don't see gold go up gradually at 3 or 4% per year for several years. You tend to see it do little or nothing, and then it has this big catch up phase, like those periods of time that you talked about. When we talk about physically holding on to gold, you know, it's cool. It's one of those type of investments where if you do hold it yourself, there's no login or password to access your goal that is physical, intangible.

Keith Weinhold (00:33:10) - And you know, Brad, one thing that a lot of gold people often talk about is a positive attribute to holding gold is that it has zero counterparty risk when it's yours. No one can take it from you. But does it really have no counterparty risk? Because I think about if a person wants to hold physical gold, well, if they outsource it to a third party vault or a bank safe deposit box, then the counterparty risk is there. But if they hold it onto themselves and store it in their own home, which I don't know if that's a good idea, but if they choose to do so, well then the counterparty risk is the thief. So I think gold is a great way to store wealth, but is there really zero counterparty risk associated with gold?

Brien Lundin (00:33:48) - Well, from that standpoint, there's never a zero risk. There's never a zero risk. When you step out of your door in the morning, either, you know, there's always some risk. You can mitigate the risk. And it reminds me of of what I tell people when they're really new to the sector is there are two reasons to buy gold.

Brien Lundin (00:34:04) - One is as insurance and one is as an investment. And insurance is what you need to worry about right away because you're insuring against something you know is going to happen. If you feel like 3 to 5 years, the dollar's purchasing power, it's going to be much less than it is today. I think we can all agree in most likely is then by buying gold today, you lock in today's value of the dollar because gold will make that up, and perhaps even more so, it will protect you against that depreciation. So you can ensure your wealth by holding some physical metals. And I think that's the most important thing you can do, at least initially, is get silver and gold. Now, as far as storing it, a lot of people can store enough gold in their house to gain a good bit of insurance against whatever their wealth is. And by that, you know you will have to invest in a safe. Don't tell anybody about where it is and a good alarm system. And if you haven't and a location where you have a good police force, then you're talking about 20 minutes that somebody's going to get in your home before the police come and knocking, and hopefully they can't find the safe, much less get into it in that amount of time so you can do it in your house to some degree.

Brien Lundin (00:35:16) - You can store it elsewhere, but there are important considerations there. They're very respected storage facilities and the like. You don't want to store it in a bank because one of the things you're insuring against is a bank holiday, thanks to like you to store it there either, but you can find respected institutions to store it. I recommend people don't put all the eggs in one basket and store it with a number of institutions, or as many as they can practically do. But yeah, it is important to own the metals, you know. Otherwise you're going to lose from here. On the day that you decide not to buy gold and silver to protect your wealth from that day on, you're accepting a rate of purchasing power depreciation that we know is considerably more than what the government says it is, and is historically high to begin with.

Keith Weinhold (00:36:09) - I generally think it's a good idea to own at least a little gold if you have trepidation about buying gold. Think of it this way in a way you're not buying gold, You're transferring some of your prosperity over into gold, which has had lasting value for millennia, across cultures and across generations.

Keith Weinhold (00:36:28) - And for some reason, I think a lot of people my age and younger that they don't own any gold. I would imagine that 90% plus of people, I think the statistics are out there. 97% of Americans don't own any gold. And maybe you feel like you don't understand gold and you don't want to own what you don't understand. But you could purchase this a 10th of an ounce of gold for under $300. And you know, by buying just a little bit, you begin to get a vested interest in this stuff. So with that in mind, Brian, how much do you think one should allocate and in what form should they make their purchase?

Brien Lundin (00:37:02) - It's interesting. There have been studies for many years showing that the highest risk adjusted return you can get in a diversified portfolio with about 5% of your wealth, or your investing portfolio allocated to go to heaven. Those same studies done that are indicating more like 10% or more. It's to the point that you sleep well at night, whatever makes you comfortable.

Brien Lundin (00:37:27) - But you know all of those studies back test it and they look back and see how gold and a portfolio meshes with the six, the classic 6040 mix of stocks and bonds etc.. But what we've seen over the last 12, 14 years is that post the 2008 great financial crisis is that all of these asset classes have become more and more positively correlated because everything's dependent on the Federal Reserve and monetary policy. So all of the correlations have started to trend toward one, where they all rise and fall together in unison. Because everything, again, is just depends on monetary policy and the flow of liquidity from the Federal Reserve and other central banks. So that fact alone argues for even a greater holding in gold, because all of that portends greater and greater inflation, greater monetary accommodation, and the kind of thing that gold insures against. So the way to look at gold as insurance is not quite like home insurance. You know, you buy home insurance, you pay the premium every year in case your house catches on fire.

Brien Lundin (00:38:38) - But you really don't expect your house to catch on fire. With gold. You're buying insurance. You're paying the premium, perhaps just once, and you're insuring against something that you know is going to happen, that the purchasing power of your dollars are going to depreciate. So if you have a significant cash balance in accounts, you might as well put it into precious metals and lock in the current rate before it gets the purchasing power of the dollar depreciates even further.

Keith Weinhold (00:39:06) - That is a good point with gold as money insurance from the standpoint that with your homeowner's insurance and your landlord's insurance policy, you need to pay a premium annually. You potentially only need to pay that once upfront when you purchase your gold, and there's typically a spot price differential to overcome. Well, Brian, you are the host of America's longest running investment conference, which is founded on championing American's right to own gold. The New Orleans Investment Conference. It really feels like there is a touch of prestige when you're there. I can speak to that personally because I've attended it at least three times in the past.

Keith Weinhold (00:39:47) - It's coming up in November. I hope to attend again this year. You've got some illustrious speakers there. Tell us about this year's New Orleans Investment Conference.

Brien Lundin (00:39:58) - Yeah, it is our 50th anniversary. You know, I think it's the oldest investment conference in the world today and longest running. And we do have that legacy, that prestige of being somewhat gold oriented. We're actually covering a good bit more real estate lately, but we really cover a lot of the macro picture macroeconomics. We have some of the leading thinkers come to our vet every year and a great audience as well. Very highly qualified, very successful investors. This year is up 50th. So we have another wonderful roster of speakers. We have Jim Grant coming, George Gammon, James Lavish, Danielle DiMartino Booth, Britt Johnson, Abby Gilbert, Adam Taggart, the list goes on and on. Rick Rule, Peter Boockvar, dozens and dozens of top minds. And, you know, we kind of alluded to it in this talk, but these are really strange and interesting and dangerous, extraordinary times that we're living through right now.

Brien Lundin (00:41:02) - And it is amazing to me, having been in the business for 9 to 40 years now, seeing these kinds of periods come and go. And it seems that when they do happen, we get this kind of underground media that arises, and people who really bring in losses come to the fore to comment on what's going on and provide really valuable insights. And after all the years I've been in this business, I know who really contributes value, who the best thinkers are, and I'm getting them all to come to New Orleans. As I have to say, I'm a big fan of all of our speakers. I think they are absolutely extraordinary, and we are so confident that you will find our event to be worth many times the cost of attending, that we have a money back guarantee. If you don't think it does, if you don't think it's worth many times what you paid for, we'll give you registration feedback. So it's very few events that can offer a guarantee like that. And I think you would agree with me that you have to be there to really experience it.

Brien Lundin (00:42:07) - And it really is just an extraordinary experience.

Keith Weinhold (00:42:11) - Yeah, I can't imagine anyone not getting a multiple on their investment with attending the conference. You know, one thing that you do really well there at the conference, Brian, besides just listening to all those speakers that you just mentioned, you also have panel format discussions where sometimes you can learn more when you're listening to a conversation than you can when you're listening to a presentation. You have both choices there. Then if you prefer you want to break, you can go across the hallway to where the exhibit hall is and do some learning and meeting people over there. And then you also have these breakout sessions where you go upstairs into small rooms and learn from presenters in just the niche that you think most interests you or that you want to learn more about. So there's really good variety there.

Brien Lundin (00:42:54) - Yeah, it's kind of a time tested format. It's different than most conferences you'll find out there, but it's worked well for us for 49 years, and our attendees seem to appreciate the unique format that we have and the ability to learn.

Brien Lundin (00:43:09) - And it really is information almost overload. There's so much of value from these speakers. If you are intellectually curious, if you are a serious investor, if you enjoy an intellectually stimulating environment in a destination location, this is really the place for you. And you know, I can go on over and over again for as long as we have time for and more to say talking about it. But the best advertising we do are people who word of mouth from people who have come. And I would encourage anyone who is considering coming to the New Orleans Investment Conference. Number one, this is our 50th anniversary. It's going to be a very special year. But number two, find somebody who's been before. Talk to them about it. And I think you'll get excited about attending this year.

Keith Weinhold (00:43:56) - Each year it is at an excellent location. It's at the New Orleans, Riverside Hilton and Bryan Terrace, those November dates for the event and then how one can attend.

Brien Lundin (00:44:07) - Yeah, it's November 20th to 23rd this year, so it's the week before us Thanksgiving week.

Brien Lundin (00:44:14) - So it's it doesn't interfere with that holiday. It's kind of a good little slot there. And people can learn more by going to one New Orleans conference.com. Very simply New Orleans conference.com.

Keith Weinhold (00:44:29) - All right. It's been great catching up on the state of the economy, real estate inflation, interest rates, gold. And thank you so much for putting on this terrific conference for the benefit of every interested investor. It's been great having you back on the show.

Brien Lundin (00:44:43) - Wonderful to talk to you again, Keith, as always.

Keith Weinhold (00:44:52) - Oh, yeah. Bright, inarticulate thoughts from Brian, as always, when he and I discussed those related factors of inflation and interest rates. I mean, this is such a germane discussion because, like he brought up, there seems to be this increasing propensity for all asset classes to rise or fall together. Like nearly every asset class is near an all time high right now. I'll need to research the incidence of this some more so that it's not just anecdotal, but the Fed's decisions. They seem to increasingly float up or knock down just about every investment class almost simultaneously.

Keith Weinhold (00:45:35) - Real estate stocks, gold, crypto commodities, collectible toys, even nearly everything. And when you're a real estate investor, you are already investing in commodities and metals, and you have direct ownership of those. Now, not so much precious metals in your real estate, but we're talking about items that are built into it, like aluminum and steel and copper. They probably exist in your properties. Well, their prices go into the replacement cost of your property, and they are a reflection of your real estate portfolio's overall value, too. Coming up here on future episodes of the show, it will be the inaugural appearance of the King of Commercial Real Estate here on the show. Also, there seems to be still a mainstream aversion to all debt types, and I suppose it finds me in the position of being real estate's debt proselytizing. Well, coming up on the show, I am going to ask and answer the question for you is any debt worth paying off? Which debts are good to pay down? Which stitch should be paid off, and which debt types do you want to keep, and which debt types do you actually want to get more of? What are the exact distinctions so that you know right where to draw that line on all the debt types that you hold on to.

Keith Weinhold (00:47:00) - So coming up here on the show, is any debt worth paying off? And I am pleased to tell you that if you would like to meet in person, yes, you're going to have a chance to do that at the special 50th anniversary of the New Orleans Investment Conference. Now, I'm not sure that meeting me in person really brings any benefit to you or the event, but yes, I am attending in person in New Orleans. I haven't been there since 2021 and I want to return. Brian London really knows how to put on an event. There is a lot of macroeconomic talk there and you will hear more about both that and gold than you will about real estate, although I expect plenty of real estate investing information there as usual. Again, it's November 20th to 23rd, four plus months away. And the registration link that you can use for this is in today's show notes. I will also get it into the next newsletter for you. Big thanks to the wise and wonderful Brien Lundin today. Until next week, I'm your host, Keith Weinhold.

Keith Weinhold (00:48:03) - Don't quit your daydream.

Speaker 5 (00:48:09) - 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 (00:48:37) - The preceding program was brought to you by your home for wealth building. Get Rich education.com.

509: Legendary Investor Jim Rogers' Dire Warning on US Debt Jul 08, 2024

Asset prices are near all-time highs for almost everything: real estate, stocks, gold, bitcoin, and more. This is because in a wave of high inflation, investors chase yields.

Legendary investor Jim Rogers joins us.

Jim gives dire warnings about US debt levels.

Meet me and one of our Investment Coaches in-person at FreedomFest in Las Vegas, July 10th to 13th.

I put $1T into perspective. A trillion seconds ago was 31,700 years ago. That’s when neanderthals roamed the plains of Europe.

The dollar is a monopoly. The US government has no competition for their product, the dollar.

Jim Rogers believes that higher inflation and interest rates are here to stay.

He says: “Before this is over, interest rates in the US are going to go much, much higher.”

Resources mentioned:

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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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. I'll tell you about a chance to meet me in person. Then we're joined by a renowned and legendary investor for his sage like wisdom on how you should respond to record US debt levels for forecast the future direction of inflation and interest rates, plus a taste of the Singapore real estate market today and get rich education.

Robert Syslo (00:00:27) - Since 2014, the powerful Get Rich Education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Weinhold writes for both Forbes and Rich Dad Advisors, and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich Education can be heard on every podcast platform, plus has had its own dedicated Apple and Android listener. Phone apps.

Robert Syslo (00:01:02) - Build wealth on the go with the Get Rich Education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates (00:01:13) - 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 (00:01:29) - Welcome to GRE. From Sydney, Australia, to Sydney, Nova Scotia, Canada, and across 188 nations worldwide. I'm Keith Weinhold and you're listening to Get Rich Education. Why are our values of almost every asset so high? Well, one reason is because we've had that high wave of inflation. When that happens, savvy investors, people just like you, they ensure that money must flow into assets. And that's because you seek a real return above and beyond inflation. If inflation were low, investors wouldn't have to chase yields this way. I've got more on asset values in a moment. But first, on today's guest, legendary investor Jim Rogers, who will hear from as a returning guest here soon in early 2019. So more than five years ago, he told us right here on the show that interest rates are going to go much, much, much higher over the next few decades and that is going to ruin a lot of people.

Keith Weinhold (00:02:32) - In fact, let's listen into that. Here it is. This is from get Rich education podcast episode 224, which you heard here in January 2019. This is Jim Rogers.

Jim Rogers (00:02:43) - And interest rates are going to go go much, much, much higher over the next few decades. And it's going to ruin a lot of people.

Keith Weinhold (00:02:50) - And then from there, he went on to tell us at that time, rising interest rates will set in for a long time. And this was back when the fed funds rate was just half of what it is today in mortgage rates were 4.5% back there in early 2019. So Jim Rogers made that firm prediction even before we knew about Covid. Then. And on that episode, we talked about getting your debt and locking it in. And then two years later in 2021, he was back here on the show to warn us to expect high inflation. Well, we sure got that too. And as you listen to Jim Rogers on today's episode, consider that, you know, he just often speaks with this sort of, I suppose, nonchalance that I think can make it easy to dismiss what he says.

Keith Weinhold (00:03:46) - But don't do that because countless people have benefited from his guidance for decades. Just like I hope that you do today in the real estate world. Now, agencies agree that the national year over year home price appreciation rate is 6%. That's today per the FHFA, the NAR and Case-Shiller 6% home price appreciation. What about rents? Today, Single-Family rents are up 5%. Nationally, multifamily rents up 2.7%. So why are Single-Family rents growing faster than multifamily rents? Well, it's partly because 2023 saw the biggest surge in new apartment supply since 1987. Yes, that's back when Madonna was the hottest music artist and Reagan met with Gorbachev. But there's less apartment construction this year, so expect a lot of that to get absorbed. Available inventory of Single-Family Rentals is going to stay more scarce than apartments for quite some time, but long term they both expect to be in really great shape. Residential rental demand is sustainable now. Back in 2022, available single family home inventory that was an astoundingly paltry one quarter of what was needed.

Keith Weinhold (00:05:20) - Well, now it's up to half. Some inventory has definitely been added. In fact, I was recently on television being asked about that. But this still means that demand handily exceeds supply. There's not nearly enough housing, especially on the single family end. And what about those perpetually just around the corner, always, constantly just around the corner, fed interest rate cuts. They keep getting delayed beyond a lot of people's expectations. Well, per the CME's Fed Watch tool, here is the chance given of when the first rate cut will occur by the end of July. 10% September 60th 4%. November 70th 7% December 90th 3%. You know, personally, I think the chances are lower than all of those currently inflation's at 3.3%. But here's the thing. Even when it hits the Fed's target of 2%, that doesn't mean that rates must be cut. All right. That's a reality that a lot of people seem to forget. Now here on the show, not after every quarter, but sometimes when a quarter ends, just like one did a week ago, we take a quick look at other asset class moves outside of real estate in order to get a relative perspective.

Keith Weinhold (00:06:43) - Some comparison here. If you're listening to this episode ten years from now, this is really going to help mark this era for you to is we do have many listeners that listen to every single episode. The 30 year mortgage rate is near 7%. Now, all these next figures are year to date through the first half of the year. So this is just the performance of the first half. Stocks have soared. The S&P is up 15%. One way that US stocks changed last quarter is the trades are now going to settle faster. Investors will see their purchases and sales finalized in just one day instead of two. Gold is up 13% to over 2300 bucks. Bitcoin up 44%, oil up 16% to $82. And again, that's performance for just the first half of this year. The world's three largest companies Apple, Microsoft and Nvidia have a combined value of over $9 trillion. Now, a company's total value is known as its market cap, and that is simply found by multiplying share price and shares outstanding. By comparison, all the gold in the world is worth 15 trillion.

Keith Weinhold (00:07:54) - Hey, if you're familiar with an event called Freedom Fest, I have some cool news for you. It's an annual conference that. How would I describe it? Well, I haven't attended it before, but there you can learn to expect more about free thinking and ideas about the size of government. Well, it starts in two days. It's July 10th to 13th in Las Vegas. You can meet one of Gre's investment coaches in person there and you can also meet me. Yes, we'll both be there. If you see us, be sure to say hi. We'd both like to meet you. Hashtag IRL in real life, some of the Freedom Fest speakers include our frequent great guest, Robert Kiyosaki, as well as some other guests that you've heard with me here on the show. Also, Steve Forbes, Iced Tea, the comedian Rob Schneider, Nevada Governor Joe Lombardo, Whole Foods founder John Mackey and the congressman that wants to end the fed, Thomas Massie and more. They're all speaking. So yes, not a lot of notice, but if you're going, it's a way to meet me in real life, perhaps just in a casual way, in two days at Freedom Fest.

Keith Weinhold (00:09:08) - Well, it is public information that the net worth of this week's guest is $300 million. He's been influential for a long time. Let's talk to legendary investor Jim Rogers. This week's guest needs a little introduction. He is a legendary business and investing mogul of our time. He's a Yale educated, prolific author. He co-founded the Quantum Fund, and he even has his own commodities index and ETF. He's also a prolific traveler. He wrote a very well known book about his world travels, visiting some 116 nations. Hey, welcome back to gray. It's Jim Rogers.

Jim Rogers (00:09:51) - I'm delighted to be here. Okay, let's get rich. I need to get rich. I want to get rich.

Keith Weinhold (00:09:56) - Hey. Well, your guidance helps us do that. That's why you're here. And Jim is joining us remotely from his home nation city of Singapore today. And it's always interesting syncing up our times of day here. Jim, where to begin? You've been with us here. I think this is the fourth time you're here and about the last five years, and we're at a time when asset prices of seemingly everything are near their all time highs, maybe even in their inflation adjusted all time highs in some cases.

Keith Weinhold (00:10:25) - What are your thoughts with asset price levels?

Jim Rogers (00:10:29) - Keith. You it's very perceptive of you and insightful. Yes. This is one of the few times in world history that I know about where nearly everything is making new eyes. I think China is probably the only country. It's not making new eyes, but nearly everything else is. Now it's wonderful. It's great. A lot of people are having a lot of fun, but unfortunately, I've been around long enough to know that when things get this good, when everybody's having so much fun, we're getting closer to the end. I am not selling short or anything yet, but I see the signs that this is going to come to an end, as it always does, and it's going to be a mess. And the reason this is going to be a big mess this time. You remember what happened in 2008 because of too much debt each. That's 2009. The debt everywhere has skyrocketed. I mean, even China has a lot of debt now. China bailed us out before, but everybody has a lot of debt now.

Jim Rogers (00:11:31) - Maybe not North Korea, but everybody else does.

Keith Weinhold (00:11:34) - And that sure includes us. I mean, we have these asset prices at all time highs. Yet here we are, still the largest detonation in the history of the world in the United States now at 35 trillion. And we're spending dollars on others wars, something that we couldn't say when you and I talked a few years ago. The biggest line item of our national budget anymore is about $1 trillion in annual interest payments alone in. Jim, we're really on this course now where soon the US annual tax receipts won't even cover the interest payments on our debt, and we may have to borrow just to pay the interest. So where do we reach the breaking point here? With this world in debt led by the United States?

Jim Rogers (00:12:20) - You one makes some very good points. Unfortunately. I wish you didn't. I wish you couldn't make those points right. It's simple arithmetic. Just look at the numbers. And the numbers you recite are just what they admit, what they write.

Jim Rogers (00:12:34) - There's a lot of off balance sheet debt that they don't even talk about. I mean, the numbers, if you try to get out of pencil on a piece of paper, you will realize that the market can never pay this debt. Never. Countries that have gotten into this situation in the past have had big problems. Now it's a good time to be an old American. I don't have to worry about all this for too many years, but I have young children. Oh my gosh. The problem is that their country is going to face in their lifetime. I was staggering. You look back at previous countries that have done this kind of thing. In the 19 to 100 years ago, Britain was the richest, most powerful country in the world. 50 years later, it was bankrupt. IMF had to fly to London and pay their bills. It wasn't fun. It was terrible what Britain went through. But other countries have done the same thing. Maybe we don't like what I'm saying or what's happening, but just read the history and you will see how it winds up.

Jim Rogers (00:13:38) - I certainly don't like it, but I have to deal with facts. If I don't deal with facts, I'll go bankrupt. To which I don't want to do.

Keith Weinhold (00:13:48) - Yeah, sometimes let's laugh to keep from crying. Right? When you talk about how certain government figures are just what the government is willing to admit to, I think that's the right lens to look through. When you look at any government figures. Well, at least that's the part that they're willing to admit to. It's interesting that they're willing to admit to this is interesting that they're willing to admit to 9% inflation like we peaked at two years ago. But when you talk about the future and this huge debt load and children or grandchildren, could austerity be part of it, something that's very politically unpopular. But if we lived in an austere state, wouldn't that really be sort of like the downfall of the American empire at that point?

Jim Rogers (00:14:30) - Well, that's what happened to the British. As I said 100 years ago, they were the richest, most powerful country in the world.

Jim Rogers (00:14:36) - There was no number two. Then if two years later, completely bankrupt, I happened to be in England during part of that time and it was a mess. Wretched. So I don't like saying any of this, but I have to deal with the reality and the numbers you cite or what they admit. You know, the numbers are much worse. I don't know if anybody in Washington really knows. I don't even know if they care enough to check to see how bad things are. But every time a someone from Washington, a politician or a bureaucrat says something, they say, don't worry, everything's okay. We have a Janet Yellen who's a secretary of the Treasury. Are you or two ago said, don't worry, we have everything under control.

Keith Weinhold (00:15:20) - Reassuring isn't it? Not really.

Jim Rogers (00:15:22) - Oh my gosh. He's got a couple of fancy Ivy League degrees, but she still says, don't worry, it's okay. Well, I worry, I'm probably not as smart as she is, but I worry.

Keith Weinhold (00:15:36) - Well, it's interesting that you bring up the fact about the things that we don't know and these numbers, these debt levels and even the deficit gets so big, we're just throwing around this word trillion anymore.

Keith Weinhold (00:15:48) - For some perspective, I happen to know that 1,000,000,000,000 seconds is 31,700 years. In order to help put this into perspective, well, 31,700 years ago, that's just about as far back as when the planes of Europe were being roamed by Neanderthals. That's 1,000,000,000,000 seconds ago. And again, we are $35 trillion in debt, and we have a deficit of at least $1 trillion. The annual thing.

Jim Rogers (00:16:21) - I'm glad you're putting some perspective on this, but I don't need it. I know it's a staggering whatever number you want to look at, whether it's the one they report or the one that's they hide whatever it is, I know, because I can add and subtract. I know that America has a gigantic problem that is going to end up like every other country that's done this sort of thing. It's going to end up badly. America is going to lose its status, not this month. Don't worry. July is okay. But no, I can read, I can add, I can subtract. I know how it's going to wind up.

Jim Rogers (00:17:02) - It's not good for young Americans.

Keith Weinhold (00:17:06) - I mean, we think of the fall of the Roman Empire. You bring up the UK. The UK is still part of the G7, but they're no longer the one predominant power in the world. Jim, when I look at history and I think about sort of the powers that be and how they create and debase the currency, and how those problems percolate into so many parts of the society. I think if the United States is basically they have a monopoly on creating currency, and I just wonder if that's part of the problem. Lennar builds houses, but they have competition from KB homes. John Deere makes tractors and they have competition from New Holland. Heinz makes ketchup and they have competition from hunts. See, when there's competition, there's sort of this incentive to produce quality and provide others with value. But since the U.S. has no substantial competition to the dollar, I wonder if we can think of this as a de facto monopoly from its dilution of the purchasing power of the dollar.

Keith Weinhold (00:18:06) - Its quality is suffering because the dollar doesn't have any substantial competition. So I guess what I'm leading up to, what I'm getting at, is we think about currency creation as a de facto US monopoly. I mean, does the government have to be the exclusive money printer where all this just ends up in the debt column here?

Jim Rogers (00:18:24) - You raise some very good points. But back to the first main point. The main point is there is no way that America can ever pay these debts except by default, Which is one horrible way. Or by printing gigantic amounts of money, which is another horrible way. This is not the first time countries have done this. If you just go back and look, it is never ended well. Never ended well. Yes, England is still there, but nobody thinks about England the way they did 100 years ago. And nobody in England lives like they did 100 years ago, and many people left. I don't know what's going to happen to the US, except I know it's not going to end well because I can add and you can add and subtract.

Jim Rogers (00:19:15) - I wish we could subtract. There's nothing to subtract because the debt just keeps high and higher and higher. And the numbers are very simple. If you get out the amount of debt we have and see the possible income, it just doesn't work. If you have fifth grade education, fifth grade arithmetic, you know it doesn't work.

Keith Weinhold (00:19:39) - Jim, I don't know if you remember this, but the first time you were with us, it was January of 2019. That was more than five years ago. And at that time you said interest rates are going to go much, much, much higher. That was your direct quote, three matches. And you said that it's going to ruin a lot of people. And here we are with a lot of people ruined in the commercial real estate world and the apartment syndication world and so on. So if you continue to think there's going to be more currency creation to make it easier to pay back our debt, does that mean you believe that higher interest rates and higher inflation are going to be a persistent condition, say, just till the end of this decade, which is about another five years? What do you think about inflation and interest rates for these next five years?

Jim Rogers (00:20:27) - I know that in Washington they will print money.

Jim Rogers (00:20:31) - That's all they know. They want to keep their jobs. They don't care about you. I don't care about any of us. They care about keeping their job. And they will do whatever they have to to keep their job the easy way. Now, the proper way, of course, is to buckle up, buckle down, and start doing something about the rendus situation we were in. They don't care. They think they'll be gone by the time those times come, if they're ever coming, and they will say, but we're America. We cannot have problems like that. Well, that's what the British said, too. Once upon a time. And as I say, there was no number two to the British. They were that power. They were that much on top. It's not that I don't like saying. I don't like thinking it. I don't like living with it. But I do hope I can prepare so that I don't go down the tubes like some other people will. But I may just do the arithmetic.

Jim Rogers (00:21:32) - It's very simple. The numbers just cannot work. I didn't say the numbers do not work. I said they cannot work because the situation is that dire. They can hold it off for a while by printing money. Great. But then not for you and me. Certainly not for our children.

Keith Weinhold (00:21:51) - I think that's all they're going to keep doing. That's the most expedient way to do it, to keep printing any politician that proposes austerity. And you having soup for breakfast, lunch and dinner is not very likely to get re-elected. Does that mean in the next five years you foresee historically elevated interest rates and inflation, which is basically where we actually still are now?

Jim Rogers (00:22:14) - Well, of course I do. I mean, there's the market. The problem is right now the central banks still think they're in control, and they pretty much are. But there will come a time. And there always has in history when the market says, wait a minute, we know you're lying. We know this cannot work. And then when the market takes over and the market starts setting interest rates and other conditions, that's called disaster.

Jim Rogers (00:22:41) - That's a real, real serious problem. The market will know how bad things are, and the Treasury secretary can sit there and say all day long, don't worry, don't worry. We have it under control. And the Marquis will say, thanks, but we know better.

Keith Weinhold (00:22:59) - Well, we've got more coming up with Jim, including. He spent some 60 plus years abroad. I want to learn more about what he thinks with living and traveling so much about the United States. You're listening to get Rich education. Our guest is legendary investor Jim Rogers. When we come back, I'm your host, Keith White. Hope your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K.

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Speaker 5 (00:25:08) - This is The Real World Network's Kathy Petke, and you are listening to the always valuable get Rich education with Keith Reinhold.

Keith Weinhold (00:25:26) - Welcome back to get Rich. university. So we're talking with investing mogul legendary Jim Rogers.

Keith Weinhold (00:25:32) - He's joining us from Singapore today. He's joined us a few times over the past five years. And with what he said in what's coming, he's really been remarkably accurate. Sometimes he just gives a pretty casual delivery, but you really want to listen in to what he's saying. A lot of people have hung on his every word for decades here. And Jim, part of that is all your worldly experience. From so many of your travels and visiting over 100 nations. I've only visited about 35 so far myself. What do you think that we can learn about the United States from living and traveling abroad?

Jim Rogers (00:26:07) - First of all, I used to tell you I have made many mistakes in my life. I don't think I don't know how to get things wrong. I have many times. But yes, living abroad, I certainly even traveling abroad is an eye opening experience. It's a fabulous education. Rudyard Kipling, who won the Nobel Prize for literature, once had a line and a poem. The name of the poem was The English flag and the lion was.

Jim Rogers (00:26:36) - What can he know of England? Who only England knows. One is you'll know a lot about your own country if you know about the rest of the world. And you will you. If you go to country X and you see they eat different food or wear different clothes, it'll make you realize a lot about America. So my point is it's a fabulous education to see other places. I don't know if it's helped me. I in my view, it has helped me a lot to understand the world and to understand other people.

Keith Weinhold (00:27:11) - Now, in my international travels, which are a fraction of yours, a lot of times I get a reminder that life in the United States is still pretty clean and efficient. We have an abundance of potable water all the way to an amenity like fast Wi-Fi. And you know if someone abroad is traveling in the United States, they get to experience those things, and they probably don't even realize or understand that we're the greatest detonation in the history of the world. It's actually pretty difficult to know.

Jim Rogers (00:27:40) - There are signs that even those travelers will see. If you go to JFK airport, you will see the huge difference in JFK and say, the Japanese Narita Airport. You know your intuitive world when you visit some international airports outside of the US. But it's not just that America. Five star hotels do not compare with five star hotels in other countries. Listen, I don't like any of this because I have to live it. But the facts are. Yes. And you make a very good point that most people do not notice or does not affect them much at all if it affects them at all. But that just makes the eventual problem worse, because it hits us out of the blue and we don't know what happened. At least if we're worried, we can prepare. But you know, if you ride down the highway, most people think everything. It's okay. This is a nice interstate layout of potholes. They think everything is great. I hope that this all changes. I hope I'm wrong, but I have seen enough to dough that it's not going to end well.

Keith Weinhold (00:28:55) - Tell us about where you've lived for a long time. I mean, you come from the United States, but you've lived abroad for a long time. You've been there in Singapore for a while. Singapore, which is a place I haven't traveled to, has a reputation for being prosperous and enterprising in a really clean place. So will you tell us a little bit more about why Singapore is prosperous, including what its real estate markets like?

Jim Rogers (00:29:20) - Singapore is a tiny country. There are only 5 or 6 million people here. So yes, it has been a remarkable success story. It's probably been one of the greatest success stories in the world in the past 40 or 50 years. It still amazes me to see how efficient and how well everything works here. And they don't have yet the getting debt now, but they don't have the staggering debts that some other countries do. I mean, Japan, America. You look at some of the great success stories that come to people's minds. Japan did it by borrowing staggering amounts of money.

Jim Rogers (00:29:57) - Every day, the Bank of Japan borrows huge amounts of money it's going to have a problem to someday. I mean, it's just very simple. I don't want it to sound like some crazy fear monger, but I can read. And I know how this is always wound up. Now there's some very exciting and successful places in the world. And if you go to some parts of the United States, you say, oh my gosh, what a wonderful place. And it is. But underneath seems to me that there are problems developing. If you come to Singapore, you'll say, oh my gosh, and I'm not the only one who knows it all. The international surveys show that Singapore is one of the very top.

Keith Weinhold (00:30:42) - Now in Singapore, is it more of an owner society where most of the residents own the home they live in or like you find in a lot of urban areas? Is there a disproportionately high amount of renters there in Singapore?

Jim Rogers (00:30:55) - Over 80% of the people at Singapore own their own home.

Jim Rogers (00:31:00) - The guy who set out to build Singapore new and he especially because in his lifetime there had been a lot of riots in Asia. And he somehow knew that if people own their own home, they had a huge stake in the country, right? Had a reason to make sure, to try to make sure everything went well. So in this country, over 80% of the people own their own home. Yeah, he may have a mortgage, but still they own their own home. That's part of the reason for the success. I mean, for what it's worth, I'll also tell you he was a huge believer in education. He made sure that everybody spoke at least two languages. I mean, he knew what it took to be successful and he did it. Yeah.

Keith Weinhold (00:31:49) - Homeownership is generally good for communities like you touched on. You just have more of a stake in making sure your neighborhood stays quiet. Or you might show more interested enthusiasm in new clean mass transit coming into your area. You're more likely to be a voter when you own your home, and so on.

Keith Weinhold (00:32:06) - So sure, that gives the residents a more vested stake in their own community, which is good for everybody. Does Singapore have one problem that we have here with United States housing? Do you have any idea if there's a substantial housing shortage there in Singapore, like we're seeing in so many places?

Jim Rogers (00:32:21) - Do not shortage in the sense that you probably mean it? Yes. At times prices go high because there's not an abundance of housing and people keep moving to Singapore because it has been a successful place. So no, it's not like many places that we both know, but there are more immigrants coming here. The population is rising and they got a little somewhere. Yes, people are building homes and so it's not a gigantic problem at the moment. Can it be? Yes, of course it can be. And maybe it will be someday, but not at the moment. One thing I'll quickly say. Many societies, many countries, have a saying that families go from rags to rags and three generations. And there are many reasons for that.

Jim Rogers (00:33:11) - So social reasons. I will point out that Singapore is now on its fourth new government. So maybe if human wisdom is correct, maybe Singapore is going to have some problems in the future. You don't see them now. They might though.

Keith Weinhold (00:33:28) - Well, that's an interesting way to think about it. We've talked about problems in a few nations, Jim. I wonder, do you see there being a bright next up, incoming nation because you have this relative perspective from all your travels.

Jim Rogers (00:33:43) - There are places that are trying to change and do better. Yet, Nam is a perfect example. I mean, what a nightmare it was 40 or 50 years ago. Right now it's on the rise. South Korea is one of the most successful, prosperous nations in the world. And in 1970, North Korea was richer than South Korea. That, of course, is not true anymore. So countries can change and can develop. And it has worked. I'm interested in Uzbekistan now, in Central Asia. It was ruined by the communists.

Jim Rogers (00:34:20) - over 600 years ago. Uzbekistan conquered a lot of the world. I mean, then the communists came along and ruined it. But now they're changing again. So there's always somebody on the rise, and I'll be somebody on the decline. That's key, of course, is to be in the place where things are getting better, not getting worse.

Keith Weinhold (00:34:42) - With that in mind is we're about to wrap up here. Jim, you know, I like an actionable takeaway for the audience. And before I ask you that, if I can share with you what we do here in a nation and a world of expanding debt, Grey's take on debt here is the way that we can borrow large amounts prudently and get our own debt is to buy income producing real estate. If you borrow more, you can only control more and both inflation and tenants passively debase your mortgage debt for you, which enriches that borrower as long as they can control their cash flow. So really, that's one thing that we're doing to play things here in a world of inflation.

Keith Weinhold (00:35:25) - What are your thoughts with that? Or if you think that there's something else that the everyday person can really do to protect themselves in the future.

Jim Rogers (00:35:33) - It's pretty clear that there have been, if you understand that and if you manage it properly, oh my gosh, you can become unbelievably successful and unbelievably rich. The proper words are though, if you handle it properly. History also showed that many people have been ruined by debt, so I hope that everybody understands that debt is not as simple as it looks, but if you handle it properly, oh my gosh, the returns and the rewards are huge. And yes, there are many, many throughout history, throughout the world, many people that made gigantic fortunes from property, from real estate. So I hope you're doing it right. I hope all of your viewers are doing it right. It's not as easy as it looks, but it can lead to great success and great disaster. So yes. Don't stop. Make sure that everybody understands the potential problems and the potential rewards and they don't get overextended.

Jim Rogers (00:36:37) - Oh my gosh, you'll be very, very rich.

Keith Weinhold (00:36:40) - Yeah, that's a little bit like fire. If used inappropriately, could burn down your house. But if you know how to use fire, you can cook meals for the rest of your life. Do you have any last thoughts overall, anything you'd like to share? Anything we really want to know?

Jim Rogers (00:36:54) - I will tell you again that before this is over, interest rates in the US are going to go much, much higher. The debt is staggering. It is just whenever I look at the numbers and think about them, it shocks me, stuns me because I know it's going to lead to huge, huge, huge problems. But the people who are aware and understand what's happening and thrive. So this is not some kind of disaster for everybody, but some people will do extremely well. I hope that everybody you know does extremely well.

Keith Weinhold (00:37:31) - Well, Jim Rogers, it's been a pleasure hearing from you again. As always. Thanks so much for coming out of the show.

Jim Rogers (00:37:37) - My pleasure. I hope we can do it again sometime.

Keith Weinhold (00:37:45) - Oh yes. It's good to get the bigger picture. Sage like wisdom. I'm not sure if you caught it early in the interview, but Jim is not selling short. That means he's not betting that stocks are about to take a big fall. He expects even higher interest rates when it comes to America's swelling debt. Most agree that they're just going to keep inflating their way out of it, rather than default on it. I do, too, but consider that the US actually does have a history of defaulting, like in 1971 when we told the world that you can no longer redeem our debt, IOUs for your gold, that there was defaulting on a promise, we weren't going to give them the gold anymore. Singapore is still growing fast. In fact, it's averaged about 2% annual growth over the last decade. If you discard pandemic aberrations, the value of the median Singapore condo is $1.7 million, and it is 1000ft² in size. That sort of makes you think about New York City real estate.

Keith Weinhold (00:38:52) - And in fact, I had a trip planned to Singapore in February 2020. It was a cruise, but I didn't go. That part of the itinerary got cancelled. If you remember, Covid heated up in Southeast Asia early on, so I ended up spending more of that trip in India and Dubai. As it turned out, with our accelerated expansion of the supply of dollars that have been created since 2020. Here's one result today, more than 43% of Americans have been forced to cut back over the past year, and nearly 20% have had to borrow from family or friends in order to make ends meet. And you know when politicians brag about government funding. Just remember this. They're actually expecting you to give them credit for spending your money. That's what that means. And unfortunately, no one is immune from Congress's spending, which can be reckless at times. If you don't pay for something with taxes, then you pay for it with inflation. And that's exactly the type of issue that we expect to study on at Freedom Fest, where I might be fortunate enough to meet you in two days.

Keith Weinhold (00:40:10) - Big thanks to the iconic Jim Rogers today. His website is Jim rogers.com. Coming up on the show here in future episodes soon, we're going to discuss a few components that add value to your residential real estate that really don't get discussed very often. Garages and also the vacant land that your property sits on. Also, the King of Commercial real estate is set to make his Get Rich Education debut. We'll learn about commercial real estate turmoil and the commercial sectors that higher interest rates have blown up. Well, hey, do you have family or friends that are into investing or real estate? I love it when you hit the share button on your podcasting device or whatever platform you're listening on. Everything that we do here is free, and the share button really helps the show. And be sure to follow or subscribe to the get Rich educational podcast yourself if you haven't already. Until next week, I'm your host, Keith Reinhold. Don't quit your daydream.

Speaker 6 (00:41:19) - 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 (00:41:29) - 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 (00:41:47) - The preceding program was brought to you by your home for wealth building. Get Rich education.com.

508: Essential Real Estate Quotes You Must Hear Jul 01, 2024

Explore influential quotes and maxims from the investing and business world.

This includes from: Warren Buffett, Mark Twain, Robert Kiyosaki, Albert Einstein, Dan Sullivan, Thomas Edison, Benjamin Franklin, Suze Orman, and yours truly, Keith Weinhold.

“Why not go out on a limb? That’s where the fruit is.” -Mark Twain

“Given a 10% chance of a 100x payoff, you should take that bet every time.” -Jeff Bezos

“The stock market is a device for transferring money from the impatient to the patient.” -Warren Buffett

“Don’t live below your means; expand your means.” -Rich Dad

“The wise young man or wage earner of today invests his money in real estate.” -Andrew Carnegie

“Savers are losers. Debtors are winners.” -Robert Kiyosaki

Resources mentioned:

For access to properties or free help with a

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GREmarketplace.com

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RidgeLendingGroup.com or call 855-74-RIDGE

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Complete episode transcript:

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. Real estate and other investing involves people from the disappointing to the mesmerizing. People have contributed countless quotes, maxims and aphorisms on investing today. All recite and then we'll discuss dozens of influential ones and what you could learn from this timeless wisdom today on get Rich education.

Robert Syslo (00:00:29) - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Reinhold writes for both Forbes and Rich Dad Advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus has had its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast.

Robert Syslo (00:01:06) - Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates (00:01:14) - 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 (00:01:30) - Welcome to diary from Ellis Island, New York, to Ellensburg, Washington, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to get Rich education for the 508th consecutive week. Happy July. It's the first day of the quarter, and it's now the second half of the year. So late last year when you got takeaways from our goals episode here, I hope that you're still applying them today. We're doing something different on this show. For most episodes. I divulge a lot of my best guidance. Some even quote that material. But why don't I acknowledge others great quotes maxims in aphorisms along with some of my own? And then I'll tell you what you can learn from them. So yes, today it's about axioms, adages, mantras and quotes, maxims and aphorisms. Some of these you've heard, others you probably haven't.

Keith Weinhold (00:02:28) - The first one is the only place you get money is from other people. Yeah. Isn't that so solidly true? You've never received any money in your life from yourself, unless you try to counterfeit it and give it to yourself. It's always been from other people. When you realize that the only place that you do get money is from others, you realize the value of relationships and connectivity. The next one comes from the brilliant entrepreneurial coach Dan Sullivan. You are 100% disciplined to your set of habits. Gosh, this is a terrific reminder about the importance of how you have to often uncomfortably apply something new in order to up your skill set up your game. If you keep getting distracted, well, then that's a habit, and then you'll soon become disciplined to the habit of distraction. The next two go together, and they're about market investing. Nobody is more bearish than a sold out bull. And the other is bears make headlines. Bulls make money. Really the lesson there is that they're both reminders that it's better to stay invested rather than on the sidelines.

Keith Weinhold (00:03:53) - The next two are related to each other as well. Albert Einstein said, strive not to be a person of success, but rather to be a person of value. And then similarly, a more modern day spin on that. Tony Hsieh, the late CEO of Zappos. He said, Chase the vision, not the money and the money will end up following you. And the lesson here is, well, we'd all like more money, but if you focus on the money first, well then it doesn't want to follow you. You need to provide value and build the vision first, and then the money will follow and you know, to me, it's kind of like getting the girl if you act too interested in her and you get too aggressive, it's a turnoff. But if you quietly demonstrate that you're a person of value, or subtly suggest somehow in a way that their life could be improved by having a relationship with you or being around you, then they're more likely to follow. And yes, I'm fully aware that this is a heterosexual male analogy, and I use it because that is what I am.

Keith Weinhold (00:04:58) - So if you're something else, I'm sure you can follow along with that. The next quote is from Susie Kasam. Doubt kills more dreams than failure ever will. Gosh, isn't this so on point? It's about overcoming the fear in just trying. And then if you know that you've lived a life of trying, you're going to have fewer regrets. Thomas Edison yes, the light bulb guy in the co-founder of General Electric, he said the value of an idea lies in the using of it. Oh, yeah, that's a great reminder that knowledge isn't really power. It's knowledge plus action that creates power because an idea that remains idle doesn't do anyone any good. Hey, we're just getting started talking about investing in real estate quotes today here on episode 508 of get Rich education. And, you know, remarkably, these maxims and catchphrases, they're usually just 1 or 2 sentences, but yet they are so often packed with the wisdom such that these takeaways and lessons are like your three favorite ones today. They can change the trajectory of your entire life.

Keith Weinhold (00:06:20) - The next quote is one that I have said carefully bought real estate has the best risk adjusted return in. The world. And I don't need to explain that because we talk about that in some form or another on the show many weeks. Albert Schweitzer said success is not the key to happiness. Happiness is the key to success. If you love what you're doing, you will be successful. Yeah, I'd say that one is mostly true. Just mostly, though, there's no attribution here. On this next one, you might have heard the aphorism money is a terrible master, but an excellent servant. Yeah. Now, I've heard that one for a long time, and it took me a while to figure out what it really meant. And here's my take on that. If you make money, the master will. Then you'll, like, do almost anything. You'll trade your time for money. You'll sell your time for dollars instead. If you invest passively and it creates leveraged equity and income streams, oh, then money serves you.

Keith Weinhold (00:07:28) - It's no longer the master. That's what that means to me here in a real estate investor context. And, you know, it really underscores the importance of making money work for you. And is a follow up to last week's show. Whose money are we talking about here? Whose is it? It's focusing on getting other people's money to work for you, not just your own. Now, the next one is a quote that I've said on the show before, quite a while ago, though. And come on now, what would an episode about quotes, maxims and aphorisms be without some contribution from Mark Twain? Here Twain said, why not go out on a limb? That's where the fruit is. that's just so, so good in business and in so many facets of your life, constantly playing it safe is the riskiest thing that you can actually do. Because a risk averse investor places a ceiling on his or her potential in a risk averse person imposes an upper limit on their very legacy. In fact, episode 275 of the get Rich education podcast is named Go Out on Limb precisely because of this Twain quote.

Keith Weinhold (00:08:45) - So listen to that episode if you want to hear a whole lot more about that. It's actually one of Twain's lesser known quotes, but perhaps his best one. The next one comes from famous value investor Benjamin Graham. He said the individual investor should act consistently as an investor and not as a speculator. Okay, so what's the difference there? A speculator takes big risks in hopes of making large quick gains. Conversely, an investor focuses on risk appropriate strategies to pursue longer term goals, which is really consistent with being a prudent, disciplined real estate investor. Presidential advisor Bernard Baruch contributed this to the investing world. Don't try to buy at the bottom and sell at the top. It can't be done except by liars. yes. Tried to time the market. It might be tempting, but it rarely works because no one really knows when the market has reached its top or its bottom. All you can really hope to do is buy lower and sell higher. But you're never going to buy at the trough and sell at the peak.

Keith Weinhold (00:10:00) - And even buying lower and selling higher is harder to do than it sounds, even though everyone knows that's what they're supposed to do. Albert Einstein is back here, he said. Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn't pays it. And as you've learned here on the show on previous episodes, compound interest. It does work arithmetically, but not in real life would apply to the stock market. Of course. My quote contribution to the investing world on this is compound interest is weak. Compound leverage is powerful. I broke that down just last week on the show, so I won't explain that again. Now, really, a central mantra in GR principle is don't live below your means, grow your means. But I must tell you, I can't really take credit for coining that particular one because from the rich dad world, the quote is don't live below your means, expand your means. But I did hear that from them first, and though it can't be certain, I think it was Sharon letter that coined that one.

Keith Weinhold (00:11:13) - A lot of people don't know this, but she was the original co-author of the book. Rich dad, Poor Dad with Robert Kiyosaki. And Sharon has been here on the show before, and if I have her back, I will ask her if she is the one that coined that. Don't live below your means. Expand. Your means. But yeah, I mean, what this quote really means is, in this one finite life that you have here on Earth, why in the world would you not only choose to live below your means, but actually take time and effort learning how to do a better job of living below your means when it just makes you miserable after a while, when instead you could use those same efforts to grow your means and you can only cut down so far. And there's an unlimited ceiling on the upside. And now there is one caveat here. I understand that if you're just getting on your feet, well, then living below your means might be a necessity for you in the short term.

Keith Weinhold (00:12:08) - And what's an example of living below your means? It's eating junk food because it's cheap and filling, expanding your means. That might be doing something like learning how to do a cost segregation to accelerate your depreciation. Write off on your 20 unit apartment building. But you know, even if you're in hardship, I still like live within your means more than the scarcity minded guidance of live below your means. Next is a terrific one, and it really reinforces the last quote a rich man digs for gold. A poor man is concerned with the cost of a shovel. Oh yeah, that's so good. And I don't know who to attribute that to. It's about growing your means and taking on and actually embracing calculated risks. Not every risk, calculated risk. And you can also live that regret free life this way. In fact, episode 91 of this show is called A Rich Man Digs for gold. So you can get more inspiration for that from that episode. Okay, this one comes from the commodities world where there are notoriously volatile prices.

Keith Weinhold (00:13:18) - How do you make a million? You start with 2 million. now, this next one is one that I don't really agree with that much. You really heard this a lot the last few years. It applies when you have a mortgage on a property, and that is the house is the liability and the debt is the asset. I know people are trying to be crafty. People kind of use this pithy quote when they're discussing how those that locked in at those artificially low mortgage rates years ago considered the debt so good that it's an asset. It's like, yeah, I know what you're saying. And I love good real estate debt and leverage and all that, of course. But really, for you, truly, then if the House is a liability and the debt is an asset like you're saying, then give away the house to someone else. If it's such a liability, and keep the debt to pay off yourself if it's really such an asset. A little humorous here. Next, Forbes magazine said, how do you make a million marry a millionaire? Or better yet, divorce one then more? Real estate ish is Jack Miller's quote how do you become a millionaire? Well, you borrow $1 million and you pay it off.

Keith Weinhold (00:14:31) - And I think we can all relate to that here at GRE. Better yet, borrow $1 million and don't pay it off yourself. Have tenants and inflation pay it down for you. And you know, inflation is getting to be a problem for any of these, like century old classic quotes that have the word millionaire in them. Because having a net worth of a million that actually used to mean you were wealthy, and now it just means you're not poor, but you might even be below middle class. Now, you probably heard of some of these next ones, but let's talk about what they mean. Warren Buffett said the stock market is a device for transferring money from the impatient to the patient. And then Benjamin Franklin said an investment in knowledge pays the best interest. I mean, yeah, that's pretty on point stuff there when it comes to investing. Nothing will pay off more than educating yourself. So do some research before you jump in. And you've almost certainly heard this next one from Warren Buffett.

Speaker 4 (00:15:28) - You want to be greedy when others are fearful, and you want to be fearful when others are greedy.

Keith Weinhold (00:15:32) - That is, be prepared to invest in a down market and to get out in a soaring market. As per the philosophy of Warren Buffett, it's far too easy for investors to lose perspective when something big goes wrong. A lot of people panic and sell their investments. And looking at history. The markets recovered from the 2008 financial crisis. They recover from the dotcom crash. They even recover from the Great Depression, although it took a long time. So they're probably going to get through whatever comes next as well, if you really follow that through what Buffett said there. Well, then at a time like this now, I mean, you could be looking at shedding stocks as they continue to approach and break all time highs. Carlos Slim, hello said with a good perspective on history, we can have a better understanding of the past and present and thus a clear vision of the future. Sure. Okay, that quote like that probably didn't sound very snappy and it's really simple, but he's telling us that if you want to know the future, check on the past.

Keith Weinhold (00:16:39) - Not always, but often. It will tell you the future directory, or at least that trajectories range. And this is similar to how I often say take history over hunches, like when you're applying economics to real estate investing. Now this next guy has been a controversial figure, but George Soros said it's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong. Okay, I think that quote means that too many investors become almost obsessed with being right, even when the gains are small, winning big, and cutting your losses when you're wrong. They are more important than being right. Amazon founder Jeff Bezos said given a 10% chance of a 100 times payoff, you should take that bet every time. All right. Now, that's rather applicable to the high flying risk of, say, investing in startup companies. We'll see. Bezos himself, he took a lot of those bets, a 10% chance at a 100 X payoff. And that is exactly why he's one of the richest people in the world.

Keith Weinhold (00:17:49) - Now, if you haven't heard of John Bogle before, you should know who he is. He co-founded the Vanguard Group, and he's credited with popularizing the very concept of the index fund. I mean, Bogle transformed the entire investment management industry. John Bogle said, don't look for the needle in the haystack. Just buy the haystack. Okay? If it seems too hard to say, find the next Amazon. Well, John Bogle came up with the only sure way to get in on the action. By buying an index fund, investors can put a little bit of money into every stock, and that way they never miss out on the stock market's biggest winners. They're only going to have a small part. And what that means to a real estate investor is, say, rather than buying a single property in a really shabby neighborhood, that neighborhood will drag down your one property. So to apply boggles by the whole haystack quote. What you would do then is raise money to buy the entire block, or even the entire neighborhood and fix it up, therefore raising the values of all of the properties.

Keith Weinhold (00:18:55) - Back to Warren Buffett. He had this analogy about the high jump event from track and field. He said, I don't look to jump over seven foot bars. I look around for one foot bars that I can step over. Yeah. All right. I mean, investors often do make things too hard on themselves. The value stocks that Buffett prefers, they frequently outperform the market, making success easier. Supposedly sophisticated strategies like short selling. A lot of times they lose money in the long run. So profiting from those is more difficult. Now, you might have heard the quote, and it's from Philip Fisher. He said the stock market is filled with individuals who know the price of everything but the value of nothing. Yeah. I mean, that's really another testament to the fact that investing without an education and research that's ultimately going to lead to pretty regrettable investment decisions. Research is a lot more than just listening to the popular opinion out there, because people often just then invest on hype or momentum without understanding things like a company's fundamentals or what value they create for society, or being attentive to price to earnings ratios.

Keith Weinhold (00:20:08) - Even Robert Arnott said in investing, what is comfortable is rarely profitable. You know, that's pretty on point at times. You have to step out of your comfort zone to realize any big gains. Know the boundaries of your comfort zone. Practice stepping out of it in small doses. As much as you need to know the market, you need to know yourself too. Can you handle staying in when everyone else is jumping out, or do you have the guts to get out during the biggest rally of the century? You've got to have the stomach to be contrarian and see it through. Robert Allen said. How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. That's the end of what Robert G. Allen said. Yeah, though inflation could cut out the millionaires part. Yeah I mean point well taken. No one builds wealth through a savings account. Now a savings account might be the right place for your emergency fund. It has a role, but it's not a wealth builder.

Keith Weinhold (00:21:10) - I mean, since we left the gold standard back in 1971, so many dollars get printed most years that savers become losers. Which, hey, that does bring us to Robert Kiyosaki. He's been a guest on the show here with us for times now, one of our most frequent guests ever. Here he is. The risks at Port Arthur. And you probably know what I'm going to say. He is, he said. Savers or losers? Debtors or winners of something that your parents probably would never want to know that you subscribed to your grandparents, especially. Yes, he is one of the kings of iconoclastic finance quotes. And as you know, I've got some contributions to that realm myself. But what Kiyosaki is saying is if you save 100 K under a mattress and inflation is 5%, well, now after a year you've only got 95 K in purchasing power. So therefore get out of dollars and get them invested. Even better than if you can get debt tied to a cash flowing leveraged asset. In fact, episode 212 of this very show is named Savers are Losers.

Keith Weinhold (00:22:18) - Debtors are winners. So I go deep on that theme there. We've got more as we look at it and break down some of the great real estate investing quotes, maxims and aphorisms. They generally get more real estate ish as we go here, including ones that you haven't heard before and dropping, quote, bombs here that absolutely have to be enunciated and brought to light ahead. A group of Real Estate quotes episode. Hey, learn more about what we do here to get rich education comm get rich education.com. And do you have friends or family that are into investing or real estate? I love it when you hit the share button on your pod catching device or whatever platform you're listening on. Everything that we do here is free and the share button really helps the show. Be sure to follow or subscribe yourself if you haven't done that more. Straight ahead. I'm Keith Reinhold, you're listening to get Rich education. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings.

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Keith Weinhold (00:25:20) - Welcome back to Get Your Education. I'm your host, Keith Weiner. We're having some fun today, looking at and breaking down some of the great investing quotes, maxims, and aphorisms. Andrew Carnegie said, the wise young man or wage earner of today invests his money in real estate. Another one for Mark Twain here by land. They're not making it any more. You probably heard one or both of those. And yeah, Twain's time predated that of those islands that are built in Dubai. But Twain's point is still well taken. There is an inherent scarcity in land. Louis Glickman drove the point home about real estate investing when he simply said, the best investment on Earth is Earth. A Hebrew proverb goes as far as saying he is not a fool man who does not own a piece of land.

Keith Weinhold (00:26:18) - Wow, that's pretty profound right there. And if you're a female listener, yes, many of these timeless quotes from yesteryear harken back to a period when all of the landowners were men. President Franklin D Roosevelt, he has a real estate quote that you probably heard, but let's see what I think about it. Let's talk about it. Here it is. Real estate cannot be lost or stolen, nor can it be carried away, purchased with common sense, paid for in full and managed with reasonable care. It is about the safest investment in the world. That's from FDR. That's pretty good. I just don't know about the paid in full part because you lost your leverage. FDR, Johnny Isakson, a US senator, said, in the real estate business, you learn more about people and you learn more about community issues. You learn more about life. You learn more about the impact of government, probably more than any other profession that I know of. And that's good, really on point stuff there.

Keith Weinhold (00:27:23) - If you're a direct real estate investor like we are here, you really learn those things. If you're in, say, a REIT, well, you're not going to be exposed to that type of knowledge in experiences. Hazrat Ali Khan is a spiritualist and he said, some people look for a beautiful place, others make a place beautiful. Yeah, that's some mystical motivation for the house flipper or the value add real estate syndicator right there, Political economist John Stuart Mill, he said something you've probably heard before. Landlords grow rich in their sleep without working, risking or economizing. Oh, yes, you can have a real estate quotes episode without that classic one. Although rather than landlords growing rich in their sleep, the phrase real estate investors is likely more accurate. Don't wait to buy real estate. Buy real estate and wait. You've surely heard that one. You might not know that it was actor Will Rogers with that particular attribution, entrepreneur Marshall Field said buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy, billionaire John Paulson said.

Keith Weinhold (00:28:45) - I think buying a home is the best investment any individual can make. That's what Paulson said. let's give Paulson the benefit of the doubt here. Although Robert Kiyosaki famously said that a house is not an asset because an asset puts money in your pocket and your home takes money out of your pocket, well, a home is something that you get to live in, build family memories in, and you do get some leverage if you keep debt on your own home. So maybe that's more of what's behind John Paulson's maxim there. Notable entrepreneur Jesse Jones. He said I have always liked real estate, farmland, pasture land, timberland and city property. I have had experience with all of them. I guess I just naturally like the good Earth, which is the foundation of all our wealth. Business mogul Tamir Sapir said if you're not going to put your money in real estate, where else? Yeah, I guess that's a good question. Anthony hit real estate professional. He said to be successful in real estate, you must always inconsistently put your client's best interests first.

Keith Weinhold (00:30:00) - When you do, your personal needs will be realized beyond your greatest expectations. Yeah, I think he's talking about being a team player there. And if you're a real estate agent, it's about putting your client's needs over yours. If it's a landlord, perhaps then you're thinking about putting your tenants first and meeting their needs so that they stay in your property longer. Here's a quote that I've got to say I don't understand. It's from real estate mogul and shark tank shark Barbara Corcoran. She says a funny thing happens in real estate. When it comes back, it comes back like gangbusters. I don't really know what that means, and I don't know what a gangbuster is yet. I see that quote all over the place. I can't explain why that would be popular. I don't get it at all now, novelist Anthony Trollope said it is a comfortable feeling to know that you stand on your own ground. Land is about the only thing that can't fly away. Entrepreneur Armstrong Williams is here with this gem. Now one thing I tell everyone is to learn about real estate.

Keith Weinhold (00:31:12) - Repeat after me. Real estate provides the highest returns, the greatest values in the least risk. Yeah, that's a real motivator of a quote. As long as one knows what they're doing and buys, right? All of that could very well be true from Armstrong Williams. It was none other than John de Rockefeller that said the major fortunes in America have been made in land. Yeah, it's just really plain and simple there. John Jacob Astor, he got specific and more strategic here. This is Astor. He said, buy on the fringe and wait by land near a growing city. Buy real estate when other people want to sell and hold what you buy. I mean, yeah, that's pretty much an all timer right there from Astor. Winston Churchill said land monopoly is not only monopoly, it is by far the greatest of monopolies. It is a perpetual monopoly, and it is the mother of all other forms of monopoly. Yeah, interesting from Churchill. And there's a good chance that you haven't heard that one before.

Keith Weinhold (00:32:26) - Perhaps. So say, for example, if one owns real estate on all four corners of a busy street intersection, then that quote applies. It's like you've got a monopoly on a popular intersection. Russell Sage said. This real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security. That's from Russell Sage. And, you know, you know, something here is we've got lots of real estate specific quotes in this segment is that it is rare to nonexistent to see any negative quotes about real estate, about anyone saying anything bad about it. It's all positive stuff. Waxing eloquent about real estate. And there are a lot of reasons to do that. But not every real estate moment is great. Maybe this is all because nothing quotable is said when you find out that one of your tenants is a drug dealer. Well. Finance expert Susie Orman says this owning a home is a keystone of wealth, both financial affluence and emotional security.

Keith Weinhold (00:33:46) - Yeah, a lot like an earlier quote. A home is the only investment that you get the benefit of living in. Peter Lynch said. No, what you own and why you own it. I mean, that is short, sweet and it's just a really good reminder to you. Do you now own any properties that you would not buy again? And if you wouldn't buy it again, then should you consider selling it now? Not FDR, but Theodore Roosevelt. He said every person who invests. In well selected real estate in a growing section of a prosperous community, adopts the surest and safest method of becoming independent for real estate is the basis of wealth. That's Theodore Roosevelt. Yeah. He reiterates that you want to own most of your property in growing places, something that really hasn't changed over all this time. Coke Odyssey contributes to this. The house he looked at today and wanted to think about until tomorrow, maybe the same house someone looked at yesterday and will buy today. Oh, gosh, that's true.

Keith Weinhold (00:34:58) - I think that everyone has the story of the one that got away. Margaret Mitchell said the land is the only thing worth working for. Worth fighting for, worth dying for. Because it's the only thing that lasts. Yeah. Wow. Some real passion there from Margaret. Sir John Templeton said the four most dangerous words in investing are. It's different this time. Yeah. I think what Templeton is advising is to follow market trends in history. Don't speculate that this particular time will be any different. Warren Buffett said wide diversification is only required when investors do not understand what they are doing. Yeah, that insight from Buffett. That's pretty applicable when you understand that you've got to get good in a niche and then get rich in that niche, meaning being narrow. Why diversification? That's likely better when you're just beginning and you don't know much, but then you want to get niche in your big earning years. And then perhaps when you're older, you get diversified once again because you're more interested in just protecting what you have.

Keith Weinhold (00:36:15) - Robert Kiyosaki said it's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. Now there's something with tax efficiencies and more in that Kiyosaki quote. My friend Dave Zook, billionaire dollar syndicator and frequent guest on this show, he said, you can be conventional or you can be wealthy. Pick one. Oh yeah, I love that from Dave. Because if you do what everyone else does, you'll only get what everyone else got. And I've contributed some material here over 508 episodes of this show. Although I won't claim the eminence of some of the other luminaries of the past few centuries discussed today. I've been known to say these. You do care about what others think. That's your reputation. I've been known to say the scarcity mentality is abundant and the abundance mentality is scarce. And some say that in real estate, I was the first one to point out back in 2015 that real estate pays five ways. Another that I have is a critique of delayed gratification.

Keith Weinhold (00:37:31) - Now, some delayed gratification is okay early on in your life, but I've said too much delayed gratification becomes denied gratification. Here on Earth, you live just one life. Hey. And the other day, an entrepreneurial friend. I don't know. He seemed to think that I have the right life balance. I'm not sure if that's true or not, but here's what I told him. And I think he said this because he often sees me out to exercising and things. I told him I give my best to exercise. Business only gets left over time. That's because exercise is hard and making money is easy. Yeah, there it is. That's my take on that. And that's it for today. I hope that you got some learning, some perspective, a few laughs and that some thought was spurred inside your mind in order to give you at least one big, rich novel takeaway here. And it's probably best for you to refer back to this episode of quotes, maxims, and aphorisms. At times when you're feeling shaky about your investment decision making, or just other times of uncertainty.

Keith Weinhold (00:38:49) - Until next week, I'm your host, Keith Reinhold, and there's something else that I've been known to say. Don't quit your day. Drink.

Speaker 6 (00:39:00) - 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 (00:39:28) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

507: Compound Interest is Weak Jun 24, 2024

Compound interest in stocks gets worn down to less than nothing due to: inflation, emotion, taxes, fees, and volatility.

I focus on the little-understood deleterious effects of volatility.

DON’T focus on getting your money to work for you. Learn what to focus on instead.

Compound leverage and OPM are the wealth-building flexes.

We discuss how to use a lower down payment to achieve a potential 20% cash-on-cash return with the BRRRR Strategy. Join our live, virtual event for this at: GREmarketplace.com/webinar

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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Compound interest is weak. What kind of iconoclastic heresy is that? Oh, I've got even more. Including. Don't get your money to work for you. This is a wealth building show. So why don't we discuss 401 days in IRAs here? It's precisely because they're not designed to build wealth. We'll get into that then. A way you can achieve higher property, cash and cash returns than you can with buy and hold real estate today and get rich education.

Robert Syslo (00:00:38) - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Wine, who writes for both Forbes and Rich Dad Advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki.

Robert Syslo (00:01:06) - Get Rich education can be heard on every podcast platform. Plus it has its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates (00:01:23) - 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 (00:01:39) - We're going to go from Saint Helena Island to Helena, Montana and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get Rich education. Compound interest is weak. Compound leverage is powerful. And with both available to most anyone, why don't you have more leverage in your financial life? That was a long time listener. You probably understand that if you're a newer listener, your reaction to that is like, wait, what? I mean, your inner self is telling you something like that challenges my existing longtime belief about how compound interest builds wealth. In fact, I will fight to protect this core belief. Even Albert Einstein purportedly called compound interest the eighth wonder of the world.

Keith Weinhold (00:02:36) - All right, well, let's break down compound interest until it looks as impotent as it is, as pathetic as it is, and as fallacious as compound interest is in the sense that it applies to your life as an investor. Now understand, I once thought the same limiting way that perhaps you once did, and that most others still do. When I was out of college and at my first job, I thought that there could be nothing better than getting my money to work for me with compound interest. Oh, and then maybe even the layer on top of that with the tax efficiencies of, say, a 401 K, 400 3B4 57 plan or an IRA. Then I took a real interest in this stuff, and I soon learned that I don't want any of those things because they don't build wealth. I don't want compound interest. I don't want to focus on getting my money to work for me. And I don't want any of those government sponsored retirement plans either. And that's why today I don't have any of them now, I remember when I had this one particular appointment, a financial planning appointment a few years ago, and I had it with what I'll call a conventional financial planning firm.

Keith Weinhold (00:03:56) - Maybe I remember it so well because it was an in-person meeting. It was in a tall office building that I went to and visited in downtown Anchorage, Alaska. And when I was in this money manager's office where basically what he was trying to do is win me as a new client. That's fine. That's his business model. Well, he had this big paper and cardboard sort of laminated charts thing resting on an easel, and this chart was prominently placed in his office so that I or anyone could see it. It showed the rate of return over time of. And I forget which index it plotted. It was either the Dow or the S&P, but no matter. It showed the return line going up and to the right for over 100 years. Your classic chart go up. It gave the impression to a prospective new client like me that, oh well, I had the opportunity to buy into this. And if I just invest my capital with this money manager and pay him fees for managing it for me now, I was at the point where I was starting to become better educated on these sorts of things compared to a layperson, for sure.

Keith Weinhold (00:05:06) - And I had been a real estate investor for a while at this point. Well, that physical chart in his office resting on an easel, it showed something like an 8 or 10% stock market return over time. Let's just be kind and call it 10% annually. And that's the first time in my life that I ever remember asking the question when I asked that money manager something like the chart shows a 10% market return, but what would my return be after inflation? Emotion taxes, your fees and volatility. Mic drop. You could hear a pin drop. I'll tell you what. That money manager almost froze. He didn't know what to say. I just remember, he began his reply, starting with talking about how inflation was low at the time. And yes, CPI inflation was low at that time, but he just didn't have a good answer for me. He was overwhelmed. He may have not ever had anyone ask him a question like that in his life. That sure is how he acted. And needless to say, I left his office that day without ever becoming one of his investors.

Keith Weinhold (00:06:17) - All right, so then let's dig into it. I've scratched the surface a little. What is the problem with, say, a 10% average annual return compounded over time? I mean, that sounds rather attractive when it's presented that way. Well, first, what do you think that the real rate of. Long term inflation is some make the case that it's still 15% today, even though the current CPI is 3 or 3.5%, and anyone that's looked at it feels that measure, the CPI is understated. So what do you think you want to use 6%. How about 6% as the long term true diminished purchasing power of the dollar? Okay then will your 10% stock market return -6% or you're already down to a 4% inflation adjusted return? Then there's the emotional component to buy and sell at exactly the wrong time, because no matter what people say they're going to do, most people want to sell when stocks are low because they're discouraged and they're just tired of taking their losses and they want to cut their loss. And then conversely, people want to buy when stocks rise because they're encouraged and they say they're a momentum investor and they experience FOMO if they're not in and riding the stocks up, well, what did you just do then? You just sold low and bought high.

Keith Weinhold (00:07:42) - How much does that emotional effect drag down your 4% inflation adjusted stock return that were already down to now? I mean, are you already at less than zero? Then there's taxes. Even in a 401 or IRA, you either pay the tax now or you pay the tax later. It's not tax free. How far below zero is your real return? Now that it's taxed? The IRS won't adjust your tax for inflation on a capital gain. Then tack on the investment fees, which can be 2% or higher. If you've got a professional money manager like the guy I met with in downtown Anchorage, or the fees can be really low if you are in an index fund. But how far below zero are you now? And that brings us to the last drag on compound interest in the stock market. We're not even done yet, remember? Okay, all we've done now is deduct out inflation, emotion, taxes and fees. What about adjusting it down further for volatility. Let's look at how deleterious volatility is to this floored compound.

Keith Weinhold (00:08:48) - Interest builds wealth thesis right here. Because you know on a lot of episodes we've just glossed over that. It just comes down to math. If you're up 10% one year and down 10% the next year, you're not back to even run the math and you'll see that you've lost 1%. That's just simply math. And now I'm going to get wonky here for a moment, and I'll use a more extreme example to demonstrate my volatility point for you. But I must get that way in order to debunk this myth about how compound interest builds wealth, or the getting your money to work for you builds wealth. Time spent making up lost returns is not the same as positively compounding your return. Any time you're looking at the annual average performance of an investment, it is vital to check how that performance has been calculated. And bear with me here for a minute, because this is substantive. Say your collection of stocks or whatever it is, just your overall portfolio value. It doesn't matter. Say it's up 50% one year, down 40% the next, then 50 up 40, down 50, up 40 down again.

Keith Weinhold (00:10:05) - All right. That right there was a 5% average annual return. But your average annual return. That is a lie because a 5% return through arithmetic performance. That sounds better than what really just happened to your money. So in a mutual fund prospectus, you might see that as a headline number, the 5% average annual return. But that's a lie in the small print. That's where you're more likely to see this CAGR, the compounded annual growth rate, and the CAGR. That's usually going to be worse than what the average annual number is. That headline number. And in our example, the CAGR is -5.1%. In this case that's the geometric figure. That's what you really want to look at not the arithmetic one. It looked like the market was up 5%, but your real return on your money was down 5.1%, a delta of 10.1% then. And the more volatile your returns are, the wider and wider this difference becomes. Now, if there were zero volatility, your average annual return, the arithmetic thing and the CAGR, the geometric thing, they would be the same and there wouldn't be any need to have this discussion.

Keith Weinhold (00:11:35) - This discussion is. Germane because volatility exists in the stock market and its related derivatives. So small differences over time compound and see really the problem is over the decades in your conventional retirement account, if you think that you're going to be quadrupling your money over time, but you only double your money over time, now you can see how this becomes a major problem. Come time for your retirement when it's too late. All right. Now, if you didn't follow that part because there were a few numbers flying around, just remember this time spent making up for lost returns is not the same as positively compounding your return inflation, emotion, taxes, fees, and volatility that just broke down any conventionally invested nest egg to less than nothing. This is why volatility is worse for investments than most people think. Well, we had someone write in to our general mailbox a while ago. And by the way, we like to hear from you. You can always communicate with us here at GR either through email or voice at get Rich education.

Keith Weinhold (00:12:52) - Com slash contact that's get rich education comment. I'd love to hear from you and really appreciate having you as a listener. Well, a listener wrote in on our inbox. They're asking why, if we're a wealth building show, why don't we talk about the benefits of 401 or IRAs? Well, it's squarely because those things don't create wealth. They aren't even designed to build wealth, but they create the illusion of doing so, partly due to the myth of compound interest that I just explained. But there's more outside of any employer match for IRAs and just generally investing cash in mutual funds or stocks or ETFs, they all have another gigantic problem. It could be a problem even bigger than the compound interest fallacy, which I just addressed. And that is all you're trying to do is get your money to work for you. Getting your money to work for you does not build wealth. Show me some evidence that it does. All right. Well, what's the problem here with these 41K and IRAs? I think you know, where I'm going is that you don't get any leverage.

Keith Weinhold (00:14:06) - Where is your leverage? Every single dollar that you lock away there means that you don't get the opportunity to ethically use three x or four x of what you've invested in OPM, other people's money, which you can build wealth off of. Where is your compound leverage with those conventional vehicles? It's gone. It never existed in the first place. Plus there's typically zero monthly cash flow. Plus you could have it invested where you don't legally have to pay any tax. Instead any tax, because retirement fund investors either pay tax today or pay tax later. Real estate can permanently mitigate income tax like you can get with real estate depreciation and absolutely zero capital gains tax on your real estate with the 1031 exchange. But let's not let the compound interest versus compound leverage case go to rest here just yet okay. How does then compound leverage build wealth instead? Well, the most available means for you to get access to leverage OPM is with real estate. Well, let's just look at what's going on today. Today, per the Fhfa, national home prices, they're up 6.6% year over year.

Keith Weinhold (00:15:26) - That's the latest figure that's not too different than historic norms. All right then. Well, if one year ago you had made a 20% down payment on a property that's 5 to 1 leverage, so you just take your 6.6% home price appreciation rate multiplied by five, and there's 33% for you. You went from a 6.6% return on the asset to a 33% return on your money, because you got the return on both your money and the bank's money. The majority is from the bank, OPM. So if you got a 33% return in year one, maybe it's 26% the next year and 21% the following year. It will go down over time as equity accumulates. And that's compound leverage. That's the wealth builder. And notice what else? Now that you know how destructive volatility is to returns, there is less volatility in real estate asset values. So now you're really on the path because you have a durable wealth builder. And then of course in real estate those high leverage returns are one of just. Five ways you can expect to be paid, but that one is the biggest leveraged appreciation.

Keith Weinhold (00:16:41) - That is the biggest return source of the five over time. And now you better understand why you don't want to set up your investor life to optimize getting your money to work for you. You don't want that. It's to get other people's money to work for you. And my gosh, mathematics makes compound interest in getting your money to work for you look amazing. But the real world proves that compound interest in getting your money to work for you is a farce, and it will keep you working at a job, maybe a soulless job until you're old. But the sheep believe it. You're listening to this show, so you're not a sheep. You're not among the masses. If you do what everyone else does, you'll only get what everyone else got. If you want wealth for yourself. All right, well, then, do you see that? You would have to think differently. And do you think that you would have to learn new things and then act differently than the masses? Well, yes, of course you do.

Keith Weinhold (00:17:41) - You can either go through life as a home run hitter or as a bunter. Most people are afraid to do anything other than learn how to be a bunter. And that's why the most popular personal finance platforms give the worst advice that limit you and keep you small. It's because they're talking to people with average or below average mindsets, not below average intelligence, but an audience of average or below average mindsets, which are the masses and they're just striving to get to a level of mediocrity, okay. They cater to financially irresponsible people that are just trying to get up to a mediocre level. And you know what? I was recently listening to one of these shows, I'll call it, a get rid of your debt and invest for compound interest and get your money to work for you shows. One caller called in. He and his wife got a $60,000 windfall from an heir. And they're wondering what they should do with the money. And they owned a home valued at 500 K, with 320 K left on the mortgage, which was a 3.25% interest.

Keith Weinhold (00:18:53) - And the guidance that the host had for this caller. I'm not kidding. Here was to use the 60 K to pay the 320 K mortgage down, so then they'd only owe 260 on the mortgage. I'm not kidding. That was the recommended course of action. And this is not an aberration. I've heard this same guidance with other callers on this conventional show. I mean, the opportunity cost of such a misguided move, what has he done when he pays down his mortgage? 60 K like that. He lost liquidity, he lost leverage. And it didn't even help with his cash flow. Because with a fixed amortizing loan, your monthly payment is the same the following month. Anyway, that 60 K, instead of being used to pay down a mortgage that could have been leveraged again by purchasing, say, a 250 to 300 K rental property. So my point is that conventional guidance does not build wealth in financial freedom. When you're actually young enough to enjoy it, you do things like learn how to get out of debt and then solely grind for decades, doing so, all while paying the opportunity cost of being leveraged less for the opportunity cost of targeting something like debt free, which is the wrong target rather than being financially free.

Keith Weinhold (00:20:18) - It's just like, if you want a wealth coach, well, then you don't hire and listen to guidance from a mediocrity coach. It's the same is if you want to learn how to skydive, then don't ask a basketball coach because you're going to die. We practice what we preach here at GRA. Now me what would I do if I had a paid off rental property or paid off home? Well, first, I've never had any residential rental property paid off in my life. Not one. Although I could, I'd recognize the opportunity cost of zero leverage. But just say, hypothetically, a paid off home fell in my lap. What's the next thing I do? I would go get the maximum loan against it, and then I'd have access to cash that I could invest in other properties. But what about these new loans that I'm taking out? What happens with them? I'm not concerned because both tenants and inflation pay it down passively, without my involvement at all, without my grinding for it at all, without me trading my time for dollars at all.

Keith Weinhold (00:21:27) - Well, I am really glad that we got into this here in the first segment of today's show. If you're near the show, it probably gave you a starting point for. Some new topics to search. Maybe you should start with learning the difference and reading more about average annual return versus compounded annual growth rate. It's really eye opening. And yes, you've heard me say on the show before that stock returns are dragged into negative territory with inflation, emotion, taxes, fees and volatility. And what's new here today is that I took the volatility component and broke it all the way down for you. There is a real paradox out there in America and elsewhere. You know, people spend all this time learning about how work works, zero time learning about how money works. And yet money is the main reason that people go to work. So congratulations so far on educating yourself some more today. Suffice to say, compound interest does not build wealth. If you're focused on getting only your money to work for you, you are really missing out on leverage through OPM.

Keith Weinhold (00:22:38) - And the good news here is that you actually don't have to believe everything that you think. Even if you thought the same way for years or decades. Chances are you're by yourself when you're listening to me right now. So that way you can change your mind all on your own without anyone thinking that you're wishy washy. Is it iconoclastic? Yeah, sure it is. If you're going to live an outsized life, if you're going to have an outsized impact in this world and on others, then you don't want to get labeled as normal. I mean, me, myself. I want nothing to do with normal. You can learn more on topics like this with our Don't Quit Your Day Dream email letter that makes it visual for you. Get it free at get Rich education com slash letter I write every word of the letter myself again. Get it at get Rich education.com/letter or it's quicker while it's on your mind right now. Text gray to 66866 to get the letter. Text gray to 66866. More straight ahead on how to potentially achieve cash on cash returns of 20% plus with real estate today.

Keith Weinhold (00:23:58) - That's next. I'm Keith Reinhold. You're listening to get Rich education. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%. Hundreds of others are text family 266866. Learn more about Freedom Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text family to 66866. 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.

Keith Weinhold (00:25:21) - 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.

Ken (00:25:48) - This is Rich dad advisor Ken McElroy. Listen to get Rich education with Keith Reinhold and don't quit your daydream.

Keith Weinhold (00:26:06) - We're talking about how to profit more and faster than with buy and hold property with the BR real estate investing strategy will tell you more about a live virtual event tomorrow night, with more about it where you can attend from the comfort of your own home and have any of your questions answered in real time. And can is with me today to talk about it. Welcome in. Hello, Kate. Thank you. Thank you for the invitation to be.

Ken (00:26:32) - A part of the get Rich education podcast.

Keith Weinhold (00:26:34) - Oh, we're honored to have you. Tell us a little more about yourself. First, you're Memphis based and you're part of a real estate family. Your wife is a realtor.

Keith Weinhold (00:26:44) - Yes, that is true. I have been in.

Ken (00:26:46) - The real estate industry in Memphis, Tennessee since 1992. I believe I was born to be in real estate. If real estate's in my DNA. If you cut me open little houses, duplexes, commercial buildings and multifamily apartments will drip out. I am pure real estate.

Keith Weinhold (00:27:05) - And you definitely came up in the right place for that. For us major metros, you're in perhaps the best cap rate market. Now. A lot of people are familiar with fix and flip real estate, maybe something that they've seen on HGTV where you buy low, you fix it up and you sell it for more. In fact, a lot of people think that's what real estate investing means. And others, they think of real estate investing more passively by identifying a good property that's already fixed up for you with a tenant in it, and ready property management. That's sort of the turnkey way. Tell us more about the BR, where I think of it as using elements of both the fix and flip world and the buy and hold world, putting them together to produce high returns and even infinite returns.

Ken (00:27:54) - That is correct. So what we're doing and what we offer, it's a hybrid, turnkey and BR, we call it BR key a nice. So basically that acronym as you know it stands for buy, renovate, rent, refinance and repeat. And we've added the key to it because we do all of the turnkey worked for our investor clients. We do all of the heavy lifting. So we turn BR into a passive investment where we find properties through our sourcing, we vet the properties and then the properties are offered to investors in as is condition. We provide a desktop appraisal which provides a future estimated after repair value after the property has been renovated. We seek out appraisers who are certified, who are licensed in the areas in the markets that we provide properties in, so that we're not just shooting at the door on a future value, basing the values on what Trulia says or Zillow or Redfin and what have you. So it's a real certified value from a licensed appraiser. Then we have licensed contractors to provide the scope of work and an estimate on how much the renovations are going to cost.

Ken (00:29:24) - And then we do we have a relationship with an in-house property manager. The property manager markets the property, leases the property out, and our target market is partially section A, government subsidized tenants, because we found that in the Memphis, Tennessee area is that section eight pays more than market rate in most instances. And I like to say that section eight rent payments, the recession proof, they're Covid proof, they're pandemic proof. I have not received a call yet. And section eight says, hey, we could not get your section eight payment out because of Joe Biden not being able to sign the check, or he didn't work last week, or Donald Trump could not sign the check or what have you. But time and time again, those section eight payments, even during the pandemic, they always showed up at the beginning of the month without fail.

Keith Weinhold (00:30:25) - I have rented to section eight tenants myself, and I can attest to that. That check just keeps coming in. You have to have a case manager come in and take a look at the property.

Keith Weinhold (00:30:38) - Prior to that section eight tenant being placed. Section eight a government subsidized housing program for those that qualify. But now that we've talked about the tenant, some what which is the rent are if we look back at the first are in the borough that is the rehab. You could also call that first are renovation. And really what you're doing there is you're eliminating friction for a lot of people because one thing that turns. People away from the Bir or concerns them about the BR. Is that first r the rehab because they find it daunting or intimidating to manage contractors? A lot of people don't want to have to manage contractors, and those that do, they don't want to do it again. But the thing is, is that you formed a team of contractors, property managers, project managers to manage those contractors and lenders to assist with that entire BR key process, making it pretty hands off for the investor.

Ken (00:31:37) - That's absolutely correct. So we have the relationships with contractors your locally that we've vetted that have proven themselves.

Ken (00:31:46) - They're true blue and these contractors have withstood the test of time. We develop relationships with electricians, plumbers, heating and air conditioning guys, roofers, painters, flooring experts, guys that can do kitchen cabinets, countertops, everything from the router to the tuner. And we also have excellent relationships that we've developed not only with the big boxes, Home Depots, Lowe's, but there are actually many locally owned mom and pop family owned supply houses that we are able to get better prices on some items versus the big boxes. So if those savings are passed on to the investor clients that our project managers and contractors are renovating those properties for.

Keith Weinhold (00:32:41) - I want to talk more about how that's actually going the actual track record with that team. But before we do, if we talk bigger picture, let's look at some real numbers on an example property so that one can understand the overall process. On why BR is attractive to investors, and why they can put substantially less money into the deal than they can with what we would call a deal that's already completely done for you.

Keith Weinhold (00:33:08) - Turnkey.

Ken (00:33:09) - Yes, and I like to use a $100,000. It's a nice round number, right.

Keith Weinhold (00:33:16) - Inflation is basically it, but you can still find some.

Ken (00:33:19) - Yes. So an example said hypothetically, if we had a vetted property that was available to be purchased by an investor client, and that appraised value after repairs is estimated to be $100,000, we simply take 75% of that after repair value of $100,000, and we arrive at 75,000. So we work in reverse, in a sense. And if the contractor has estimated that the renovations, labor and material cost is going to be $25,000, 75,000, 75% of the 100,000, -$25,000 in renovation expenses that would leave $50,000. So the actual purchase price of the property would be $50,000 plus $25,000 in renovations. So the investors approximate all in is $75,000. That doesn't take into consideration title company fees, homeowners insurance. We encourage all of the investor clients to get a six months builder's risk policy from one of our sources that we use here locally, but of course, all of the investor clients are free to use or choose whomever they'd like to.

Ken (00:34:53) - So the property is purchased for 50,000. The renovations, which are high quality, are done for 25,000. So now the investor is all in for $75,000. Now we're at that second stage, and many times the renovations are completed before the property is rented. So though that second and third are kind of interchangeable, sometimes we the property's refinanced before it's rented, sometimes it's rented before it's refinance. So in a perfect world, the property has been rented to a client. So if the client's all in for $75,000 and we have what we created, our own 1% rule of thumb. So if the investor is all in for 75,000 and the numbers are still based on renting it for maybe 1% of the value. So we find that our rent versus price return is more than 1%. So in many cases we blow that 1% out of the water. We're talking about the.

Keith Weinhold (00:36:01) - Monthly rent being 1% or greater of the overall value or purchase. Price of the property.

Ken (00:36:06) - Yes, sir. That's true. That's correct. So after the property is rented for, let's say, $1,000 per month.

Ken (00:36:15) - Now it's time to get the property appraised. We do have lending partners that are very experienced with investment refinancing, whether it's conventional or whether it's DSC or refinancing. So now the appraiser comes out to the property after the investor client has made loan application. The investors appraiser comes out and voila, the property is totally renovated. It's rented out. The appraiser appraises the property for $100,000 plus or minus. It may appraise for 95, it may appraised for one T, and so on, so forth. So what happens with the investment refinancing the loan to value or LTV is usually 75%. It's not typical for the lender to refinance at 80% or 85% of the refinance. But with investment financing, refinancing nowadays is typically 75%, so the praise is for 100,000. The lender lends 75% of the 100,000, which is 75,000 on the refinance. So now the investor who has paid cash or possibly obtained a hard money loan or private financing in order to purchase the property, their coffers are replenished with it. 75,000 were either the hard money or the private.

Ken (00:37:42) - Long is paid off, and the investor now has a property that they've refinanced for 75,000. That's worth 100,000. But the key is now they've refinanced and they're at that final, or now they're able to repeat the process, rinse and repeat, re-up whatever you want that are to me. But it basically means you can reuse that $75,000 again to purchase your second property. Third property, you're able to scale quickly or pay off the hard money lender. And the hard money lender says, hey, I don't need this $75,000. Do you own it again to buy property number two? We're property number three. And it just goes on. And I'd like that word that to use key efficient.

Keith Weinhold (00:38:28) - Right. Because in at least one of the scenarios you described there, you would have no money left in the deal and 25% equity in the property.

Ken (00:38:37) - That is correct because even though the investor is all in for 75,000, that new roof, the new windows, the new luxury vinyl plank flooring, the new HVAC system and so on, so forth.

Ken (00:38:53) - Those improvements cause to happen is called force appreciation. It's worth more than $75,000 because of all of the improvements that have been made to $25,000 to new light fixtures, the pretty paint color, the new mailbox, the landscaping. So we found that many of the houses that we offer, they once were the ugly ducklings of the neighborhood. Now they're the beautiful swans of the neighborhood, and they're the homes and houses that people flock to that they prefer to living.

Keith Weinhold (00:39:30) - Yeah. So we're talking about some of those rehabs you might LVP the floor do a kitchen fluff up. By that I mean maybe you're saving and painting the cabinets, but replacing the countertops, new light fixtures, perhaps keeping bath tile in place, but glazing it and then bringing everything to code?

Ken (00:39:47) - Yes, sir. That's absolutely correct. And we do have a really nice design for our properties. We use really nice neutral colors when it comes to the tile, to the paint, the flooring, the vent hood color, so on, so forth.

Ken (00:40:02) - And you mentioned code enforcement, which we had excellent relationships with the Memphis Shelby County Code Enforcement officers, whether it comes to the electrical inspection, plumbing inspections, what have you, we have really good relationships with those government officials.

Keith Weinhold (00:40:20) - You might want exotic colors for your own home, but in a rental property you want to go neutral. It can take a while to rent a purple kitchen. Now talk to us about the the timeline to rehab and refinance a property. How many months or days does that take? And I'm looking for an not an optimistic scenario, but a realistic scenario and a real life track record of what you've done. Because I've known that our followers have bought a number of properties from you.

Ken (00:40:49) - Yes, our average turnaround time right now is approximately 90 days. The quickest turn that we've ever done from acquisition all the way to the final stage of refinancing was 32 days. But that particular property there was the scope of work of $15,000. It was really clean. Okay, already had a new roof, the AC system was already top knots, so there was just very few things that had to be delivered.

Ken (00:41:21) - But on average it's about 90 days from start to finish. And in this part of the country the weather's quite nice, especially during the summertime. It's very hot, but we are hit occasionally in the wintertime with snow and ice, and it paralyzed the city of Memphis because we're just not equipped the way the northeast is and some other parts of the country when it comes to snow and ice. So we push back our estimated time frame to complete a Berkey property during the winter months to about 120 days. But our average is 90 days, and we tend to we like to under-promise with the 90 days, but we may hit our target in 75 days or 80 days, and we just recently had some properties that we should be able to smash the all time record of 32 days, where we may be able to get from a buy to refinance done, and maybe 21 days.

Keith Weinhold (00:42:21) - Wow. That's the result of a well refined system. And I would submit to most any listener to try to do that across state lines or even in your own home market, as you're trying to manage contractors and codes and inspectors and appraisers and lenders and everything else, you're going to join us with our investment coach narration, co-hosting Gre's live virtual event.

Keith Weinhold (00:42:47) - Alex, a little bit more about what one can expect there. Attending the live virtual event to learn more about what.

Ken (00:42:54) - One can expect is that we will have, I guess, actual numbers on properties that are available, scopes of work, rental amounts that are based on our studies with the data that section eight provides, as well as the local market rents for cash paying tenants. So I do want to make it clear we do have cash paying tenants as well. But we do offer to the investor clients a choice. If we have a four bedroom property, for example, that section 8th May possibly pay 1700 a month for, and then all of a sudden we get a cash paying tenant that's willing to pay 1600. We present the information to the investor to say, hey, would you rather hold out for the $1,700 section eight tenant? Or would you rather go with the $1,600 cash flowing ticket that works at Blue Oval City, the electric vehicle plant that's on the outskirts of Memphis, about 30 miles outside of Memphis at the end.

Ken (00:44:01) - Who knows? Real soon. It was just announced yesterday that X, I and Elon Musk, they've chosen the city of Memphis to be the headquarters for the world's largest supercomputer. So we're looking forward to the benefits and economic boom that that's going to add to the Memphis market.

Keith Weinhold (00:44:23) - All right. So we've got some economic drivers behind this. Learn more about vetting tenants. Berkey and importantly, the value added here. By bringing that team, especially those contractors that are being managed for you with the Berkey join Jerry's live virtual event. It's where you can attend live in real time. You can ask questions if you wish that way, and you can do it all from your own home. Gree investment coach extraordinaire Naresh is going to co-host it along with my guest Ken. Here it is free to attend free learning and if you wish, expect a buying opportunity for property conducive to the BR. Often single family homes two, three and four bedroom properties in Investor Advantage Memphis, you'll learn which properties are right for this and which ones are not.

Keith Weinhold (00:45:10) - Attend tomorrow night it is Tuesday the 25th at 8:30 p.m. eastern, 530 Pacific. Attend tomorrow and sign up now at GR webinars.com. You can do it right now while it's top of mind for our live event that is at Gray webinars.com. Hey, it's been great having your insight. Thanks so much for coming on the show today.

Ken (00:45:33) - Thank you. You're welcome.

Keith Weinhold (00:45:40) - Between last year and this year, more followers have bought from this provider in this system than any other in the entire nation. Strong deals with less out of pocket for the investor. And maybe you don't prefer a section eight tenant. You can ask about that during the virtual event. And again, what was I saying here last week? This is the event that's a bigger deal than Olympic handball. Really though I would like for you to attend. This is entry level housing. So you're going to own a scarce asset that everyone wants. Expect to be in for a little of your own skin in the game, and you'll own a leveraged asset of tangible value that down the road.

Keith Weinhold (00:46:27) - Demographics say that people will desire to first rent from you and then later buy from you. If you think that it can benefit you and you like to learn, then I'd really like you to attend tomorrow night. I invite you Tuesday the 25th at 8:30 p.m. eastern, 530 Pacific. Register free now at Gray webinars.com. Until next week. I'm your host, Keith Wild. Don't quit your day dream.

Speaker 5 (00:46:58) - 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 (00:47:26) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

506: Properties are Vanishing, More $2M Median Home Prices Jun 17, 2024

The homeownership rate has fallen due to low affordability. This means that there are more renters.

There are still just one-half as many housing units as America needs. But it had been one-quarter.

New duplexes, triplexes, and fourplexes are vanishing. I describe six reasons why.

Two entire US counties now have a median home price of $2M+. Learn where they are.

It’s better to be an investor than a landlord or flipper.

GRE Investment Coach, Naresh, and I discuss how to use a lower down payment to achieve a potential 20% cash-on-cash return with the BRRRR Strategy. Join our live, virtual event for this at: GREmarketplace.com/webinar.

Resources mentioned:

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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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Hold properties are vanishing, and sadly, they represent some really good property types that are hardly being built anymore. American housing is changing for good. Two entire U.S. counties now have median home values of $2 million or more. You'll learn where those are and learn about a specific real estate investing strategy, where investors are getting especially high yield returns in today's low affordability market. All today on get rich education.

Robert Syslo (00:00:37) - Since 2014, the powerful Get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Weinhold writes for both Forbes and Rich Dad Advisors, and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform.

Robert Syslo (00:01:09) - Plus it has its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates (00:01:23) - 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 (00:01:39) - What we heard in 188 nations worldwide. I'm your host, Keith Weinhold, and you're listening to get Rich education. Last week, I covered a lot of bad news here as you and I uncovered some real estate problems. Of course, overall, when you're invested in real estate and obtain productive working income for yourself through tenants in their employment, you can almost always play another side of the coin and be profitable because, well, it really comes right back to the fact that real estate pays five ways simultaneously, for example, souring housing affordability. Well, that's bad for homeowners. That's bad news for people that are primarily want to be homeowners and not you. You're an investor. In fact, here's exactly what that means when you're the investor, the homeownership rate has fallen in in the past year.

Keith Weinhold (00:02:38) - It's gone from 66% down to 65.6% due to that low affordability. Okay. Well, that's just a 4/10 of a percent drop in the homeownership rate. And it is poised to fall further. Or what does that 4/10 really mean. Well, that's the proportion of Americans that don't own their homes. So then they have to rent. And this means that there are hundreds of thousands more American renters today than there were just a year ago. And that pushes up rental demand, rental occupancy and the price of rent itself. And that's what you get to capture off from a low affordability problem, which outsiders only think of as bad real estate news, because it is bad news through the lens of that one of your first time homebuyer. Now I want to tell you about the property types that are disappearing. Just vanishing today, and it's the degree to which it's happening that you probably aren't aware of. I'll also tell you why it's personally concerning to me, why this is all going on at all, and I don't even see any reason that it's going to turn around.

Keith Weinhold (00:03:52) - It's probably going to get worse. What's going on is basically that too many builders have thrown their duplex, triplex, and fourplex development plans out the car window like it's an Apple Corps on a summer road trip. They are vanishing. Yes, 2 to 4 unit properties vanishing. In fact, if you're a newsletter subscriber here, you got to see a jarring chart that shows this. And what you'll basically see is that in 2007, the number of 2 to 4 unit properties built just fell off a cliff. It flatlined, and it still hasn't gotten up. The amount constructed now is still just one half to one third of what it had been in pre global financial crisis years. Really they're only closer to a third. All right. So what we're talking about here is only about one third as many duplex triplex and fourplex starts today as there were 20 years ago. And this is sourced by the National Association of Homebuilders. And some call this entire phenomenon M triple M multi families missing middle. And whatever you call this disappearing act.

Keith Weinhold (00:05:10) - Before I get to the reasons for why this is happening, I've got to tell you that this disappearance, it hurts me a little. It's sort of heartfelt because as you know, I began this way with a fourplex that was my first ever property of any kind. You know, the story where I lived in one unit and rented out the other three. It was just an amazing way to start with a bang. Well, now, when we compare this paltry construction, this dearth of. construction today, when we compare that to both smaller property types and larger property types, that being single family homes and five plus unit apartment buildings, will construction of all three of these types fell hard around 2008. But here's the thing. Single family homes and five plus apartment buildings. They got back up around 2010 and they started resuming more building. But duplexes and fourplex, they never did. They never had that happen. The number coming out of the market that just kept flatlining. Those new starts. All right.

Keith Weinhold (00:06:16) - So why exactly is this going on with these vanishing 2 or 3 and four unit property construction types? Why this trend? Well, first, it's NIMBYism, not in my backyard ism primarily of those single family homeowners, because once people are comfy in owning their single family home. Well, then they don't want higher density duplexes in fourplex built in their area. They fear that it can lower their property values. It'll almost certainly increase the traffic around that area. And the second reason is that there simply just been less building overall of most all housing types. And I have discussed this elsewhere, so I won't get into it again. Yes, it is that erstwhile housing supply crash. A third reason for these vanishing 2 to 4 unit properties is the need for zoning reform and the adoption of what's called light touch density. Light touch density. That means a zoning strategy for more dense housing. And what are we up to now for? The fourth reason is that builders, they find more scale efficiencies when they build larger apartments.

Keith Weinhold (00:07:25) - Fifth is limits in international building codes, in international residential codes. And the sixth reason is that this trend began around 2008. These more recent work from home lifestyle starting in 2020. That means that residents can live in single family homes, and they tend to be further from the urban core, rather than 2 to 4 unit properties. And this lifestyle trend right here, that can mean that this disappearing trend for this property type continues. And there you go. They are the six reasons for why. If you were 2 to 4 unit properties are being built today, drastically fewer. And I lament this fact because see duplex the four plex neighborhoods, they can have good walkability where you don't always need a car to get everywhere. And yet at the same time, they still have ample green space. Now, conversely, some fourplex neighborhoods, you know, they can get to look and really junky. Well, they all have different owners. And then there are dumpsters all over the place, like my first fourplex was, and like my second fourplex was as well.

Keith Weinhold (00:08:33) - I really hope that builders become more attracted to the 2 to 4 unit space. See, with giant large apartment complexes, say 300 units. Well, the builder has to wait until the construction of all of those 300 units are done until they can start filling it with rent paying tenants. So therefore builders have to wait longer to start getting that rent income. But instead, construction of this missing middle housing that can be broken into phases. And that way units can be open when they're completed. And that provides early rent revenue to the builder and 2 to 4 unit properties. I mean, they really are an investor sweet spot, but due to builder and lifestyle trends like I'm describing, fewer are being built new. But please remember there were many missing middle properties built decades ago and they can still make good investment properties into the future. In fact, the first two fourplex that I bought were both built in the mid 80s, so there's still plenty that are already out there. The takeaway here for you is that you're going to be seeing fewer new ones, and that means that duplexes to fourplex is now take up a smaller proportion of America's housing stock, and that portion is positioned to become smaller and smaller going forward.

Keith Weinhold (00:09:56) - So it's not that death of these properties. We even have home builders at Gray Marketplace right now with new build 2 to 4 plex. So it isn't their death, but they are dying, waning in number. Now, Jerry recently got Ahold of some jaw dropping info here. I my gosh, now remember a few years ago, maybe even ten or more years ago when you probably heard something like certain small towns in California, Silicon Valley. They now had median priced homes that hit the million dollar mark. And you know, when you first heard that, you might have thought, oh, wow, it's not just neighborhoods, but entire towns in aggregate have hit the million dollar mark in some high priced American places. Well, then get ready for this. As housing affordability makes headlines in California in its wealthiest cities, continue to fight building more housing. We have two Bay area counties, not towns, but entire counties that have hit a milestone. The median price for sold homes there has climbed to $2 million or more.

Keith Weinhold (00:11:15) - We're not just talking 1 million anymore, and we're not just talking about one upper crust town, but two entire California counties now have median home prices of $2 million or more. And notice these are not asking prices. No speculation here. These are the values, the amounts that they have actually sold for. And this is according to a recent California Association of Realtors report. Median homes are now $2 million plus in which two Bay area counties, you might wonder? Well, first, Santa Clara County, which includes San Jose, they notched an even $2 million back in April. And yes, this is more than San Francisco County's $1.8 million. And the second county, it spirals even higher than that. The second California county, with median home prices of 2 million plus is San Mateo County. It's basically a county that lies between San Francisco and San Jose. And that's where the median home price sold for in San Mateo County, California, $2.17 million. Not just one upper crust town, but an entire county.

Keith Weinhold (00:12:38) - Not just $1 million, not even $2 million anymore, but $2.17 million. And this is not for a fancy, lavish home. This is just the median priced home in the middle and San Mateo County that is home to the nation's most expensive zip code, by the way. Atherton, California, where the median home price tops the charts nationally at $7.1 million. That's that is according to Compass Real Estate. And if that's not enough, homes are still flying off the shelves there. They're days on market is now at the lowest since 2022. And though all this sounds pretty astonishing right now, you know what? If you are listening to this episode ten years from now, well into the 2030s, you might think these were the good old days here. How quaint. Because over the next ten years, we all expect more inflation, and we've still got more housing shortage years between now and say, ten years into the future. And of course, here at URI, we don't tend to focus on the high priced markets, which tend to be on the coasts, things like this.

Keith Weinhold (00:13:55) - Really, it's just a harbinger of what's to come to more parts of the nation later on. What we do here is we help you win in real estate without being a landlord and without being a flipper. As a savvy investor that tends to buy either new or fixed up properties and might have a manager manage them for you, hands off is the place to be. Hands off is being an investor, and you get the best tax advantages this way to when your hands off and you know something. Some people that get into real estate investing, they think that they have to be a flipper, or that they have to be a landlord in order to make it profitable. Now, there's nothing wrong with those two disciplines. So much flipping or landlord. I was a landlord for a little while on my own properties. Most of my investment career. I use a property manager and I never flipped. It's just that these things flipping and landlord, they're not any sort of prerequisite to you being a successful investor. You can shortcut all of that with turnkey real estate investing or like with a different strategy that we're going to talk about later today.

Keith Weinhold (00:15:04) - What most people really want is the financial freedom that real estate investing brings. But in order to get there, it's often not the route that you think it is. It's typically not flipping or landlords. And, you know, really it's this way with a lot of things. For example, say that you want to own in ice cream business. Well, most people think that they have to start their own ice cream business from scratch. And like you need to find a space and you need to buy all the equipment and develop systems and go through the excruciating process of hiring all of your staff. No, a lot of times you can shortcut all of that by not starting your own ice cream business, but instead studying, vetting, and buying an existing ice cream business without having to start your own from scratch. Be strategic, study a little, shortcut the process and get in where it's profitable. You want the benefit of owning real estate without having to use a nail gun yourself, or being a manager where you're 25 tenants can text you.

Keith Weinhold (00:16:17) - What kind of life are you building for yourself? Then you want the benefit of owning an ice cream business. The way to get to the end goal. The path there is often different than you think. And here's another example that I can relate to, but I think that you will too. Do you have a favorite real estate? Influencer out there and they think about starting a podcast. Well, I personally know three real estate podcasters out there that have all quit. They produce some episodes and all three quit doing their podcast. And these are just among people I know and just real estate thought leaders. Just that space and all. Recent hosting your own podcast platform is a ton of work from. You need to have a huge bank of your own original content, to having the ability to book big name guests and then making sure they're prepared to. Making sure you have the right marketing team so that a podcast actually reaches the right people. It is work, work, work, and seemingly no one in this world knows that better than me.

Keith Weinhold (00:17:21) - With 500 plus episodes reliably released every single week since 2014, and we don't replay old shows either, there is nothing passive about this. There are so many shows today that if your favorite real estate influencer starts one, they're going to be competing with a lot that are already out there. I mean, anymore, even celebrities that start podcasts, they usually don't get any substantial reach or traction. All these people that start and quit their podcasts, they were too slow to realize that actually they didn't want to host a podcast. What they really wanted is for their voice to be heard. Well, the way to shortcut that, like with turnkey real estate investing or with buying an existing ice cream business, is that that influencer should have developed a strategy for being a guest on other shows that are already popular and established, probably by hiring an experienced and connected booking agent. That way, you've outsourced all of that marketing and research activity to another show that already did that for you. So the point is, be clear on getting what you want.

Keith Weinhold (00:18:34) - What is the goal that you want first, it's probably a large real estate portfolio built for leverage and income, and then work your way back to try to find the most efficient route to get there. And there are often shorter paths to get there than what you first thought. Now, when we talk about where are the best real estate deals today, you have to look harder than you did, say, 8 to 10 years ago. Coming up shortly, you'll have the pleasure of hearing an in-house chat with I in one of Gre's own investment coaches. We're going to talk about a strategy that specific and proven but underutilized in order to recapture those higher cash on cash returns like you could have gotten back in, say, 2015 and 2016. And for a time, I had been talking about how Newbuild properties and their builder interest rate buy downs, that they're really the place to be. And that's still true, but not to the extent that it was just a year ago, because today some builders, they're not paying down your interest rate for you as much as they did last year.

Keith Weinhold (00:19:39) - They're asking you to pay more toward it. Now. A few minutes ago, I told you about America's vanishing duplexes to fourplex. And if you're one of our newsletter readers, you got to see a jarring chart or two that demonstrates exactly what I was talking about there. And also in our newsletter, I show you great maps, real estate maps that beautifully demonstrate housing market trends and where the opportunities are for you. Also, in a recent letter, I showed you exactly where I'm getting 8% interest paid to me and what's basically a savings account. If you don't already subscribe, it is free. Our email letter is called the Don't Quit Your Day Dream letter. It's concise, valuable info that's just good, clean content that I put directly into your hands. It is easier to use than a website. Today's websites have paywalls and cookies, disclaimers or pop up ads. This is just the good stuff directly from me, straight to you. And you can get the letter now at get Rich education com slash letter that's get rich education com slash letter.

Keith Weinhold (00:20:50) - In a world of AI and bots, I actually write every word of the don't quit your daydream letter myself, just like I have from day one. And another easy way to start the free letter is text gray to 66866. Just do it right now while it's on your mind. Text gray to 6686616. I'm Keith Reinhold. You're listening to get Rich education. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just 25 K. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%.

Keith Weinhold (00:22:02) - Hundreds of others are text family 266866. Learn more about Freedom Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text family to 66866. Role under the specific expert with income property, you need Ridge lending group and MLS for 2056 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 prequalification 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. This is peak prosperity.

Robert Syslo (00:23:00) - Chris Martinson, listen to get Rich education with Keith Arnold and don't quit your daydream.

Keith Weinhold (00:23:15) - Hey, would like to welcome in Gray's extraordinary investment coach. He's booksmart because he's got his MBA. He street smart because he's an active direct real estate investor, just like I am. Before joining gray back in 2021, he worked for financial publishing companies and in the banking sector, too and elsewhere. And today is an investment coach here.

Keith Weinhold (00:23:36) - He helps beginning real estate investors understand the process of acquiring rental property, and he helps veteran investors optimize their strategies to save on taxes and more. Hey, it's terrific to welcome back Naresh Vizard. Thanks a lot Keith. It's been a while, but I'm looking forward to talking real estate before we're done. Today, we're going to tell you about an upcoming live GRE virtual event, where you learn how to get 20 to 25% of immediate built in equity through real estate. And before we do the race, let's talk about what's really going on. Besides giving GRE devotees free education and guidance like you do, you also help them find the best deals on income properties nationwide and for a time, brand new build to rent properties they look good in. Many still do with a lot of rate buy downs into the fives and even the fours on those new build properties. But this year, I learned that builders aren't contributing to buying down the race for the investor like they had last year, and that the onus seems to be more on the investor to buy the rate down with some of these builders.

Keith Weinhold (00:24:44) - So tell us more about what's happening in America's build to rent sector. Well, Keith, build to rent. For those who don't know, it's been around here at GRA. Bill to rent asset classes, build to rent real estate. But it's the concept of builders building real estate properties with the intention of selling them to investors so they can rent it out. So right now I live in a house that was built, and I bought it because the builder intended for somebody to buy it and live in it. That's not built to rent. Build to rent is the idea of.

Naresh Vissa (00:25:16) - Specifically selling it to investors like our listeners, like our loyal followers who live out of state and who want to rent the properties out to tenants. Now, Build to Rent was very hot and it's still popular. I don't want to call it hot, but it's still popular for those who want new construction properties. However, the rehabs are making a furious comeback because there was about a four year period from 2019 to 23 or so where you just couldn't find good cash flowing rehabs.

Naresh Vissa (00:25:50) - Right. And when I say rehabs, I mean these older properties that were built 50 years ago, maybe as long as 120 years ago there we have some properties in our inventory that were built in the late 1800s, and they've just kept being rehabbed and rehabbed and renovated. Buildings are making a furious comeback because they're cash flowing better. Previously, they were just cash flowing marginally better than new construction built to rent properties. Now, especially with a strategy called ver, which we'll talk about some more, you can have the opportunity to get cash on cash returns back to what you remember in 2016, 2015 where we're talking 15, 16% cash on cash returns. I mean, some of our BR clients or listeners who ended up buying BRS, they're doing 2021 all the way up to 30% cash on cash returns. So BR simply means buy, rehab, rent, refinance, repeat the cycle. So that's B followed by for Rs b r r r r buy, rehab, rent, refinance. Repeat the process again.

Naresh Vissa (00:27:10) - And it's during that refinance where investors are getting a good chunk of their down payment back. Because what happens in that refinance is after you rehab it and you read it, you rent it out at the target rent, which almost all of these are renting out at very aggressive high target rents. When you refinance it, the property appraises at a value that's much, much greater post rehab than when you initially bought it. And that's where you get essentially your money back. You can choose to keep it in with the mortgage company so you have more equity in the property, or you can take the cash back and use it to buy more BR properties. It's become a very popular. Form of real estate investing. People think when they hear this. Well, it sounds like flipping, right. This is not flipping. Flipping is kind of like day trading. You're looking to make a quick buck, whereas in this case you're not selling the property. You're keeping the property with the intention of renting it out and collecting the cash flow from your tenant.

Naresh Vissa (00:28:19) - So that's in a nutshell, what BRR is. And we are having a live event on Tuesday, June 25th at 8:30 p.m. Eastern Time. That's Tuesday, June 25th at 8:30 p.m. eastern. Time to talk about and go over this BR process. The bird key process or listeners are familiar with turnkey. Well we have BR key which is similar except it's using the BR method. And Keith, you probably know this and you've talked about it a little bit on your podcast. BR has become the most popular strategy that our investors are utilizing this year, 2024.

Keith Weinhold (00:29:01) - Yeah. Now back to the build to render the new build properties is attractive as they can be because they attract a certain quality of tannin and they're not going to have any maintenance or repair issues, most likely for quite a while. The thing with those is, oh, you might pay 300 K or more for a new build. Single family home in the builder rent style with 20% down payment, 5% for closing costs, you're out of pocket. 75 K.

Keith Weinhold (00:29:30) - One reason that this has become the most popular strategy for gray followers we're talking about here. The BR strategy is that you could come out of pocket with a lot less to begin with.

Naresh Vissa (00:29:42) - That's number one. Number one is we have some GRE followers who went into this Berkey and they put no money down. They got lucky. They initially bought the property, and the property appraised so much that they got their money back and their down payment was actually zero. They didn't make money on it, but what they allocated, what they thought that they would allocate 25% down, they ended up using that money since they got it back to buy a second property and then a third property and then a fourth party. We have one guy who bought six properties, all birds, because he didn't get I don't want to say, look, we're not making promises that you're going to put 0% down. That's not the promises that we're making. The worst case scenario is that you put 25% down and that's your standard real estate investment.

Naresh Vissa (00:30:27) - But there is a chance that you could put 15% down or 10% down if the rehab turns out really well. And if you get a good appraiser, there's a chance it can happen. But the goal here, again, is not to make a quick buck or to house hack. We're not taking shortcuts here. The goal here is simply to buy a property renovated or rehab it and drive up the rent price, drive up the value of the property, put a good tenant in there and call it a day. Collect those cash flows. Now I do want to say a few things about that process. So like I said, the first thing that you do is you buy. So first you buy, then you rehab. You do not have to do we call it Berkey because everything is done for you. So when people hear this, they're like, oh, this sounds like I live in Florida. I don't want to go to Memphis. And by the way, this specific market is in Memphis, Tennessee that we're focusing on.

Naresh Vissa (00:31:26) - We have burrs in Baltimore, Maryland and Philadelphia, Pennsylvania and Pittsburgh, Pennsylvania. But we've identified Memphis as not just the hottest, but it just makes the most sense numbers wise. And so I want to go back to the point of, hey, you don't have to physically go or even go on Google and find handymen or rehab ers to do this for you, our Berkey provider. The best part is they do it all for you. It's completely taken care of. You literally just sign some papers. Once you decide that you like a property and the specs of the property, you sign some papers. They take care of it. The rehab takes about 90 days. Then from rehab to closing, it takes another 40 days or so. And then from closing to someone signing a lease that takes another 30 days to find somebody, stick them in there and takes another 30 days after that for the tenant to move in. So overall, this process can actually take just for one property. You can take six months.

Keith Weinhold (00:32:26) - Now. Naresh has touched on it somewhat. One conventional problem with the Burr strategy by rehab rent, refinance, repeat is that first are the rehab because it involves vetting and managing contractors, which is a real nightmare for many. So instead, we're talking about tapping into a system with a proven team of contractors and lenders and project managers to make it easy. It's known as Berkey, and it's in profitable Memphis.

Naresh Vissa (00:32:54) - Profitable Memphis. And I'll say this about Memphis, we're going to talk. Way more about this on the webinar. Highly recommend people go to GRI webinars. Com gri webinars.com. You can sign up for the webinar there. It's actually live. So this is not like something that you just can show up to whenever you want. It's a live event on Tuesday, June 25th at 8:30 p.m. Eastern Time. That's Tuesday, June 25th at 8:30 p.m. Eastern Time. Great webinars.com is how you can register. And like you said, we could have focused on Baltimore, Maryland or Pittsburgh. Memphis has really and I myself by the way, own five properties and four in Memphis proper.

Naresh Vissa (00:33:42) - And one is in the Memphis area and Mississippi, a suburb of of Memphis. And this I don't want to call it a town, because Memphis used to be one of the most popular towns in the south back in the day. But this city has really come up as a result of pandemic, of population growth, of even inflation. We've seen rents go up, we've seen the population go up. Memphis is not what you think of from eight years ago. Seven years ago when I first bought my properties. I'll admit, when I bought my first property seven years ago in Memphis, I had a lot of problems with tenants. I had a lot of problems with the city. I didn't like what I was reading about the police department, just all sorts of things. Not the police department, just crime in general. And Memphis has really turned itself around. Not completely turned itself around, but it's gotten better. And we're seeing it just on the investment side because that's where we're seeing appreciation growth. My personal properties, they're up since 2020, since January 2020, I was when I closed all my last Memphis property.

Naresh Vissa (00:34:49) - They're all up at least 50% in value. So it's a market that's still appreciating. But the most important thing because we are cash flow investors, not necessarily appreciation investors. It's great to get the appreciation, but the rents keep going up. And I actually today I've talked to a Berkey client, great loyal Jerry listener and follower who ended up buying three properties, and she's on her fourth one, or about to do a fourth one with this Memphis market provider. And when she told me her rents, I was blown away at how much these properties were renting for before the rehab. So it's not just the appreciation again, that goes up after the rehab, how much they were renting for before the rehab. We're talking less than $800 a month and post rehab. Her rents went up by nearly 50%, about 45% on average. House rehab is like three bedroom, one and a half bathroom. Homes initially she bought them. This is how a lot of the properties are. They only had two bedrooms and they converted one of the spaces.

Naresh Vissa (00:36:05) - The rehab were converted at no extra. You know, it's all inclusive of the rehab charges. They were able to find space in a lot of these properties that were two bedrooms to create a third bedroom and turn them into three bedroom properties instead of two bedroom properties, which also improves the value of the home. And you can get another body in there and increase the rent. So, Jerry, listeners have been really, really happy with this burpee process because at the end of the day, you really do get more bang for your buck. Yes, new construction overall. It's just safer. We have tons of great new construction providers, especially in Florida, whom we recommend, but this is an alternative for those people who don't have $100,000 sitting in the bank ready to invest in a new construction, single family, or a new construction duplex. The Berkey, I mean, really all you need is about 20, $25,000 to do it. And like I said, if you get lucky, you could get a decent portion of that back after the rehab.

Keith Weinhold (00:37:08) - Well, you bring up so many good points there in the race. For one thing, with real estate, you can intentionally improve the value. That's something that you cannot do if you own a stock or if you own cryptocurrency, or if you own gold, you can help control what your investment is worth. And a lot of that happens here in the rehab process. Well, the race would love to tell you more, including walking you through an example with numbers, but that's the best place for him to do it. That is on the live event next week because it is co-hosted by narration. You can join the live virtual event from the comfort of your own home. You can ask questions and have them answered in real time. It is all free and we'll also be sharing special off market Berkey inventory. In Memphis for two, three and four bedroom properties, so go ahead and attend on June 25th. Which again is next Tuesday. Be sure to register now at GR webinars.com. Just been great to walk through the Berkey.

Keith Weinhold (00:38:12) - Thanks so much for coming back on the show.

Naresh Vissa (00:38:14) - Thank you. It's been a pleasure.

Keith Weinhold (00:38:21) - Oh good info from Gree investment coach Naresh as always. Next week's live event. That could be a bigger deal than the Paris Olympics this summer and this year's presidential election combined. Oh yes. Well, at least it expects to be more profitable for you than those other events. It will also be more entertaining when you join as an attendee live next week. Certainly more entertaining and informative than Olympic handball and Olympic race walking, no doubt about that. I don't think I've offended any race walking fans because there are only perhaps five in the world. In any case, BR is a process by which, after you buy months later, you can expect to refinance at a higher valuation since the property has been rehabbed from your initial purchase, and then you get a big chunk of your own down payment back, meaning you have less invested in the deal. And that's why you get a higher cash on cash return. Because cash and cash return all that is, is your annual cash flow divided by your initial investment or your starting equity position.

Keith Weinhold (00:39:37) - The last R in BR is repeat. You can repeat sooner because you did get some of your invested cash back. And that's part of what makes the strategy so effective. Now is part of your refi. You might get a post appraisal rehab that's so high you essentially get all of your down payment money returned to you, at which point it would be an infinite return because you don't have anything invested in the deal. But you should not count on having all of it returned, just a lot of it or most of it. Next week's live event is where the BR real estate investing strategy gets introduced to a wider swath of America one last time. Attend live next Tuesday. The 25th. I really encourage you to check it out. Be sure to sign up for the virtual GRE live event now! It's pretty quick and easy to do at GR webinars.com. Until next week, I'm your host, Keith Weintraub. Don't quit your day dream.

Speaker 5 (00:40:41) - Nothing on this show should be considered specific, personal or professional advice.

Speaker 5 (00:40:45) - 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.

Robert Syslo (00:41:09) - The preceding program was brought.

Keith Weinhold (00:41:10) - To you by your home for wealth building. Get Rich Education.com.

505: Real Estate Problems - Affordability Issues and Foreclosures Today Jun 10, 2024

Big capital gains tax bills are hitting more home sellers. Exemptions exist for up to $250K single, $500K married.

Bad housing affordability means a low home ownership rate, hence, more renters.

The homeownership rate has dropped from 66.0% to 65.6% in the last year.

I have a hole in the roof of a rental single-family home, with about $10K in damage. Learn how I handle it.

Two of the first three income properties that I bought performed poorly.

VP of Market Economics at Auction.com, Daren Blomquist joins me. We learn why foreclosure activity is 10% to 20% below pre-pandemic levels.

Learn about judicial and non-judicial foreclosure states.

From homeowners surveyed, the top concern about falling into delinquency are rising insurance and property taxes.

Auction bidders are confident about the real estate market. They’re willing to pay more, which is 60% of ARV nationally.

You can bid on distressed properties with your phone via Auction.com.

Opportunity Zones are generally working.

Resources mentioned:

Nation’s Largest Online RE Auction Marketplace:

Auction.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

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Complete episode transcript:

Speaker Weinhold** ((00:00:00)) - - Welcome to GRE! I'm your host, Keith Weinhold, talking about a lot of housing market problems today. Capital gains taxes hitting more home sellers. Home affordability is still bad. The American homeownership rate is falling. I've got roof damage on one of my own properties. Then an update on American mortgage delinquencies and foreclosures. It's mostly bad real estate news today on Get Rich Education.

Speaker Syslo** ((00:00:29)) - - Since 2014, the powerful Get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Reinhold writes for both Forbes and Rich Dad Advisors, and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform. Plus it has its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast.

Speaker Syslo** ((00:01:06)) - - Sign up now for the Get Rich education podcast or visit GetRichEducation.com.

Speaker Coates** ((00:01:14)) - - 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 Weinhold** ((00:01:30)) - - We're gonna go from Bavaria, Germany, to Batavia, New York, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich education. There is a large online source of foreclosure and bank owned properties that you won't find on the MLS. In fact, they are the largest in the nation, and their VP of Market Economics will be here with us later today. Home price appreciation. That has been wonderful for the last several years. But one negative consequence is the fact that more home sellers now are getting hit with big capital gains tax bills. Now we'll discuss income property shortly, but when it comes to primary residences, you probably know that if you are single, you won't pay any capital gains tax on the first 250 K profit of your sale. That 250 K exemption. That is only half of what married couples enjoy.

Speaker Weinhold** ((00:02:29)) - - They don't have to pay tax on the first 500 K of profit. Yes, a $500,000 exemption on capital gains for married couples. So basically, single people in high priced markets like you often find on the coasts, they get hit the hardest. Married couples in lower priced markets more toward the heartland and in the South. Those married couples, they're more likely to get away without paying any tax on the profit from their home sale. All right, well, just what proportion of homes are we talking about here? Well, last year, 8% of sales had capital gains of over 500 K. All right, well that potentially makes them exposed to the tax hit. Compare that to a couple decades ago. That share was just over 1%. So it's gone from 1% to 8%. These are exorbitant capital gains tax events. And you know what this does. People trying to avoid that it keeps even more homes off the market. Now it's not as pronounced as the well-documented interest rate lock in effect okay. Call this the capital gains tax lock.

Speaker Weinhold** ((00:03:46)) - - In effect people avoid the tax by not selling. And it makes some older people age in place. That's part of what's going on here. Because if the homeowner keeps it until they die, then the heirs, they might be able to sell it tax free due to the tax laws and capital gains taxes. Like, what rate do you actually pay that can be as high as around 20% on you for selling your primary residence if the gain exceeds those thresholds? And yeah, those thresholds, they haven't moved with inflation in quite a long time. Now, understand that right now you are living in an era where many Americans, they can't afford to live in the home that they live in right now if they tried to repurchase it at today's prices. So again, it's not the mortgage rate lag in effect here. It's the purchase price paid lock in effect. Now look, yes, overall I am a real estate market optimist. You are too, when you understand how real estate pays you five ways. But as far as anyone saying something like, oh, there is never been a better time to buy, that doesn't make any sense.

Speaker Weinhold** ((00:05:02)) - - Now. At the same time, I don't see any evidence that waiting is going to do you any favors, but there have obviously been some better times to buy. In fact, do you know the best year in modern history that I can think of for buying real estate? Any idea it was the year 2013? Yeah, 2013. That's when prices were low because they still hadn't bounced much off of the GFC lows and mortgage rates. They actually were in the absurdly low threes back in 2013. Now starting in 2021 you know I have been on record on this show. I've been on record on television and on our own YouTube channel here and in Forbes and elsewhere. Since then, I've said that home prices, they're not poised to fall, they're going to stay stable or they're going to keep going up. I was perhaps one of the earlier people to point that 3 or 4 years ago that the low housing supply and the government safety nets that won't let people lose their homes, those things keep the markets buoyant.

Speaker Weinhold** ((00:06:16)) - - Now, today, I see more signs that prolonged bad affordability will slow down. Home price growth in that part is bad for investors, of course. Prolonged. Bad affordability. That means something good for income centric investors at the same time, sort of like David Stockman and I touched on last week here. Yes. Souring affordability. What that means is a falling homeownership rate that would make sense in the homeownership rate. That means that just what it sounds like, that is the proportion of American homes that are occupied by their owner in the past year. Yeah, the homeownership rate has fallen, but not too much yet because there are some lag effects and other factors to account for. Like, imagine if there are new zero money down loan programs that are made available. You can see how that would make homes more affordable, even if rates and prices and wages stayed the same. So there are X factors out there and lag effects out there. In the past year, the homeownership rate has fallen from 66% down to 65.6%.

Speaker Weinhold** ((00:07:33)) - - Not too much of a slide, just 4/10 of 1%. That is a Fred stat sourced through the Census Bureau. All right. So what's that really mean if you're looking for income. Well, what that means is that there are now hundreds of thousands of additional renters today than there were just one year ago. And the number of renters, those that aren't homeowners, that looks to increase in both absolute and relative terms. There's a lot of people expect the homeownership rate to continue to drop from here. Now, no investor conditions are absolutely ideal everywhere you look. In fact, of the first three investment properties that I personally bought in my life, only one of those three went really well. It was that first ever fourplex I bought because it appreciated from 295 K to 425 K in just three and a half years, and it provided some cash flow and even a place for me to live. But the second property I bought, which was also a fourplex, it hardly cash flow because I bought it at 90% loan to value, and I also bought it in 2007.

Speaker Weinhold** ((00:08:46)) - - Not great timing, so its value dropped. I was a pretty new real estate investor then, and when its value dropped, it didn't return to the 530 K value that I bought it for for about six years. And then I got wiser and I started buying across state lines, since that's where the best deals often are. Well, this was then my third investment property, a brick single family home that cost 153 K in the Dallas-Fort worth area. And the main reason I bought it is because it was cheap, which was a mistake. It was also in a growing area, but I couldn't keep it occupied, so I soon sold it for about the same price that I bought it for. All right. But even in those far less than ideal beginnings for me, two of my first three properties, they weren't disasters, but they weren't a great experience either. Yet I still got some leverage, a little cash flow. I got tenant made principal pay down all the while, tax benefits all the while, and that inflation profiting benefit.

Speaker Weinhold** ((00:09:52)) - - And I did then find myself better off overall. Despite that the appreciation and the cash flow weren't all that great. If you blend those first three properties together and today, perhaps a lot like you or what you want to do. I own properties in multiple markets, and I remotely made as the property managers in those markets. And you know, just yesterday I got an email from one of my property managers about roof damage to one of my properties. It's a rental single family home. It's going to be about $10,000 worth of repair work. Some bad news and the way I'm hailing it is a way that you might think of handling a real estate problem. I sure don't just send off a $10,000 check right away and chalk it up as a loss, and ask myself how many months it's going to take me to make that up. The first thing that you can do in this situation is check to see if you have a home warranty that covers it in full or in part. Whether you bought your property new or renovated, a warranty might apply.

Speaker Weinhold** ((00:10:58)) - - It actually does not in my case here. Well, if the warranty doesn't cover your issue, of course, check with your insurance provider and see what your deductible is there. Consider that when insurance premiums have risen sharply in a lot of markets, you need to get something back for that premium that you're paying in a lot of cases. All right. And if those things don't work, then don't just take the first quote that your property manager gives you that they got from the first contractor, which is. Ten K in my case. For a substantial work item, ask your property manager to obtain at least three quotes for you. That's reasonable. And then look at the most competitive of those three quotes. So to review here three ways to avoid paying. For example a full 10-K. In my case it's your warranty, it's your insurance. And if you feel like you must come out of pocket, then get three quotes in order to reduce your cost. And here's the thing you don't do these things yourself.

Speaker Weinhold** ((00:12:03)) - - What you do is you ask your manager to do these things and make it easy for you. Your manager should check with your insurance policy and they should check on your warranty. And then you can back it up and take a look at it. If you don't like the answer, they should obtain the roofing contractor quotes for you to. You are paying your manager for this stuff, maybe 8 or 10% in a management fee, and that should not be for nothing. Have them do this stuff that's their job and ask them to do it. Because if you don't just watch, they'd be happy to have you do it for them. Don't. You don't have to. So we're talking about mitigating your out-of-pocket cost in your time expended when you have a real estate issue, like a hole in a roof of one of my single family rentals. Now sometimes you're going to get caught in some snafu. But again, our strategy here is that you're usually not even holding any one rental property for more than 7 to 10 years, because by that time, it's accumulated sufficient equity so that you can make a tax deferred exchange up to another property, keep leveraging that equity, because the rate of return from equity is always zero.

Speaker Weinhold** ((00:13:16)) - - Now, that process, that 7 or 10 years, that might be on the slower end. Now though, since the property that you consider relinquishing is going to have a lower mortgage rate than your replacement property, it will. And one other thing to keep in mind here it's about providing America with that clean, safe, affordable, functional housing. What that means is that while roof quotes are being obtained here if needed, and it takes a few works until those roof repairs can begin, what you can do is have a cheap temporary repair done until the permanent roof fix starts. That's pretty common with roofing repairs, and that way not only is any interim damage avoided, but the tenant is not being negatively impacted here either. No slumlords around here. As we're discussing real estate problems today, we're about to delve into what happens when homeowners in real estate investors, when they can't make the mortgage payments on their property, and is that proportion of people going up or is that going down in this low affordability market? We'll also get some takeaways by looking at the bidder activity on foreclosure properties.

Speaker Weinhold** ((00:14:33)) - - That can tell us quite a bit about the market and about buyer expectations for the future of the market. And I'll also tell you how you too, if you're interested, you can find opportunities and get a deep discount on a foreclosed upon property. That's all. Next with a great guest, I'm Keith Reinhold. You're listening to get Rich education. Your bank is getting rich off of you. The national average bank account pays less than 1% on your savings. If your money isn't making 4%, you're losing your hard earned cash to inflation. Let the liquidity fund help you put your money to work with minimum risk. Your cash generates up to an 8% return with compound interest year in and year out. Instead of earning less than 1% sitting in your bank account, the minimum investment is just $25. You keep getting paid until you decide you want your money back there. Decade plus track record proves they've always paid their investors 100% in full and on time. And I would know, because I'm an investor, to earn 8%.

Speaker Weinhold** ((00:15:41)) - - Hundreds of others are. Text. Family 266866. Learn more about Freedom Family Investments Liquidity Fund on your journey to financial freedom through passive income. Text family to 66866. Role under the 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. Start at Ridge Lending group.com Ridge lending group.com. This is Rich dad advisor Tom Wheelwright. Listen to get Rich education with Keith Reinhold and don't quit your daydream. This week's guest is the VP of Market Economics at auction. Com they are the largest online source of foreclosure and bank owned properties that you won't find on the MLS. You can bid on properties from anywhere with your mobile device. We'll learn more about that later. First, we're covering a general real estate market update today, and then we're mostly going to discuss what's happening in the foreclosure market, including just what a foreclosure market even is.

Speaker Weinhold** ((00:17:25)) - - Hey, it's been over a year since we've had you here. So a big gray welcome back to Darren Lundquist. Thank you so much. It's great to be back and.

Speaker Blomquist** ((00:17:34)) - - Glad to see you, Keith.

Speaker Weinhold** ((00:17:35)) - - For listeners in the audio only Blomquist is spelled with just one oh, despite being pronounced. Blomquist and Daren, as we talk about the state of these markets today, it also helps to mix in lessons for the follower and listener that's watching or consuming this. In ten years. And before we discuss foreclosures. Now, Darren, when I look at the residential real estate market today, there are a few ways that it appears rather normalized actually. For example, all price appreciation rates are normal rent growth levels. They're pretty close to historic norms. Interest rates are even near historic norms, which is a surprise to laypersons. But that's three huge measures that are actually normal, and no one else anywhere talks about that. But there are some aberrations in today's market, the most chronic and saddening of which is the lack of housing supply.

Speaker Weinhold** ((00:18:28)) - - So with that backdrop, what are your thoughts on today's overall American housing market?

Speaker Blomquist** ((00:18:34)) - - It's really interesting. We have these normal metrics that we look at when we look at how home price appreciation. Now home sales I would say are abnormally low. Right. But home price appreciation is doing well. Some of the other metrics that we look at. But it's coming off of this abnormal what I would say an abnormal period over the last three years or so, mostly during the pandemic when the housing market went a little bit crazy and you saw home prices rise abnormally fast. I would argue too fast for such a short period of time. And so you'd almost expect after a period like that to see a correction in home prices. And we saw a slight correction in late 2022, early 23. Right. But now home prices are, as you mentioned, kind of back to normal actually maybe a little bit on the high side of normal, 5 to 7% home price appreciation that we're seeing annually. And so there is this sense that things look normal.

Speaker Wheelwright** ((00:19:32)) - - But below the surface there are, I believe I would argue and you may not agree with this, some underlying problems that I think could come back to bite us if, you know, depending on how things go over the next few years. But certainly the underlying fundamental biggest storyline, that's not necessarily maybe as accessible to a lot of people is this housing supply that you mentioned, Keith. And over the last the decade that ended in 2020, we saw, I would guess, based on my analysis, about 4 to 5 million housing units that were not built, that in a sense should have been built. But we were short 4 to 5 million housing units relative to the number of households that were being formed during that same time period. And so that is set us up for this market that we're in now in the 2020s, where we're seeing, despite the fact that home prices are going up and are out of whack with fundamental price to income ratios. In other words, affordability is a problem. Despite that fact, home prices continue to go up because you have this underlying lack of supply and so you have enough demand to fuel rising home prices, given the lack of supply, if that makes sense.

Speaker Weinhold** ((00:20:48)) - - Yes. You mentioned the paltry volume of sales, which is really one consequence of this constrained supply. And there are so many ways to measure it. You threw some numbers out there just using Fred's active listing count. They have one and a half to 2 million homes normally available. Inventory bottomed out near a jaw dropping, just fantastically paltry 350,000 units in 2022. And then the latest figure is about 730 K. So really doubling off the bottom, but yet still far below what is needed there in in 2021 and 2022, I started informing our audience that the housing crash of this generation, it's already occurred. It was a supply crash, which hedges against a price crash even amidst a tripling of interest rates. I guess there. And from your vantage point, when will this low housing supply abate?

Speaker Wheelwright** ((00:21:46)) - - But I think on the multifamily side, you're seeing signs that we've, in a sense, caught up with housing supply. You're seeing the multifamily sectors start in terms of the builders start to pull back. I think because of that.

Speaker Wheelwright** ((00:21:58)) - - And one piece of evidence of that is the slowdown in rent appreciation. But then on the Single-Family side, we're still seeing pretty robust increases in housing starts and builders starting housing units. And I was just looking at the latest numbers for April up 18% year over year. And we're at over a million housing starts in April on an annualized basis. You know, it's hard to predict what household formation will be doing over the next decade, but I believe that million number is enough to supply the new households that are being formed and are projected to be formed over the next few years. And so we're kind of at a place where at least we're treading water in terms of housing supply. And I do think there are some demographic trends that could by the year 2030, which may seem like a long ways off still, but by that time we would see this kind of reverse a little bit. And the demographic trends I'm talking about are slower population growth, the birth rates. There's a big article in the Wall Street Journal.

Speaker Wheelwright** ((00:22:58)) - - If you write, birth rates are surprisingly not really coming back. They dropped during the pandemic have not really come back. And in many areas, including the US or below replacement level in terms of replacing the population at 2.1. Yes. So not to get too deep into the demographics, I'm not a demographer, but I think that combined with these increases in housing starts that we're seeing, we will see that supply in the next five years. Maybe when I'm on next, I'm with you to see that it is a slow moving train. I think we're headed in a good direction in terms of that, that housing supply. And those are already, I would argue, some early signs at 2024 at least. It's still a low supply environment, but it's at least somewhat better, incrementally better than 2023 was in terms of inventory. And we're seeing some more inventory. Come on. One tip I would just say that's I think a long term thing to look for, no matter what environment you're in, is if you look at the inventory, inventory is a great and a barometer of market health.

Speaker Wheelwright** ((00:24:00)) - - And if you look at inventory numbers by market, which we do, you do see some markets all of a sudden inventory is starting to spike. And that to me is a signal that those markets could be softening in terms of prices and even in terms of sales. So you see some markets in Florida popping up like that. But whether or not we're talking about now or anytime, it's a great metric to look at. For anybody investing in real estate, especially at a market level, is that inventory of homes. You can look at month supply of inventory for sale. Six months supply is a great milestone. If there's six months supply, that's a balanced market. If it's below six months supply, it's a seller's market. And if it's above six months supply, it's a buyer's market. So just a general kind of rule of thumb to look for there.

Speaker Weinhold** ((00:24:46)) - - Sure. We've seen months of supply three months or less in an awful lot of places. However, you alluded to coming potential problems for the housing market earlier.

Speaker Weinhold** ((00:24:55)) - - Can you tell us more about that? Have you already done that with talking about a potential softening with some inventory coming on faster in some markets?

Speaker Wheelwright** ((00:25:04)) - - I think you're a thesis about this. The housing crash has already happened and it was a supply crash is very interesting. When I look at price to income ratios over time, you know, home prices versus incomes, we've diverged from that long term mean of that price to income ratio right. In the last couple of years. We saw that during the the bubble of 2004 five six. But it's even more dramatic in the last couple of years where we saw at the peak of this, the actual home prices. We. Nationwide, we're about 30% above what we would expect the price to be based on incomes and that historic price to income ratio. And so I do expect a reversion to the mean at some point. Now, whether that could occur as a pretty sharp correction, although I can't point to a specific trigger that would cause that correction necessarily may could occur more of a stagnation over time, where home prices kind of flatten out and increase less than the median long term average.

Speaker Wheelwright** ((00:26:07)) - - I do believe that we will see a reversion to that mean eventually, especially as we see more supply coming onto the market. I think it's actually healthy for the housing market, but it could be experienced by many people as weakness in the housing market, because you could see home prices decline a little bit, especially in certain markets.

Speaker Weinhold** ((00:26:25)) - - From your vantage point. Darren, you are an expert there in helping people find deals because you really keep a pulse on what's happening in the foreclosure market. Maybe some of our audience doesn't completely understand what the foreclosure market means. Now, Darren, I think of delinquency is that condition means that mortgage borrowers have been making some late payments. Tell us about how delinquency differs from foreclosure. And that will help if you go ahead and define just what the foreclosure market is.

Speaker Wheelwright** ((00:26:57)) - - Starting with the foreclosure market. I mean, when you can call it the distressed market or the foreclosure market. And that's really where auctions. Com operates. And is this foreclosure market, it's loans that the borrower cannot continue to make payments for a variety of reasons.

Speaker Wheelwright** ((00:27:12)) - - When you have a home that's financed and the borrower cannot continue to make payments, the recourse for the lender is foreclosure to take back that property by taking back that property and then selling it, recouping or trying to recoup as much of the losses on that property that they can in terms of the loan that was given on that property. Okay.

Speaker Weinhold** ((00:27:34)) - - So let's talk about delinquencies here. We're looking at certain levels of severity being 30 days late on your payments, being 60 days late and being 90 days late. And interestingly, we see a big spike in FHA loan types that have had more delinquencies than conventional loan types.

Speaker Blomquist** ((00:27:50)) - - That's right. Yeah. So delinquency is kind of the top of the funnel if you think of the distressed market or for leisure market as a funnel, the top of that funnel is someone can't make their payment one month. They miss their payment, mortgage payment one month. That's what this 30 or 30 day delinquency. And when you look at the chart that we're looking at, you do see those 30 day delinquencies rising over the especially on FHA loans, which are, I would argue, the most kind of risky loans in our current marketplace.

Speaker Blomquist** ((00:28:19)) - - Yeah, the last ten years, over the last decade. And we see those even from 2021, rising steadily up back to really 2019 highs on the 30 day delinquencies, you also see a slight gradual increase in conventional loans, which are loans backed by Fannie Mae and Freddie Mac as well as VA loans. But those are the 30 day delinquencies. They're are not back to pre-pandemic levels even on that front. So that's the 30 day. Usually if someone misses a monthly payment, it's not super serious at that point. What really gets more into our marketplace is when we see a 90 day delinquency, or what's known as a seriously delinquent loan alone, that is past due by 90 plus days. And we have that chart here. What stands out to me on this chart is you actually see those 90 day delinquencies continuing for the most part to trend lower, even though the 30 day delinquencies are going up, 90 days are coming down, and there's a lot of reasons for that. But at the end of the day, that means people maybe are getting into trouble, but they're able to get out of trouble before they lose the home to foreclosure in many instances.

Speaker Weinhold** ((00:29:29)) - - All right. So in summary, 30 and 60 day delinquencies have risen over the past two years. But over the past two years, serious delinquencies, 90 day delinquencies therefore, are lower over the past two years.

Speaker Blomquist** ((00:29:43)) - - That's right. And then if we look at foreclosure starts, which is kind of the next step. So you missed three months worth of payments. That's when the bank starts to think about starting the official foreclosure process. And if you look at foreclosure starts, we are seeing those rise as well. And part of the reason that you see these rising, even though seriously delinquent loans are falling, is because there was a bit of a backlog from the pandemic still. Yeah, loans that were delinquent when the pandemic started that were delayed from going to foreclosure, that are now coming back. So we see this sharp drop off in 2020 when there was a foreclosure moratorium. Those numbers have reverted back, have bounced back. But there's we're still seeing about 60 to 70,000 foreclosure starts, a quarter nationwide just to put some numbers on this.

Speaker Blomquist** ((00:30:31)) - - But back in the first quarter of 2020, before the foreclosure moratoriums, we were at 81,000. So we're still at about 80% of the pre-pandemic levels. But foreclosure starts have come back. We're just getting back to what I would consider kind of normal levels of foreclosure, and especially if you look at in the context of what we saw during in 2009, 2010, we were seeing over 500,000 foreclosure starts a quarter back then. Now we're seeing 68,000. So we're paling in comparison to those numbers.

Speaker Weinhold** ((00:31:04)) - - As you, the investor, is thinking this through, we're talking about how many opportunities there will be for you here, basically to scoop up a distressed deal, a fixed and flip property. If you're looking to fix and flip one just in the general context, that's what we're talking about here.

Speaker Blomquist** ((00:31:21)) - - Opportunities really foreclosure starts are for. Opportunities. If we look at where the opportunities are emerging in terms of those foreclosure starts, we do see a lot of increases in looking at March of 2024. Year over year, a lot of increases in Florida, and foreclosure starts and also Texas in California.

Speaker Blomquist** ((00:31:42)) - - So it's interesting. I mean, these are markets that are doing pretty well, pretty healthy. But we are seeing some of those foreclosure starts come back in pretty big percentage wise in those areas. If we look at auction com data, specifically the state level, in the interest of time. But just to look through the lens of looking for opportunities. Auction com resides a step after the foreclosure start. Then eventually it goes to a foreclosure auction where the property either sells to an investor or it goes back to the bank is what's known as an REO. And where we're seeing on our platform the biggest kind of return to normal levels of foreclosure auction volume, where there's that property actually is sold, is mostly in the Rust Belt, Upper Midwest. That's where we're seeing volumes return to normal. And a place like Florida, we're only seeing foreclosure volumes are over 70% below normal, and Texas were 55% below normal. And when I say normal, I'm saying I'm comparing that to pre-pandemic levels. And then in California, we're at about 45% below those pre-pandemic levels.

Speaker Blomquist** ((00:32:54)) - - So some of the big volume states, we're still waiting for the foreclosure volume to return. But if you look like at states like Indiana, Iowa, Minnesota, places like that, Oklahoma, we are seeing that foreclosure auction volumes have returned to those pre-pandemic levels. So there are more opportunities in those areas, at least relative to their population and their their size of in terms of housing units.

Speaker Weinhold** ((00:33:20)) - - So in general, in a lot of these upper Midwestern states, in northern Great Plains states, we see a greater foreclosure volume than we did pre-pandemic, because those levels are at over 100%, 100 being the pre-pandemic level. There is one aberration on your map, for one thing, Darren, and that is in Connecticut, where we have 306% of the foreclosure volume that we did pre-pandemic. That's over three x what's going on in Connecticut?

Speaker Wheelwright** ((00:33:50)) - - I'm glad you pointed that out. I mean, that is part of the the issue with Connecticut is you do have relatively low foreclosure volumes there. So the 306% is coming off even pre-pandemic, some pretty low volumes of foreclosure.

Speaker Wheelwright** ((00:34:03)) - - We are seeing and I can't point to exactly what's happening there in terms of the economy, any other extra weakness in the economy or in the housing market there? But we are seeing definitely that's the top state in terms of where foreclosure volume is back way above, in fact, pre-pandemic levels. That was one of the areas, at least parts of Connecticut where the work from home trend maybe got a little bit out of control, and people were buying homes and willing to pay very high prices for homes that were who worked in New York City. And now we're thinking, well, I can work from Connecticut. In the country. There was probably more of a pandemic housing boom in Connecticut than some other areas of the country, and that may be part of the story that's going on there.

Speaker Weinhold** ((00:34:54)) - - We're talking about the most densely populated part of the United States here, the tri state area, which is New York, Connecticut and New Jersey. And what's unusual is that one of those three states, new Jersey, is the antithesis of what's happening in Connecticut.

Speaker Weinhold** ((00:35:09)) - - Connecticut has about three x the foreclosure volume than they did before the pandemic, and new Jersey is just 25%. They only have one quarter the foreclosure volume that they did before the pandemic. Are there any other tri state dynamics going on there with foreclosures there?

Speaker Wheelwright** ((00:35:25)) - - That's a great observation. And one thing that becomes very important with foreclosures is the foreclosure process is governed by state law. It's not a federal national law that governs how the foreclosures work. And so you do see a lot of variation in the states based on how that foreclosure process works. And then also even how the the legislatures in those states have stepped in in some cases. And that's the case in new Jersey and created new laws even in the last couple of years to, for lack of a better word, stymie the foreclosure process and may put extra barriers in getting to foreclosure. And so, number one, new Jersey is what's called a judicial foreclosure state, where the foreclosure process is inherently longer than many states, including Connecticut. And then on top of that, the new Jersey legislature has enacted at least one law that took effect in January that even creates more barriers to foreclosure.

Speaker Wheelwright** ((00:36:22)) - - And we probably don't have time to get into the details of that law. But that's really, I think, what's it's less about that new Jersey is a much more healthy housing market than Connecticut. As to what you see there is the effects of the state governed foreclosure process with those numbers.

Speaker Weinhold** ((00:36:40)) - - So just some great context for the listener and viewer here. The state jurisdiction in the judicial process has an awful lot to do with foreclosure volume. That's not necessarily indicative of the condition of its housing market.

Speaker Wheelwright** ((00:36:55)) - - That's right. And it does vary quite a bit. When we look at going forward at risk. We actually asked, so our clients are the banks, the mortgage servicers, the lenders who are foreclosing on these properties. And we ask them what they think is the highest risk of increasing foreclosures in the future. And the the top of their list was rising insurance and property taxes.

Speaker Weinhold** ((00:37:22)) - - That's super interesting.

Speaker Wheelwright** ((00:37:23)) - - Yeah, and that's been a hot topic recently. I would put that at the top of my list of risks.

Speaker Wheelwright** ((00:37:29)) - - Going back to your question about why could the housing market experience weakness in the somewhat near future? I think this is the top of my list of as a catalyst that could potentially trigger weakness in the housing market, specifically home prices. Because of these variable costs of homeownership. You know, your mortgage is a fixed cost. You know what it's going to be every month, but your insurance and property taxes are variable costs. And there are in some states, those have skyrocketed. For some homeowners. This insurers are pulling out of states.

Speaker Weinhold** ((00:38:02)) - - This is all such a great finding. Again, Darren's firm asked the survey question how much would you assign each of the following in terms of risk for higher delinquencies between now and the end of this year? And the number one answer is rising insurance and property taxes to Darren's point. That's because these are variable costs that everyone is subjected to. And we need to be mindful that more than 4 in 10 American homeowners are free and clear of their mortgage, so they don't have any payment.

Speaker Weinhold** ((00:38:27)) - - So on a percentage basis, when you look at homeowners expenses, when they have rising insurance and property tax problems, you can see how this can increase foreclosures.

Speaker Wheelwright** ((00:38:38)) - - That's right. That's a great point. A couple other risks that ranked fairly high with our clients. We're rising consumer debt delinquencies so that we do see things like credit card debt and auto loan debt, specifically those two delinquencies on those types of more or loans, not mortgages, are rising quite quickly over the last few quarters. And so that's an area of risk that we're seeing. And then they put rising unemployment is third. But you know right. We're not seeing unemployment rise right now. And unemployment is very low. They put that a little bit lower on the list. Those two things to look out for are those rising insurance and property taxes. If we continue to see that be a problem, that could be a trigger that causes some fallout in the housing market, as well as if we continue to see those rising delinquencies on credit card and auto loan debt that could ripple out as well to the housing market.

Speaker Weinhold** ((00:39:35)) - - It's really interesting. Higher property taxes are often a result of a homeowner's property having gone up in value. But if you own a paid off home and you're just going to continue to live there for the rest of your life, that rising property value that really doesn't help you so much, it actually might hurt you in a way, because you will have a commensurate increase in your property. Taxes, making it harder for you to live.

Speaker Wheelwright** ((00:39:57)) - - Yeah, that's right. It's a double edged sword there with the rising values. And usually it's, you know, property taxes is not an unbearable cost for most people. But when you're on the margins and you're just barely able to make your mortgage payment each month, and if you're in that situation, a fairly small rise in property taxes can make a big difference in whether you're able to continue to make those payments.

Speaker Weinhold** ((00:40:21)) - - Yes. And then the rising insurance premiums, they've gone to X to three X on some homeowners in just a few years. It won't go up that much on a property taxes.

Speaker Wheelwright** ((00:40:30)) - - The insurance is there's been more of the problem recently, but property taxes are kind of layered on top of that. Moving on. I just wanted to land, I think really on getting back to that question of opportunity for investors out there and auction com buyers are typically fix and flip or you know, fix and rent investors. And so what they're doing is they're looking to buy these properties. And it usually takes maybe six months, 90 days to six months to renovate these properties and turn them around and sell them. And so one of the things we look at very carefully is, are the bidding behavior on our platform as an indicator of what's coming in the retail market, because our buyers are they're pretty good usually at anticipating what's going to be happening in their market over the next 3 to 6 months. Our buyers did pull back in their bidding behavior, they got more conservative and were willing to pay less. Back in 2022, when mortgage rates spiked. But it appears now that our buyers have gotten comfortable with this kind of higher for longer concept of interest rates.

Speaker Wheelwright** ((00:41:36)) - - Yeah, and our bidding behavior on our platform is mostly trending higher, meaning that our buyers are pretty confident that the housing market, despite, you know, I might have sounded a little doom and gloom, but our buyers are pretty confident that in their local market, they will continue to be able to buy these distressed homes at a discount. The metric we look at is what they're paying at auction, relative to the after repair value of the home, the estimated after repair value, and as of March of this year, that was at 59.8%. So they're buying at 60% of after repair value at 40. You could turn that around and call that a 40% discount. That number is, believe it or not, been trending up over the last few months. So they're willing to pay more, which indicates confidence in the housing market going forward. Historically, that's our bidders have been a good harbinger or indicator of what's to come in the retail market when they're more confident the retail market typically does well and vice versa.

Speaker Wheelwright** ((00:42:39)) - - You know, if we look at that by market, it's really interesting to see where our bidders are most confident about home prices going up in different markets. And we see a lot of confidence actually, the places where we see it's probably coincidental, but some of the places where we see higher foreclosure volume, as we talked about earlier, some of the upper Midwest Rust Belt areas are where we're seeing our buyers willing to pay more than they did a year ago relative to after repair value. So that's where they have a lot of confidence, actually, even out in California and most parts of Florida, they're still pretty confident. And Texas, there are some areas where our buyers are pulling back and and are paying less relative to after repair value. And there's kind of a cluster of markets in on the Gulf Coast, right? You know, in Mississippi, Alabama. And I don't know if that relates to insurance costs. I haven't made that connection solidly. That's an area where there has been rising insurance costs.

Speaker Wheelwright** ((00:43:39)) - - It varies quite a bit. There are some other markets mixed in across the country. Even though most of Florida, our buyers are pretty confident there is one area where they're they've become cautious, which is Cape Coral, Florida. They've pulled back in terms of what they're willing to bid.

Speaker Weinhold** ((00:43:55)) - - Buyers for foreclosure properties still look overall quite confident in Florida. But yeah, like you touched on Darren, it's the lack of confidence to pay more for foreclosure properties in and around southern Louisiana. I know there's been some population loss there. And yes, like you touched on, they are more sensitive to insurance premium rises in Louisiana too.

Speaker Wheelwright** ((00:44:17)) - - That's right. So the takeaway is there's still the beauty of buying at that auction and distressed properties you are buying at a discount below after repair value. There's still a lot of risk involved because you may not know all that that's needed to renovate these properties, but you do have that. Rather than just counting on the housing market. Home price appreciation to increase to drive your profits, you have this component of added value.

Speaker Wheelwright** ((00:44:45)) - - So you're buying the property at a discount. And even at the housing, home prices don't go up in the next six months. By adding value to that property, you can still turn a profit because you're selling it for more than you bought it for. We have two types of auction on auction. Com there's the foreclosure auction, which we've talked a lot about, which comes at the end of the foreclosure process. And that's typically on the local courthouse steps. Although auction com in many counties allows you to bid remotely on your phone, we're we're pretty excited about that technology that we've introduced in the last couple of years. And then the second type of auction is if it doesn't sell at the courthouse steps foreclosure auction, it goes back to the bank as an REO. And we do the Ro auctions, which are mostly all online, and you can bid from anywhere. And it's pretty consistent between those two types of auctions. On average, at least over time, buyers are typically paying about 60% of after repair value, so about a 40% discount between after repair value.

Speaker Wheelwright** ((00:45:46)) - - Now, a lot of these homes need are in need of a lot of repair. But you have that type of discount available. And even though foreclosure volume has not come back to pre-pandemic levels, we're still seeing a consistent flow of that happening. There are certainly many markets, especially if you're willing to go off the beaten path a little bit in terms of markets where you can find inventory and also good discounts on these properties, especially if you're going to markets where maybe other investors aren't as aware of or aren't as interested in.

Speaker Weinhold** ((00:46:18)) - - Therein. I wonder about local flavor. For those that bid through your platform on these distressed, foreclosed properties. Here we have a lot of investors that buy properties pretty passively where the property is already fixed up for you, maybe already held under management. And a lot of those investors, they go ahead and buy across state lines, because the best teals tend to be in the Midwest and Southeast and a few other pockets in places. So there are an awful lot of out of state investors.

Speaker Weinhold** ((00:46:49)) - - On the passive side, what do you see for a breakdown of local investors in state investors and out-of-state investors through your platform for these distressed properties? I imagine it might be somewhat more localized than what I just described.

Speaker Wheelwright** ((00:47:01)) - - We do have some investors who are buying out of state, but actually the majority are buying in their backyard. Again, because these properties require their high touch, they require a lot of renovation. And so it's good to be local. It's definitely possible, especially with the REO properties where you can buy online. There is some more flexibility there if you have a crew, if you have boots on the ground in the market where you're buying, where you can do that, actually, the average distance between our buyers and the properties they buy is about 20 miles. I should say that's a median distance. So they're very local. There's definitely some exceptions to that you can buy across the country. But it is harder with these properties. These folks are very local. They know the markets they're operating in, and they know they have the resources in those markets to do the renovations.

Speaker Wheelwright** ((00:47:53)) - - Our buyers are probably a great resource for your students, Keith, to be able to tap into these types of local investors who have a supply of homes that they're creating, and sometimes they're selling back to owner occupants, you know, they're putting those properties on the market as renovated properties, and those might be good turnkey rental opportunities as well.

Speaker Weinhold** ((00:48:17)) - - You know, that makes a lot of sense. And how your platform can help people not just find properties, but maybe network and find some like minded people that have tread where you're trying to go. Well, Darren, is there any last thing that you would like to tell us along with your online platform? Is there also perhaps an auction mobile app?

Speaker Wheelwright** ((00:48:37)) - - Absolutely. We have an auction. Com app, and that's a great way to just either on on the website or on the app. You can go on and start searching. There's no subscription fee or anything like that to start looking and seeing where the opportunities are in the markets that you're interested in. You go to auction.com/in the news.

Speaker Wheelwright** ((00:48:57)) - - I actually end up talking to quite a few buyers of our buyers, and we've done some videos where we've gone and visited some of these buyers on location to see what they're doing, how they are operating on a human level. It's very interesting because these buyers are actually doing a lot of good in their communities. Many times by willing to take these down and out properties and down and out neighborhoods and renovate them, but also just on the level of understanding how this all works. That's a great resource. So that's auction.com/in the news and look for those videos featuring some of our buyers. I think that would be a great resource.

Speaker Weinhold** ((00:49:33)) - - Well this has been great information to get an update on what's happening in the foreclosure market and where some of the local areas of opportunity might be as well, especially compared to pre-pandemic conditions. It's been valuable and it's been a pleasure having you here on the show. Thank you so much, Keith. Yeah. Good knowledge for foreclosure expert Darren Bloomquist today. It's when borrowers miss three months of mortgage payments.

Speaker Weinhold** ((00:50:05)) - - That's that mark, where banks often begin foreclosure proceedings. Another thing that you learn is compared to pre-pandemic levels, national foreclosure levels are 10 to 20% lower today than they were then. And see with those that have a late mortgage payment or two, oftentimes that's not going all the way to foreclosure. They're getting caught up on their payments before it goes to foreclosure. And what's really going on here with that dynamic is that, see, today's homeowners, they are more motivated to stay caught up on their payments if they fall behind. And that's because they usually have a substantial positive equity position to protect. And the other factor is that if you lose your home today and you're locked in at a low pre 2022 mortgage rate, it's often going to cost you more per month to go out and rent somewhere else. So it's cheaper on a monthly basis to live in the home that you own. One piece that you might have learned is that high foreclosure activity in a state or city that is not necessarily indicative of that area's economic fortunes.

Speaker Weinhold** ((00:51:10)) - - Instead, it might be tied to its judicial foreclosure process. Nationally, buyers are paying about 60% of after repair value for a foreclosure property. I just talked to Darren some more outside of today's interview, he discussed that foreclosure properties are often in opportunity zones, and if you don't know what they are, are designated distressed areas. That's where there are benefits given to you. If you invest specifically in that zone, you might remember that Opportunity Zones were part of Trump's 2017 Tax Cuts and Jobs Act. They have those zones in all 50 states. And Darren said that overall Opportunity zones are working next week here on the show. Properties are vanishing. Yeah, it is a real tweak to your investor mindset. Disappearing properties. Tune in next week as I cover. Properties are vanishing here on the show. If you haven't yet on your favorite pod catching app, be sure to subscribe or follow the show on your favorite app. Until next week, I'm your host, Keith Windle. Don't quit your daydream.

Speaker Blomquist** ((00:52:23)) - - Nothing on this show should be considered specific, personal or professional advice.

Speaker Voice** ((00:52:27)) - - 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.

Speaker Weinhold** ((00:52:51)) - - The preceding program was brought to you by your home for wealth building. Get rich education.com.

504: The Father of Reaganomics, David Stockman Joins Us: Ominous $100 Trillion Debt is Coming Jun 03, 2024

We’re joined by President Ronald Reagan’s Budget Director, David Stockman. He tells us what real estate investors and everyday people need to know.

Stockman served as Reagan’s Director of Office, Management and Budget from 1981 to 1985.

He tells us to expect higher inflation and interest rates for longer, maybe even the rest of the decade. Don’t expect rate cuts for a long time.

The US is moving toward an unsustainable debt situation, with $100T in public debt expected within twenty-five years. We have embedded deficits.

Learn why the recession has been postponed. David also reveals what will inevitably pull the trigger to potentially start the recession. Hint: Household budgets.

Pandemic stimulus programs gave citizens $3T. Half of it has now been spent.

He was also one of the founding partners of Blackstone.

David Stockman tells a story about President Reagan’s personal touch with him.

You can subscribe to David Stockman’s Contra Corner for free here.

Resources mentioned:

David Stockman’s Contra Corner

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GREmarketplace.com

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RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to our Ivory Coast, Keith Whitehill. There are some dire warning signs for the future of our economy. We're joined by none other than the father of Reaganomics. To break it down with us. Today is late. President Ronald Reagan's budget director joins us. When is this perpetually postponed recession coming? Why? Inflation and high interest rates could carry on for the rest of the decade. And what it all means to your finances and real estate today on get Rich education.

Robert Syslo (00:00:34) - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from past real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Wine, who writes for both Forbes and Rich Dad Advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener.

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Keith Weinhold (00:01:35) - We're going to drive from Glen Burnie, Maryland, to Glen County, California and across 188 nations worldwide. I'm Keith Reinhold, and you're listening to get Rich education. We're going bigger picture this week before we talk to President Reagan's money guy in the white House. Understand that today's guest was also one of the founding partners of Blackstone, and they are in the real estate business. You're going to get a lot of deep, uniquely qualified insights today. And I'll tell you what's going on around here. Lately, things have been feeling awfully presidential between last week's program and now this week's program. Hey. Stars and stripes forever. Semper fi. Rah! Now, as the greatest detonation in the history of the world, how in the heck are we, as the United States, going to keep financing our debt now, you can think of a treasury, also known as a bond, as an IOU, as we take on debt to fund our government spending programs.

Keith Weinhold (00:02:42) - Really, what we do is issue then these IOUs to the rest of the world and then down the road. We need to pay back these IOU holders, treasuries, holders, whatever we've borrowed with interest on top of that. That's a really simple way to describe how it works. Think of a Treasury as an IOU. Well, we have $9 trillion in treasuries that need to be rolled over at higher interest rates just this year alone. Okay. Well, how does the market look for that sort of thing? Well, a lot like before you decide to sell a piece of real estate, you would want to know how that buyer's market looks. How is the buyer's market for us selling more treasuries, which is basically us issuing more IOUs? How is that world interest level in our treasuries? Well, this is a time when the world is selling treasuries. We're trying to get rid of them. Well, why would they buy more when we keep printing like crazy, debasing the dollars that they will eventually get their treasuries repaid in down the road? Case in point, China is down to just over 700 billion of treasuries that they're holding.

Keith Weinhold (00:04:01) - Well, they were 3 trillion not too long ago, more than four times that Russia and Iran sold all of their treasuries. Other countries are shedding them too, like Japan. It gets even worse than that because the number one holder of our own debt is our own fed. And then it gets even worse than that. Yet, because even our own fed is rolling treasuries off of their balance sheet. So who is going to finance this often irresponsible US spending the 10 trillion or $11 trillion every single year for the next ten years that we have obligations toward already, and it looks like all those are going to be at higher interest rates, too. Now, I am not telling you how to think about us as the United States, for example, sending foreign aid to multiple nations. That's up to you to decide whether it's Ukraine or the Middle East or Taiwan that gets political. And that is beyond the scope of GR. We are an investing show. What I'm saying is that backdrop that I just gave you, that's something that you need to take into consideration, is you weigh those foreign aid decision types.

Keith Weinhold (00:05:20) - Speaking of getting worse, do we at least have competent decision makers today? Now, as we'll talk to the father of Reaganomics here shortly, someone that served in an earlier era. Here's a clip from this era that really went viral lately, but it's apropos to play it here. This is Jared Bernstein today. He chairs President Joe Biden's Council of Economic Advisers. How much confidence does this instill? And remember, this guy chairs the economic advisers to today's president.

Jared Bernstein (00:05:56) - The US government can't go bankrupt because we can print our own money.

Voice (00:06:00) - Like you said, they print the dollar. So why? Why does the government even borrow?

Jared Bernstein (00:06:04) - Well, the, so the I mean, again, some of this stuff gets some of the language that the, some of the language and concepts are just confusing. I mean, the government definitely prints money and it definitely lends that money, which is why the government definitely prints money. And then it lends that money by, by selling bonds. Is that what they do? They they, the.

Jared Bernstein (00:06:34) - Yeah. They, they they sell bonds. Yeah. They sell bonds. Right. Because they sell bonds and people buy the bonds and lend them the money. Yeah. So a lot of times, a lot of times at least to my year with MMT, the, the language and the concepts can be kind of unnecessarily confusing. But there is no question that the government prints money and then it uses that money to so, yeah, I guess I'm just I don't, I can't really, I don't, I don't get it. I don't know what they're talking about.

Keith Weinhold (00:07:08) - Well geez. How's that for clarity and confidence from today's major decision makers on our economy? Gosh. Now, in my opinion, back in 2020, our government, they set up the wrong incentive structure to deal with the pandemic. Remember things like the PGP, the Paycheck Protection Program, remember mortgage loan forbearance and the eviction moratorium. See when that type of aid is given, well, then the result is that citizens don't learn that they need to keep some cash handy, and then that behavior that gets rewarded gets repeated in that behavior is handouts.

Keith Weinhold (00:07:53) - And then the expectation for more handouts. 56% of Americans don't even have $1,000 for an emergency expense. Well, see, they're not really incentivized to in the future. If in a crisis, everyone just gets another taxpayer funded handout, but then see those same people that got that handout get hurt in the long run. Anyway, with the longer run inflation that the handout created, don't let there be one day of austerity for the least prepared American, I guess. Instead, bail them out and add on to everyone's debt load, which you know that right there. That seems to be the playbook. Like that is the protocol of the day that is not responsible, in my view. Now, the minutes of the latest fed meeting, they said that some fed officials would be open to raising interest rates if inflation doesn't let up. I mean, that news alone that sent stocks plunging like they were riding the Tower of Terror, giving the Dow its worst day in a while. I'll discuss that more with the father of Reaganomics, David Stockman, today.

Keith Weinhold (00:09:01) - It's the kind of episode that can stretch your thinking here. Now, what is Reaganomics? Well, one thing that you should know is that it's committed to the doctrine of supply side economics. You probably heard that term before. And really what that's all about is lowering taxes, decreasing regulation, and allowing free trade and what was called the Reagan budget. That's something that his budget director Stockman expected would help curtail the welfare state. And he gained a reputation as a tough negotiator for that. He lives on the Upper East Side of Manhattan today, and it's kind of funny with macroeconomic discussions. You'll notice something here, the word million, that doesn't even come up that much anymore. It's simply a number that is too small. It is more like billion and trillion. And hey, let's see if the term three orders of magnitude above trillion comes up today. Quadrillion, or even the one after that quintillion. Is that where we're going next? We'll see. before we meet David Simon, I've gotten more questions about something, because the national average bank account pays less than 1% on your savings.

Keith Weinhold (00:10:18) - And where do you really get a decent yield on your savings, even beyond the 5% in an online only savings account or a CD, which that does not outpace true inflation? For years now, I've reliably been getting 8%. What I do is keep my dollars in a private liquidity fund. You can do this to your cash generates up to an 8% return. The minimum investment amount is just 25 K, and you keep getting paid until you decide that you want your money back. And the private liquidity fund has a decade plus track record, and they've always paid their investors 100% in full and on time. And I would know this because I am an investor with them myself. So see what it feels like to earn 8%. A lot of other great listeners are any investing involves risk, even dollars at a brick and mortar bank. So to learn more, just text the word family to 66866. Learn more about the liquidity fund. Get 8% interest. Just do it right now while you're thinking about it.

Keith Weinhold (00:11:23) - Text family to 66866. Let's meet David Stockman. A Wall Street and Washington insider and Harvard grad. Today's guest is a former two time congressman from Michigan, a prolific author, and he is none other than the man known as the father of Reaganomics. He was indeed President Ronald Reagan's budget advisor. Welcome to the show, David Stockman.

David Stockman (00:11:54) - Great to be with you. And, that was a while back. But I think there's some lessons from that time that we would be well advised to try to apply today, that's for sure.

Keith Weinhold (00:12:05) - Well, it's an illustrious title that you'll never shake. It's a pleasure to have you here. And David is a real estate investing show. At times we need to step back and look at the bigger picture. And now on the economy, one seems to get a different answer depending on who they speak with. You have a highly qualified opinion. What do both investors and citizens need to know today about the condition of the American economy?

David Stockman (00:12:29) - I don't think the outlook is very promising, but I think it's important to understand what that means for real estate investors, because the fact is, if you're in real estate and I know many of your listeners or viewers are very knowledgeable and sophisticated, there's really two ways to look at real estate.

David Stockman (00:12:49) - One is as a property that generates a flow of cash or income that is highly reliable, and that you can count on and produces a rate of return on the invested capital that's attractive. That's one way. The second way is that if you invest at the right time, when perhaps interest rates are falling and therefore multiples or cap rates are becoming more attractive and property values are rising rapidly, mainly because of easy money and lower interest rates, then there's a huge opportunity for capital gains. As another way of generating return on capital. But those are two obviously very different tracks. The capital gains route by old invest, improve flip flop the gain and move on or the, you know, income based rent and earnings based, approach to property. Now, I think the reason I went through this is pretty elementary, of course, is that the macro environment is very different between the first strategy and the second strategy. And therefore, the important thing to understand about the macro environment is which environment are you in and is it conducive to strategy a the income strategy or b the capital gains strategy? I would say right now we're totally in an incomes strategy environment, the first route.

David Stockman (00:14:34) - And that's because as we've gone through several decades of easy money, of rapidly rising asset values, of ultra low interest rates, very high multiples, in terms of property values to income that has generated trillions and trillions of capital gains for smart real estate investors. But I think we're out of that environment, and we're in an environment now where we're stuck with massive public debt and deficits. We're stuck with a, central bank that is, basically painted itself into a corner, created so much fiat credit, generated so much liquidity into the economy that now it will be struggling with inflation for years to come. Which means, notwithstanding Wall Street's constant belief that rate cuts are coming tomorrow, there won't be rate cuts for a long time to come. And what we're facing, therefore, there is likely higher rates for longer. A environment in which property values are flat if not declining, and therefore the capital gains route is not going to work very well. But if you have good properties with good tenants and good cash flows and, rental flows, real estate mine works out pretty well.

David Stockman (00:16:05) - But you have to understand the macro environment. And that's one of the things that I work on daily when I, publish my daily newsletter, which is called, David Stockman's Contra Corner.

Keith Weinhold (00:16:19) - You can learn more about Contra Corner, David's blog, before we're done today. David, you have a lot of interesting things to say. There we are in this environment where rates have been higher, longer. It sounds like you believe that is going to continue to be the. Case is rate cuts will be postponed is a little more difficult question. It's some crystal ball stuff. But can you tell us more about that? What can we expect for inflation in interest rates for the rest of this 2020s decade, which has about six years to go?

David Stockman (00:16:48) - There's going to be high rates for most of this decade because we have so much inflation and excess demand built into the economy. We really went overboard, especially after 2020 with the pandemic lockdowns and then these massive stimulus program, something like $6 trillion of added stimulus, was injected into the economy in less than 12 months.

David Stockman (00:17:16) - That created a undertow of inflation that is still with us. And despite all the hopeful commentary that comes from Wall Street, if you look at it year to date, I don't look at just the CPI because the headline number is somewhat volatile and can be pushed and pulled a lot from a month to month based on nonrecurring conditions. But if you look at something called the 16% trimmed mean CPI, it's just the same CPI, but it takes out the lowest 8%, the highest 8% of price observations each month out of the thousands in the market basket. What it does is basically takes the extreme volatility out of the top and the bottom, and gives you a trend that is more reliable if you're looking like on a quarter by quarter or year by year or even multi year basis, well, I mentioned this is important because the trim means CPI is still running at about 4.3% during the first four months of this year to date. That's not a victory over inflation. That's double what the fed says his target is. And frankly, the Fed's target is a little bit phony.

David Stockman (00:18:35) - I mean, what's so great about 2% inflation if you're a saver and your savings are, you know, shrinking by 30% over the course of a decade, so they're going to have a tremendous wrestling match with inflation, not just for a few more months, but I think for several more years in this decade, I don't see the federal funds rate, which is kind of the benchmark rate for overnight money coming down below 5% very soon, or if at all. And that's because with inflation running at 4% or better, if you have a 5% money market rate, you're barely getting a return on capital, especially if you factor in taxes. You know, it's like it's a rounding error and that doesn't work over time. I mean, you're not going to get long term savings. You're not going to get long term capital investment. If the return is after inflation and taxes are either non-existent or negative, as they've been for quite a while. So even though everybody would like to hope we're going back to the good old days of 0% over 90 money or 1% money, which they got so used to over the last couple of decades.

David Stockman (00:19:55) - It was bad policy. It wasn't sustainable. It caused a huge amount of bubbles and distortions in our economy. But once we finally got to the end of that in March 2022, when the fed had to finally pivot and say, yeah, inflation isn't transitory, it's, embedded, we got to do something about it. People think we're going right back to where we were, and that's the key thing to understand. We are not going right back to where we were, in part because of all this inflation business I've talked about, but also in part because they got so used to borrowing money on Capitol Hill and practically zero interest rates that they are now, you know, they have built in deficits of 2 trillion or more a year. And, we are going to be pushing into the bond pits, massive amounts of new government debt. There's no consensus to do anything about it. You know, if the Republicans talk about reforming the entitlements, the Democrats say you're throwing grandma out the snow. If the Democrats talk about raising revenue, the Republicans talked about, you're going to get slaughtered with higher taxes.

David Stockman (00:21:12) - And then everybody's for more wars and more defense and the bigger and bigger national security budget. And that's all she wrote. If you don't do with revenue, you don't do it national defense and entitlements. The rest of it is rounding errors. And so we're stuck with these massive additions to the debt. Now, everybody knows the public debt. Is 34 trillion. Ready? Yeah. What I'd say they don't understand is that by the end of this decade, you ask about the decade, right? Will we close to 60 trillion of debt. And, if you look at the last CBO, projection they do every year at long term projection, and CBO actually is more optimistic than it is warranted in any way. In other words, their long term assumptions I call rosy scenario. There's no more recessions for the next couple of decades. Inflation is well-behaved, interest rates stay low. Full employment lasts indefinitely and forever. Well, this doesn't happen. Look at the real world. Over the last 20 or 30 years, we've been all over the lot.

David Stockman (00:22:18) - So if you look at the CBO forecast, which is I'm just saying here is exceedingly optimistic. They never are the less are projecting that the public debt and they don't even write this number down in their report because it's too scary, will be $100 trillion before the middle of this century.

Keith Weinhold (00:22:41) - That's a.

David Stockman (00:22:42) - Trillion. Yeah. Now, if you ask people today who are market savvy, I like a lot of your viewers. Where are the Treasury bills, notes and bonds today? Well, if you average it all out, it's about 5%. I don't think it's going to come down much. It'll vary a little bit up and down over time, but let's just say it stays at 5%. That means the carry cost of the public debt of a couple decades will be 5 trillion a year. The interest okay. It's staggering. That's almost as much as the whole federal budget is spending this today at, you know, about 6.6 6.7 trillion. So that's where we're heading, a massive debt crisis because they built in a structural deficit that the politicians and I call it the unite party.

David Stockman (00:23:33) - They fight about silly things, but they agree on the big things which are leading to this outcome. The unit party has no ability to do anything about this structural deficit or the march from the 34 trillion that we're at today to 60 trillion by the end of the decade, and 100 trillion of public debt by mid-century. Now, for a real estate investor, that's probably the most important number you're going to hear. You know, at least this week or maybe this month or even this year, because what it means is that the amount of new government debt flowing into the bond pits, that'll have to be financed and that can't be monetized by the fed anymore because there's too much inflation, is going to put constant, enormous pressure upward on interest rates. And of course, higher interest rates mean lower property values. That's just basic real estate math. That's the environment we're heading into, which means good properties with good income and good rental flows are really the only way to go.

Keith Weinhold (00:24:55) - Yeah, well, there's an awful lot there.

Keith Weinhold (00:24:57) - And with this persistent higher inflation that you expect, the way I think about it is the higher the rate of inflation, the more that moves a person's dollars out of a savings account and instead out onto the risk curve. Well, David alluded to a problematic economy. We're going to come back and talk about more of those warning signs and what you can do about it. You're listening to Get Resuscitation, the father of Reaganomics and Ronald Reagan's budget director, David Stockman, I'm your host, Keith Reinhold. 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 7 (00:26:06) - This is author Jim Rickards. Listen to get Rich education with Keith Reinhold and don't quit your day dream.

Keith Weinhold (00:26:23) - Welcome back to Get Ready. So we're talking with the father of Reaganomics. His name is David Stockman, President Reagan's budget advisor. David, you've been talking about a problematic economy and places we can look and the outcomes that that can create. Why don't we talk about some more of those where we're here in a period where we feel like it's an official recession postponed, for example, are there other places that we should be looking? Is it the sustained inverted yield curve that we had for almost two years, the longest one ever, and a Great Recession predictor? Or is it that we're on the precipice of implosion from a debt to GDP ratio that's at 122%. It actually spiked to 133% when Covid first hit. Or for example, is it something and you've already touched on it a bit, is it more of that federal spending on our debts, interest payments alone each year, which had almost $900 billion for that interest line item that now even exceeds the massive $800 billion that we spend each year on national defense, or should we be looking at somewhere else? So what's out there that's really problematic and what's overblown?

David Stockman (00:27:28) - Okay.

David Stockman (00:27:29) - That's great. And all of those things you mentioned you should be looking at, it depends on your time frame. But I think on the initial question, where is this postponed recession? Why hasn't that happened? The place to look is somewhere that I think most Wall Street analysts aren't focused on, but they should be. And that's a series published by the Federal Reserve that tracks household balance sheets, in other words, liabilities and assets. But there's a particular series that I think is critically important to look at, and it's basically bank deposits, checking account savings accounts plus money market funds. This is all the liquid cash accounts of the household sector, not long term investments in real estate or stocks or bonds, but the short term money. It's the spendable money that households have now, what happened during the pandemic and lockdowns. And then the 6 trillion Is stems that were injected into the economy, like some kind of fiscal madness was going on in Washington, created a total aberration in the amount of cash in the economy, in the household sector, in these accounts that I just mentioned, normally right before the lockdown started and the stimulus was injected, you know, the level of cash accounts was about 12 trillion.

David Stockman (00:29:00) - Within two years it was up to 18 trillion. And normally that cash balance grows about the same rate as the economy. In other words, as incomes go up, people save a small share of their income that goes into various bank accounts. There tends to be a lock step relationship. But what happened during that two year period was there was so much extra cash sent out to the households with the $2,000 checks in the $600 a week extra stimulus money, and then the, trillions that went, you know, for things like the Small Business Administration loan program, which was all forgivable, was about almost upwards of $1 trillion. You know, we could itemize all the others. But this enormous government, unusual cash flow into the economy added to these bank accounts enormously. And then something else happened. The geniuses in Washington, led by Doctor Fauci, decided to shut down half of the service sector, the economy. I'm talking with restaurants and bars and gyms, malls and movies and and all the rest of it.

David Stockman (00:30:09) - So all of a sudden, the normal money that people would have been spending on the service venues, which is a big part of total spending, was stopped. It was kind of forced into artificial savings, sort of government mandated savings. Now, if you put the two together, there was about 2 trillion, extra transfer payments sent out to the public during that two year period. And there was a little over a trillion of normal service spending, restaurants in, etc. that didn't happen because there was a closed sign on the door, compliments of Doctor Fauci, or people were scared to death to go out because, you know, they created all this fear that Covid was some form of black death, which it really wasn't for 95% of the population. In any event, if you put the extra free stuff from the government, 2 trillion and the for savings because of these lockdowns, trillion, you have 3 trillion of unusual cash that flowed into the economy on top of the normal production. Income and profits and spending that would have otherwise gone on.

David Stockman (00:31:26) - Now that 3 trillion temporarily ended up in this account, that I'm just talking about the cash balances of the household sector and its peak, there was about 2.8 trillion extra compared to what would been be the normal case in a regular economy. In a normal economy, that money has been slowly spent down by the household sector, even as the fed has tried to put the screws to the economy. In other words, there was so much extra cash in the system that even as the fed raised interest rates from 0 to 5% and did their darndest to slow things down, all of that excess that was built up during the pandemic period was available to spend. It was spent. And here's the key point. About half of it is now been spent. In other words, there's only about a trillion and a half of the nearest 3 trillion left. Now that is what's delayed the recession. If that big, massive 3 trillion nest egg had been there and the fed began to push rates up as it normally did in a normal cycle, we would have been in recession months ago.

David Stockman (00:32:41) - But what has delayed or deferred the recession is this, cushion, this huge macro piggybank of cash that the government inadvertently or adversely is the case may be generated, during the pandemic period. So that's new. See that? Nobody looks at that because normally it's not a factor. You know, the cash balances are a pretty, prosaic, neutral part of the economy. They're not where you look for the leading edge of where the cycle was going or where new developments may turn up tomorrow. But this time, because of this total aberration of what happened to government transfer payments plus the lockdowns, we have a, X factor, let's call it in the macro picture that is confusing people. It's leading a lot of people to abdicate this no landing scenario. In other words, you know, there's not going to be a recession. We're just going to go on to bigger and better things. And, the fed will get inflation under control and then we can be back to happy times again. No, they're missing.

David Stockman (00:33:56) - The elephant in the room is this massive aberrational unusual one time cash balance that was, generated by these policies. And that still has a little ways to go now. I think at the rate it's being run down, you can almost calculate it a couple hundred billion dollars, a quarter sometime next year, all of that extra cash will be out of the system. And then people will be back to spending only what they're earning. And frankly, earnings they're not. I'm talking about wage and salary earnings, are advancing barely at the inflation rate at the present time. So when we get back to about zero real growth in earnings, we're going to finally see the recession.

Keith Weinhold (00:34:45) - I think one of the big takeaways here is that all these artificial economic injections really take time to unwind.

David Stockman (00:34:56) - Exactly. You have to look at, you know, they always say, well, when the government changes policy, fiscal policy, you tighten or you loosen or monetary policy they raise or lower interest rates. They got QE or they got cute putting money in or taking money out that there's lag and lead times in all of this.

David Stockman (00:35:18) - The problem is, none of the great economic gurus who talk about this really know whether the lag time is 12 months, 25 months, 50 or 5, and it varies. I mean, the circumstance has changed so much in a world GDP of 104 trillion, a domestic economy with 28 trillion of GDP, and all the complex factors that are moving back and forth in today's world, especially as it's enabled by technology and global trade and the internet and all the rest of it, nobody knows the lag times. And as a result, it's very hard to predict when the, brown stuff is going to hit the fan, so to speak. On the other hand, you don't have to know the exact date. You really need to understand the direction, the flow of things. And if you're in an environment that isn't sustainable because you're borrowing like crazy or interest rates or artificially. Low or stock price multiples are way the L2 ie or cap rates on real estate or you know, abnormally low. Then what you have to say is we're going to a different state.

David Stockman (00:36:35) - It's not going to be as conducive as the current state, and we have to be prepared for it, even if we are not sure whether that's 12 months from now or 24 months. But it's going to change. So one thing you can be sure of, there is a famous economist back in my day when I worked on Capitol Hill earlier on, he was Nixon's chief economic adviser in the early 70s. And he famously formulated an aphorism, I guess, which said anything that is unsustainable tends to stop. Okay, that's what I know about the lag times. We're in unsustainable financial, fiscal and monetary environment. And the trends that it has given rise to are going to stop and and not in a good way.

Keith Weinhold (00:37:24) - He even fed Chair Jerome Powell has confessed as much as that. This situation is indeed unsustainable, the exact word that he used. Well, David, this has been great in winding down as Ronald Reagan's budget director. Can you share any anecdote, story or quote from you spending time personally with Ronald Reagan? And the reason I ask is because he is perhaps the most revered president of the past few generations.

Keith Weinhold (00:37:52) - That might mean a lot to our listeners here.

David Stockman (00:37:54) - He should be revered, and not only because he was a great president and a great communicator, and did a lot of important things in policy. Some of them got implemented, and a lot of them were frustrated by Washington and the politicians and the Democrats and everybody else. But also, he was a great human being. And my story about that was when I was budget director, in the fifth year of the Reagan administration, we had our first child, and my wife was in the hospital. At that point in time, President Reagan was in Europe on a very important big international, series of meetings. But, somebody in the white House told him that our daughter had been born. And so he took the time out of his schedule for a call from Germany, the hospital where my wife was, and said he would like to talk to her and, congratulate us on our new arrival. But my wife was in a room with another, a new mother.

David Stockman (00:38:53) - She the other person answered the phone and she said to my wife, there's some joker on the phone with President Reagan. And sure enough, he was there. and he took the time to congratulate my wife. And, so that's the kind of, person he was. He really was a great human being.

Keith Weinhold (00:39:13) - Wow. Yeah. That really shows that he can still be warm and heartfelt, even while doing some key international negotiations there. Potentially. Well, we mentioned it earlier. I can tell you, the audience, that David is a regular author and contributor to his Contra Corner blog and letter, and you can get access to that for free. This is information coming from the father of Reaganomics to you. If you think you would find it a value. David, tell us how our audience can connect with you there.

David Stockman (00:39:44) - Just Google David Stockman Contra corner I publish, I have a website, issues a newsletter every day. It comes automatically in the email. I also have a Substack version. You can sign up for either one, the email from my site or from Substack.

David Stockman (00:40:02) - And every day we try to publish something on these issues that we've been talking about. One day it might be Wall Street, another day it might be Capitol Hill, another day it might be, you know, the war in Ukraine. All of these things matter. All of these things influence the environment that investors have to function in. So we try to comment on a variety of those issues based on, you know, the long experience that I've had, both not only in Washington, but also I was on Wall Street, for about 20 years. I was one of the founding partners of Blackstone, for instance. And we were in the real estate business in a major way, even then.

Keith Weinhold (00:40:44) - Well, we absolutely love that. And I sure am appreciative of your time. It was great connecting with you. And thanks for being on the program today, David.

David Stockman (00:40:53) - Very good. Enjoyed it.

Keith Weinhold (00:41:01) - Yeah. Deep insights from the father of Reaganomics. Stockman thinks we'll be struggling with inflation for years to come.

Keith Weinhold (00:41:08) - There won't be rate cuts for a long time. He sees real estate values as flat or declining, so have good tenants with steady income streams. Of course, in our favoured real estate segment here, residential 1 to 4 units where you can get 30 year fixed rate debt. Higher mortgage rates tend to correlate with higher prices, just like it has for the last three years and almost every period before that too. But there could be more pain for the commercial sector then, and assets that are tied to floating rate debt. And if you're aligned with David Stockman on that, you might want to look at your helocs, because after a fixed rate period, their rates tend to float along with the fed funds rate. So be cautious with Helocs and ask David for specifics. He doesn't see the federal funds rate coming down below 5% anytime soon, and you probably know that is the interest rate that a whole bunch of other interest rates are based off of. And that rate is currently at about 5.3%. By the way, there is projected to be more than 100 t more than $100 trillion of public debt before the middle of this century.

Keith Weinhold (00:42:22) - That's less than 25 years away. I mean, these figures just become unfathomable sometimes. Pandemic wrought inflation that really occurred due to this greater supply of dollars that was introduced chasing a reduced supply of goods. And there were fewer goods because people got paid to stay at home not producing anything. Plus, what had been produced often could not be shipped either. David discussed the 16% trimmed mean CPI, and I've got to say, as much as I am a student devotee in studying inflation, I had never heard of that from his vantage point to find recession signs, look at household balance sheets and what's delayed the recession is that those pandemic measures put an extra 3 trillion bucks into households, and households still have about 1.5 trillion left to spend, which could further delay a recession. He projects that it's sometime next year that all of that extra cash will be out of the system. When you talk to how many people got this recession predictions so horribly wrong? Back in October 2022, Bloomberg Economics forecast a 100% chance of a recession by the following fall, which is almost a year ago now.

Keith Weinhold (00:43:48) - Well, a 100% chance that left no room for anything else to happen. And they really whiffed on that one. Now, you know, I've got to add something here. A personal note if I can, but I'll give you a lesson along with it. And that is that at times like today, where I found myself one degree of separation from one of the most revered presidents in all of American history, I sometimes have some difficulty understanding how I keep having the opportunity to share time with people like today's guest. Now, I'm certainly not a PhD economist. And in fact, on the flip side, I've also never been a person that's been so poor and destitute that I was dying of hunger. But I do come from a modest place. When I flew the coop and left my parents home, I rented my first pathetic place to live a $325 a month pool house in the back of my landlord's property at 852 Spruce Avenue in Westchester, Pennsylvania. Yeah, a pathetic little pool house right next to the landlord's swimming pool.

Keith Weinhold (00:45:04) - I mean, I was living really pathetically there for a while as I was struggling just to do things like find gainful employment and figure out the world and find a steady income. Yeah, it was 325 a month plus electric and the one small heater that was there, it was electric and it was really expensive to run. And on the coldest days, it wouldn't even adequately heat my pathetic little pool house that I ended up living in for 18 months. And just because I couldn't figure a way out of that situation for a while, I mean, I was too ashamed to ever bring a girl back there to that sad pool house. It was just one sink for the whole place. Combined kitchen and bathroom sink in the bathroom. I mean, most of my friends, they got their driver's license at age 16 and they soon had their own car. I didn't own a car until I was aged 22 or 23, and it's not because I lived in an urban area and walked. Everywhere use public transit there in Pennsylvania.

Keith Weinhold (00:46:02) - It just took me a long time to afford a beater car and pay for insurance. I really needed a car and couldn't afford one. So really my point here is that sometimes I have to wonder how I got here from there. And I think what it is is taking an interest in real estate and investing. And despite just having a humble bachelor's degree in geography, it's really about becoming an autodidact, meaning self-taught. And it's easy to teach yourself when you find what interests you. And let me point to two other things besides adopting an auto didactic ethic to help me turn the corner into being in a place where I can have conversations like the one that I've had today. It was getting around aspirational friends. Like I've mentioned before, that showed me how I can start with a bang buy with little money. On my first home, I could put a 3.5% down payment on a fourplex, live in one unit and rent out the other three. And I will give myself some credit for doing those things. And then really, the third thing is that stroke of luck element, like just 4% of world inhabitants have been.

Keith Weinhold (00:47:15) - I was one of that 4% that was born in the United States. And then I had two great, married, stable, supportive parents to cultivate the right environment for me. And well, today was just one of those days where I sort of nudged myself and I'm glad that it happened. Most importantly, I trust that you got value from today's show and that you do every single week here. Check out David Stockman's Contra Corner. Next week, we'll look for signs of distress in real estate as we delve inside the foreclosure market and how you can find discounted deals there. Until then, Idaho's Keith Wayne hold don't quit your day trip.

Speaker 8 (00:48:02) - 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. The.

Keith Weinhold (00:48:30) - The preceding program was brought to you by your home for wealth building.

Keith Weinhold (00:48:34) - Get rich education.com.

503: How Decades of Inflation Destroyed Our Dollar, Today’s Rent Trends May 27, 2024

We’ve already had more inflation in this young 2020s decade than the entire 2010s.

If the next forty years have as much inflation as the last forty, gas will cost $13.38 per gallon, the average home $1.88 million, and the average rent $59,000 annually.

Inflation impoverishes most people. You can profit from it 3 ways at the same time. Watch the free 3-part video series: GetRichEducation.com/TripleCrown.

The 30-year fixed rate mortgage is a uniquely American construct. It virtually exists nowhere else in the world. I compare this to mortgage terms in Europe, Canada and Australia.

In much of the world, homeowners have had their mortgage payments double overnight!

Trends that won’t soon be disrupted: more inflation, people need to live somewhere, there aren’t enough places to live. That’s so simple! Invest in it.

Rents are increasing the most where little new supply has been added.

There’s a myth that gigantic institutional investors are gobbling up all the single-family rental homes. But they only own 3% of the market. Mom & pops own 80%.

Single-family rents are up 3.4% per CoreLogic. Detached SFHs are up more than attached types.

Property prices and rents are positively correlated. Some people falsely think that they move inversely.

Resources mentioned:

Profit from inflation 3 ways:

GetRichEducation.com/TripleCrown

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RidgeLendingGroup.com or call 855-74-RIDGE

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Complete episode transcript:

Welcome to GRE! I’m your host, Keith Weinhold. Learn how the misery of INFLATION is altering BOTH your quality of life and the return on ALL of your investments…

… also, many people are now having their mortgage payments DOUBLE overnight and IT’S creating pain, then, what are the factors affecting the future direction of RENTS - all that, and more, today on Get Rich Education!

______________

Welcome to GRE! You’re listening to one of the longest-running and most listened-to shows on real estate investing. This is Get Rich Education. I’m your host, Keith Weinhold - the voice of RE since 2014.

I don’t know if you fully realize how much inflation is steering all of your investments - and it’s emphatic at a time like this when the dollar is down 25% cumulatively just in the last four years. Gosh!

And I’ve got some jaw-dropping inflation fact to share with you soon.

We’ll get to inflation’s RE affects shortly. But here’s what I mean.

In stocks, they keep riding up on a wave of optimism, anticipating a Fed interest rate cut - largely due to future INFLATION expectations. Yes, there’s jobs & GDP and some other factors.

But the stock market - which is a FORWARD-looking market - it moves based on what’s expected to happen 6 to 12 months from now.

STOCK investors know that rate cuts open the floodgates to get us closer to the “easy money” days again.

That’s why - as backwards as it is, the worse the economy looks, the lower that inflation tends to be, and then, in turn, the lower that interest rates can go, which the stock market likes.

So a worsening economy often pumps up the stock market. Soooo backwards.

Just look at what happens historically. Recessions sound bad. Yet what happens is that rates get cut in a recession - because the economy needs the help.

But nearer-term, it’s this ongoing expectation of the rate cut - that’s been looming out there for months but hasn’t happened - which CAN keep propelling the stock market to higher highs. It’s already hit all-time highs here recently. You can make the CASE that stocks should keep floating higher from here… based on that premise.

Before we look at real estate & inflation. Understand this.

Inflation has already widened the divide between the affluent and the deprived. That divide has gone from a gully to a canyon.

But... my gosh! Here’s the stat that I want to share with you. And you’re really going to get a sense for the gravity of what you’re living through this decade.

We've already seen more inflation in the first 51 months of the 2020s decade than in the ENTIRE decade of the 2010s. Already.

This gets really interesting. Let’s look at about the last four decades here.

Alright, in the 1990s decade, America had 34% cumulative inflation. Let’s go ahead and… we’ll associate this decade with President Bill Clinton.

We won’t tie any President to the inflation number because there are lag effects and other factors. A President really can’t take the credit or blame, in most cases. Just marking the era here.

So, 34% inflation in the 1990s.

The 2000s decade saw the GFC and… 29% inflation. Most of those were George W. Bush years.

The 2010s decade saw lower inflation → Just 19%. So that’s under 2% a year. These were mostly the Obama years here in the 2010s.

Little flex there from the former Commander in Chief.

Then the 2020s decade → have seen, like I alluded to, and under Joseph Robinette Biden, Jr. - yes, as the oldest sitting president ever, it’s easy to forget that he’s a “junior. In this young 2020s decade, we have, 21% cumulative inflation. Already.

So this figure is after just the first 51 months of this decade, if we’re counting from 2020… and this is largely due to supply shortages from the COVID pandemic.

So 21% ALREADY this decade… and just 19% ALLLL of last decade which was a full decade. That’s the impact.

That’s reflective of what you see in home prices and rent prices and utilities, transportation, labor, and almost every facet of your life.… and what you see in your weekly Costco bill and Trader Joe’s bill.

Who have we left out here? A one-term president, so far? Does somebody feel left out.

Yes, that is the actual person of one Donald John Trump.

Psssshhh!

All of those figures I cited are from the BLS, and I’ve been rounding to nearest whole percent.

But get this! Inflation over the next forty years could make the LAST 40 years seem like a picnic.

That's partly because we're $35T in debt and that figure now grows by $1T every single quarter… every 90 to 100 days. So we MUST keep dollar-printing to help pay it back.

But just, if the last forty years repeats itself, by the year 2064, which is the next forty years, we'll see these prices. Prepare for a future that looks like this:

Gas at $13.38 per gallon

The home price at $1.88 million

Average rent at $59,000 per year

And the average salary at $104,000

That is if inflation over the next 40 years, looks like that last 40 years.

Also, note how salaries don't keep pace with prices. That $104K average salary in the year 2064 doesn’t sound as high-flying as those other figures.

Well, this is all really frustrating for consumers… and even debilitating to one’s standard of living. Remember, this latest wave of inflation brought us the biggest YOY increase in homelessness - based on HUD figures.

and why you need to invest in something that reliably BENEFITS from inflation and pays you an income at the same time.

Look, here’s really, the deal. Dollars are abundant. So then isn’t it a paradox that a major spike in the supply of dollars would create more homelessness?

Well, you know that dollars are there for your taking - because so many more have been brought into existence. Dollars are abundant. So as they cycle through the economy, rather than going through the consumer motions, you can build your diverter. That’s where the world of abundance exists, so get into that flow.

Ultimately, REAL capital is scarce. Your time and energy are scarce. Natural resources are scarce. Labor is scarce.

What’s frustrating is that money ought to reflect that scarcity if it is going to accurately convey the value that enables people to make capital accumulation decisions.

And alas, we’re doing our measuring in dollars and the dollar is not remotely scarce.

The middle class and poor often have wages that don't track inflation, yet they disproportionately suffer the higher consumer prices.

The investor class owns assets that float up with inflation. And GRE listeners will do even better than that.

As income property owners with mortgages, we're winning three ways at the same time with the Inflation Triple Crown. That’s your dollar diverter.

Alright, so that’s longer-term inflation. I’ve been talking in terms of decades - both the past and with an extrapolation into the future to 2064 there - and it’s really rather sobering.

Well, what's the more CURRENT inflation situation? The situationship? Ha! What’s the situationship now?

In trying to quiet it down to their 2% target, the Fed has run into so many hurdles that you'd think they were training for this summer's Olympics in Paris.

After it peaked over 9% two full years ago now, inflation’s been bouncing near 3-and-a-half-percent for a year and they just keep having trouble getting it lower than that.

Hmmm... would we say that this could turn into Jerome Powell's three-quarters life crisis? We’ll see.

Rising inflation is one of the key factors that brought down the Roman Empire. They famously experienced hyperinflation after a series of emperors lowered the silver content of their currency, called the denarius.

Today, some lament that the dollar isn't backed by gold, silver, or anything else.

But it is.

It's backed by the world's most powerful military, strongest economy, reserve currency status, international trade agreements, and you also… must pay your taxes in dollars.

Dollars are still liquid and useful… but perpetually debased, so get them and then transition out of them.

Yet, at the same time, we're also the greatest debtor nation in world history. The easiest way to pay it all back is to simply print more and inflate more.

So that’s why it's almost inevitable that dollars will keep being worth less... and BTW, the two words “worth less” sound awfully close to the word “worthless”. Ha!

That’s where we keep heading.

Until you can send a Venmo request to the Fed to compensate you for your loss in purchasing power, we need to actually do something about this.

And the dollar that you had when you started listening to me today could very well now only be worth 99 cents. Ha!

We can either have our standard of living degraded by inflation or we will decide to profit from it.

So, if you haven't yet, check out GetRichEducation.com/TripleCrown.

Rather than impoverish you, learn how you can make inflation CREATE wealth for you three ways at the same time with that free, 3-part Inflation Triple Crown video series. Good learning there.

It’s free & easy to watch, again, at GetRichEducation.com/TripleCrown

Inflation seemingly seeps into everything.

Inflation took down the commercial sector - Apt buildings & offices. Apts are down 30-40% in the last two years. It’s all because inflation made the Fed panic and jack up those rates.

If that’s not jaw-dropping enough. Office values are down 80%+ in the last two years. 80%+, 90%+ in some cases.

Of course, office RE got the double-whammy of the inflation-induced interest rate hikes AND the Work-From-Anywhere movement.

That leaves residential 1-4 unit properties in good standing - and still impacted by inflation, but LESS impacted by inflation.

Yeah, your 1-4 unit RENTS are up - and I’ll talk more about rent later in the show today.

inflation also jacked up your expenses like insurance, utilities, maintenance & repair cost and more.

But as we move away from the inflation conversation now, of course, one big reason that 1-4s have stayed resilient is the American privilege of LTFIRD - and the fact that it’s 30 years for most US properties.

In fact, in 2022, 89% of homebuyers applied for the 30-year.

I think that you’re about to get more appreciation for this… perhaps than you’ve ever had.

The 30-year FRM is a UNIQUELY American construct.

And, BTW, some people don’t seem to know what the word “unique” means. You’ve probably heard people misusing this word all the time.

Unique does not mean something that’s sort of different.

Unique means “ONE of a kind”. Unique means something that does not exist ANYWHERE else.

What do I do here on this show? Besides giving you the occasional geography lesson as a side dish to your real estate, I do this with vocabulary, grammar, and syntax as well, don’t I?

Even though my own is surely imperfect.

Anyway, the reason that the 30-year mortgage can exist is due to our deep financial markets - especially our secondary market for mortgage-backed securities, where your loan gets packaged up and purchased by a bond investor - a bit like Ridge Lending Group President Caeli Ridge & I touched on last week.

The reason that mortgage-backed securities are attractive to investors in the U.S. and across the globe is because their government sponsorship makes them safe investments over long periods of time. They also provide a fixed payout to the MBS holder.

And see, the rate on the 30-year fixed-rate mortgage tracks closely to 10-year Treasurys because “U.S. real estate is almost as good an investment as a U.S. Treasury bond.”

They’ve got Fannie & Freddie insurance.

And that entire MBS process now has more guardrails in it than we had before the Global Financial Crisis.

We’re talking about the foundation here - really - of where you get your big lumps of money from - the 30-year FRM and its uniqueness.

Compared to the world, the US has very little variable rate debt.

Less than 4% of American mortgage borrowers have debt that’s on rate terms of a year or less. Over 96% of US debt is LTFRD, defined as 10 years or more.

That is virtually unparalleled worldwide. To compare us to some other developed nations, mortgage borrowers in Germany - just 47% of them have long-term fixed debt - and none of them can get 30-year debt.

Long-term debt, again, defined as ten years or more,

Is little to ZILCH for mortgage borrowers in Canada, the UK, Ireland, Italy, Sweden, Finland, Australia, and other developed nations like them.

In Canada, the most common mortgage terms reset to the prevailing market interest rate every five years.

In Finland, their mortgages reset annually or faster. Gosh, can you imagine if your mortgage rate reset every year like it does for the Finns?

Sheesh, that's more often than some people lose the remote control or rearrange their furniture.

OK. So what's this really mean?

Ya gotta… pour one out for most mortgage borrowers in the rest of the world.

They can’t lock in their mortgage interest rate for the long-term. So with rates doubling or tripling, starting from 3 years ago, it's totally ruined a lot of foreign homeowners.

Look, what if you're middle class and your monthly mortgage payment soars from $1,893 on Tuesday up to $3,415 on Wednesday?

That's what's happening elsewhere. It can go up 50% overnight and nearly double overnight in Australia, Europe and elsewhere.

But in the mortgage-advantaged US, we're safe.

If we buy at an 8% mortgage rate on a 30-year fixed amortizing loan today—just the plain, vanilla loan:

If rates rise to 10% later, you're happy to be locked-in at 8%

If rates fall to 6% later, you'll refinance

Note that I refrain from saying "just refinance". I don't like the word "just". You'll still need hours to provide documentation and your credit score will be checked. But it's worth it.

You won’t “just refinance”. Ha! You’ll refinance.

So think of it this way then, you can alter your deal with the bank whenever you want—and usually with no prepayment penalty. Yet the bank can't alter it on you.

What did Darth Vader say to Lando Calrissian in the “Empire Strikes Back?”. I am altering the deal, pray that I don’t alter it any further.

Ha! We better not play that clip here. I don’t know the copyright laws with LucasFilm or Disney there. Ha!

But you’re not a dark lord of the Sith for doing it… for altering the deal on the bank. You’re playing within the rules.

This is almost an unfair advantage for Americans.

The bottom line here - with this unique American advantage, is that, as rates change, you get to play both sides of the game. And that’s why we add smart properties with loans.

We turn that into wealth, with compound LEVERAGE.

Now, mere compound interest, that’s a vehicle for you to rely on more for your shorter-term funds, your cash or what you’re keeping more liquid.

Long-term wealth is build through compound LEVERAGE.

Short-term funds - that’s for compound INTEREST.

And… your bank is getting rich off of YOU. The national average bank account pays less than 1% on your savings.

If your money isn’t making about 4-5% today, you’re losing your hard-earned cash to inflation.

What I do, is keep my dollars in a private LIQUIDITY FUND. You can do this too.

Your cash generates up to an 8% return with—COMPOUND INTEREST—year in and year out instead of earning less than 1% sitting in your bank account - or even 4-5% elsewhere.

The minimum investment is just $25K.

You keep getting paid until you decide you want your money back. This private LIQUIDITY FUND has a decade-plus track record - and they’ve always paid their investors 100% in full and on time. I would know… because, I'm an investor with them myself.

See what it feels like to earn 8%. A lot of other GRE listeners are. To learn more, just text the word FAMILY to 66866 to learn more about Freedom Family Investments' LIQUIDITY FUND. Get 8% interest! Just do it right now, while you’re thinking about it. Text FAMILY to 66866.

More straight ahead, including what’s happening with rents. I’m Keith Weinhold. You’re listening to Get Rich Education.

_____________

Welcome back… you’re listening to Episode 503 of Get Rich Education. I’m your host, Keith Weinhold.

We’ve got a poll result, from our Get Rich Education Instagram Page.

The poll question was simple. “When buying property, what’s more important?”

The purchase price or the mortgage rate.

71% of you said the purchase price. 29% of you said the mortgage rate.

Of course, both are important, but I think that the PURCHASE PRICE is the best answer - because your purchase price stays fixed for the life of your ownership period, and you can CHANGE your fixed mortgage rate and make it malleable… whenever it suits your needs.

As we talk about where the OPPORTUNITY is today, though multifamily apartments are going to bottom out sometime and therefore, at some point, they’ll make a wise investment - who REALLY knows - maybe the time for larger apartments is now…

… one opportunity is… giving good people OPTIONS during a housing affordability crisis.

And what’s going on right now is that… let me put it this way… when people have a hard time affording their own home today, basically (ha!) people are having a hard time transitioning from resenting their landlord to bickering with an HOA.

Ha! That’s kind of how the world works.

Seemingly everyone would rather be bickering with an HOA rather than resenting their landlord.

A lot of renters want to be buyers… they can’t… and that isn’t expected to change anytime soon… as prices will likely stay elevated… and mortgage rates are staying higher, longer too.

These things are ALMOST “knowns”. It’s often wise… to invest in trends that are known. Nothing’s completely predictable, but when you’re looking for a place to park your investment dollars, a few other things… are known… right now.

And AI is not expected to change what I’m about to tell you… anytime soon.

VR - virtual reality is not about to change what I’m about to tell you anytime soon.

AR - augmented reality isn’t either. Machine learning won’t imminently disrupt this.

And that is, that… everyone expects more long-term inflation. At what rate, no one knows.

People will need to live somewhere… and there are not enough places to live.

Those three facts, right there, are so simple. I love simple. Ha! One reason I love simple things is that I can remember it.

So many investors - investors in all types of things, say, from tech EFTs to junior mining stocks to crypto - you can make money there.

But, at times, investors will unnecessarily go out on the risk curve and GUESS and speculate… at a future trend.

Some are right. They’re often wrong, and adopting too much of that approach… that’s exactly when your risk-adjusted return goes down throughout your investor life.

Instead, you can get great returns - real estate pays 5 ways-type of returns - in these trends that I just described that are near certainties.

Why guess? When instead, you can almost be certain.

Often times, the certain thing is right… there.

It’s often easier, like I think I brought up on the show once before, inspired by Jeff Bezos - don’t ask what will change in 10 years.

The more insightful question and profitable question that fewer people think to ask is actually - “What will be the SAME in ten years?”

Well, when we talk about rents and the fact that tenants WILL keep paying you to live somewhere ten years from now, the trend that’s taking place here in the mid-20s decade - here in the mid 2020s, is that…

Rents are increasing the most where there hasn’t been enough new supply added - up 5-6% in parts of the Northeast including New York and Boston - Seattle too… and parts of the Midwest. Detroit and Honolulu rents are each up about 5%.

Rents are decreasing the least, and even declined - where they’ve added lots of new supply recently, like Austin, Texas and Miami, where they’re down 3% or more in each. New Orleans is another major city that’s down - at minus 1%.

But among the larger cities, Austin, Texas is the WORST performer in the nation right now.

If you’re listening to this either this week or you’re listening to this ten years from today, if you want to know future rent trends, look at where they’re adding supply.

Especially in apartments. But all these new apartments will fill up and nationally, they’re building fewer apartments this year than last year’s apartment-building boom.

When we talk about rents and who owns SINGLE-FAMILY HOMES, there are a few myths that I want to help bust for you here.

There seems to be this misconception or misinformation that GIANT Wall Street firms are buying up all the SFRs. That’s just not true.

Now, there is more participation from the big firms than there has been historically, but those that own 1 to 9 SFRs… which is our definition of mom & pop investors here… constitute 80% of the SFR market.

80% own one to nine units. Now, you might own more than 9.

In fact, 14% are in that next tier up, owning 10 to 99 SFRs. Then 3% - known as small national investors own between a hundred and a thousand.

And, what’s left, the big institutional investors - those that own 1,000+ SFRs - and you’ve heard of some of these companies - Invitation Homes, and another is American Homes 4 Rent.

Progress Residential, Blackstone, First Key Homes - all those big players own just 3% of the market.

So again, 80% are the small ones - the mom & pops… a highly fractured market.

There are a total of 82 million SFHs in the United States. Out of all of them, do you have any idea what percent are OOed and how many are rentals?

It’s 83% OOed and 17% of the single-families are rentals. So about one-sixth of SFHs are rented out.

Now, here’s the thing. Some people tend to think of mom and pop single-family rental operators as unsophisticated charity case workers who never raise rents.

That’s part of the perception out there.

But that narrative has never really been true, and, in fact, the COO of American Homes 4 Rent - his name’s Bryan Smith - recently brought up this key point on their recent earnings call.

He said that while historically mom and pops hadn't always priced directly to market because of a lack of market data, "they've migrated into a strategy that's closer to ours."

How is this and why is this? Anymore, why ARE mom & pops raising rents just about as aggressively as the big institutional players.

It’s really increased transparency on the rents that landlords are asking… through internet listing sites like Zillow.

It's not that mom and pops didn't increase rents before. (I mean… just look at what happened with rising rents in the 1970s and 80s before institutions were in the sector.)

But when there's a lack of rent amount transparency, it takes longer for operators to discover and adjust to market pricing-- especially for smaller players in a deeply fragmented market.

That's the part that’s changing.

But see, increased transparency works both ways. It’s good for you and bad for you as a property investor.

This information helps tenants too. In upswing markets, operators may push rents faster than they would otherwise.

But in a downswing market, operators may cut or keep rents flat faster in order to lease the unit.

Because tenants can easily see what other LLs are charging and compare features. When you price too high, units sit vacant and generate no income.

Since renters benefit from increased transparency too, if they see two similar homes, they're usually picking the better deal.

And increased transparency is why NEW lease rent growth is cooling off.

In fact, CoreLogic just released their latest SF Rent Index report last week. It showed that, nationally rents are up 3.4%, which coincidentally, happens to be the same as the latest CPI inflation number.

Detached properties are seeing more rent growth than ATTACHED ones - like townhomes. If you think about it, that makes sense. Townhomes are in less demand now.

Because the homeownership dream, is when one moves out of the apartment & buys a detached house.

And since that’s so unaffordable to buy here in the 2020s decade, that’s why more people are willing to pay more for to rent the detached type.

Note that SFR rent growth has moderated since mortgage rates spiked-- further dispelling the sticky myth that rents boom when home sales fall.

Remember - when homes price growth is really hot - like it was in 2021 and 2022 - near 15% - rent growth tends to be hot too. It was ALSO near 15%.

And when home price growth is moderate, like it is now, well, rent price growth is moderate too.

Prices and rents move together. They’re POSITIVELY correlated. Some people think they move inversely… and we’re looking at history over hunches again - what REALLY happens here.

So though you’re almost certainly going to get nominal rent growth over time, it’s not a good thing for you to count on it in the short-term - it NEVER is, in any era.

The time for you to push rents is, of course, in any market, when you go for NEW leases. A new lease with a new tenant is going to be higher than a renewal lease.

It’s the ol’ - this has been a good tenant for three years, so I don’t want to push the rent too hard & lose them.

To review what you’ve learned today, inflation is affecting ALL of your investments, 30-year FRMs are a UNIQUE American advantage…

…it’s wise to invest in future trends that are KNOWN, if you want to know what is going to happen with rents in the near future, look where they’ve added supply.

Less new supply correlates with more rent growth… and large institutional investors own just 3% of SFRs.

If you enjoy the show, please, tell a friend about it.

Isaiah on LI had the most flattering comment. Over there, he wrote and called GRE “The best podcast on the planet.”

I… really don’t think that I can take credit for that, though… I’d like to think we’re a good resource for building your wealth through REI and regularly informing you, giving you ideas that you’ve never thought about before that add real value to your life.

You’ve heard of Bidenomics. The first portmanteau type that I ever heard about a President’s economic policies is REAGANomics, though it was a little before my time.

Here on the show next week, with us, will be none other than “The Father of Reaganomics”.

Yes, late President RONALD REAGAN’S Budget Director will be here next week. Basically, he was Reagan’s “Money Guy”.

His name is David Stockman and he often met with the President in the Oval Office, advising Reagan on economic affairs.

I have asked David Stockman, if besides talking about the condition of today’s economy next week, he’ll also discuss real estate - and he agreed to do so.

That’s “The Father of Reaganomics”. You can look forward to he & I together next week here on the show.

You might be one of the listeners that’s been here every single week since 2014 - just like I’ve been here for you.

A new podcast is published every Monday. If you want more our DQYD E-mail Letter is published and sent about weekly, that’s typically been on Thursdays lately. Then, there are many new videos published each month over on our Get Rich Education YouTube Channel. Those are the main three places that you can find us.

Until next week, if you enjoy listening, I really appreciate if you would told a friend about the Get Rich Education Podcast.

Until then, I’m your host, KW. Don’t Quit Your Daydream!

502: The BRRRR Investing Strategy: Your Path to Infinite Returns May 20, 2024

You can get financially free twice as fast with the BRRRR Strategy instead of buy-and-hold.

But it’s less passive.

BRRRR stands for: Buy, Rehabilitate, Rent, Refinance, and Repeat.

You can get an infinite return this way, by generating yield with none of your own money left in the deal.

Learn how to obtain BRRRR financing from Caeli Ridge, President of Ridge Lending Group.

The LTVs are 70%, 75%, or 80% depending on the property and financing type.

RidgeLendingGroup.com specializes in helping investors buy income property.

Resources mentioned:

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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GetRichEducation.com/ad

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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@keithweinhold

Complete episode transcript:

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. The real estate BRRRR strategy is a shortcut to growing your wealth. But it's less passive than buy and hold with a property manager. Learn what is the Burr strategy and then about some of its pros and cons, mistakes you must avoid and financing programs available, and how it can generate infinite returns for you today and get rich. Education.

Robert Syslo (00:00:28) - Since 2014, the powerful get Rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Reinhold writes for both Forbes and Rich Dad Advisors, and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener.

Robert Syslo (00:01:02) - Phone apps build wealth on the go with the get Rich education podcast. Sign up now for the get Rich education podcast or visit get Rich education.com.

Corey Coates (00:01:13) - 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 (00:01:30) - Welcome from Bridgeport, Connecticut, to Bridgeport, Texas, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to get Rich education. Let's Do Good in the world and abolish the term slumlord profiting at the same time by providing housing to others. It's clean, safe, affordable and functional. This is where, you know, on this show, we often tell you how to become financially free through real estate investing in the next 5 to 10 years without having to be a landlord or flipper. We're going to talk about how to shorten that timeline in a moment, but I have a couple resources to share with you. First, one, late breaking development at GRI marketplace that's been popular is in Florida with new builds, brand new construction for plex's duplexes and single family rentals with points paid a 4.25% mortgage rate.

Keith Weinhold (00:02:28) - Yes, 4.25%. You can pay fewer points and still get a 4.75% rate. Also, some good low interest rate deals for foreign nationals. Go ahead and connect with a great investment coach and learn about those at great marketplace.com. For a 4.25% mortgage rate. If you're a Spanish speaker or have Spanish speaking friends, check out get Rich education.com/espanol to see my free video course on how real estate pays five ways in Spanish. It's pretty interesting how our team here has applied AI to show me speak it in Spanish. Again, you can see that at get Rich education. Com slash espanol. Now the BR real estate investing strategy is popular because it can reduce your out-of-pocket expense for property substantially. Let's break it down here. That is the b are are are are. There are four hours after the B which stands for the first B is buy. You buy a distressed property that needs to be fixed up. Then the R's stand for rehab, then rent, then refinance at that higher value, then repeat. More of you have been buying BR property through GRE marketplace.

Keith Weinhold (00:03:52) - Yes, we help you find not just buy and hold properties here, but properties optimized for the BR as well. There are properties that need some work and they are not turnkey, not ready to go with little or no money. In less than three years, you can have a portfolio of 10 to 20 properties with the BR strategy. That's a shortcut, but that does take some work. It's less passive. You're buying distressed property that needs to be fixed up, and you have to be sure that the contractor is getting the work done on time, on budget, and of adequate quality standards. And vetting contractors and dealing with contractors is not easy. I'm going to have a few tips to help you deal with that today, but if you get it dialed in, BR lets you pursue an infinite return strategy where you buy property at a low price, renovated, get it rented, and then refinance it at the higher value. And at times you can get all of your invested cash out on that refinance.

Keith Weinhold (00:05:04) - Well, because a return on investment formula is simply your dollars returned divided by the cash that you have invested in the deal. Well, therefore, if you have no money left in the deal anymore, your return is infinite. Listen carefully. If our guest doesn't do it, then what I'll do is introduce an example here in our conversation for you to get you to help understand the BR. And if this is new to you, this will stretch your thinking somewhat. And then after our break, I'm going to come back and we'll discuss more about any changes to conventional loans for buy and hold investment property. And there's one place that's created more financial freedom through real estate than any other lender in the entire nation. It's time for a big welcome back to their leader, Charlie Rich.

Caeli Ridge (00:06:02) - Hey, Keith. Thank you for having me. It's always a pleasure to be here.

Keith Weinhold (00:06:05) - Well, you know who she is by now. She leads Ridge Lending Group. They're an investor centric lender, and she does such a good, concise job of explaining what real estate investors need to know in optimizing your loan positions.

Keith Weinhold (00:06:18) - And that's why she's here with us again. And, Charlie, rather than just learn about conventional buy and hold loans or refinance loans like we've covered in the past, let's talk about lending for the BR real estate investing method. BR is a method for buying distressed property at a discount. So not turnkey, not fixed up property. Here in BR stands for buy, rehab, rent, refinance and repeat. Now for these loans. Is the lender looking more I guess Charlie maybe we should start with are they looking at the property strength or more at the borrower strength for BR loans?

Caeli Ridge (00:06:54) - Well, first of all, I would say that BR is one of my favorite strategies for real estate investors, especially if they're getting into diversifying their portfolio. I think BR is a very lucrative way to achieve the returns that people are after, not only in appreciation but also in cash flow. You can get some really great leverage in these ROI and ends up being better if you find the right properties. So I'm a big fan of the BR, but to your question, Keith, it depends on what product they're going to elicit for the end loan, for that refinance loan, if we're talking about a conventional loan, Fannie, Freddie and the qualifications are still about the individual and their debt to income ratios, etc. if we're going to put this on a debt service coverage ratio, which it can apply to both, or can, I mean, the strategy does not obligate them to one or the other.

Caeli Ridge (00:07:39) - So we can go conventional where it's still going to be about the individual. Or we can look at more of a debt service coverage ratio, where it's about the income of the property in relation to the mortgage payment.

Keith Weinhold (00:07:48) - And before we go on, of course, identifying a deal is a key here in the BR strategy. Is there any guidance you'd give with identification of that property. Because you might know more from the lender perspective on what's going to be lendable.

Caeli Ridge (00:08:03) - Well, as long as it's habitable, we can lend on it. I would say that you really want to pay close attention to a couple of things. From a lender's perspective, the ARV, right? The after rehab after repair value is the linchpin to all of this. And if you're out there getting your comps from whatever sources, the agent or Zillow or Redfin or whatever it is, the more data that you can gather, the better. But just keep in mind that the ones and zeros that you're probably gaining access to don't necessarily have the components that show all the rehab work that you're putting into it.

Caeli Ridge (00:08:34) - So if you're getting a value of a property like kind property in the area or vicinity that the property is located, it's not always going to attest to what extras you put in, whether it be the hardwoods or square footage or whatever it may be. Just keep in mind that you may not be on point there, and real estate agents, I would want you to have or be working with one that really understands the BR method, aka investor models, to make sure that you don't get caught in a scenario where you're expecting a value of x that comes in at Y, that can be very devastating to the BR methodology, especially for new investors.

Keith Weinhold (00:09:09) - It was more about coming up with the ARV because with a conventional loan on a conforming property, that value that you're lending against is typically the appraisal.

Caeli Ridge (00:09:21) - Correct. And the appraisal is going to take into consideration those rehab pieces. But it's not dollar for dollar. And while I don't know that we want to go down the appraisal rabbit hole, I will tell you that if you've got $50,000 of rehab into the property, that doesn't necessarily mean you're going to get a full 50,000 in extra value.

Caeli Ridge (00:09:38) - A lot of it has to do with what you paid for it. Like Keith, you said at the top of the podcast here, distressed property. A lot of times when people are getting into BR, they're finding under market value property to begin with, that's already worth more. They're putting in some real value adds, maybe cosmetic, maybe a little bit more, and then expecting quite a bit more in value. So there's definitely a science to it. But just make sure that for all intents and purposes, you're gathering as much data as you can. And the agent, if you're using a real estate agent to help with MLS listings, etc., that they have some basis of background within this, this particular philosophy.

Keith Weinhold (00:10:12) - Okay, so we are projecting an RV in after repair value here, and then we need to lend against a percentage of a certain value. So clearly since in this case the property is distressed, well then if the property is the lender's collateral and that collateral is a little, you know, why don't we call it damaged, if you will? Well, then I'm going to speculate that is that lender probably not going to give you as favorable loan terms as they would on a conforming property.

Keith Weinhold (00:10:39) - So tell us more about how those bur loan terms look.

Caeli Ridge (00:10:42) - So you might be surprised. Again, as long as the property is habitable the LTV is going to be the same. The value of the property. It is probably what you're going to notice more than what the lending side is going to allow for in the loan to value. So on a single family residence, if it's habitable, we're going to give the individual up to 75% of that ARV. Now, I don't know if we're ready to go down this road. I think we should talk about it at some point. The ARV and how we want to maximize and not leave any money on the table. We want to discuss the purchase price and the acquisition. I think we'll come to that. But to answer your question, habitable 75% single family or 70% on a 2 to 4 unit is going to be the maximum loan to value using the appraisal. When we talk about a cash out refinance of an investment property, which may be different if we get into a rate and term refinance as a purpose of Bur, which will probably touch on as well.

Keith Weinhold (00:11:36) - What I think for the listener benefit here, maybe it's good to jump into an example if you want to apply some real numbers here to a bird deal, and then let's walk through that with the financing and more.

Caeli Ridge (00:11:48) - Let's start with cash out, because it is different than a rate and term. So cash out simply to clarify means that the individual is going to get cash in hand. We are not simply paying off an existing hard money loan. That is a rate and term refinance. So we want to start with cash out where the cash to acquire the property was the individual sourced and seasoned funds. And let's assume that the scenario looks like this. They paid $100,000 for the property. And then there's $50,000 in renovation with the expectation. Or let's just say that we get an appraisal for 200,000. So at 200,000 and it's a single family residence, 75% of that is 150,000. Okay. So that pretty much covers their total acquisition costs. But then we've got a recommendation.

Keith Weinhold (00:12:28) - Cost is quite.

Caeli Ridge (00:12:29) - Covered. But we have to account for closing costs tax and insurance.

Caeli Ridge (00:12:31) - Let's just make it around ten grand. So the individual is going to end up with 140,000 from their 150 total acquisition cost. If you divide those two numbers, you're probably going to be at what? So 140 divided by 150,000. Yeah, 93% overall leverage. You've got ten grand skin in the game. And when you look at it from that perspective, 93% over all loan to value or leverage of this property is very, very high. If you can get a deal to work like that, you're doing very well.

Keith Weinhold (00:12:59) - And you can see why people like this and why people are attracted to this. So go ahead and tell us more about this. Because really, when we talk about lending for a bigger property, we're probably talking about two different loans, right? We're talking about the purchase price upfront and then the refinancing later on.

Caeli Ridge (00:13:17) - Right. So let's going back to my example. If you paid cash for the property, if that 150,000 was your sourced in season funds. And if you want Keith tell me later and I'll go into what source and season it is.

Caeli Ridge (00:13:28) - But you have 150,000 in on this property. The key to getting up to the maximum of 150 back. Or in our example, you ended up with 140 back because we accounted for ten grand. And in closing, cost is to make sure this is wildly important. And a lot of people get this wrong the first time they go down the Burr road. Make sure both the purchase price and the acquisition costs are listed on your final CD, aka Closing Disclosure. A closing disclosure comes to you at closing, where it's a document, a form that illustrates all of the line item pluses and minuses of the buyer and the seller and what everybody netted at the end. The CD must have the total 150 listed on there, and just one number is fine. It can be broken up into two numbers, whatever. But as long as both numbers are listed on the CD, you as the borrower, our client, her guidelines are eligible to get up to that much back. So the guideline states that the individual cash in hand cannot exceed a maximum of what the total acquisition costs listed on that CD is.

Caeli Ridge (00:14:28) - So what the common mistake is, let's just keep using our 100,000 purchase in our $50,000 renovation. The common mistake that people make is, is that they pay the 100,000, the seller is made whole. And then the day after closing, they are officially now the owner of this property. They send the 50,000 out to the contractor. Seems obvious, right? Well, in doing it that way, you've left 50,000 on the table and now you're going to have to wait 12 months per new guideline to have 12 months of ownership, seasoned ownership for Fannie Freddie to get the total 150. So make sure that the total 150 is on that CD. And the way to do this, just one more little detail. You want to be working with an escrow company that provides something called an escrow hold back. Because a lot of times when I give this advice, people say, well, I don't really want to release $50,000 to the contractor before they even started any of the work, right? That makes sense to me.

Caeli Ridge (00:15:16) - And most escrow companies do this in escrow. Hold back says that the hundred grand goes to the seller. The 50,000 is earmarked for the general contract, you've gotten your bids, etc., but the escrow company will then deliver the 50,000 upon your approval as draws to the contractor as work is being completed. And that kind of absolves that extra layer of risk. But now you've done the appropriate thing for the financing to get maximize your cash out, and you're not leaving yourself in a weird position to frontload 50 grand before you know they've even started on whatever repairs there are.

Keith Weinhold (00:15:49) - Yes. How much motivation does every contractor have if they've already got their 50 K for 50 K worth of work before they do their work? And it works this way a lot in the contracting world, where progress payments are made intermittently as the contractor performs their work. So tell us more about what we need to know here. Clearly, especially when it comes to the Bir and loans, because you just gave us a great mistake to avoid there.

Caeli Ridge (00:16:13) - Kind of keeping on that theme. And then let's talk about a rate and term refinance. You know, some of the pushback that I'll get when I have these conversations. Well, you get your bids. Okay. We'll start talking about the 50,000 renovation per hour example. And you probably get a low and a high and middle. Maybe you go with the middle. It's been my experience personally and just through conversations that the bid is 50,000. If you don't have the upfront conversation to say, I'm not going to pay a cent over the 50,000 and or you negotiate to say, okay, what is our variance here? Because a lot of times the contractor is not going to be pigeonholed to 50,000. They're going back and say, no, I'm not going to sign anything that says that it will not exceed 50,000. There are costs and things that are out of my control, blah, blah, blah. Then coming up with, okay, fine, 55,000, 50, 2000, whatever that margin might be, including that in there and then having the conversation that says, okay, fine, because you don't want to leave that money on the table.

Caeli Ridge (00:17:03) - So let me take a step back. 50,000 becomes 55,000. And if you didn't have it on the CD, that $5,000 is not eligible to get back. So if you increase the amount that's on that CD, per the conversation with your contractor, make sure one of two things that if it isn't spent, that it's coming back to you and assuming if it is, then everybody is on the same page and it's just going to be part of the expense and part of what you have potential to get back. So just food for thought there. Then moving into the rate and term refinance. Now this is something totally different. This means that you went out and got a hard money lump, some kind of a private bridge loan, which by the way, Ridge does. We have bridge loans that can help fund the purchase and the renovation. We can talk about that if you like. But if you went out and got a hard money loan, this is no longer a cash out refinance unless the value is so high that based on a 75% LTV for cash out, that there's enough money on the table that you don't want to wait the 12 months.

Caeli Ridge (00:18:00) - I'm going to pause on that for a second and just say that the numbers work for a rate and term refinance, where we have an existing loan. Let's say you've got a hard money loan for 150,000. A rate and term refinance lets us go to 80% loan to value on a single family, 75 on a 2 to 4. If you recall a minute ago it was 75 and 70. That's cash out. Refinance rate and term refinance rules when you're not getting any money in hand, were simply paying off existing liens plus closing costs. They increase the LTV allowances. So 75 2 to 480% on a single family residence. So if we can go 80% on the 200,000, what is that one? I can't do mental math, Keith. So 80% of 200,000 is 160. So in that case think about this. So let's just keep going back to our example. You've got 150 into it. We've got 10,000 of closing costs okay. 150 is a hard money loan that we have to pay off. And the 10,000 is what the new refinance closing costs are going to be.

Caeli Ridge (00:19:00) - The value came in at 200,000. 80% of that is 160,000. That's no skin in the game. You have completely covered the hard money loan paid for the closing costs. I mean, you can't get better than that. That's 100% leverage, right? You're not getting cash back. Now let's take that and say that the value came in at 250. And that's a lot of money. In that case, you may want to wait for the 12 months to get that cash back, because you're going to be limited if you use leverage to acquire the property versus your own cash, that's when you're going to have to wait that 12 months. Or if you're cash acquisition, the numbers work out where you'd get an exponentially more amount than what you put into it. You may want to wait there, too. It really just depends on what that RV is going to be. That's why it's the linchpin that'll make you decide whether you're going to wait the 12 months, or if you're ready to rock in in the immediate terms with a rate and term refi.

Caeli Ridge (00:19:53) - No seasoning. If you're not getting cash back, I don't care. We can do it immediately or a cash out refinance. As long as you're not getting more back than what you paid for it. And we can show that the dollars to acquire all in the CD and they came from, you know, seasoning.

Keith Weinhold (00:20:07) - All right. So it's the BR strategy with the cash out refinance and then the burr strategy with the rate and term terms there, if you will. Is there anything else that we need to know about either one of those.

Caeli Ridge (00:20:19) - Really a lot of people always want to say what are the rate differences? And I would say that, you know, overall they're going to be roughly the same when we start talking about those LP's. Again, Keith, low level price adjustments there, pluses and minuses that have to do with risk. A cash out is a higher risk than a rate and term, a rate and term at 80% versus a cash out at 75% might offset that. So relatively speaking, they're probably going to be within an eighth to a quarter percentage point if all the other variables are equal.

Keith Weinhold (00:20:44) - Now, clearly, I think of a hard money loan is something that allows. You to put both the purchase price of a property and the projected rehab cost, and roll those all into the loan at closing. That's what I think of as a hard money loan. Is there any difference between a hard money loan and the other things that you're describing to us?

Caeli Ridge (00:21:04) - Not really. I mean, it's probably a cat of a different name, right? I mean, a hard money loan, a private money loan, a portfolio loan, a bridge loan. I mean, you could use the same thing, depending on the context of the sentence, to mean the same thing, maybe something different. You're probably right in this context. It's going to be the same, I think.

Keith Weinhold (00:21:21) - Well, I want to talk to you more about conventional loans and any mortgage industry trends that have been taking place lately. But before we do, do you have any last thing to tell us about the Burr strategy, where really someone can accumulate maybe 10 or 20 properties in just three years with little or no money, but more work?

Caeli Ridge (00:21:39) - Yeah, a little bit more work.

Caeli Ridge (00:21:40) - I would say get to know your market, have your team. That contractor. Man, I think you alluded to this. I think that that's the piece that most people struggle with is finding the right contractor for one of the things that tends to work well, if you have established a relationship, is kind of getting in with some kind of a JV with the contractor, right? They've got skin in the game. Maybe if your numbers work out, they get a 5% bonus on the end, whatever. Just to kind of not keep them honest but keep them honest, if you know what I mean. So making sure you've got a good contractor that you can trust if you're going to be doing this out of state from where you live, even more so, doubly so you really want to have the right team. And that includes the general contractor, the escrow company, your lender. Everybody's got to kind of be on the same page if you're going to continue to do this as a rinse and repeat.

Caeli Ridge (00:22:23) - And then finally I would say bring it to Ridge. Let's just make sure if you're new to doing this, I want to make sure you're not leaving that money on the table, that we're structuring it appropriately so that we're maximizing the loan to value, we're maximizing your dollar, and that you're not leaving money or leaving money for some period of time longer than what you would have wanted to, because this is a rinse and repeat, right? If you don't do it right the first time, you could be stuck tying up 30 grand for 12 months that you would have otherwise been able to capitalize on. If we looked at it in advance of you pulling a trigger.

Keith Weinhold (00:22:52) - Yeah, that's correct. In fact, that last R in the BR strategy is to repeat it. And yet, to your point about contractors, I like to think about what contractor motivations are and what my motivations are. And in times I have incentivized contractors with giving them a 5% bonus if they finish things ahead of schedule or a 5% penalty if they finish things behind schedule and putting that in the contract as well.

Keith Weinhold (00:23:14) - You're listening to get versus a case. We're talking with Ridge Landing President Charlie Ridge about getting loans for the BR strategy more when we come back. I'm your host, Keith Windhoek. 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 prequalification 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, 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.

Keith Weinhold (00:24:29) - 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 (00:25:06) - This is our Rich dad, Poor dad author Robert Kiyosaki. Listen to get Rich education with Keith Wayne. All scripture data.

Keith Weinhold (00:25:25) - Hey. Welcome back. You're inside. Episode 502 of gray. I'm your host, Keith. Y'know, we're talking with the president of Ridge Lending Group, Charlie Ridge. She talked to us before the break about her financing strategies and the things that you need to keep in mind in order to optimize your returns there. It's only now back here on the conventional side, we talk more about conforming loans for properties that are already fixed up.

Keith Weinhold (00:25:48) - Or maybe people call those turnkey. What about some of those hurdles that investors often have in there? For example, I know that the DTI one exceeding their debt to income ratio threshold when they try to qualify is sometimes a problem. So can you talk to us about some strategies with that? For example, sometimes a person might have a $500 a month car payment, but they only have four or more payments to make for their $2,000 principal balance. And it just makes more sense to pay that off. And then that drops off the DTI calculation. Are there any other thoughts you have with regard to that?

Caeli Ridge (00:26:18) - There's so many in this. I mean, we probably have our own episode for all different ways on debt to income ratio and to move that needle. Just to go back to your example, just FYI, if the car loan is financed, not leased, and there are ten months or left reporting on the credit report automatically per guideline we had, we can exclude that if it was at least with ten months or less, we have to keep it in the ratio.

Caeli Ridge (00:26:39) - But if it's a finance car, ten months are left are showing on the report. It's automatically reduced from the liability section of DTI. The other things that we're to look at just obvious things. Can we gross up any kind of income. Right. Are there bonuses or commissions or Social Security or veterans benefits or whatever that allow us to gross those up, making sure that we've got all of the applicable income that they gather? Sometimes people will forget to say, oh, I get this. You know, child support or alimony or whatever it may be that I didn't think to disclose. We want to make sure that we have that in there. And then we talk about liabilities we want to look at here's kind of a good one. Student loans let's say that either cosigned or you have your own student loans. Fannie and Freddie have different. And maybe they're in deferment. Okay. So when we pull the credit it shows zero as the monthly payment. While Fannie and Freddie have different rules about what we have to hit them for.

Caeli Ridge (00:27:25) - And I could be getting these backwards, but I think that Fannie is 1% of the outstanding balance, whereas Freddie is a half a percent. So depending on some other variables, we may elect to say, okay, DTI is really tight, we're going to take this and make this one of Freddie, assuming that they fit all the other boxes so that we're only having to hit them for that half a percent. Otherwise we look at maybe paying off revolving debt, get those payments down if they're small enough, maybe there's a $3,000 balance that has a $300 payment that's really screwing things up, and they can afford to pay that off. So certainly we can look at those kinds of things, adding in a co-borrower, putting more money down, buying the interest rate down, maybe finding slightly cheaper insurance, right. At least for the purpose of the loan. And then if you wanted to get higher insurance or lower deductibles or higher deductibles later, you could certainly do that. So there's so many different variables that we can look at to really it's not a one size fits all.

Caeli Ridge (00:28:13) - And DTI is kind of a slippery slope. And there's lots of different ways in which we can get that down into check. And if it doesn't happen today, we can help them plant the seeds for what to do tomorrow and making sure that we get them there.

Keith Weinhold (00:28:24) - Wow, that was fantastic. I hope you, the listener, are listening closely because Charlie just gave so much packed, nutrient dense information about what you can do with your DTI. And for starters, I think a lot of people think about reducing their debt to improve their DTI. But is all your income being credited as well? Hopefully you caught that part which said that. But when it does come to reducing the debt portion, of course student loans have very much been in the news with all these plans for forgiveness. Is that impacting DTI substantially?

Caeli Ridge (00:28:53) - If they had the right documentation? Sure. Yeah. If they're on there and we have the right documentation that shows that they are forgiven, but they just haven't caught up with the system, then absolutely.

Caeli Ridge (00:29:00) - Otherwise, if they don't have the supporting doc, the letter that says and it's on the credit report, we're going to have to hit them for it, whether there's a payment there or a zero deferred. And then we have to figure out the 5.5 or the 1%. It'll have to be in there. Just depends on what they can deliver in terms of that forgiveness in paper trail.

Keith Weinhold (00:29:18) - You do with mortgages every day in there. That's what you specialize in for investors. Are there any just overall mortgage industry trends that really specifically impact real estate investors that have occurred? Or amid.

Caeli Ridge (00:29:31) - The rates? Everything is going to come back to the rates. As much as I impress upon people, it really shouldn't be about the rate. And I understand the psychology. Listen. But if they're not doing the math, they're really doing themselves and their future investment a disservice. The shelf life, you guys of an investment property mortgage is five years. Whatever the rates are today, you're not going to have that interest rate almost certainly in 5 to 7 years.

Caeli Ridge (00:29:54) - So kind of looking down the forecast of where rates we think they're going to go, the appreciation of the property, harvesting equity, pulling cash out. Keep those things in mind when you fixate on the interest rates. I would say that that's usually what it's top of people's minds. The most recent inflationary data came out. It was hotter than we expected. However, shortly thereafter, if you're watching closely the unemployment rate and the jobs report, I think it offered 175,000 new jobs and the projection was to something. So that's good news. And listen, you guys, you can't have it both ways. We're in a hot economy. I guess it depends on who you're talking to and who you're asking. I understand, but for all intents and purposes we've got inflation is is down. It's not down where the Fed's wanted that 2%. The unemployment rate is very, very low. So in that regard we're doing very well. So interest rates are going to be higher. Unfortunately it balances this way. The worse the economy does the better the interest rates do.

Caeli Ridge (00:30:48) - Finding that equal balance I think is the key. And don't ask me, I'm not going to try and predict how to do that. But do your mouth be prepared for refinancing when it comes. Sitting on the fence is usually not going to be to your advantage if you're waiting for interest rates to come down, and that coupled with house values, come down a little bit too. And you may have played yourself out of the refinance anyway for the purposes that you wanted to pull cash out. So just be educated. Call us. We can kind of walk you through some of that stuff. Interest rates, I think, are going to be higher for longer unless we see some real significant data trends, because there's a lag. And what we get from the Fed's and I think they try to put that in there, but who knows what's going to happen. What are they going to see us again June, July. We'll see what happens. If jobs reports keep being light, then maybe we start to see a little bit more reprieve in the interest rates.

Caeli Ridge (00:31:32) - But we're still we're what, seven and a quarter, seven and a half for investment property I think in most cases. So if that's too high to cash flow, find a short term rental. Find a mid term rental. There's other ways in which to accomplish your variety of variables. Even in the seven and 7.5% interest rate environment.

Keith Weinhold (00:31:49) - Well, there's so much I can say about the fed and the interest rates, but I think you said something very important earlier that the average shelf life of a mortgage loan product is about five years. It's exceedingly few people. Well, less than 1%. They're making their 360th monthly payment ever at a 30 year fixed rate loan. Charlie, I want to ask you what. Maybe it's becoming sort of known as the Charlie Ridge question. I like to ask you this almost every time that you're on the show, because it gives us a temperature of the market, because you see so many loans and so many appraisals come in there, what percent of appraisals are coming in above value? What percent are coming in on value, and what percent of appraisals are coming in below value?

Caeli Ridge (00:32:26) - We don't see as many low values.

Caeli Ridge (00:32:28) - I think that there was a period of time where that was rampant. It was really frustrating for a lot of people, especially on the Non-owner occupied side. The vast majority are coming in on point, and I think a lot of that has to do with 0809 regulation. Appraisers are kind of scared of their own shadow and overvaluing properties. So I think that they do very everything they can to hit the mark. And I don't see too much over an occasion. We'll see a little bit over. It's more likely to see it over than under these days. I would say, okay, percentages under 10% on the mark 8075 and then over. We'll give it.

Keith Weinhold (00:33:03) - 1515. Okay, a few more over than under, but pretty close to right on value there. You do loans in almost all 50 states. And these are the states where the property is located, not where the borrower lives. Right. So it's every state except a few.

Caeli Ridge (00:33:20) - Right? We're not in North Dakota and we are not in New York.

Caeli Ridge (00:33:22) - Otherwise we are lending in all 48 states where the property is. That is correct.

Keith Weinhold (00:33:27) - Yeah. And you specialize in loans for investors. Like I said earlier, what other loan types do you offer investors and others in there because you do a few primary residence loans too.

Caeli Ridge (00:33:38) - We do lots of primary. I would say, you know, it's 7030 probably. We're very capable, full service direct lender. What that means is we fund on our warehouse line, we underwrite in house, but we don't service these loans. So we bundle them up in mortgage backed securities and we resell them on the secondary market to aggregators. You guys will know this as servicers. Any Mac, Wells Fargo, whoever is going to be the end servicer of the loan. And I've worked really, really hard to create an environment specifically for investors, not exclusively, but largely so that we're not a one size fits all. So I really appreciate the question and being able to articulate to your listeners, we really do everything. It's very uncommon that we don't have a loan product to feed the actual need.

Caeli Ridge (00:34:17) - The one thing that I would say we don't have or don't offer is going to be a lot bear lot loans we don't fund on just bare land, but we can do the Fannie Freddie's bridge loans. So for the fix and flip or fix and hold the BR, we do non QM. This is just non QM is kind of everything outside the Fannie Freddie box. If you can't quite fit into the rigors of Fannie Freddie you're going to be in non QM probably where debt service coverage ratio lives. Bank statement loans live, asset depletion loans live. We have commercial loan products for commercial properties. For residential properties we have. Ground up construction. First line Helocs for relationship clients we have second line Helocs. We had second line for everybody when we pulled back just for relationship clients for reasons that we'll discuss on one on one if anybody's interested in that. What am I forgetting, Keith? You get the point. There's a lot. If you think that you're trying to get financing for residential or commercial properties, please email us and we'll take some information to let you know what we can do.

Keith Weinhold (00:35:10) - Well, yeah, to my point, you provide such a great service in a wide palette of options. It's somewhat easier to describe what you don't do. Yeah. And what you do offer to people. And of course, I've done my own loans in there at Ridge and my own refinancings in there. And yes, I usually end up getting a servicer. That's one of the big banks that you've always heard of over the long term that I make payments to. Where does one get started to get things rolling with Ridge or just to ask some questions.

Caeli Ridge (00:35:36) - Call us 855747434385574. Ridge, you'll get someone immediately. We don't have any call trees. You'll speak to me if I'm available at the time. Our website's got a lot of great information. Ridge lending group.com email info at Ridge Lending group.com. All of those ways will get you on the books with me, if that's what you like. Or assign you to a loan officer in the company. And we look forward to serving you.

Keith Weinhold (00:36:00) - You have given our longtime listeners more good, timely mortgage information than anyone in the history of the show here, and we're all better for it.

Keith Weinhold (00:36:09) - Charlie Ridge, thanks so much for coming back on to the show.

Caeli Ridge (00:36:11) - Thank you Keith.

Keith Weinhold (00:36:18) - Let's review some of what you learned about Bir and their loans today. Once your property is renovated and rented, which are the first and second are the third are. Is refinance for a cash out refinance type? It is a maximum of 75% loan to value on single family and 70% on a 2 to 4 unit, and then for a rate and term refinance, which means when you don't get any money in hand after closing and you're simply paying off existing liens plus closing costs, it's 80% loan to value on single family and 75% on a 2 to 4 unit. And you learn to be sure that both the purchase price and the acquisition cost are listed on your final closing disclosure. You know what I think is interesting with originating mortgage loans today? Overall, it's one question that I've been thinking about, and maybe we'll do a poll on this question. If we do, I'll share the results with you. And that is, do people care more about the mortgage interest rate than the purchase price of the property itself? Sometimes it seems that way to me.

Keith Weinhold (00:37:29) - Now your mortgage rate definitely matters, but not as much as the purchase price. I mean, later months or years down the road. After you purchase a property, you can often renegotiate the mortgage interest rate, like if rates fall, but your purchase price stays fixed, that part never gets renegotiated. And like I mentioned last week, low mortgage rates don't create wealth. Leverage does. And to put a finer point on that, consider that in 1971, the mortgage interest rate was 7.3%. Back there in 1971, if you had waited for interest rates to go down, you wouldn't have purchased a home or an income property until 1993. You would have waited 22 years for rates to go down. And meanwhile the price of real estate quadrupled, and many people expect mortgage rates to stay higher, longer. Whether you're interested in the BR strategy or already renovated income, property or even primary residence loans, I invite you. You can get loans at the same place that I have myself for years. That's it.

Keith Weinhold (00:38:41) - Ridge lending group.com. Until next week. I'm your host, Keith Winfield. Don't quit your day dream.

Speaker 6 (00:38:52) - 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 (00:39:20) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

501: Home Prices Aren't Really Up. Here's Why. May 13, 2024

In this episode of the Get Rich Education podcast, host Keith Weinhold explores the current state of home pricing and the housing market.

He examines whether homes are overpriced or underpriced by comparing them to historical values, gold, and bitcoin, and discusses the influence of inflation and financing on affordability.

The episode features insights from Danielle Hale, chief economist at realtor.com, on the challenges for young homebuyers, housing supply issues, and mortgage rate effects.

The conversation also covers the build-to-rent trend, investment strategies, and the importance of increasing housing construction.

Weinhold concludes by offering free coaching for building real estate portfolios.

Resources mentioned:

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RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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Complete episode transcript:

Welcome to GRE! I’m your host, Keith Weinhold. Home Prices Aren’t Really Up! Brace yourself. A mic drop moment on real estate costs is coming.

It’s an unmasking - a reality check on property prices. Are homes actually still priced too LOW today? How could that POSSIBLY be true at all? On Get Rich Education.

_____________

Welcome to GRE! From Belgrade, Serbia to Belleville, Illinois and across 188 nations worldwide. I’m Keith Weinhold and you’re listening to Episode 501 of Get Rich Education.

We’ll get to “Are homes overpriced or underpriced today?” shortly.

But understand this…

I successfully acquired something at a young age. And you can too. That thing that I successfully got ahold of was not millions of dollars… because I came from average means.

What I intentionally and successfully acquired was millions of dollars in debt.

Yes, obtaining millions in debt from a young age… is what led to me quitting my day job while I was young enough to enjoy it.

You, the longtime listener, COMPLETELY understand and appreciate what I just said. If you’re a newer listener, that sounds unusual or even irresponsible. Well, come along for the ride.

Also, a layperson - or a newer listener - would respond with, “No one talks that way, thinks that way, or does that.” - taking out millions in debt and calling THAT aspirational.

But using that debt as leverage is how you ethically take funds from the big banks - take Chase Bank’s money, take Bank of America’s money, take Wells Fargo’s money - learn how to use it, be a responsible steward of the funds, provide good housing for people and prosper.

That means you get the return on both your down payment - and the entire amount that you borrowed from those banks. That all goes to you. And both your tenants and inflation pay the debt back - not you.

Look, I know one person. I personally know a guy - Greg. Greg makes $80K a year from his day job. Good guy, married guy, one kid.

And his NW increased by $2M just in the COVID run-up. He has a modest salary but his NW is up $2M just since 2020.

First of all, do you think that any of Greg’s co-workers experienced that effect? No, he’s really going down my path. You soon get unrelatable to co-workers and even some of your peers.

Well, what makes it possible for a good family guy - or anybody - to go from a middling salary to obtaining life-changing wealth?

It takes leverage. He borrowed for bank loans. That way, he could acquire 5x as much property than if he paid all cash for his rental properties.

That way, he had 5x as MANY properties… and properties all appreciate at the same rate regardless of how much equity you have in them.

See, if he had paid all cash, he’d only have a $400K capital gain. Not bad, but $2M is life-changing. Thanks to leverage.

Everyday people obtain life-changing wealth this way. It’s so substantial… that it won’t only affect Greg’s life. If he continues on this way, it’ll take care of his children, grandchildren, and great grandchildren.

And you know, maybe this is why, one of the most recurrent guests we’ve had here in the history of this GRE, Ken McElroy, he says:

“The best investment in RE is the one that appreciates the most, not the one that cash flows the most.” That’s Ken McElroy. And now you can see why he says that.

Leveraged appreciation creates wealth the fastest. Cash flow is important and it CAN boost wealth but that happens more slowly. Principal paydown doesn’t create it - it enhances it… and it’s the same with tax benefits.

Deferring your tax on a 1031 means that you can re-leverage a greater amount.

Low interest rates also don’t create wealth. In fact, I bought my first ever income property with a 6⅜% mortgage rate and my second income property with a 7⅝% rate - that second one had interest-only payments.

But I borrowed the maximum amount that I could without OVERleveraging. Overleverage means losing control of the mortgage and operating expenses.

The lesson here is… get the leverage.

And… case in point. Here we go…

Speaking of appreciation, the LATEST Case-Shiller Home Price Index figure came in. The US currently has… 6.4% YOY home price appreciation. Now, their index is only based on 20 cities but that gives you a pretty good idea.

In fact, that is the fastest rate of increase since 2022.

Now, if you’ve let equity build up in your properties to the point that they’re half paid off, you had 2x leverage, meaning the 6.4% appreciation just gave you a 12.8% leveraged return on your skin in the game.

And, of course, if you leveraged with a 20% down payment a year ago, that 6.4% means that you just got a 32% return.

And as we know, these returns I just told you about are from one of just one of FIVE ways that you’re expected to be paid simultaneously.

But yeah, a 6.4% higher is merely a DOLLAR-DENOMINATED price. That’s what that is. Why do I say that carefully?

Well, there are a few reasons that home prices are 6.4% higher - inflation from dollar printing could be why, the value - not price - but some properties have a greater VALUE, distinctly separate from inflation.

What’s the distinction there - how does this happen? What’s one difference between an INFLATED price and a greater value?

Well, say that a local economy is hot because there are more high-paying jobs there now than there were last year - say an influx of medical jobs or AI jobs or chipmaking jobs.

Well, even absent inflation, a property that now has PROXIMITY to better-paying jobs - that’s now a property that’s more desirable.

Someone is more willing to PAY MORE FOR - and simply CAN pay more for. Again - that phenomenon is ABSENT inflation.

What’s another reason that home prices rise - and rose 6.4% YOY in this case?

If better PHYSICAL AMENITIES are in new homes than there used to be - say bigger garages or new communities with pickleball courts, well, people are more willing to pay more for that.

To review, there are three reasons that home prices go higher: inflation, appreciation from value creation - like how the same home is now located closer to more high-paying jobs, and thirdly, better built-in amenities.

All three of those increase dollar-denominated price or value. They all increase the nominal price.

Now, let’s pivot into the fact that “Home Prices Aren’t Really Up”.

I’ve covered this a little before, but I’m going to go deeper today in giving you the most comprehensive look at home prices today - compared to the past - perhaps than you’ve ever had in your life.

Some might say, “C’mon. How can this be? Homes cost, perhaps 40% more than they did just four years ago.”

Well, I’ve got a mic… drop… moment… coming.

- Home Prices Aren’t Really Up.

We need a good measuring stick to see what home prices are doing. So we’ve got to stop pricing homes in dollars for a minute. It's a poor long-term value measure.

Ludicrous inflation means the dollar has lost over 25% of its value just since 2020, and 97% of its value since 1920.

Let’s use a commodity and money that has been valued for five millennia - and its physical properties have not changed one bit in allll that time, and its valued across continents and cultures - that’s 50 centuries of value! That’s gold.

We’ll get to a more modern measure soon. But first, gold is the best one.

Now, I don’t know who to credit, but for a while, there was an image floating around out there that GRE got ahold of.

It showed that 10 kilos of gold would buy you an average home back in 1920… and also, that 10 kilos of gold would still buy you an average home today… total… mic… drop… moment. Wow! Is there any better evidence that home prices are NOT up - but higher prices reflect that the dollar is down?

Actually, yes, there is a little better evidence. We ran the numbers here and learned that - it’s even more astounding than that!

You run how many dollars per ounce gold is worth, that 35ish ounces are in a kilo and you look at home prices then and now and we discovered that - it’s even more of a jaw-dropper…

… because in 1920 - which I’ll just call a century ago - you could buy an average home for 8 kilos of gold and today, you can buy an average home for just 6 kilos of gold.

So if you want to know how much home prices have changed in the last century, they are down 25%.

They’re 25% cheaper today in terms of gold - clearly a more stable value indicator than horrendously diluted dollars are.

And also, GRE made a new image that shows this - 8 kilos for an average home a century ago, 6 today. I sent you that image in our newsletter about ten days ago and that image got shared a LOT of times.

Your first reaction to this whole thing could be: "Wow! That's wild. The dollar really is sooo diluted."

Alright. What about home prices in terms of a popular, nascent asset that only arrived fifteen years ago, bitcoin?

2016: Average home cost $288K, or 664 bitcoins.
2020: Average home cost $329K, or 45 bitcoins.
2024: Average home cost $435K, or 7 bitcoins.

So, eight years ago, a home cost 664 bitcoins and today it costs 7.

That means that home prices are down 25% in terms of gold in the last century.

But they’re down 99% in bitcoin over just the last 8 years.

And the dropped mic keeps reverberating through the stadium.

Today's homes are cheaper in gold and drastically cheaper in bitcoin.

See, it takes real world resources and proof of work to create real estate, gold, and bitcoin. None of these things are required to produce a dollar - none of them. That's why its value is approaching zero.

But let’s go deeper. You need more answers - you are part of a really intelligent audience.

Because you might be thinking: "Wait a second. Some other things have changed too." For real people - everyday people - aren't home prices actually more out of reach than this?

That's because since 1920, home prices have risen faster than incomes. That puts them OUT OF REACH for more people.

Something else has changed. A home's lot size is smaller today too - the land that comes with the property has a smaller area.

Let’s understand too - homes also use some cheaper materials today. For example, heavy, milled raw wood doors - the interior doors - of yesteryear have given way to molded particle board today.

This is beginning to build the case - evidence - that homes SHOULD be cheaper than they are today.

Let’s keep going, because there’s more to consider.

Mortgage rates themselves - just rates in isolation - they don't put homes out of reach at all. The long-term average is 7.7%, per Freddie Mac, on the 30-year FRM. That average goes back to 1971, when they first began tracking them.

Oppositely, you can make the case that U.S. homes should cost even more than they do today.

In many advanced nations, homes are way more pricey. Even next door in Canada, they cost about 20% more than U.S. homes. Canadian salaries are lower than US salaries too - yet their home prices are markedly higher.

On some levels, you're getting more "home" today in the US.

A 1920 home would feel savagely uninhabitable to you if you tried to live in one now.

Here’s what I mean…

In 1920: 1% of homes had electricity and full plumbing.
Today: 99% of homes have electricity and full plumbing.

What I mean then, by savagely uninhabitable, is enjoy walking to the outhouse in the middle of the night when it's 35 degrees.

Then there's size:

1920: The average home had 242 sf per person.
Today: The average home has 721 sf per person.

Because today, family sizes are smaller and homes are way larger too.

Today's amenities would be unthinkable in 1920—walk-in closets, roofs with R38 insulation, double-paned thermal windows, smart thermostats, voice-controlled lighting, quartz countertops, and Kitchen Aid appliances. Maybe even a security system. They’re all things that homes have today.

Gosh, even the fact that you have a garage - a HEATED garage even, finished basement, air conditioner and modern washer-dryer would leave 1920 homeowners dumbstruck with their mouth agape—maybe even flabbergasted. Those old folks from yesteryear wouldn’t believe all that you get with a home today.

Yet that 1920 home would have cost you more in gold, than today’s more sizable homes with all their plush amenities.

Now, when it comes to - though home prices aren’t up, are they more “out of reach” for the average American?” Over the past five years, they ARE - because home prices have now risen faster than incomes over THAT stretch.

But another BIG reason that homes are SUBSTANTIALLY more affordable today than they were in 1920 is… financing terms.

Today, you can make a down payment for between 3% and 20% on a home. Do you know what loan terms were like in 1920? You had to make a 50% down payment and then had to pay off your mortgage in 5 years.

Can you IMAGINE if that were the case today? How many people could put 50% down on a home today and then pay off the balance within 5 years. Virtually nobody. That’s why homes are more within one’s grasp today.

Overall, you can see that there are a lot of countervailing factors here… tempering that it took 8 kilos of gold to buy a home a century ago, and it just takes 6 kilos today.

The bottom line here is that, long-term, real home prices aren't up. Dollars are down because they've been printed like crazy.

From today, nominal home prices could keep rising for years.

Dustin on social had a funny comment about this - “How many baconators from Wendy’s would it take to buy a home today?” Ha!

I don’t know. I guess that’s a hamburger - I don’t go to Wendy’s. Maybe then, a home costs 60,000 baconators today.

Coming up straight ahead - what will happen first - a $750K median-price home, $100K bitcoin, or $5K gold.

Also, what’s perhaps the biggest trend in real estate investing that not enough people are talking about - and how you can make money from it… and more… all next - I’m KW. You’re listening to Get Rich Education.

______________

Welcome back, to Get Rich Education. I’m your host, Keith Weinhold.

On our latest GRE Social Media Poll, we ran this question.

What will happen first?

The median home value hits $750K.

Bitcoin hits a $100K price. Or…

Gold hits $5K.

I’ll give you the result, but what do you think? Again, which one of these three things will happen first?

The median home value hits $750K.

Bitcoin to $100K. Or…

Gold hits $5K.

The results across both LI and IG were pretty similar - sometimes you get differences there, as LI is a more professional audience.

One voter in the poll also commented - it’s syndication attorney Mauricio Rauld, who we’ve had here on the show before.

Mauricio said: I think assuming Bitcoin doesn't collapse, it probably makes a run to $100K in the next few years (who knows, could be next few months). But with the median home, at 10% a year, it would take 6 years to hit $750K so that is a decade away. That’s his thought - sounds reasonable.

The poll RESULT is:

Bitcoin will hit $100K first. That was most likely, with 57% of you answering that. That makes sense since its volatile and close to striking distance.

The median home value will hit $750K finished 2nd. 26% of you said that.

And gold up to a $5K price got just 17% of the vote. That makes sense since gold prices would have to about double from here.

You can always join along in the conversation and polls. We are really easy to find - because on virtually every social platform - Facebook, Instagram, LI, YouTube - we ARE: “Get Rich Education”.

Over on the Get Rich Education YouTube Channel, I recently covered how the Fed is overseeing a “Tug of War” between inflation and a recession. They don’t want the game to end. The Fed is trying to keep the game going.

They don’t want participants on either side falling into a pit in the middle of the Tug of War game between inflation and a recession. They don’t want either side to win. If one side wins, the Fed loses.

This “Tug of War” game is really a great way to understand how the Fed works, how they control your money, and what their motivations are. A video about that is on our YouTube channel - where you get the visual of the Tug of War game between inflation and a recession.

That’s just one example of how that content is often different from what you’re hearing now. Get more… on our YouTube Channel… called “Get Rich Education”.

The homeownership rate just fell again a little, quarter-over-quarter, increasing the number of renters and rental demand, which I expect will only continue. From CNBC, Realtor.com’s Chief Economist Danielle Hale tells us more. Let’s listen in. It’s about why the housing market is pretty dire for young Americans, then I’ll be right back with some key commentary on this.

Yeah, there in Economist Danielle Hale’s interview - if mortgage rates go higher, inventory pulls back and we tend to see modest HPA. Most agree that if mortgage rates go lower, we’ll see RAPID HPA.

She also just keeps exposing what we all know. “We need to build more housing”.

A brand-new home constructed with a renter in mind, sold to an investor, is known as build-to-rent housing. You’ll see it abbreviated BTR. It's usually single-family.

Some abbreviate it B2R. These must be the same people that say H2O instead of water.

It's become massively popular.

Despite an overall housing shortage, last year, a record 27,495 BTR homes were completed.

That's up 75% from the prior year and up an astounding 307% since pre-pandemic deliveries back in 2019.

So what's driving the build-to-rent trend?

Locked into low mortgage rates, existing homeowners won't sell. So, instead, new inventory must be constructed.
More overall housing demand than supply.
Wannabe first-time homebuyers cannot afford homes today. Renting a BTR is next best. National BTR occupancy is over 96%.

BTR operates similarly to apartment buildings under property management, yet offer a single-family living experience.

Some of these communities have: leasing offices, pools, and fitness centers.

The homes themselves often have: luxurious modern finishes, garages, and fenced backyards.

What's in it for investors? How do you make money with BTRs?

5% mortgage rates* (I’ll get back to that in a minute)
A long-term ownership focus, generating revenue over time rather than immediately
Tenants have a house-like feel. Expect 3+ years avg. tenancy duration.
Mgmt. fees are low because all houses are the same and all in the same area too
BTR purchase prices are HIGHER than resale property. You will pay more.
Expect better appreciation than resale property
The rent range is often $1,500 to $3,500
You can expect low maintenance. It's new.
Builder home warranty

So there are a ton of factors that give build-to-rent investor appeal.

Really, 5% mortgage rates? Yes. Here at GRE, we can introduce you to some BTR homebuilders that will buy down your rate for you. One is lowering it to 4.75%.

I encourage you to get that incentive now, because when mortgage rates fall substantially, I don’t expect these national and regional homebuilders to keep giving you the rate buydown.

Sorry J-Pow. This kinda makes your next Fed rate decision… seem pretty irrelevant.

It's a great rental model to pursue and an amazing time to do it with the rate buydowns. I wish BTR would have existed when I began as an investor.

You really didn’t start hearing about BTR at all until about ten years ago.

Now, I appear as a guest on other business and investing shows. Quite a few times, the host asks me where the REI opp is today.

The answer that I’ve been giving is that it’s with build-to-rent properties and these rate buydowns.

An income-producing asset is like your employee that’s working for you—but without the personality problems. The property is also working for you 24/7.

Besides just helping you find the best BTR deals today, we can help set up an entire real estate investment portfolio plan for you.

-We can help build an income-producing RE portfolio for you with our free coaching. Truly free.

Now, if you’re new here, you might think that we’re trying to sell you something - and we aren’t.

The way it works elsewhere is that some people get attracted to the free thing and then once you’re on the phone or Zoom or free live, in-person event, they’re going to try to sell you their better PAID coaching or some online course for a fee.

We don’t even sell coaching or sell a course. This is free no-strings, no upsell, no catch coaching.

OK, it’s sort of the opposite of your auto dealer calling you about your extended warranty - an overpriced item that you don’t want. Ha! If you want to buy something from GRE, you can’t because we don’t even have anything to sell you. We are here to help!

Also, I have no problem with companies selling paid courses or paid coaching - not at all. Some courses are worth paying for. It’s just not what we do or have EVER done here.

But see, buying real estate that you own directly is still not as simple as just finding a keyboard and pressing: Ctrl, alt, Deal.

So that’s why our Investment Coaches help you learn your goals, and navigate the process. Then you’ll want to keep in touch with your coach because the best deals are often changing.

For example, you might think that you want to buy income property in, just say, Alabama, because its prices haven’t run up as much as they have in Florida.

But we keep regular lines of communication open with build-to-rent homebuilders nationwide… and say there’s a new community, in, Florida, where the real deals are going to be for the next few months…

…and though you still like Alabama, you like how Florida is growing faster so you end up going there.

Or there’s better cash flow with some BRRRR strategy properties in say, Ohio, that we have that your coach informs you about.

So, I encourage you. Get & maintain a line of communication with your GRE Investment Coach.

To review what you learned today:

Leverage is THE most powerful wealth creator.

You can make the case that homes are NOT overpriced today. Home prices aren’t up; the dollar is down.

No one knows the future. But there is ample room for more home price growth.

Build-to-Rent property keeps increasing in popularity… and investors can get mortgage rates on them as low as about 5%.

To contact an investment coach, it’s free, start at GREmarketplace.com.

Until next week, I’m your host, KW. DQYD!

500: All You Ever Have is Now—Always May 06, 2024

Become a time billionaire.

In this episode of the Get Rich Education podcast, host Keith Weinhold explores the significance of living an extraordinary life, emphasizing the importance of time management and the value of time.

You are here today, gone tomorrow.

Gain new perspective on life and death.

The show promotes strategies for achieving financial freedom through real estate investing.

A hypothetical scenario examines the potential impact of eternal life on Earth's resources, prompting listeners to consider the implications of unlimited population growth.

The episode offers a blend of motivational content and practical wealth-building advice, with a side of philosophical musing on the nature of time and life's finitude.

We listen in to Neil deGrasse Tyson’s “Life and Death: A Cosmic Perspective”.

Resources mentioned:

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

For advertising inquiries, visit:

GetRichEducation.com/ad

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete episode transcript:

Welcome to GRE! I’m your host, Keith Weinhold. You need to become financially-free so that you have… time to be present and live in the “now”.

You are here today and gone tomorrow. There’s not much time to leave your dent in the universe. All that you ever have is now - and that’s how it will always be. Today, on Episode 500 of Get Rich Education.

Welcome in… to Get Rich Education. I’m your host, Keith Weinhold.

At times, people tell me something like: “Look at what you’re doing. You live an extraordinary life.”

Now, I might reply to that person with something like - “Thanks. I appreciate it. I like to get out and see the world.”

But do you know what’s really going on inside my head when someone tells me that I live an extraordinary life?

I’m really thinking, “Well, of course, I do. Don’t you? You design your life: So why would you choose anything… else or anything… less… than an extraordinary life?”

Esp. in this world of abundance that we all live in. That’s why you have zero reason to live any life that’s LESS than extraordinary - if that’s what you want.”

Investing for income now is a tool for freedom.

When you're no longer trading your time chiefly for dollars, that's when you can stop living a disembodied existence - when you’re living such that your mind and your body are in two different places.

Begin to own your time and truly be yourself.

You need time.

And you don’t have much time. That’s why, in my experience, it's better to err on the side of being too early over being too late.

Are you truly living… or are you only existing in space and time? I think that deep down… you know. Ask yourself. You already know the answer.

Remember, Episode 1 of this very show is called: “Your Abundance Mindset.”

But if you’re thinking in LIMITING ways, here’s the good news - the really good news for you.

You don’t have to believe everything that you think.

The good news is that… you were born rich. You were born with an abundance of choices. Society stifled that.

You don’t have to believe… everything that you think.

Since there's never a "perfect time" to build financial freedom, your conception that it's too early is often just your fear.

As long as you've got a few touchpoints, once you dive in, you'll figure it out.

Old people tend to regret the things they didn't do, or didn't do earlier—not the things they did.

The best reason for becoming financially-free is so that you can buy time and finally start to be yourself.

If you don’t want to do it for yourself, do it for someone you love… because there's someone in this world that needs you to be... you.

Since all that you’ll ever have is “now”, you need residual income to buy time so that you can spend more of your life present in the “now”.

Now, if you were to ask yourself, what made the most successful leaders in the world successful, was it the capital they had, their technology, the people they knew, or their mindset? Which one of those things was it?

It’s their mindset.

See, because if you took away the capital, technology, or friendships from Jeff Bezos or Steve Jobs or Mahatma Ghandi or MLK - whoever you want to use as your leader.

If you took away those elements but they retained their mindset, they would most likely go on to regain everything they’ve got.

That’s why you must deeply explore and consider, what mindset do you have, where did you get your mindset, and what mindset do you need for the decades ahead?

Did you get it from… your parents? If so, I’m sorry to say, that’s usually a red flag… and that’s where most of us get our mindset from.

But most people never learn differently.

Realize this - and this is a little hard to say. But the truth is hard.

Your parents don’t want your success. Isn’t that ironic? Your very own parents don’t want your success; they want your safety.

They want you to have a stable, safe, say, accounting job, in a cubicle that only gives you two weeks of vacation a year - because it’s KNOWN and average.

A ship in harbor is safe; but that’s not why ships are built. Some safety is OK. But you weren’t built to live a life CENTERED on safety either.

That’s not even approaching living your dreams or doing anything ‘extraordinary’.

Most people aren’t living their dreams. They’re living their fears.

When your parents had you at birth - in the hospital delivery room - they’d be thrilled to know that you’d grow up to live your DREAMS. But on the day-to-day, they’ve got you living your fears.

Once your parents got “newborn you” home from the hospital, all the way up to adulthood, an overly fragile safety mindset often becomes pervasive… and it stifles dreams.

If you don’t take a chance, you don’t have a chance. Take the risk or lose the chance.

Don’t live below your means; grow your means. It’s in your genes… though that probably wasn’t part of the mindset of your formative years.

I love my parents. They cultivated the right environment for me. But you’ll often find an overabundance of safety from yours - especially from your mother.

Eckhart Tolle said: “Most humans are never fully present in the now, because unconsciously they believe that the next moment must be more important than this one. But then you miss your whole life, which is never not now. That’s Tolle.

Alright. But once you’ve made time, what’s next? It’s how you arrange your priorities.

We think it’s about time management - and it STARTS THERE.

True achievers in life make large blocks of uninterrupted time - notifications off, phone one room away.

But more specifically, it’s about your priority management.

For me, I know that I’m going to be living in this same body 50 years from today - just like you will inside yours, so I make FITNESS a priority in life - often at the expense of investing & business opportunity.

That’s my take - it doesn’t have to be your take. That’s an example of priority management.

First, you’ve got to play a game worth winning.

It’s been said that one question to establish focus is, ask yourself:

Are you hunting antelope or field mice?

This… idea is simple (but supremely powerful):

A lion is capable of hunting field mice, but the prize wouldn’t be sufficient reward for the energy required to do so.

Instead, the lion must focus on the antelope, which does require considerable energy to hunt, but provide a sufficient reward.

In whatever you are pursuing, are you hunting antelope or field mice? Are you focusing on the big, weighty, important tasks that will provide sufficient reward for your energy?

Or are you burning calories chasing the tiny wins that won't move the needle?

Ask yourself this question from time and time and use your answer to reset as necessary.

Always hunt antelope!

When it comes to priority management…

… you’ve got to make time for yourself and create better “nows” for yourself beyond the mandatory loads that you’re already encumbered with.

Because you’ll still have meal planning, grocery shopping, doctor’s appointments, housekeeping, scheduling, meeting, driving…

There’s not much leftover discretionary time left over to make you the you that you need to be - whether you’re trying to be the best equestrian rider that you can be because you connect with horses…

…you’re trying to be the greatest PARENT ever, cleaning up a beloved local creek, coaching your kid’s sports team… or maybe you’ll move heaven & earth to write that book that you just KNOW that you have inside of you. Get it out there!

But instead, people rationalize away their low quality of life.

If you’re working for the weekend, examine your M-F. You’re not living in the “now”.

If you call Wednesday “hump day”, you’re not living in the now.

The good guys are BRAVE enough to risk investment, commitment, marriage, being vulnerable to family members, and all those things that make the non-doers and bad guys envious. Be brave enough to study and then risk boldly.

This is sad. You’ve probably heard of stats like this before - a Pew survey from last year found that 46% of US workers who receive paid time off from their employer take less time than they’re offered. Almost half!

People rationalize away their low quality of life - actually defending living a small, scared, too-safe life.

If you need a push to fire up Google Flights, consider that you will be happier because of it.

That’s what the science says: researchers from the Netherlands found that the biggest boost in happiness around vacations came from the simple act of planning one. Then you get to anticipate it.

How important is it to build a residual income rather than work more hours? Is working more and working late the answer?

Understand… that twenty years from now, the only people who’ll remember if you worked late are your kids.

Instead, become a time billionaire. Let’s lean into this and look at what some others say.

Graham Duncan proposed the concept of the Time Billionaire. If you’ve got a billion seconds worth of wealth, that’s 31 years. He said that:

"A million seconds is 11 days. A billion seconds is 31 YEARS… I feel like in our culture, we’re almost obsessed, as a culture, with money.

And we deify dollar billionaires in a way...And I was thinking of time billionaires that when I see, sometimes, 20-year-olds—the thought I had was they probably have two billion seconds left.

But they aren’t relating to themselves as time billionaires."

That’s what Graham Duncan said.

The central point here… is that TIME is our most precious asset.

No one ever posts pictures of napping on the sofa on social media. But if you’re a time billionaire - you might consider that an ostentatious display of time wealth. Ha!

When you're young, you are RICH with time. At age 20, you probably have about two billion seconds left (assuming you live to 80). By 50, just one billion seconds remain.

But as Graham Duncan pointed out, we don't relate to ourselves as the "Time Billionaires" that we really are. Most of us fail to realize the value of this asset until it is… gone.

In his passage called On the Shortness of Life, the stoic philosopher, Seneca, says, "We are not given a short life but we make it short, and we are not ill-supplied but wasteful of it." That’s Seneca.

To me, being a “Time Billionaire” isn’t necessarily about having the actual time, but about the awareness of the precious nature of the time you do have.

It’s about embracing the shortness of life and finding joy in ordinary daily moments of beauty.

Let me introduce the “Surfer Mentality”. Yeah, the surfer mentality. When a surfer gets up on a wave, they enjoy the present moment, even though they know with certainty that the wave will eventually end.

They fully enjoy THIS wave, with the wisdom and awareness that there are always more waves coming.

There are five ways that you can apply this “Surfer Mentality” and have this awareness in your life: (1) enjoy your next wave and embrace the present moment, (2) be strategic about your positioning in between waves, (3) PASS on more waves rather than jumping at the first one that comes your way, (4) always get in the water and stop sitting on the shore, and (5) roll with the punches that life deals you.

That’s the “Surfer Mentality”

Do not become an ostrich. An ostrich will bury its head in the sand to avoid danger. A lot of humans behave the same way when they encounter new information that challenges their existing beliefs or views.

An ostrich cares more about being right than finding the truth. Do not become an ostrich, embrace new information that forces you to change your mind. That, right there, is growth.

A great, actionable way for you to GROW with the time you’ve created and the priorities that you’ve outlined is to Do something new that scares you. This is EXACTLY what you did as a kid but that you forgot how to do.

For example, when you were age 11, you swam in water over your head for the first time. It made you rise up, grow, and gain confidence. I can’t tell you what grows inside you psychologically, but…

We’re operating 200,000 year-old mental software. That’s when the modern human brain came into existence.

Our primordial brains are evolutionarily wired to see problems - to detect threats like lions & tigers - and our body still responds to those threats like they are lions.

And today, we don’t have to look very hard to find those problems. Just turn on the news or scroll social media and there they are.

And in this environment, it can be easy to let ourselves be yanked around by our circumstances.

When it comes to OTHERS - peers, family, and friends along your life journey…

You have to be strict with yourself but tolerant of others.

That’s what the stoic Marcus Aurelius wrote about in his meditations. He has these exacting high standards.

Most people don’t have the self-discipline that you do… and it’s called SELF-discipline for a reason.

It’s not a thing that you get to project onto other people. You don’t get to go around insisting that other people follow YOUR standards and your code.

You have to be encouraging and forgiving of other people because they don’t have the gift that you have. They don’t own the drive that you have. There’s even a saying in ancient Rome.

“We can’t all be Catos.” If you remember from history, Cato was the influential leader that championed Roman virtues during THEIR empire.

We have to be tolerant, and accepting and encouraging of other people. If this realization is still frustrating to you…

Another way that you can think of this, is that others never signed up to the code and standards that you have.”

Money is a tool for freedom. The best reason to accumulate wealth is to buy yourself freedom from anything you don’t want to do, and the freedom to do the things you do want to do. Money is not an end in itself. If you sit on it and never use it, you’ve wasted your life.

Money CAN absolutely buy happiness. But only so long as you spend it on upgrading and expanding the things that make you happy or in buying time, instead of using it to play status games or on fleeting experiences.

Increase the difficulty. If you’re listening to this, then your life is (probably) already on easy mode compared to the global and historical standard. You need to strategically introduce some challenges to keep yourself motivated. Don’t ruin yourself, but don’t let yourself get too complacent, either.

Investing involves risk. You’re going to lose sometimes. The good news is that you don’t have to make money back in the same PLACE where you lost it.

If something in your business or life is losing money, you don’t have to plug the hole right there at that spot. Often it’s easier to make the money back elsewhere.

It’s never the right time. Any time you catch yourself saying “oh it’ll be a better time later,” you’re probably just scared. Or unclear on what to do. There is never a right time for the big things in life: having kids, changing jobs, breaking up, getting engaged, or buying the property.

Err on the side of too early over too late. Related to that point, since there’s never a “perfect time,” it’s almost always better to do things “too early.” Your conception that it’s too early is just your fear, and once you dive in you’ll figure it out. Old people tend to regret the things they didn’t do, or didn’t do earlier. Not the things they did.

Bad things happen fast, and good things happen slowly. This is one reason why bad news seems more newsworthy - but it’s not actually more important.

It’s hard-wired within you that money is a scarce resource.

Don’t be afraid to commit. You’ve got to let go of fear about tomorrow and just get on with it.

Uncertainty is a PERPETUAL condition - it’s existed in your entire past, and will in your entire future. That’s why you feel uncertainty in the present too. Uncertainty only disappears when you die.

We all want to know the future. But the truth is, it’s easier to make decisions within your certainty of NOW rather than postpone & speculate about your perpetually uncertain future.

“Life is meant to be lived, not postponed.” Don't get so caught up trying to make a living that you forget to live a life. That's not a life well-lived.

Regretting past decisions is an utter waste of energy. Does the past exist now separate from your own thoughts? Nope… it doesn’t even exist.

Coming up - you’ll hear ANOTHER voice with a more COSMIC perspective about life and the power of “now” - it includes some sound effects to anticipate.

Then I’ll come back in for today’s conclusion. I’m Keith Weinhold. It’s Episode 500 of Get Rich Education.

LISTEN: Neil Degrasse Tyson: Life and Death - A Cosmic Perspective

That’s Neil DeGrasse Tyson on the significance of life, death, and the power of “now”.

Horace Mann said, "Be ashamed to die until you have won some victory for humanity."

Life feels ordinary. But in fact, it’s incredible that you overcame tremendous odds to have your… one… precious life.

In order to be born, you needed:

2 parents
4 grandparents
8 great-grandparents
16 second great-grandparents
You needed 32 third great-grandparents
64 fourth great-grandparents
128 fifth great-grandparents
256 sixth great-grandparents
To be born, you needed 512 seventh great-grandparents
1,024 eighth great-grandparents and
2,048 ninth great-grandparents

For you to be born today from 12 previous generations, you needed a total sum of 4,094 ancestors over the last 400 years.

Think about what they overcame… to produce you – How many struggles did they have? How many battles? How many difficulties? How much sadness did THEY have?

How much happiness? How many love stories created you? How many expressions of hope for the future? – did your ancestors have to undergo for you to exist in this present moment…

The past is history, the future is a mystery, and this moment is a gift. That’s why they call this gift, “the present”.

Spend your time where time disappears. Your work should feel like play… your passions should feel like flow… with people that make hours feel like minutes.

The more present you are, the quicker the present goes. That’s the paradox.

A full life goes fast. But in the end, time that flies… is time well spent. And a life that flies by… is a life well spent.

At least here on Earth, all you’ve got is one life and one shot.

You shouldn’t fear death. You should fear a life where you could have accomplished more that fulfills your potential and aligns with your soul.

You’re here today and gone tomorrow. You’ve got NOW to go leave your dent in the universe.

There’s no time to wait. You now have less time remaining in your life than when you started listening to me today.

All that you ever have is now - always. Don’t Quit Your Daydream!

499: How They Revolutionized Real Estate - Behind the Scenes of “The Memphis Miracle” Apr 29, 2024

Other people study one real estate group’s enormous success. Go behind the scenes to learn how they pulled off “The Memphis Miracle”.

Terry Kerr and Liz Brody from terrific turnkey property provider, Mid South Home Buyers of Memphis, TN, are back on the show.

Here’s what makes them different: junk in the backyard rather than a dumpster, property addresses viewable on their website, no tenant application fees, no maintenance upcharges, no materials upcharges, no earnest money, investor cancellation allowed, specific kitchen & bath renovation, and tenants bring their own appliances.

Memphis has such a robust renter culture that tenants bring their own appliances.

Hundreds of GRE followers have purchased income property from Mid South Home Buyers.

They’re such a popular provider that there’s an investor waitlist. For GRE followers, you can reserve up to two financed properties or three all-cash properties all at once.

They offer in-person tours to see the properties. Start at MidSouthHomeBuyers.com

Resources mentioned:

Mid South Home Buyers' Website:

www.MidSouthHomeBuyers.com

Liz Brody’s e-mail:

liz@midsouthhomebuyers.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

For advertising inquiries, visit:

GetRichEducation.com/ad

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete episode transcript:

Speaker Weinhold** ((00:00:00)) - - Welcome to GRE! I'm your host, Keith Weinhold. Today we're going to visit one of my favorite real estate markets. We'll talk with an operator there that is so successful and different that other companies actually study them. And our listeners have loved them for almost ten years now. Today on get Rich education.

Speaker Syslo** ((00:00:23)) - - Since 2014, the powerful Get Rich Education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate, investing in the best markets without losing your time being a flipper or landlord. Show host Keith Wine, who writes for both Forbes and Rich Dad Advisors and delivers a new show every week. Since 2014, there's been millions of listeners downloads and 188 world nations. He has A-list show guests include top selling personal finance author Robert Kiyosaki. Get Rich education can be heard on every podcast platform. Plus it has its own dedicated Apple and Android listener. Phone apps build wealth on the go with the get Rich education podcast.

Speaker Syslo** ((00:01:01)) - - Sign up now for the get Rich education podcast or visit get Rich education.com.

Speaker Coates** ((00:01:08)) - - 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 Weinhold** ((00:01:24)) - - Welcome to GRE! From Sandy Creek, New York to Walnut Creek, California, and across 188 nations worldwide. I'm Keith Weinhold and this is get rich education. Some call Memphis, Tennessee the best place in the entire United States for income producing homes. And in past shows, we talked about all of those reasons on why that's true the economic, the geographic and the cultural. So all that I will add to that is, did trends like the era of Covid and this nascent sea of I did that change the advantageous Memphis economics over these past? So 3 to 5 years? No, not really, because this distribution hub market, air barge, rail and truck is still really the center of the most powerful nation on Earth when it comes to distribution. If you're moving a package from New York to LA, you're going through Memphis.

Speaker Weinhold** ((00:02:24)) - - The reason that really matters is that those distribution jobs are not transient. It's tough to outsource that activity to Thailand. Lots of things make Memphis well known Memphis barbecue, Beale Street, Graceland Elvis the birthplace of both rock n roll music and blues music. The Mississippi River, the Fedex hub. What we're doing today is going deep inside an enormously successful real estate group there in Memphis. They provide properties to investors. This is going to get rather interesting, because there are just so many things that make them different things they do that no one else that I know of does in the industry. In fact, during our discussion, if you miss any of these differentiators, all summarize them for you at the end. Today, other companies study these people. For example, their properties are totally viewable by the public. You can easily see them physical address, proforma and everything right there on their website. It's just one of a number of things that makes you say, gosh, why don't more people do things the same way that these people do? Now? When I visited Memphis with today's guests, we looked at properties in all different construction stages.

Speaker Weinhold** ((00:03:48)) - - At one, there was a giant pile of junk all over the backyard, and that is exactly according to their plan because we were touring a property mid rehab and they don't put a dumpster out on the street like everyone else does. Why is that? Because renting a dumpster is costly and it makes the neighborhood look blighted for a while. They just put all the refuse in the backyard and come by and have a junk collection day for their properties later. And then, oppositely, I also saw other beautifully finished homes where the real hardwood floors shined so much that I wondered when I could move in myself. Now, when you add a property to your real estate portfolio, you can do things like get a property inspection and check out that property today, and maybe even learn about your tenant before you buy a property. But one thing that you don't know is what kind of tenant could this property attract in five years? Well, in Memphis, as you'll see, it is a complete renter culture there. In fact, with the provider that we're about to talk with today, when I visited Memphis and this was quite a while ago, I was driving around with them and they were showing me their sample properties, and I asked them about appreciation in the areas where they buy.

Speaker Weinhold** ((00:05:12)) - - I asked what about appreciation? And they began talking about rents. They thought that I meant rent appreciation. No, that's not the way that I talk. Appreciation means capital price to me. But that fact right there is just indicative of the renter culture that they have there. Let's learn more about it and take a trip to Memphis. Today. It's like the return of two longtime terrific friends. It's Terry Kerr and Liz Brody from Midsouth homebuyers in Memphis. Welcome in.

Speaker Brody** ((00:05:50)) - - Hi, Keith.

Speaker Weinhold** ((00:05:51)) - - Hey, Keith. Thanks so much for having us again.

Speaker Brody** ((00:05:53)) - - Always love to be here.

Speaker Weinhold** ((00:05:55)) - - Oh, yeah. Now, I've never heard sticks, bricks and mortar talk, but if they could, they would probably sound like you two. And that's because you really are the figurative voice of properties that so many of our followers, probably hundreds, now, have bought over the years. So I just think it's reassuring for us to hear your voice here on great every couple years. And, Terry, this really all began with you 22 years ago.

Speaker Weinhold** ((00:06:20)) - - You found that you simply enjoyed fixing up houses. Then you found that others like your ability to renovate property for them, and then you began doing it at scale, placing tenants, starting your own warehouse, which I was inside when it was new. You brought in property management and more. And now that you lead a team that's done thousands of rehab properties and you've even added new build, we'll get to that later. You're still Memphis based. But six years ago you branched out to little Rock, Arkansas, two hours to the west. But with all that, Terry, back from the start, when you began rehabbing Memphis houses, at what point did you learn the fact that, oh, now you just happened to be from an Investor Advantage City, where you get high rents in proportion to a low purchase price? Like, when did that epiphany occur? I tell you what, I'm the luckiest guy I know.

Speaker Kerr** ((00:07:12)) - - I was born in the right city at the right time, and was able to cultivate an incredible team of pros to help me run this business.

Speaker Kerr** ((00:07:22)) - - Obviously, Liz has been here for 15 years running and gunning with me, but I would say when I realized that we were super fortunate to be in Memphis, Tennessee with all the awesomeness that it provides for cash flow, it was probably right in the middle of the credit crisis when it became real obvious that even though there was, you know, blood in the street, if you will, there was a ton of opportunity. And it came from a buddy of mine who had about ten houses that he had fixed up himself and was managing, and he started buying from us. And I asked him why, and he said, because as the leverage of time, I can buy them from you already fixed up for the same price that I will have in it, if not more, when I'm spending my own time. And that's when really and truly, the idea became crystal clear that passing bargains on to bargain hunters was where we were going to focus.

Speaker Weinhold** ((00:08:20)) - - You surely found your niche, and in being from Memphis and finding that right niche and finding the right properties, most people find in that sense that buying super cheap homes looks attractive on the surface to go fix up, but it often doesn't work because you're in blighted neighborhoods.

Speaker Weinhold** ((00:08:40)) - - And then in the opposite end, you don't want to go to high end because the rents really aren't that good for the higher purchase price. And both Terry and Liz, you can feel free to chime in on this, but let's talk about the formation then of your go zone versus your no go zone. So we're really talking about sweet spot discovery here.

Speaker Brody** ((00:09:01)) - - I always kind of love your origin story a little bit. As far as maybe buying a little bit too low. Right. feeling the pain. Yep. Having to protect the materials you're putting in the renovation. Overcorrecting swinging up to the pretty stuff. That kind of sounds nice at the cocktail party, but shelling out a bunch of money for very little return. It has never made sense. I have a lot that I prefer about working class renters over a class renters, if you will, for so many reasons. They stay longer. It costs money to move a class. Renters are more litigious. They're going to go be homebuyers. It's a lot.

Speaker Brody** ((00:09:36)) - - If you're paying tip top rent, you're going to call on a work order because your door handle is loose. And at the end of the day, the lower your rent is, the more people can afford your property. You want to talk about being recession proof. Being in that working class area really, really helps. So there's a lot to it.

Speaker Kerr** ((00:09:54)) - - There is. And, as of this morning, our, occupancy rate was 99.17. It'll dip down into the mid 90 eights around the holidays. Liz, you hit the nail on the head. I mean, where you want to operate in the zone where you can have the highest occupancy rate. And, although a class properties that may look nice, but folks don't stay long because they're more transient, they end up buying a home for themselves. So in the beginning, we did things the wrong way a lot. And we, you know, scraped our toes and scuffed our knees. And we're just fortunate that we were able to figure it out and then work it to scale.

Speaker Brody** ((00:10:28)) - - And another thing I think that is really neat and powerful about our roots as a company that I always love is so, so Terry, realizing that he wanted to, you know, pass on bargains to bargain hunters, he'd been buying and creating these homes. For himself. You were building your own rental property portfolio, as people do, but there was a doctor that we had sold a number of houses to, but Taylor was not managing them, and they were out at dinner and they were comparing notes, and Terry's properties were outperforming the doctors. And they were identical. They were identical rehabs, identical everything. And the difference was Terry's management doctor said, I'm not going to buy any more houses from you unless you will manage my properties too. And you'd known the day was coming. He'd been thinking about it anyway. But we had a property management company. It just managed Terry's properties and so much about how we manage properties. And that really is feeding into that 99% occupancy rate came because Terry designed his property management company as an owner.

Speaker Brody** ((00:11:30)) - - One thing we've talked on about here before is how we don't charge application fees to renters. That's because when Terry was standing in the front yard of a house that he had spent his life savings, his nights and weekends renovating, he didn't care about $50 an adult head from an application fee. He wanted to get the best human being possible in his home. And to this day, we are the only property management company I know of coast to coast. That is a no application fee at all times. Company not up charging maintenance, not charging materials. There's so much that is unique about how our property management company operates, because if Terry didn't say, I'm going to manage your properties differently than I manage my own, I just think that's a really important foundational forming sort of a factor for how we manage.

Speaker Weinhold** ((00:12:17)) - - You do so many things differently there that you're really interesting to study, and your primary business is renovating homes and selling them to investors like me and our followers that want to hold them with a tenant in it for the long term production of income and leverage and all of that.

Speaker Weinhold** ((00:12:35)) - - The neighborhood. It wouldn't matter to you as much, probably, if you're just doing in and out fix in flips where you don't have any future ongoing relationship with that buyer of your rehabbed property. Therefore, in that case, you would have less neighborhood concern. But now, of course, the neighborhood, it really matters to you because you are managing what you sell.

Speaker Kerr** ((00:12:58)) - - Absolutely. And that's why not only is it the neighborhood that matters in managing what we sell, but it's also why we like to buy the houses that are in the worst condition. Because the worst condition of property is when you buy it, the more things you can replace, right? And so we're proud of the fact that we're taking the ugliest house on a street that was owned by a local investor who maybe bought it 30 or 40 years ago, managed it, his or herself, retired, and is then at a point in their life where they want to sell it. Typically there's tons of deferred maintenance, and we're proud to be able to buy those houses and pay a little more than the market, because we have honed our skills at taking these houses that are in super bad shape and bringing them all the way up to the best house on the street.

Speaker Brody** ((00:13:45)) - - And Keith, you hit the nail on the head. We're not just walking away. Our acquisitions team actually passes on about 25 houses. For every one that we put an offer in. You can actually look at our inventory on our website. And so when you go to the available property section of Midsouth homebuyers, those 50 or 60 houses you're seeing, each one jumped through 50 or 60 hoops to become a Mid-South homebuyers house. One thing I always tell folks is, as you know, Keith, we have a short waitlist for our properties, but my acquisitions team is not out there thinking about me and my waitlist. It is actually a mandate from Terry that we do not pass on a property to an investor that he would not probably own in his own portfolio, and we have no one wants to manage a problem property. Nobody wants to manage a property in a neighborhood that can attract a quality renter. If you get approved with our property management company, that means you would be approved anywhere in town within the limits of your income.

Speaker Brody** ((00:14:43)) - - That's the way of stating, essentially, that our renters have choices and options about where they live. People with choices and options don't put their families in unsafe neighborhoods, let alone environmental factors. Being close to a corner store that gets too much foot traffic, highway noise, just little things like that. And we're built on repeat and referred business. And frankly, our profit margins are really slim per house. So there's just no reason to buy a house that is less than and risk a repeat buyer risk or problem, something that's harder to manage.

Speaker Weinhold** ((00:15:18)) - - Yeah. So we're talking often about rehabbed single family homes here. Your price points seem to be between 95 and 160 K for that. And sometimes you have duplexes and other more expensive properties. And these are good houses in pride of ownership neighborhoods that I have been inside with each of you. So that's what we're talking about here. But you. Another differentiator. There is something that makes you guys different, and that's the fact that you do publicly put your physical addresses out there for anyone just to see easily on your website.

Speaker Weinhold** ((00:15:50)) - - That's something that a lot of companies don't do. Can you tell us why that is? Why do you make this so publicly available and that few others do?

Speaker Kerr** ((00:15:59)) - - So our philosophy has just been we want to be the easy folks to work with. Whether it's our investor partners are bankers, contractors, subcontractors, internal employees, closing attorneys, whatever it is. And and so we also wanted to make it easy for folks to learn about how to shop for a turnkey seller in any market, whether it's us or anywhere in the US. And we want to make it easy for folks to go in and check out our properties, see what we have under contract to sell and use those properties, kind of as a litmus test to kind of get used to what's going to be coming down the pipe for them if they hop on the wait list. So we don't want to make our potential investor partners jump through hoops so we can grab their email address and give them the hard sell. We pride ourselves on being able to communicate what a turnkey seller can do to provide value and operate from an educational standpoint.

Speaker Kerr** ((00:16:54)) - - And and in the same vein, it's the same reason, like Liz was mentioning, that although we do all the same background checks, credit checks, employment verification, we don't charge our residents for that. And it's the same way, like when we sell houses, we do not require earnest money. So someone puts a house under contract with us, we've never required any earnest money and someone can cancel for any time for any reason. Because if life happens to someone during the contract process, we are not going to hold their feet to the fire. And one of the other little example of us really working hard to be easy to work with is property management. Most property management companies, you sign a contract and you're locked in for this period of time. If something happens to someone for some reason and they like, have to put their parents into a nursing home or their kid doesn't gets into a college, it's really expensive and they need to sell or whatever it is. Like there's no oh, you're locked into a contract.

Speaker Kerr** ((00:17:50)) - - So we're just looking to be easy to work with and operate from an educational standpoint.

Speaker Brody** ((00:17:58)) - - I don't want you to be popping champagne at the closing table. Or confetti if you don't drink. If the wind change directions for any reason, if you want to take it to Vegas, we understand one of the fun things about our business model is the house's cash flow for us as well. They really do make money and so we're able to approach it from that. And personally, as I educate folks about us, you know, Mid-South is one of the most formulaic businesses that especially in real estate, where there's such a wide variety of things that I have ever encountered, almost going back to acquisitions and how picky we are on the houses and how they have to jump through so many hoops. One thing I like to tell investors, as many people know, I buy directly from the company. I pay full price. There's no employee discount on a house. I pay 10% management until I got to a portfolio size and so on.

Speaker Brody** ((00:18:47)) - - And what I tell folks is when I get my down payment saved up, I'm ready to buy my next Mid-South house. Keith, I've found that house in 3 to 4 weeks because there's nothing to hold out for. There's nothing to wait and see. There's not that one special deal. And so going back to the houses being all on the website. So there's kind of a two pronged thing there. So our leasing team, we often take a deposit from a renter before we're even done with the rehab. Just like we get a lot of investor referrals, we get a lot of renter referrals. We are the only turnkey that I'm aware of as an example, that does all new kitchen cabinets every single time. Nothing wrong with painted cabinets. I've lived in houses with painted cabinets, but we all know kitchens and baths rent houses and they sell houses. And that's like my leasing team is showing these renters the all new tile shower surround, the all new kitchen. I am able to show investors. Since we do have we're grateful to have more investors and houses, and we do have kind of that short, maybe 90 day wait time before they can get houses.

Speaker Brody** ((00:19:50)) - - I say jump on our website, have a pretend shopping trip, pretend every one of those houses is available today and you're going to write a check today. And the 4 or 5 that you kind of start to identify as ticking your boxes if you're like in 320 Maple Street today, I am going to have 490 Maple Street for you. Same zip code, same cash flow, same price to rent relationship. And that means it makes sense for you to join our short wait list because you're going to see that same thing. And so it's very helpful. And I think most other people's approach and there's nothing wrong with this, but you're going to have our friendly competition. There might be a five year old water heater and a 20 year old roof, and this house has a new water heater, but an even older roof. And the price and the relationships are kind of all over the map. And they'll say, well, it's because of area and this and that. And again, back to me being able to pick out my Mid-South house within about three weeks of having decided I'm going to do it.

Speaker Brody** ((00:20:46)) - - And I know this isn't very scientific. I go on like trying to curb appeal within my price range, because Mid-South has hammered out every other floor and they get so interchangeable. And so the web that having all of our properties, even though they're under contract to investors at the top of the wait list available where everyone can come and see that is so helpful.

Speaker Weinhold** ((00:21:06)) - - Yeah, because of course it's about making the right upgrades when it's going to be a rental property. Words like opulence and extravagance really don't make a lot of sense here. I mean, adding a wine cellar with mahogany finishes and marble floors to might boost the price. 40 K and not only would you over improve the neighborhood, but your target tenant, they might only pay $25 more per month for that. So it's about making those right upgrades like you touched on.

Speaker Brody** ((00:21:34)) - - I always say, every dollar we spend is either to defer maintenance or to attract another dollar in rent. And if it doesn't check those two boxes, it doesn't make sense. So an example would be if you were going to sell something retail to an owner occupant, maybe an eight foot wooden cedar privacy fence might make sense for a rental property over a chain link.

Speaker Brody** ((00:21:56)) - - It does not get you $1 and you're that was going to, you know, rot and so on. And so that's our approach on everything. But there is money you can spend that does attract another dollar in rent. And that's when we spend it.

Speaker Weinhold** ((00:22:08)) - - Now there's something really interesting going on in you guys. Is geography both in Memphis and out in little Rock. When we talk about those physical amenities inside a property, and that is with appliances rental demand in Memphis, and little Rock is so high that tenants bring their own appliances. Tell us about that.

Speaker Brody** ((00:22:27)) - - Actually, little Rock is more like the rest of the country. It's one of the things that we I kind of use that website for. So it's one of the few differences you'll see between our houses is if you're looking at the kitchens and the Memphis houses, there's no appliances. If you're looking at the kitchens in our new construction properties, because it's at a rent point or that kicks in in our little Rock properties, you're going to see brand new black or stainless steel GE whirlpool appliances in there, but about 80% of our inventory is going to be renovated properly.

Speaker Brody** ((00:22:57)) - - In Memphis, where you will not see those appliances and is Terry knows I came to him 15 years ago from a different market and about ten years in property management, and he casually and calmly told me to remind the renters to bring their own appliances. I had come in from the leasing side and I thought, I'm working for a lunatic. I am about to get laughed off the phone. Oh my gosh, am I even? I'd been there a week. I was like, oh man, what are we doing? And literally the first Mrs. Smith, if you will, that I spoke to on the phone, I kind of softly whispered with trepidation for the backlash, don't forget to bring your appliances. And she was like, oh yeah, of course. And she actually paused and said, they're not in there, right? There's nothing in there because she owned her own appliances. Our average renter is coming to us from another single family home. One of our many rules is you have to pay rent yesterday.

Speaker Brody** ((00:23:53)) - - We want a lot of folks will take two years. Landlord history, and it's okay if you've lived with your mom for a year. There's a lot of ways that our criteria is just a little bit more stringent. Our typical renter is coming to us from another single family home. They have a lawnmower. They own their stove, they own their fridge, then they own their washer dryer. And it is just a subtle perk. You don't repair them. You don't replace them.

Speaker Weinhold** ((00:24:14)) - - Yeah. That's interesting. I'm a geographer. I often think about and love maps. Maybe I need to do some research and make a range map of where tenants travel with appliances. Does that happen up in Missouri or out in Oklahoma? Or just where do the limits of that map and you're listening to it versus occasion? We're talking with the voices of Mid-South homebuyers Terry Kerr and Liz Brody. When we come back, I'm your host, Keith Windle. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256 injury history from beginners to veterans.

Speaker Weinhold** ((00:24:53)) - - 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, 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.

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Speaker 6** ((00:26:23)) - - This is Rick Schrager, housing market intelligence analyst. Listen to get rich education with Keith wine old and don't quit your daydream. He.

Speaker Weinhold** ((00:26:42)) - - Welcome back to get Rich. We're talking with Terry Currie and Liz Brodie of Midsouth Homebuyers based in Memphis, Tennessee, because they do so much volume and through their operational efficiencies like they've been describing, you can see why it's attractive to both tenants and investors. If a tenant can pay the same rent or 3% less rent and get a 12% better property, that's why they have such high occupancy. And although your bread and butter, sort of where you started out as doing renovated properties in Memphis, you've joined in and really help give the nation what they need. And that is new build property to help deal with the national housing shortage. So can you tell us more about what you're doing with New Build?

Speaker Kerr** ((00:27:23)) - - We heard from our investors for a long time, and we found out very quickly that residents also like the new construction director for rental and typical fashion, you know, we stuck our toe in, we made sure our foundation was built and we were ready to handle it.

Speaker Kerr** ((00:27:37)) - - And we slowly but surely started doing new construction in little Rock with just small developments, 130 unit development, another 30 unit development with lots of scattered lot. And now in Memphis we're doing the same thing. And we have got what Liz 1215 going right now. new construction going in Memphis. And we are definitely continuing with our bread and butter rehabs, but we're really happy to be able to offer new construction director rental properties that are built specifically for rental with ten year transferable slab warranties, PEX plumbing, hip roofs, the whole nine yards just to make them just darn near maintenance free on the exterior. And they are just flying off the shelf with renters and investors alike.

Speaker Brody** ((00:28:26)) - - It's been just fantastic. You can see them on our website. They have a special new construction label. And the we have a really cool IRR calculation on the website. And we have turned up the appreciation ratio for the new construction. It's the only way any house is calculated any differently than any other house. And I think there's just a really neat value to that in that when that investor is going to go sell that house for a profit in 15, 20 years, though, plenty of folks are leaving them to their kids, and this applies as well.

Speaker Brody** ((00:28:58)) - - You're selling a 15 year old house. That's kind of cool. It's just been really neat and one of the best things. Keith, I know you know, that our wait times had gotten and we are grateful because we were doing over 400 houses a year. But at one point our wait times were over a year.

Speaker Weinhold** ((00:29:13)) - - We're talking about your investor.

Speaker Brody** ((00:29:14)) - - Waitlist investor wait time. Thank you. Yes, the amount of time if someone called me and wanted a house today that they would have to wait as I got houses to everyone ahead of them in line. We now have a faucet and it's the new construction faucet and we can turn it on. And that additional, I believe that we provide an extra 70 houses in the last 12 months from new construction has our wait times down to 90 days or so for a financed investor, and about 45 on a cash buyer side, 45 days. And so we're just thrilled we're able to work with folks doing 1030 ones in a way we never have before. And it's just great to be able to kind of meet some of that demand.

Speaker Weinhold** ((00:29:57)) - - And you really get in there and work closely with investors that have 1031 exchange timelines to meet, and you can more easily do that now with that increased faucet flow with your new build.

Speaker Brody** ((00:30:08)) - - Absolutely, I love it. And so because for so many years, and we've always been so grateful for the demand, but I got calls. I'm selling $1 million property in California, I'm selling a $2 million property in New York. And I was so much fun to disperse with you. And while it is still just one at a time for finance buyers, so I've been doing case by case exceptions for that and for get Rich education listeners. I want to make that as just a permanent exception, that they can do two financed properties at a time. Right. And then cash folks can do three at a time. But then we are now able to have a 1031 program where if you reach out to me and we're going to discuss the date of the sale of your subject property, what your needs are. That way I can make sure my wait times that I'm quoting to other investors are accurate.

Speaker Brody** ((00:30:51)) - - We're going to make sure you're meeting your 45 day timeline. As you might know, you can do you could identify actually before the subject property is sold, which I find some people don't know, we're able to, even with all the demand for our properties, help people avoid those taxes and do the 1030 ones.

Speaker Weinhold** ((00:31:09)) - - The tax deferred exchange for people with all the accumulated equity in the Covid run up. And just real quickly, of course, this is going to change if you're listening to this five years or even one year into the future. But what are the interest rates on the buy downs that you're doing on the new build properties for the investor?

Speaker Brody** ((00:31:27)) - - So that's one of the coolest things. So and I really think Fannie and Freddie that they're doing this right. As you know, Keith, and as you talk about there is a housing shortage. Nobody loves higher interest rates. But they cooled the. Market, I think, in the way that they wanted to, but they're still encouraging new construction. And so we are able to do called a forward commitment, but we pre buy down the rate for the investor.

Speaker Brody** ((00:31:51)) - - And as people deep in real estate may know, the sellers can only contribute 2% of the purchase price to a buyers closing cost. So your average buyer can only buy their rate down X amount. What we're doing is buying it down ahead of time on these new construction properties, and you still have all the range to buy it down more on top of what we've done. So that really is a big difference. And so right now on our new construction properties, folks can get as low as 5.75.

Speaker Weinhold** ((00:32:19)) - - That's really attractive.

Speaker Brody** ((00:32:20)) - - Yeah, it's really great. You walk in the door at 6.3. I see folks out there running their numbers at 8%. And it's really fun to tell them, oh no, no no that past that. So yeah, it's been wonderful.

Speaker Weinhold** ((00:32:32)) - - That's really some of the best news. Well, the two of you have always done things differently. You've been really fairly innovative in a number of ways, in my perspective. In fact, when I visited your office back in 2015, I still remember when you had the electronic status board of your properties up there.

Speaker Weinhold** ((00:32:51)) - - This is at a time when most companies were using a whiteboard and a dry erase marker and all that. So you're always engineering in efficiencies to the things that you do in winding down here at. Tell us a little bit more, including the investor tours that you offer so often because you're so proud of what you've got there.

Speaker Kerr** ((00:33:10)) - - Liz rolls around. Any investor who wants to come visit with us once a month, we have a tour. We've got a sprinter van that we roll around. lately the sprinter van that holds 12 has not been doing it, so we've had to rent another van. But Liz tours folks around, she shows them our facility, introduces them to some of our team members, and then goes and shows them a before a during rehab and a finished rehab so they can see everything during the process and just really rolls out so folks can see a visual of exactly how we do and why we do it.

Speaker Brody** ((00:33:48)) - - Yeah, it's so much fun. So about 95% of our investors have never set foot in Memphis or Little Rock.

Speaker Brody** ((00:33:53)) - - If your goal is to do it from your living room, have no fear. We are set up for you to do everything from your living room, but it will push your confidence through the roof to come out. I can't tell you what a happy, chill vibe our office has. Terry happens to be an amazing guy to work for. We have a lot of long term employees. I've been with him 15 years. But you'll meet Nia. That's been with us for ten years. Matt, our property manager. He's been with us for 12. Nia is kind of the me on the other end of closing, even your renters actually hear a smiling voice within two rings. That's a leasing agent that's been with us for eight, nine years. You're going to get to meet those folks. You're going to get to see the warehouse. I'm no CPA, but for most people, that trip's going to be a tax write off. But we're also going to give you $500 towards your closing cost on your first house as a thank you for coming out, particularly Keith.

Speaker Brody** ((00:34:44)) - - I love it because so many of our investors are from high cost of living areas where you cannot get renovated house in a peaceful neighborhood for $150,000. And I just love, you know, the birds are chirping. There's no foot traffic. No, there's no it's just quiet because that whole neighborhood's at work and there's no trash and there's no graffiti. Not to mention letting folks bang on the cabinets and kick the the tires, so to speak. And so if people are listening to this, when our new website is up, there will be a full tour list for the rest of the year available online. If they're listening to this when it comes out, they can reach out to me for the next dates, but we'd love to sign them up.

Speaker Weinhold** ((00:35:25)) - - If you'd like, you can fly in on a Thursday. The tours are Fridays and I took a look the upcoming tours on May 17th, June 28th and July 12th, but you can see how often they're doing them there. Terry. Liz. Rarely, if ever, have I heard bricks and mortar have so much personality.

Speaker Weinhold** ((00:35:43)) - - Income was such a thing. It's amazing that this happened here. Tell us any last thoughts and then how our listeners can learn more about you.

Speaker Brody** ((00:35:51)) - - For last thoughts. I think what I want to tell people is that if you feel intimidated about investing, if you feel like there is jargon, if lending is confusing to you, please don't hesitate to reach out and jump on the phone with us. We have incredibly experienced investors that own hundreds of apartment buildings, but one of my favorite things is to just help a first time investor get their feet under them. I understand the nerves and the butterflies that can come with it. I know how hard people work to save up these down payments, and we are there for you for the questions, the granular questions, and it's okay if you're really new. I have helped folks in LA and New York that are renters, and this is actually their first. Purchase, because literally buying anything in their local market is 2 million bucks. And so if you have never bought a house before, please don't feel intimidated to email or to call because we've got you and you're going to plug in to man, I've been vetting the best lenders for 15 years, ID title companies, insurance, and the way that we keep our finger on the pulse of who's giving the best service, who's giving the best cost for even just the rest of the team that's going to get you closed.

Speaker Brody** ((00:37:07)) - - Is that and then for how to find us miss South homebuyers.com and I am Lisette. Lisette for anyone that wants to give us a shout that way. Quick side note there is a video on the home page of our website and that's true whether you're seeing the one that's out right now or the one we've got coming. But it is a video version of that tour. You can see our warehouse, you can see our offices. You're going to see houses in some different stages. We actually just one of our investors was like, you should put a GoPro helmet on your head for this tour. And that's about what we did. And so for those of you that may not be able to come right now, check out that video. As we mentioned, go look at the houses, go look at the kitchens. Go look at everything and let us know.

Speaker Weinhold** ((00:37:50)) - - Well, this has been amazing to hear a new piece of Terri's origin story. And then I think you, the listener, can feel the passion in the willingness to help in Liz's voice.

Speaker Weinhold** ((00:37:59)) - - It's exactly what she expertly does. Terri and Liz, it's so great having you back on the show.

Speaker Kerr** ((00:38:05)) - - Thanks so much, Keith.

Speaker Brody** ((00:38:06)) - - Thanks, Keith.

Speaker Weinhold** ((00:38:12)) - - Yeah. Such uniqueness. Their elucidation from Terry and Liz. Now, in real estate, you hear the term buyer's market and seller's market will. Memphis is a landlord's market when it comes to tenants traveling with appliances. In talking with Liz Sommer, it's because as this vibrant tenant and renter culture has evolved, landlords really haven't had to compete with each other. That's why that is getting a little anthropogenic here, Here are some of the attributes that make Mid-South different, perhaps even unique. There's no tenant application fee, so they get a greater renter pool. They don't mark up maintenance and materials. They put addresses of their properties on their website. Like we mentioned, they don't require investor earnest money. Investors can cancel for any reason, and tenants bring their own appliances. Those are some differentiators. And there are more. I mean, the tenant has a favorite Maytag dishwasher or whirlpool refrigerator.

Speaker Weinhold** ((00:39:21)) - - Well, a tenant might very well use that in more than one home during their lifetime. We didn't talk numbers much today, but again, you can see the properties on their website. You can come on in with your rate. Currently bought down to 5.75% on their new builds. And that's really kind of about what they will do for you. Now, the gray listener, it used to be that after you made it to the top of the investor wait list, you could buy one property, and then you'd have to go back on the bottom of their wait list in order to get your next one, but no longer for you, the GRE listener. You can reserve two finance properties at a time and three at a time. Cash. You can get started at Midsouth homebuyers.com. Until next week when I'll be back with episode 500. I'm your host, Keith Wines, a little bit. Don't quit your day. Drink.

Speaker 7** ((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.

Speaker 7** ((00:40:27)) - - 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 Weinhold** ((00:40:45)) - - The preceding program was brought to you by your home for wealth building. Get rich education.com.

498: Will Population Decline OBLITERATE Real Estate? Apr 22, 2024

If properties are empty from population decline, they’ll lose value and rent. If this happens, then what’s the timeline?

Richard Vague, the PA Governor-appointed Secretary of Banking and Securities from 2020-2023, joins us.

US and world birth rates keep declining.

As population declines, per capita GDP often increases.

Richard believes that inequality will widen.

Most models show the US population increasing for several decades. A median model is 342M today up to 383M in 2054.

Opposite of what the Fed thinks, Richard believes that lower interest rates can quell today’s persistent inflation.

The US has had 9 instances of high inflation. It’s often spurred by wars, which create shortages.

I tell Richard about GRE’s Inflation Triple Crown and ask his opinion.

Real estate values rise as debt-to-GDP rises.

I point-blank ask Richard if an economic crisis is imminent.

Resources mentioned:

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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE! I'm your host, Keith Weinhold. The phenomenon of population decline is spreading throughout the world. Will that come to the US and obliterate real estate then? A bit of a debate on the affliction of inflation and what this all means to real estate 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 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 GRE to 66866. Text GRE to 66866.

Corey Coates (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) - We're going to drive from Lake Winnebago, Wisconsin to Mono Lake, California, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to get Rich education. Real estate is obviously a strong, proven store of value. Now, what's interesting is that most economists agree that money should be three things a medium of exchange, a unit of account, and a store of value. Well, please don't take offense here. This can sound a little crude, but there's one thing to call those that use dollars as a store of value, and that is poor. How is a dollar a store of value when you've had 20% plus cumulative inflation over the last three years alone, the dollar is a poor store of value. We're going to get into inflation with our other esteemed guest and gubernatorial appointee today. He has some opinions on inflation, and you may very well feel that I poke him on this topic today.

Keith Weinhold (00:02:58) - I'll also get his input on our inflation Triple Crown concept, where real estate helps you win with inflation three ways at the same time. But first, he and I are going to discuss the specter of population decline. And well, it's not always a specter to people because some feel that the world is better off with fewer people, environmentalists and others. Japan's native born population is falling at a rate of almost 100 people per hour. Yeah, you heard that right. Well, is that coming to the United States and how bad would that be for real estate? Before we go on with those discussions about population decline and then inflation, here's something cool. Is your first language Spanish, or do you have any Spanish speaking family or friends? If you do, you're in luck! I'm proud to announce that our real estate Pays five ways video course is now available in Spanish and it is free. Yes, all five course videos leverage depreciation, cash flow, ROA, tax benefits and inflation profiting. All broken down by me in Spanish.

Keith Weinhold (00:04:15) - You can see those five videos. And again they're free at get rich education. Comment espanol tell to familia e amigos. That's all right there on the page at get Rich education. Com slash espanol. And hey, if you're a business owner or decision maker and would like to advertise on our platform, well, we'd like to check you out first and look at this slowly. Oftentimes I use the product or service myself. Get rich. Education is ranked in the top one half of 1% of listened to podcasts globally, per lesson notes on air every single week since 2014. Some say that we were the first show to finally, clearly explain how real estate makes ordinary people wealthy. For advertising information and inquiries, visit get Rich education.com/ad let's get rich education compered. Today it's the return of a terrific guest. This week's guest was with us last year. He's an economic futurist, keynote speaker, and popular author. He's the former secretary of banking and securities for the Great Commonwealth of Pennsylvania. Today, he runs a group that predicts financial crises called Tycho's.

Keith Weinhold (00:05:40) - That's really interesting. Joining us from Philadelphia today. Hey, it's great to welcome back Richard Vague.

Richard Vague (00:05:47) - Thank you so much for having me. It's real privilege.

Keith Weinhold (00:05:50) - Vague is spelled vague u e just like it sounds. If you're listening in the audio only. Richard also has a YouTube channel where, among other things, he discusses topics like population decline and inflation. Two things that we'll get into today. But before that, Richard, how exactly do you get tapped by the governor of Pennsylvania to have been appointed his banking secretary? Anyway? How does that really happen?

Richard Vague (00:06:16) - Well, I served under Governor Thomas Wolf, a superb governor here at Pennsylvania. We kind of were both very familiar with each other, and I had already written a number of books on banking crises, including The Next Economic Disaster and A Brief History of Doom. And he had read those, and so much to my surprise, he showed up in my office one day and asked me if I'd consider it.

Keith Weinhold (00:06:40) - Wow, that is really cool.

Keith Weinhold (00:06:42) - All right. You kind of led with your writing in your books for making that happen. Richard, here's a big question that I have for you. At 8.1 billion people today is Earth's overpopulated or underpopulated?

Richard Vague (00:06:58) - Well, there's a lot of very valid points on both sides of that. You know, there are a number of folks who decry the level of population we have because of its destructive impact on the environment. And there's a lot of folks that note that it's population growth that really has made our economic growth so vibrant. So there's a real contention on that issue. We tend not to take a position, but what we do know is as world population growth is slowing, which it clearly is, that is going to make economic growth much more challenging in a whole lot of places around the world, some of which you're actually starting to see population declines, like China.

Keith Weinhold (00:07:46) - I want to get to that slowing growth in a moment. We talk about overpopulation versus under population. Some in the overpopulation camp thinking the world has too many people they're referred to as Malthusian, was named for Thomas Malthus, who in 1798 he said the world would exceed its agricultural carrying capacity and there was going to be mass starvation.

Keith Weinhold (00:08:09) - Malthus was wrong. He didn't consider technological advancements. So I guess my point is the future can be really difficult to predict.

Richard Vague (00:08:18) - Yeah. Without question. You know, the big innovation came in the early 1900s when we figured out how to synthetically manufacture of things like fertilizer, which allowed arable land area to increase dramatically. It kind of took them out of this equation off the table.

Keith Weinhold (00:08:36) - Yes. With the mechanization of harvesting and the engineering of foods, there sure have been a lot of advancements there to help feed more people. And yeah, Richard, you talk about population decline. Of course, the world population overall is still growing, but its rate of growth is declining. So before we talk about the United States, you mentioned China. Why don't we discuss population decline more in global terms, where even nations like India are already struggling to exceed the replacement birth rate of 2.1?

Richard Vague (00:09:10) - Yeah, I mean, it's a phenomenon that, you know, we haven't faced or perhaps even thought of for a couple hundred years because population growth accelerated so dramatically with the Industrial Revolution.

Richard Vague (00:09:22) - We've really not known anything but rapid growth. And frankly, it's easier to grow businesses. And the economy is old. But now we're seeing places like China, Japan, Germany that are facing population declines in places like India, which, as you said, is comparatively a younger country. Nevertheless, facing this prospect as well, then in 1980, the average age in the US was 30. Today it's 38. In Germany I believe it's 48. So the world is getting old in a way that it had not previously in the industrial revolutionary period.

Keith Weinhold (00:10:03) - I think a lot of people are aware that many parts of Europe, Japan, South Korea are in population decline or they're set up for population decline. But yes, some of these other nations that we think of as newer nations or growing nations, including India, are not forecast to. Grow in, Richard. Are we really down? Of course. There are a number of outliers. Are we down mostly to Africa that still have the high birth rates?

Richard Vague (00:10:29) - As the world has become more urban, the need for more kids has declined.

Richard Vague (00:10:35) - It's in an urban environment, become an expense rather than a benefit. So that alone accounts for the deceleration. And then you have folks that are getting married later, having kids later, and you simply can't have as many kids when those two things are true. So it's a combination of events, and there aren't that many places left that have higher birth rates. And even in Africa it's declining or decelerating. So the world's just moving in that direction.

Keith Weinhold (00:11:06) - Yeah. It's really once we see the urbanization trend in a nation, what lags behind that are slowing birth rates, oftentimes birth rates that don't even meet death rates in some places. It kind of goes back to the Thomas Malthus thing again, if you will. When you don't have a family farm, you don't need nine kids to milk the cows and shuck the corn and everything else like that. You might live in a smaller urban apartment.

Richard Vague (00:11:33) - But we're all just has it been thinking about this issue? And it's upon us now, and it's going to change everything from governments to handling debts to infrastructure to growth itself.

Richard Vague (00:11:48) - So we need to start thinking about this issue much more deeply than we have.

Keith Weinhold (00:11:54) - Is there any way that an economy can grow with a declining population, and how bad will it get?

Richard Vague (00:12:02) - An economy will obviously struggle to grow if the population is declining, but the per capita GDP and increase as population declines. And in fact, we might see that early on in a population decline situation. I think that's actually been true in Japan over the last few years. The population is down, but GDP per capita is actually increasing slightly. So I think it's longer term. When you talk about trying to service the debt that we have amassed with the smaller population, that we're really going to have issues.

Keith Weinhold (00:12:41) - Talk to us more about that. The servicing the debt part of a declining population.

Richard Vague (00:12:48) - The debt doesn't shrink on its own, you know, so it tends to grow because, you know, it's accruing interest.

Keith Weinhold (00:12:54) - It always seems to go one direction.

Richard Vague (00:12:56) - It always pretty much only goes in one direction. So it's pretty simple.

Richard Vague (00:13:00) - If you have growing debt and I'm talking about public debt and private debt, and you have a declining base to service that, you have more people in retirement who are not paying as much in the way of taxes. It's going to increase the challenge, and it may in fact, increase it considerably. As we look at a few decades.

Keith Weinhold (00:13:21) - We need productivity to pay down debt that's more difficult to do in the declining population. We talk about technological advancements, some things that we cannot foresee. Did you sort of lead on to the fact that some of this might help us be more productive, even in a declining population, whether that's machine learning or robotics or AI? What are your thoughts there?

Richard Vague (00:13:45) - That's something that's been predicted for quite some time. You know, if we look back not too far ago, economists were wondering what we were going to do with all of our free time, right? Because, you know, automate. And this goes back to the 20s and 30s and 40s what we do with all our free time.

Richard Vague (00:14:01) - So we again have conversations along those lines. You know, it's not inconceivable that we could all be sitting there, you know, sipping our Mai tais, and the machines could be doing all the work for us. And servicing debt might be easy in that scenario, I doubt it. I don't think that's what's going to happen.

Keith Weinhold (00:14:19) - The more technology advances, the more complex society gets. That continues to create jobs in places where we cannot see them. I mean, case in point here, in the year 2024, we're more technologically advanced than we've ever been in human history, obviously. Yet here in the United States, we have more open jobs than we even do people to fill them.

Richard Vague (00:14:39) - Yeah. And I think one of the things that all of this does is increase the march of inequality. You have folks that master the technology become engineers, software engineers and the like that are going to be the huge beneficiaries of these trends. But folks that don't have the skill sets aren't going to benefit from these trends.

Richard Vague (00:15:01) - And even though in aggregate, we may continue to see per capita GDP increase, our track record over the last few decades would suggest that inequality will increase just as markedly as it has in the past, so we'll have some societal issues to face.

Keith Weinhold (00:15:19) - That's concerning as inflation. Continues to exacerbate inequality simultaneously, which we'll talk about later. But population decline is of concern to us as real estate investors because of course, we need rent paying tenants. So this could be pretty concerning to some. You've probably seen a lot of the same models that I have, Richard, let me know. In the United States, population is projected to increase for several decades by every single model that I've seen, maybe even until or after the year 2100.

Richard Vague (00:15:53) - The projection is by 2050, we'll have about 380 something million people, and today we're at 330 million people. So clearly the population is going to continue. It's just kind of the relative portion of those populations. And what I think we're seeing, and you as real estate investors would know this better than I, is a shift towards the type of real estate out there.

Richard Vague (00:16:19) - Right? So instead of new homeowner development, it's retirement development that I think is going to be the higher growth sector with the real estate industry.

Keith Weinhold (00:16:31) - And we're surely going to see fewer offices be built, something that may never come back. And then when we talk about things like birth rates and population growth rates here in the real estate world, I sort of think of there as being a lag effect. It's really not so much about today's births in the United States, because people often rent their first place in their 20s, and then the average age of a first time homebuyer is an all time record high 36. And all those people are going to need housing into old age as well. So to me, it's sort of about, oh, well, how many people were born from the 1940s to the 1990s?

Richard Vague (00:17:10) - Well, there's a very useful tool that's pretty easily available called the Population Pyramid. You can find that on the CIA World Factbook site for every country and including the United States. And it shows exactly what you're talking about, which is the number of folks, you know, between 0 and 10 years old and into 20 years old and so forth.

Richard Vague (00:17:32) - So you can kind of make reasonable projections about the near term based on the data that the CIA World Factbook is kind enough for by I believe the UN has this data as well, so you can make informed judgments about the very thing you're talking about here, which is how many folks are in their 20s to over the next ten years versus the last ten years.

Keith Weinhold (00:17:54) - Yeah, that's reassuring to real estate investors to know that we expect several decades of population growth in the United States. However, it may be slowing growth. So we talked about births, I mentioned deaths. Well, you tell us a bit more about immigration, something else that can be very difficult to project here in the real estate world that we have a popular analyst called John Byrne's research and Consulting. Their data shows that we had 3.8 million Americans added to our population last year, much of it through immigration. That's a jump of more than 1%, an all time record in our 248 year history in one year alone. So can you tell us, at least in the United States, a bit more about immigration in the calculus for population projections? Richard.

Richard Vague (00:18:42) - Immigration is a huge factor in the demographics of every country in the US, from a pure population growth standpoint as benefited by in-migration, including illegal and migration. That is a positive comparison versus a lot of countries that are either more restrictive art is desirable destinations for immigration and the life. So it has benefited us from a pure population standpoint. But what we clearly see is there are cultural ramifications that are difficult for us to deal with. We have the percent of folks that are in the United States that were born in another country. It's the highest it's been, I think, at least in a century or more and perhaps ever, that is really difficult for the general population to absorb. We see this in the headlines every day. We see it the concern, we see it in the political rhetoric. It's a real issue. So you have a very real conflict between the economic benefits of immigration versus the cultural divisions that that immigration creates. And that's not going to be easy to digest or to resolve. I think we probably end up continuing to compromise, but it continues to be a political lightning rod right into the foreseeable future.

Keith Weinhold (00:20:14) - And there are so many factors here. Where's our future immigrant diaspora? Is it in places in Latin America like Guatemala? In Honduras, in Colombia. And are those people going to come from there? So there are a lot of factors, many of which aren't very predictable, to take a look at our future population growth rate in the United States. We're talking with economic futurist, author and Pennsylvania's former secretary of banking and Securities, Richard Moore, and we come back on the affliction of inflation. This is general education. I'm your host, Keith Weintraub. 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. 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, or better than a bank savings account, up to 12%.

Keith Weinhold (00:21:44) - 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 4 (00:22:33) - This is author Jim Rickards. Listen to get Rich education with Keith Reinhold and don't quit your day dream.

Keith Weinhold (00:22:49) - Welcome back to get Rich. So we're talking with economic futurist, author and Pennsylvania's former secretary of banking and securities. His name is Richard Vague. And Richard, before the break we talked about how many more people are there going to be on this earth.

Keith Weinhold (00:23:03) - We know for sure that there's also the growth of the number of dollars in this nation. So we're talking about inflation here. You talk an awful lot about the affliction of inflation and the history of inflation. And I think a lot of people when we talk about the history of inflation, maybe we should begin chronologically. They don't realize that inflation wasn't always with us. Since the birth of this nation.

Richard Vague (00:23:30) - We haven't had that many episodes of inflation. We look at it pretty hard. We see nine what we would consider nine instances of high inflation. Most of those have come with war. So we certainly had that. The Revolutionary War right of 1812 and the Civil War and World War one and World War two. But inflation has been brief, contained and rare in the history of Western developed nations. We had our bout in the 1970s that related to OPEC and the constraint of the oil supply. It normally relates to the decimation or constraint of the supplies and the supply chain. We saw it again with Covid.

Richard Vague (00:24:17) - A lot of folks consider it to be a monetary phenomenon. We just don't see that in the data.

Keith Weinhold (00:24:24) - So we talk about what causes these bouts of inflation. You talked about nine of them. Well, he talked to us more about why wars often create inflation. Of course we're trying to create a lot of supplies during wars, but they tend to be only certain types of supplies.

Richard Vague (00:24:40) - World War One is a great example. Probably, you know, two thirds of the farms in Europe were decimated. So for a couple of years, there simply weren't the kind of crops that are needed for nutrition being grown in Europe, we Corps and the like. So the US had to, frankly, export something on the order of 20% of its crops to Europe to prevent starvation. Well, it's pretty easy to see that if the US if the supply has been decimated in Europe, we're having to ship, you know, a huge chunk of our crops to Europe, that the price of wheat and corn would go up.

Richard Vague (00:25:21) - And that's exactly what happened. It's also pretty easy to see that as those farms came back on stream and began growing crops, that the price of wheat and corn would drop. And that's exactly what happened. So you have this relatively short lived period of 2 or 3 years where the decimation of supplies caused inflation, and that's fairly typical.

Keith Weinhold (00:25:45) - Supply falls, demand exceeds supply and prices rise much like what happened with those Covid shortages, as you mentioned, what are the other major causes of inflation other than supply shortages that have caused these nine bouts of inflation?

Richard Vague (00:26:03) - Well, let's talk about major developed countries, which I would include Western Europe, the United States predominantly. That's pretty much the only thing that has brought sustained high inflation is supply constraint. We don't see instances of high government debt growth or money supply growth ever causing inflation. Now when you get to smaller countries where they are borrowing in a foreign currency, where they have a trade deficit and where they yield to the temptation of printing too much money, and I don't mean by printing, we use that term in the United States, and it's absolutely a fictitious term.

Richard Vague (00:26:50) - We don't print money in the United States. We have it printed money since the Civil War. So in a third world country, they can actually go to a printing press and start paying with cash for government supply needs. And you can see it very clearly when it happens and it very quickly leads to high inflation. You know, this is in places like Argentina and the like. So that would be the big issue in these countries. It's they borrow at a foreign currency. They have a trade deficit. They yield to the temptation of actually printing currency. It can get out of control pretty fast.

Keith Weinhold (00:27:26) - It feels immoral. As soon as more currency is printed, it dilutes the purchasing power surreptitiously of all those people that are holding that currency. What about Richard? The government printing. And we can put printing in quote marks, say, $1 trillion to fund a new infrastructure program. A technically that is inflation if we. Go back to the root definition of inflation, inflation being an expansion of the money supply.

Keith Weinhold (00:27:54) - But talk to us about how something like that does or does not dilute the purchasing power to fund, for example, a big infrastructure program.

Richard Vague (00:28:03) - Well, it just never happens in Western developed economies. And one of the reasons it doesn't happen is the government issuance of debt does not increase the money supply by a nickel. If the government issues debt, it actually withdraws or shrinks the money supply because folks like you and me would buy the government security that reduces the number of deposits in the system. The government immediately turns around and spends exactly that amount. So the size of the money supply from government debt projects remains exactly the same. It doesn't increase.

Keith Weinhold (00:28:42) - Does that act, however, increase our total absolute amount of national debt, which is currently $35 trillion?

Richard Vague (00:28:51) - Of course it does. Absolutely. But the increase in our debt is money largely played to the households. So what normally happens is when the government's dead increases, household wealth increases by that amount or a greater amount. So take the pandemic. In a three year period, government debt increased by $8 trillion, which means its net worth declined by $1 trillion.

Richard Vague (00:29:18) - Well, households were the beneficiaries of that household net worth in that three year period increased by $30 trillion. So, you know, net net, of course it increases their debt, but it dollar for dollar typically increases household wealth.

Keith Weinhold (00:29:33) - That wealth effect can feel great for consumers and families in the short term. But doesn't increasing their income substantially in a short period of time drive up prices and create this debase purchasing power of the dollar?

Richard Vague (00:29:46) - If we got our little green eyed shades out and went to try to find examples of that, we got a database of 49 countries that constituted 91% of the world's GDP. We just wouldn't find examples of that. And in the US, it's very easy to measure that. The number you're looking for is GDP. And we don't really see big cuts in GDP. You know, a wild swing in GDP would be 3.5% versus 2.5%. That's not a factor in any observable way. And what happens in inflation.

Keith Weinhold (00:30:19) - Richard, the term that I think about with what's happened the past few years in this Covid wave of inflation is the word noticeable.

Keith Weinhold (00:30:27) - People don't really talk about it. Consumers, families, they don't talk about inflation much when it's near its fed 2% target until it becomes noticeable. And now it's so obvious with what you see at the grocery store. So it's really infiltrated the American psyche in a way that it didn't five years ago.

Richard Vague (00:30:45) - Inflation, even moderate inflation, is a highly consequential thing to the average American consumer. And two things happened to increase our inflation. Covid supply chains decimated supplies and kicked up prices. And then a second thing happened that was even more consequential. And that is Russia invaded Ukraine. And you had two countries that were, if you add them together among the largest providers or suppliers of oil and wheat, and almost instantly the price of oil and wheat and other goods skyrocketed. It was those two things, Covid, plus the invasion of Ukraine that drove our inflation up to 9% in June of 2022. Now, in July, it dropped to 3% and it stayed at 3% ever since. But we had already driven prices up in the prior year or two.

Richard Vague (00:31:49) - And those prices even though the increases have moderated, those prices haven't come down right.

Keith Weinhold (00:31:55) - Nor will.

Richard Vague (00:31:55) - They. Now we have, you know, the threat of war again. So, you know, the price of oil just touch $90. Again, I would argue that, you know, it's going to be hard to see inflation come down. Much for like that 3 to 4 range because of the geopolitical situation. And one other thing that I would suggest is holding up inflation. And that's the Federal Reserve's interest rate. You know, if inflation is a measure of how expensive things are, high interest rates make things more expensive, right?

Keith Weinhold (00:32:27) - It's an irony.

Richard Vague (00:32:28) - It's almost exactly the opposite of what the orthodoxy at the Federal Reserve studies or believed. For whatever reason, if you're at an in an apartment in the apartment owner has leveraged their purchase of the apartments by 50 or 70 or 90% and their interest bill goes up, guess what? They have to. Charge you higher rate. I think some meaningful component of the stubbornness of inflation relates directly to the Federal Reserve's persistent interest rates.

Richard Vague (00:33:00) - I think the best thing they could do would be to pull interest rates down 1 or 200 basis points.

Keith Weinhold (00:33:07) - Well, that's interesting because the fed funds rate is pretty close to their long term average, and we still got inflation higher than their target. So tell us more about what you think is the best way out of this somewhat higher inflationary environment that we're still in Richard.

Richard Vague (00:33:22) - Well two things. I think the geopolitical impact on oil prices is you. And I think the interest rate impact, particularly on real estate prices, is huge. Those are the two things holding up inflation. So if you wanted to improve inflation, you'd lower interest rates and then you'd run around the world trying to calm down these hot spots. And you'd have 2% inflation.

Keith Weinhold (00:33:47) - Coming from some people's point of view, including the Fed's. If you lower interest rates you would feel inflationary pressures. So then go ahead and debunk this because the conventional wisdom is when you lower interest rates. Oh well now for consumers, you don't incentivize them to save as much because they wouldn't be earning much interest.

Keith Weinhold (00:34:06) - And if rates to borrow become lower, then you're incentivizing more people to borrow and spend and run up prices in fuel the economy. So what's wrong with that model?

Richard Vague (00:34:16) - Well, there's no empirical support for it. In 1986, when inflation dropped to 2%, interest rates were in the highest interest rates had been coming down by, you know, almost a thousand basis points over the prior 3 or 4 years. Money supply growth was 9%. So the two things the fed says are most the biggest contributors to rising inflation were both amply present when inflation dropped to 2%. So I just can't find any data to support the Fed's theory. And by the way, that data is not esoteric. That data is really readily available. You and I can go look at it. It's not a complicated equation. But over the last 40 years, in what at the age I call the great debt explosion, aggregate debt and the economy in 1981 was 125% of GDP. Today it's 260% of GDP and almost that entire 40 something year span.

Richard Vague (00:35:21) - Inflation and interest rates went down. Somebody, somewhere is going to have to show me the evidence for me to believe what the fed is canonical, which is almost a sacred balloon.

Keith Weinhold (00:35:33) - Well, that's a good look at history. In fact, something I say on the show often is let's look at history. And what really happens over having a hunch on how we think that things should proceed. You mentioned some inflation figures there. Why don't we wrap up inflation? Richard was talking about today's inflation measures. We've got the producer price index, the PPI, the widely cited CPI, which I recognize what you were stating earlier. And then of course there's the Fed's preferred measure, the core PCE, the core personal consumption expenditures. Richard, it's also funny to me when any measure is called core, it's core when they remove the food and energy inputs because those things are said to be too volatile. And of course, not only is food and energy essential, but what's more core than that? So perhaps the core rate should be called the peripheral rate.

Keith Weinhold (00:36:22) - But in any case, do you have any comments on the measures of inflation that are used today?

Richard Vague (00:36:28) - It's like you say, it's everything you just mentioned and more, because they're not just core inflation. There's something called super core, which I think is probably even more peripheral. Right. And I like your terminology better than the Fed's, but there's a lot of things to look at right now. They're all kind of coalescing around this at a low to mid 3% range. We got a new number coming out. It'll probably, you know here in the next few days. And it'll probably be a little bit higher than the last number, but we're talking about the difference to a 3.3% and 3.5%. And to me there's no difference between those two numbers. We were at 9%, as we just said, in June of 2022. And we're at a moderate level of inflation now after having suffered a rise in prices. It's not going to disappear. It's not fun, it's not comfortable, but it's moderate rabble.

Richard Vague (00:37:22) - It's not a big drought.

Keith Weinhold (00:37:24) - What's the right level of inflation in your opinion?

Richard Vague (00:37:28) - Okay. Anything fundamentally wrong with the the 2% number that the fed saw I think, you know, at 3 to 4% were probably on the high end of, of what might be considered acceptable. But again, it's not the fact that it's 3% that's the problem. It's the fact that it was 6 to 9% for a couple of years. Yeah, that's the problem. It'll get take a while for everything to adjust to that. In the meantime, you know, with all bets are all that you know, there's if these wars get further out of control and we see 90, $200 oil prices again, we're only about we're 50% more efficient users of oil today than were were in the 1970s. We're still a little bit over dependent.

Keith Weinhold (00:38:11) - Here at gray. I espouse how in everyday investor they can do more than merely hedge themselves against inflation, much like a homeowner with no mortgage would merely hedge themselves. But you can actually profit from inflation with a term that I've trademarked as the Inflation Triple Crown.

Keith Weinhold (00:38:27) - I'd like to know what you think about it. The inflation Triple Crown means that you win with inflation three ways at the same time, and all that you need to do in order to make that happen is get a fixed rate mortgage on an income property. The asset price increase is the inflation hedge. The debt debasement on your mortgage loan, that's an inflation profiting center. Is inflation debases that down while the tenant makes the payment. And then thirdly, now rents might only track inflation, but your cash flow is actually a profit center over time too because it outpaces inflation. Since as the investor your biggest monthly expense that principal and interest stays fixed and inflation cannot touch that. That's the inflation triple Crown. It's available to almost anyone. You don't need any degree, your certification or real estate license. What are your thoughts on that? Profiting from inflation the way we do here I think you're absolutely correct.

Richard Vague (00:39:22) - And I think you put it very, very well. And that's not just a trend at the individual property level.

Richard Vague (00:39:28) - We studied macroeconomics and we look at aggregate real estate values. And frankly, real estate values rise as debt to GDP rises. The more money there is, the more my dollars are chasing real estate and the higher real estate prices will go. So it's absolutely been the gin to put it into numbers in 1980 household. Well, this a percent of GDP was about 350%. Today it's almost 600% most household wealth that in the form of just two things real estate and stocks in somewhat equal measure, that's 80 or 90% of also. Well, so if you wanted to make money over the last 40 years and presumably over the next 40 real estate, one of the two places you could go.

Keith Weinhold (00:40:24) - Well, Richard, as we wind down here, you run a group that predicts financial crises. So I'd be remiss to let you go without asking you about it. We've had a prolonged inverted yield curve, and that's been a terrific track record as a recession predictor. Is a financial crisis imminent? Tell us your thoughts.

Richard Vague (00:40:41) - No, it's not. The predictor of financial crises is a rapid rise in private sector debt in ratio to GDP. We saw it skyrocket in the mid 2000 and we got a crisis in zero eight. We saw it skyrocket in the 1980s and we got the crisis in 87. We saw it skyrocket in Japan in the late 1980s. And you got the crisis of the 90s. We saw it skyrocketed in the 1920s and we got the Great Depression. That is the predictor. You know, we've studied that across major economies over 200 years. There really are exceptions to that as it relates to financial crises. Our numbers right now on the private debt side have been very flat, and they've really been very flat since 2008. They actually got a little bit better in that period, and they've been very flat over the last few years. We're not looking at a financial crisis in the United States. Other parts can't say that China is looking at a they're well into a massive real estate crisis there. We see companies there crumbling, declaring bankruptcy.

Richard Vague (00:41:53) - That's because they've had runaway private sector debt in China for the last ten years. And there's a few other countries that are facing that as well.

Keith Weinhold (00:42:02) - A lot of Chinese overbuilding there during that run up to, well, if you, the follower, are into using history over hunches to help you predict the future, Richard Baig really is a terrific resource for that, as you can tell. So, Richard, why don't you let our audience know how they can follow you and learn more?

Richard Vague (00:42:22) - You're so kind to say those words. We hope we provide something of value. You can get our weekly video if you go to join Dot Tycho's group.org and Tycho's is spelled E, ICOs, ICOs group. Or we send out a weekly five minute video because if you're like me, you have a short attention span and brevity is the soul of wit. I also have a book that came out recently called The Paradox of Debt. Yeah. Which, you know, covers a lot of the themes we've talked about here. You know, it'd be an honor to have anyone to pick up either.

Keith Weinhold (00:42:58) - Well, Richard, it's been a terrific discussion on both population decline and inflation. It's been great having you back on the show.

Richard Vague (00:43:05) - You have a great show. It's a privilege to be part of it. Thank you very much.

Keith Weinhold (00:43:15) - Yeah, big thanks to Richard Vague. Today he hits things from a different angle. With population decline perhaps not taking place in the US until the year 2100. Of course, we need to add years to that. Real estate investors might not have falling population growth in that crucial household formation demographic age. Then until the year 2125, well, that would be 100 more years of growth from this point. And yeah, I pushed him on our inflation chart somewhat. Richard isn't the first person, though I have heard others maintain that lower interest rates also lower inflation, where most tend to believe that the opposite is true, including the fed. In any case, wars drive inflation because they create supply shortages. That was true over 100 years ago when World War one and today with Russia, Ukraine.

Keith Weinhold (00:44:17) - I mean, is there any one factor that drives price increases more than supply shortages? The short supply of real estate itself is what keeps driving prices. And Richard asks us to look where some don't. That is that real estate values rise as debt to GDP rises. In his opinion, there is no financial crisis imminent. We need to see a rapid rise in private sector debt in proportion to GDP first. And you know what's remarkable about this economic slowdown or recession that still hasn't come, but it's been erroneously predicted by so many. It's the fact that recessions are often self-fulfilling prophecies. People have called on a recession for the last year or two. And that mere forecast alone that tends to make real estate investors think, well, then I won't buy the property because my tenant might lose their job in a recession. And businesses don't hire when everyone says a recession is coming. That's exactly how a recession becomes self-fulfilling. And despite two years of that, it still hasn't happened. That's what's remarkable. Anyone sitting on the sideline keeps losing out again.

Keith Weinhold (00:45:37) - You can follow Richard. Big Tycho's is spelled Tycho's. Follow a joint Tycho's group.org. Richard and I talked some more outside of our interview here, and he had a lot of compliments about the show. In fact, more compliments than any guest has given in a while. He had not heard of our show before last year. I'm in Philadelphia somewhat regularly and I might hit him up the next time I'm there. We'll get lunch or something. Check out Gray in Spanish at Get Rich education comma. Espanyol. Thank you for tuning in today where our episode was Bigger Picture education. Next week's show will be substantially more hands on real estate. I'm Keith Wayne a little bit. Don't quit your day dream.

Speaker 5 (00:46:24) - 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 (00:46:52) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

497: Why High Salaries DON'T Create Wealth, Why Western US Homes Cost More than Eastern US Homes Apr 15, 2024

No one gets wealthy from a high salary. Wealth is acquired by owning things.

But how can you own MANY things without much money? I discuss it.

Learn how to use major banks (Chase, Wells Fargo) to fuel your wealth and retirement when you’re young.

Debt is like fire. Kids will burn down the house with fire. Adults will use fire (debt) to produce prudent leverage and outsized returns.

High salaries don’t create wealth due to: lost time, no leverage, few tax benefits, and entrapment due to sunk education costs.

I sat down with a conventional financial advisor. Things got interesting.

Learn why Western US homes cost more than Eastern US homes. This fact confounds most real estate pros. I break down 8 reasons.

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Complete episode transcript:

Welcome to GRE! I’m your host, Keith Weinhold.

Don’t make this giant wealth mistake - understand why a high salary does NOT create wealth. Learn what does instead.

See how to get deep pocketed-banks like Chase & Wells Fargo build wealth for YOU.

I recently sat down with a traditional financial advisor - this got interesting. Then, why do WESTERN US homes cost more than EASTERN us homes? All today, on Get Rich Education.

Welcome to GRE! From Port Jervis, NJ to the Port of Bellingham, WA and across 188 nations worldwide, I’m Keith Weinhold and you’re listening to Get Rich Education. Welcome in!

When I grew up, I thought that people got wealthy from high salaries. I figured that I could get wealthy if I got a high salary too.

And then adulthood has proven to me that… they don’t.

People don’t get wealthy from high salaries. They get wealthy by OWNING THINGS.

Let’s break this down.

People DON’T get wealthy from high salaries.

In fact, have you ever seen THIS happen? I haven’t. I worked as an employee in both the public sector and the private sector, and I’ve been a longtime real estate investor and entrepreneur.

In fact, how would anyone even GET wealthy from a high salary?

If you’ve got a job… you’re trading your time for dollars and selling your time for money.

I used to do that too… and I actually think that everyone might get some perspective by having a taste of that. Most get that taste.

And say you’re even entrenched in the game of climbing the corporate ladder, to a higher and higher salary.

Well, first, in my experience, many job promotions get you perhaps 10 to 30% more in salary, but 2x to 4x the responsibility - that’s 200% to 400% more responsibility.

Even if there’s an edge case here, in your situation, in climbing the corporate ladder - where does that even get you in the end?

Look at your supervisor and their lifestyle. Is that what you want to be?

Look up higher at your supervisor’s supervisor. What’s their life like? Is that the life that you REALLY want?

Is that what you aspire to be - and expend so much of your most precious resources to get THERE - time, time away from your family, energy, skill, potential. Is that really it?

The answer is right in front of you!

People don’t get wealthy from high salaries. People get wealthy from OWNING THINGS. We’ll get more on how - if you have average means - on how you can OWN MANY THINGS shortly.

But first, let me address any more hangups you might have if you still think that high salaries can create wealth.

We won’t even look at, sort of, common jobs like an IT specialist or a systems analyst or a plumber.

Let’s take an edge case - a classically, high paid profession - a doctor, a surgeon, a specialist even. Highly compensated - several hundred thousand dollars in salary each year. I know some of them.

I also know a bunch of RESIDENT doctors too and I talk with them - they’re basically, finished with their formal schooling and are doctors-in-training.

They are repaying loans deep into the six figures after undergrad pre-med and after a few more years at medical school - often it seems to be $300K to $400K in debt that they have to pay back in the case of these resident doctors.

But that’s besides the point. It’s common for these specialist physicians, once they start working, to work as a doctor for, say, 58 hours a week… or 71-and-a-half hours a week.

Now I said that high salaries don’t create wealth. How wealthy are you, if after undergrad, med school, and three years of low paid residency, you finally get out, you’re in your 30s or older, and you’re working 60+ hours a week.

60+ hours a week is not MY idea of wealth and freedom at all.

You know what else, when you’ve pursued a specialty track like that, which often comes with loads of debt, you are in so deep - you’ve invested so much time & energy & chapters of your life… and DEBT into that field you CAN’T pivot to another career, even if you wanted to.

You’re trapped. Entrapment is the very opposite of wealth and freedom.

Understand, I just went out and gave an example of perhaps the highest salary type of person that I can think of… to help prove my point. Where’s that leave you?

And you’ve probably heard… the “end game” trope… about climbing the corporate ladder by now.

Yep, you spent the best years of your life climbing the corporate ladder… only to find at the end… at the top… that the ladder was leaning up against the wrong wall the whole time.

Because high salaries don’t make people wealthy, then how do people get wealthy from OWNING THINGS?

There are two main ways:

#1 - You can launch and own a business.

#2 - Real estate.

Now, launching and owning a business takes a ton of entrepreneurial ambition, risk, and you’ve got to have a novel idea - a NEW idea - that creates value for the world.

This can be a worthwhile venture… and successful entrepreneurs create value for the world with their own business. It’s terrific! It’s capitalistic! It’s turning lower use resources into higher use resources.

But unless you have your own money, you’re going to have to be scrappy and resilient for a long time. Because it’s really hard to get loans for a new business.

If you hire anyone to help you, you need to quickly produce enough income to have leftover profit - paying your overhead expenses, software subscriptions, paying your help… and having enough leftover to fuel your own lifestyle.

Household names like Apple and Facebook are one-in-a-million. You don’t have to be an Apple or Facebook. But it’s tough.

The first way is by owning a business. The second way is by owning real estate.

New businesses are unproven. Real estate is proven. Like I say, wealthy people’s money either starts out in RE or ends up in RE.

But how do you OWN much real estate? Because RE is expensive, and wealth is created by OWNING things.

With prudent loans. Because RE is proven, banks will GIVE you loans. Lots of them. Have good credit, be credit worthy.

And… being credit worthy should be an innate trait in any virtuous human being. Because it shows that you repay the debts that you owe.

I think that when it comes to debt, debt is like fire. Don’t let a little kid play with fire. They’ll burn down the house.

Leave fire to adults. They’ll use it to HEAT the house.

Leave debt to the adults. Use debt to fuel your lifestyle, fuel your ambitions, and fuel your opportunities. To the scarcity mindset of “all debt is bad”, here at GRE we say, you’re an adult. Grow up.

Learn… that debt is Leverage… and your debt isn’t paid back by you at all. Tenants and inflation both RELENTLESSLY and INCESSANTLY pay it down for you, until they pay it OFF for you… if you want.

So then, who’s really funding your wealth, enabling you to own things?

Who really funded my wealth from nothing, enabling me to own things?

Who funded my retirement? Leverage… from Chase Bank, Wells Fargo, Bank of America, and other banks. They all give you the opportunity to let THEM fund your wealth for you.

Now, I’m going to explain a core GRE principle here. But so that this isn’t repetitive for the longtime listener, I’ll use a NEW analogy for you, here.

Look, let’s say that you’re a kid. You don’t know how to responsibly use fire or debt. In fact, you’re still just 4’ tall.

But learning about leverage is like… seeing the light.

Now, with the sunlight, a 4’ tall kid can now cast a 20’ tall shadow. You look like a giant now.

5-to-1 leverage made you, not just grow up, but grow into a giant. You suddenly wield the power of a financial giant thanks to the banks.

Because with your 20% down payment, you're only putting up one-fifth of the property price.

How then, do these big banks make you a giant?

Let’s say that’s your $40K down - on a $200K income property, when the property appreciates only 4% - like RE did last year per the NAR number - you just got a 20% return.

How? Because you got a 4% return on both your $40K down… and you got a 4% return on your $160K borrowed.

Yep, the return from that $160K of borrowed bank money didn’t go to Wells Fargo, it won’t go to Chase Bank, it won’t go to Bank of America.

It ALL goes to you - because you leveraged them. That’s how you beat the banks. That’s how you build wealth.

Two years ago, when property appreciated 10% that year, you got a 50% leveraged return.

And it gets better than that. You can make income property down payments even lower than 20%, like I did when I began.

A 4’ tall kid then, that sees the light, can cast an even taller shadow than 20 feet at 5:1 leverage. A bigger giant.

Any GRE devotee knows that leveraged appreciation is one of just 5 ways you’re paid. We’re only talking about ONE here.

Sounds amazing. Some think, “There’s gotta be a catch.” There is, but it’s manageable. Leverage amplifies losses, just like gains.

Though it doesn’t happen often, RE can go down in value.

Even in a downturn, look at what happens. Between any ten-year period, nominally, you won’t find any loss of RE value in modern history… and you must manage cash flows.

So, no. This is not a 6-month plan. It’s to build wealth durably with a reliable vehicle in more like five to ten years.

It gets better. As your equity grows, harvesting it out through a cash-out refi maintains your… magnification into a financial giant, to stick with the analogy.

And every cash-out refinance that you do… is a tax-free event. Not tax-deferred. Tax-free.

You can make tax-free cash grabs, separating it out from your properties along the way, since the IRS doesn’t classify debt windfalls as taxable income, and you have a pro PM handling all the day-to-day for you, if you prefer.

Now you really know WHY, wealth is not created from high salaries. It’s created from owning things.

And you need to be more than creditworthy. You need to be strategic in building your portfolio with the right properties in the right markets.

Set up a time with one of our GRE Investment Coaches… and they help you do exactly that for free.

Either that or you can just keep believing that high SALARIES create wealth. Ha!

Now, a few weeks ago here on the show, I told you that I’ve had a sit-down meeting coming up with a conventional financial advisor - a retirement planner type of guy.

I’ve been getting their e-mails and dismissing them, for 8 or 10 years, but I always stayed subscribed.

This is from when I used to work at a State DOT - Department of Transportation.

So I finally responded & we set up a 1-hour sit-down. We did it virtually on web conferencing.

I prepared by having some things ready for him that he asked for - like my monthly cash flow statement, net worth worksheet, and he also asked I have my Soc. Sec. statement pulled up, so I had that ready.

Now, this is not the forum for espousing GRE’s proven wealth-building formula to him. No PROS-il-uh-tie-zing. proselytizing.

And, he told me that… I’m in really good shape.

He didn’t dig in with questions on my backstory, like, how were you able to retire at such a young age… or how did you amass all this?

And yes, I could retire now. I could have a while ago. I think you know that.

He was interested in knowing what the cash flow from the rental properties was. In fact, that was his first question about them. Good first question.

Interestingly, he really wanted to know how long I have to pay on my rentals. Like, when would the 30-year mortgages be paid off?

Well, gosh, they all have 20-some years to go. Most of them are clustered around 27 years to go.

He could see that I COULD pay many of them off quickly, now, if I wanted to. But he didn’t tell me that I should. Of course, I wouldn’t want to lose the leverage.

You know the most interesting question that this conventional financial advisor asked about these properties that I have all over the place, in different states and even nations?

He asked, “Do you plan to LIVE in any of these areas?”

No, I don’t plan to live in those properties or even in those areas. I pick investor-advantaged areas for investments, and live where I want to live.

Now, he encouraged me to import my financial info into their retirement portal. When I say, they, he works for a private company that administers the DOT’s retirement plan.

You know, I had previously been reluctant to do that and share all my financials with another party.

But, I’ve got to say, I’ve reconsidered and MIGHT enter it in there. It does some pretty impressive modeling and scenarios.

For the properties, you enter the address and they use Zillow estimated values.

It looks at how the graphs change when you get to the age of where any pensions and soc sec & all that enters your life.

All-in-all, maybe you thought I’d bust this guy's chops for being scarcity-minded or not about passive cash flow. But he was pretty good. It was an hour of my time well-spent, I would even say.

And again, the reason that I was able to be positioned this way comes down to… relying on compound LEVERAGE, not compound interest - casting the shadow of a 20-foot tall giant compared to when you’re a 4-foot tall child.

BTW, I do NOT consider myself retired. I remote “asset manage” my REIs and I produce this show, produce videos for our YouTube channel, write our newsletter, and write for Forbes and more… on material that is interesting to me and helps others.

Coming up straight ahead, why do homes in Western US states cost more than homes in the East?

This fact makes zero sense to most people, because areas east of the Mississippi River are more densely populated.

In fact, nearly 2/3rds live on just over 1/3rd of the land, suggesting the East should clearly be pricier.

Then how could it be opposite? It might seem weird. That’s coming up shortly.

You’re listening to Get Rich Education podcast Episode 497. That means we’re just three weeks away from a special, milestone, Episode 500.

I’ll tell ya. I sure know how to put the performance pressure on myself, don’t I? Ha!

Something here that we don’t often talk about or offer the opportunity for…

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On air EVERY single week since 2014, some say that we were the first show to finally CLEARLY explain how RE makes ordinary people wealthy.

For advertising information and inquiries, visit, GetRichEducation.com/Ad. That’s GetRichEducation.com/A-D

More next. I’m KW. You’re listening to Get Rich Education.

A little tribute and melodic swan song to Russell Gray there.

Welcome back to Get Rich Education. I’m your host, KW.

Before returning to real estate, let’s do a quick first quarter asset class review.

It’s coming a little later than usual here. But it’s good to see what the rest of the world is doing.

Almost everywhere you look, asset prices are up, up, up.

In real estate, as housing intelligence analyst Rick Sharga & I discussed in detail here in each of the last two weeks, prices & sales volume are both up.

The S&P had its best start to a year since 2019, up 11%

The yield on the 10-yr T-note was up 26 basis points. Remember that mortgage rates move closely along with that.

Gold was up 8% to an ATH over $2,200. And gold even touched $2,300 here in Q2.

In the first quarter, oil was up 15% to $83.

Bitcoin was up 68% to $70K

And the biggest beneficiary of AI hype, Nvidia was up 88% in just the first quarter.

And this is even wilder - a little wild card for you here - for the first time ever, cocoa prices briefly surpassed $10,000 per metric ton, making the confectionary commodity more valuable than copper.

That’s what’s goin’ in the TOTAL investment world.

Why do homes out West cost more than homes in Eastern states?

This fact makes zero sense to most people, because the East is more densely populated.

According to the US Census Bureau, 64.4% of Americans live east of the Mississippi River. That’s on land that's barely more than one-third of the US - because the Mississippi doesn’t run right down the center, it’s a little to the east of center in the contiguous states.

So this means that nearly 2/3rds of people live on just over 1/3rd of the land, suggesting the East has GOT be pricier.

Well, it’s strange to many that it is, in fact, just the opposite. The West is pricier.

Now that pandemic migration and RE prices have settled, we’ve taken a fresh look at prices and this trend - which is curious to many - continues.

Let me demystify it for you.

And you saw a beautiful, colorful map that brilliantly demonstrates this. I sent it to you a few weeks ago if you’re a DQYD Letter subscriber.

Now, there are some notable exceptions to "the West is pricier", like New England and south Florida. Housing is expensive in densely populated northeastern cities.

New Mexico is an outlier as a cheap western state.

No, the West is not pricier because The Kardashians' lavish $200M total portfolio of California real estate skews the entire nation.

Here's my more, I suppose, scholarly breakdown.

Yes, one of my degrees was in Geography before I became a real estate investor.

The first reason is - NEW: The west has more new-build homes.

Higher costs of land and labor, then, had to be priced in. Eastern homes are older because it's closer to Europe's (die-A-spruh) diaspora, where the US' early immigration was heaviest.

Then there’s the factor of - the FEDS: No, not Jerome Powell’s Fed.

It’s that over 90% of federal land is located out West. No building is typically allowed here, and that makes developable land more scarce.

This helps explain why when you see huge swaths of undeveloped land when you fly over the West and think there’s boundless room for growth and sprawl, often times, there… is… not.

3-D: Maps are 2-D. The world is 3-D. Western housing is expensive because you have scenarios like port cities surrounded by mountains and high desert.

So developable land is more scarce than it seems, making demand exceed supply in more places out West than what one might think.

San Fran is confined by the bay and hills. Seattle is confined to an isthmus. Salt Lake City is next to the Wasatch Range. Alaska looks enormous, but nearly half it’s state’s population lives in the biggest city of Anchorage, which is sandwiched between water, mountains, and that aforementioned federal land.

The fourth reason, is CALIFORNIA DREAMIN'. Despite recent domestic OUT migration and The Kardashians aside, California REALLY DOES help tilt the balance.

People are attracted to SoCal's Mediterranean climate such that nearly 1-in-8 Americans are still coolin' in Cali, with a median home price of $737,700. That climate desirability drives up prices.

Much of CA also has… these layers - just myriad - codes and limits and regulations like, for example, solar panels on new construction that can add $25K to a home's cost alone.

The next reason western homes cost more than Eastern home is, what I’ll call…

DOWN BY THE RIVER:

[Play insert]

Ha! Famous classic comedy sketch there, with the late Chris Farley.

The East has the Great Lakes and more rivers.

It costs 1/12th as much to transport goods and housing materials over water than land.

That is a fact that has been stated on this show previously. It was first brought up a few years ago when we had geopolitical strategist Peter Zeihan here to discuss the “geography of real estate” with me.

A river city like Memphis is a GIGANTIC transportation hub, for example. This keeps down the costs for all kinds of consumer goods and building materials, making for a lower cost of living and, in turn, property prices.

QUAKIN': There's more seismicity out West. It costs more to BUILD to those construction standards.

For example, CA and WA are 20%+ more expensive to build than many Southeastern states. There are more fires in the Western US, tornadoes in the middle, and hurricanes in the East.

JOBS: It takes more high-paying jobs to attract new residents and get them to uproot and move to the faster-growing West. Higher incomes buy pricier homes.

The East has tons of jobs going for it too. In fact, the northeast might be the world’s most productive region - NYC, Boston, Philly, DC.

But out in Appalachia and elsewhere, there are some waning business sectors like various heavy industries and coal. But most of the ones that were going to move out, already HAVE moved out, decades go. Much of that downdrain is overwith.

The last reason is…

I CAN SEE CLEARLY NOW: The West has mountain and desert VIEWS. These can be seen from farther away than Eastern… forest and flatter areas and piedmont landscapes. The East has a lot of lake and river view properties though… and…

There they are—8 reasons why Western homes cost more than Eastern homes.

Now you know why West Virginia has million dollar homes so big that you can get lost indoors.

And in coastal Cali, it seems like a million bucks gets you little more than a ramshackled pool house.

Of course, at times, I've had to make gross generalizations about such a vast nation of 340 million people and so many variables.

Otherwise, this episode could be a few hours long. As I discussed those, you sure could think to yourself at times, “I believe there’s an EXCEPTION to that criterion.”

I want to tell you why this all MATTERS TO YOU shortly.

Yes, there is some irony here though. The western US has lands that are arid, inhospitable, and what some describe as wastelands, like four deserts.

Well, the invention of the air conditioner made those places more livable.

The West also has the most beautiful national parks, and hey, some find places in the East INhospitable, like Michigan’s Upper Peninsula in March.

Now, I like a change in seasons, coming from Pennsylvania like I do, but some don’t. You’ve got to serve real estate to where people want to own and rent.

Florida has not been thought of as a mosquito-infested swamp since last century. Today, it’s livable and desirable to many.

Now, there are some other factors in addition to the main 8 reasons I’ve mentioned, on why Western US homes cost more than Eastern US homes, from a slavery legacy to unionization and more. I’ve been hitting the big ones here.

Real estate has made more ordinary people wealthy than anything else.

When you're on our website, GRE Marketplace, and hover over the blue "INVEST" button, you'll notice that most long-term rental investor markets are in the East.

There's a reason.

Rents are strong relative to this LOW PURCHASE PRICE that I’ve discussed here.

And now you know more of the “whys” behind the Eastern US’ lower property prices. And maybe, today, I hope it's the BEST understanding you’ve ever had for why that’s the case.

We buy in strategically chosen GROWTH areas that tend to be more East than West.

And, that’s really part of the progression of this show. We began in 2014 with this podcast and other real estate investor education. We still lead with that.

But next, listeners wanted to know where they could FIND PROPERTIES conducive to our wealth-building strategy, and we added that at GRE Marketplace.

Yet, that still wasn’t enough because I noticed that some of you that wanted to build your wealth with real estate, needed to make it easier to have your questions answered, or find a lender, or insurer, or find just the right property in the right market that fits your goals.

So starting more than two years ago, we added Investment Coaching - it’s still free like everything else that we do here.

Our coaches are real people and real, direct, real estate investors just like you are… and just like I am. Our coaches simply have more EXPERIENCE doing it than most people do.

Because knowledge is not power, but knowledge plus action is power, I often like to leave you with something actionable… that’s really going to help you at the close of the show.

If you didn’t already know, you can find properties and a coach, at GREmarketplace.com

Until next week, I’m your host, KW. DQYD!

496: The Housing Market’s Future—Trends and Predictions Apr 08, 2024

Get our free real estate course and newsletter: GRE Letter

Apartment construction is falling. It’s not because banks are pulling back from lending. Projects aren’t feasible for builders.

Housing market intelligence analyst Rick Sharga returns to discuss the real estate market.

We discuss: real estate price movement, affordability concerns, expected mortgage rate changes, migration, price reductions, new homes vs. existing homes.

Can anyone even find a new-build $225K detached SFH today? They’re nearly extinct.

Homebuilders are still buying down mortgage rates for you into the 4%s and 5%s at GREmarketplace.com.

America needs more SFHs, especially at the entry-level.

Apartment rents have declined a little. SFH rents are up about 3% year-over-year.

Delinquency and foreclosure activity remains low. These have a strong correlation with unemployment rates.

The volume of homes sales should increase this year, but only by perhaps 10%.

A recession is still quite possible later this year and expected to be mild.

Every region of the nation is currently experiencing residential RE price growth.

When mortgage rates fall, more new buyers than sellers are expected, pushing up property prices.

Resources mentioned:

Show Page:

GetRichEducation.com/496

Inquire about business with Rick:

CJPatrick.com

Rick Sharga on X:

@ricksharga

LinkedIn:

Rick Sharga

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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Complete episode transcript:

Keith Weinhold (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. Tons of new apartments were built last year, but that's abruptly going to change going forward. You'll learn why. Then a housing market intelligence analyst and I break down what's happening in the real estate market and the future direction of rents, prices, foreclosures, interest rates, and a lot 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 GRE to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

Keith Weinhold (00:01:16) - 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 266866.

Corey Coates (00:01:34) - 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 (00:01:50) - Welcome to grow from Alexandria, Egypt, to Alexandria, Virginia, and across 188 nations worldwide. I'm Keith Weinhold, holding your inside get rich education. I'm grateful to have you here. A few weeks ago, I discussed all the apartment buildings that were constructed last year. One thing that you'll often hear out there today is that apartment construction is now falling because banks are pulling back on construction lending. But no, it's really not quite that simple. In fact, that's not even the top reason for construction delays now and going forward with apartments. The number one reason for the delays today is that the project is not economically feasible at this time. That's what the NMC tells us. All right. So what does that really mean? Well, it means that projects aren't penciling out.

Keith Weinhold (00:02:44) - In other words, apartment developers, they can't generate the returns that they need to justify the project to their capital partners, those that are funding the building. And this is, by the way, not about greedy developers, because contrary to some of the noise, it's the fact that developers do not self-fund their projects. They get the money from others. So yeah, it's the developer's job to convince investors and lenders to inject that capital. And that is just harder to do right now. Despite developer's best efforts and higher rates are obviously still contributing to the problem. It's not so much that the construction financing is not available, because for residential, it's often there. It's available. The thing is, is that apartment mortgage terms and rates are way less favorable than they were a couple of years ago, as we all know. So developers, I mean, they're paying a higher interest rate then. And you therefore need higher rent to cover that higher interest rate unless you can cut a lot of costs elsewhere and in apartments, you're also getting a lower loan to value ratio.

Keith Weinhold (00:03:55) - So that means developers, they therefore need to raise even more equity in order to cover that gap. And what's happened is a lot of the equity that's shifted away from brand new ground up apartment development, and instead it's gone over into chasing potential lease up distressed deals, properties that are already out there and are having some problems. So that's where the apartment money is moving right now. Not so much to new developers and builders also aren't building many apartments this year because construction costs remain a problem. Some materials got cheaper, others didn't. One bright spot is that construction labor that is getting easier to find. But yet the actual labor cost that really hasn't dropped. Property insurance is higher too, so these rising expenses, that means apartment projects are not penciling out for builders and then apartment rents. They're just not rising that much. That doesn't help. So it's hard for it to rise, since so many were built last year and the year before. They're in the apartment world. But obviously the long term demand is for just about all residential housing.

Keith Weinhold (00:05:11) - That demand. Is there loads of long term demand for apartments, condos, single family homes, co-ops, modular homes, mobile homes, duplexes, triplexes, fourplex container homes, row houses, farmhouses, penthouses, outhouses. I think you get the idea. The demand is there. Residential is the resilient spot, and it's all about where you want to get in. And speaking of homebuilders and finding a smart place to get in, it's important to share with you the good news that homebuilders are still buying down your interest. Right for you. Now the third year rate, it hit 8% last year. And Non-owner occupied property costs a little more. So it was nearly 9% on income property. It's come down off that as we know it's been around seven lately. But see here at GREwe work with builders that are still buying down your interest rate into the fives and sometimes still into the fours on new construction, single family homes, up to four plex and sometimes larger in Florida, Alabama and elsewhere. I mean, that is just the best deal going for you today to have an income producing new build property in the path of growth at 4 to 1, leverage to 5 to 1 leverage and.

Keith Weinhold (00:06:46) - Your mortgage in the fives or less, and we'll help you find the real deals within that. To connect with a great investment coach at great marketplace.com. I think you'll be glad you did. Now, today, if somehow I could use a time machine to write a letter back to my 2020 self and inform myself about what's going to happen in the housing market for the next 4 or 5 years? And I had to keep this note to myself short. I would have written that everything is going to shoot way up, rents up, prices up, interest rates up, expenses up, inflation up. Well, now that nearly all of those run ups have settled into place, we can draw a clearer picture of where we think the real estate market is going to be positioned in the future. Our guest has just freshened things up and he's got the latest in the property market all updated for us. I do two with my own research. You'll like this. It's our housing intelligence analyst guests and I. Straight ahead.

Keith Weinhold (00:07:55) - 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. If you want to invest where I do, just go ahead and text family to 66866. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256 injury history from beginners to veterans.

Keith Weinhold (00:09:15) - 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 Ridge Lending group.com Ridge lending group.com.

Kristin Tate (00:09:42) - This is author Kristin Tate. Listen to get Rich education with Keith Weinhold. Don't quit your day dream.

Keith Weinhold (00:09:59) - Hey what has not been a very long goodbye. Just like last week when we discussed the economy this week we have the return of the C.J. Patrick Company's Rick Sharga, an extraordinary housing intelligence analyst, as we more specifically cover the real estate market. And if you're on video, you'll have the benefit of seeing some charts as well. Rick. Welcome back. Good to be back, Keith. Long time no see. Yeah, it hasn't been so long. What are your overall thoughts with the housing market? Last week we largely talked about a resilient economy potentially with some headwinds. Yeah we did.

Keith Weinhold (00:10:32) - And I think we're one of the things we left off on was the impact that the Federal Reserve had had on the mortgage market and the housing market. We probably start there. When you look at what's gone on, and just to show you how random all of this can feel sometimes this is a snapshot of mortgage rates from March 12th. And mortgage rates were trading at about 6.92% for a 30 year fixed rate loan.

Rick Sharga (00:10:56) - The most recent number I saw was about 7.1%. And as I mentioned to you and your listeners last time, I expect until the Federal Reserve makes its first fed funds rate cut, we're going to see mortgages trade right around 7% between 6.75 and 7.25%. This has made a big difference in the market because it has limited affordability for literally millions of prospective home buyers. That's makes for a difficult situation for people looking to buy or sell homes, but it also presents millions of rental property opportunities because these people need to live somewhere and they've voted themselves off the island temporarily. They just can't afford to buy a house.

Rick Sharga (00:11:41) - And you see that in terms of the reduction in number of mortgage applications that are being made. So if the Mortgage Bankers Association tracks the number of people that apply for loans, if you went back to December when mortgage rates dipped just a little bit, we saw a run up of loan applications, and as soon as they went back up to seven, we saw that number fall off. It's a very, very rate sensitive market. We'll talk a little bit about some of the implications of that as we move ahead, Keith. But the weak affordability, the higher interest rates, the continuing high home prices led to a very, very weak year in 2023. In terms of overall home sales, we ended the year with about 3.9 million existing homes sold. That's the lowest number of homes sold in a year in a quarter century. Yeah, even lower than we saw in the Great Recession. And December was the 28th consecutive month where we sold fewer properties than we sold the year before.

Keith Weinhold (00:12:39) - So a contraction in the number of sales, although prices appreciated last year.

Rick Sharga (00:12:44) - Yeah, we'll talk about that this year. I'd been hopeful that we'd be a little bit of a better start. January and February were both up in terms of home sales on a month over month basis, but continued this trend of lower sales on a year over year basis. We're looking at 30 consecutive months where we sold fewer properties than we sold the prior year. As a result of this.

Keith Weinhold (00:13:05) - Supply crash, that really began about four years ago.

Rick Sharga (00:13:08) - It's partly supplied as partly costs, that affordability. We really can't overestimate the impact that affordability has had. But you're right in terms of inventory and in fact, a good segue, it's almost like you'd seen this before, Keith. Inventory is up significantly from last year, about 24% higher than it was a year ago, according to some data from Altos Research. But it's still only running about half of 2019 levels. So in a normal market, we would have about a six month supply of homes available for sale in our market today, we're looking at somewhere between two and a half and three months supply.

Rick Sharga (00:13:44) - That lack of supply with some pent up demand is one of the reasons we have seen prices continue to be very healthy, and we haven't seen the the price crash that all the snake oil salesmen on YouTube comments. As of mid-March, about 513,000 homes available for sale, again, about 24% higher. Than last year when the numbers were just dismal. We normally do see more inventory coming to market this time of year. We'll not get anywhere near where we were back in, you know, years like 2019, 2020. But it wouldn't be a surprise to see a little bit more inventory coming to market.

Keith Weinhold (00:14:21) - Now, Rick, for existing properties, we have the very well documented interest rate lock in effect. I think a lot of people understand that. But as far as bringing more supply onto the market, do you see anything from the builder side? You know, costs are up for builders and builders feel this lack of affordability from the buyer market as well. So therefore that motivates them to build somewhat less.

Keith Weinhold (00:14:43) - And they're also building smaller properties, some shrinkflation with new construction property to try to help out with that affordability. So what are your thoughts with builder motivations this year and next year?

Rick Sharga (00:14:54) - All that thought is we're going to get to new homes in just a couple of minutes. So keep that right forefront in mind. But let's just kind of wrap up on existing sales. I do want to point out to your listeners that the inventory growth is actually outpacing the number of new listings. So new listings are only up about 14% year over year, whereas overall inventory is up 24%. The reason for that is it's taking longer to sell homes once they get to market. So once those properties are listed, they're staying in the inventory numbers a little bit longer than they were last year or even a few months ago. So that's one of the reasons the inventory numbers look a little bit better than they did. You talked about the rate lock effect. It's still very real. About two thirds of everybody with a mortgage has a mortgage rate of 4% or less.

Rick Sharga (00:15:43) - And this is not home sellers being picky or having a psychological problem. This is math. If you sell a property today and buy a new one for exactly the same price as the one you just sold, you've now doubled your monthly mortgage payment and most people simply can't afford to do that. So the properties being listed or by by people who feel like they need to sell, there's a death in the family or a birth in the family. There's a divorce or there's a marriage. There's a job loss or job that requires a transfer, maybe some financial difficulties where the borrowers in distress so they feel like they have to sell the home, or somebody's been retired for a long time, has a lot of equity, and just says, oh the heck with it. It's time for me to downsize. But the people who would normally be making a decision that maybe I'd like to sell, maybe I'd like to look at a move up opportunity. Those people are sitting on the sidelines and rather than seeing a price crash, which is what people are breathlessly trying to sell you on YouTube, the most likely scenario, something we've seen play out in the 80s and 90s and is likely to play out again in the 2020s, which is several years of kind of lackluster sales volume and modest price growth.

Rick Sharga (00:16:54) - And it takes a few years to reset the levels so that all those people with the Sub4 mortgages gradually, slowly work their way out of inventory and are replaced by people with mortgages that are closer to today's rates. And we've seen that happen, like I said, in the 80s and 90s, and it's a very normal occurrence when you have a sudden shift in either mortgage rates or home prices, that's much more likely to happen than a 2030 40% drop in home prices to make things affordable. And I would just ask anybody who's skeptical, if somebody approached you tomorrow and you didn't have to sell, but they said, hey, sell me your house for 40% less than market value. How interested would you be in having that conversation?

Keith Weinhold (00:17:36) - Wouldn't last long.

Rick Sharga (00:17:37) - No. And then home prices are up in every region. You mentioned this, Keith. Across the country I'm sharing for people that can see it. I'm sharing data from the Fhfa, which is the entity that controls Fannie Mae and Freddie Mac. So all of those 30 year fixed rate conventional loans and a year over year basis, we saw prices go up 6.3%.

Rick Sharga (00:17:56) - They were up in every region of the country. And that's a little different than the prior year when the Pacific region was actually down. But every region of the country is seeing price growth right now. And whichever price index you look at Case-Shiller,, Freddie Mac, the Fhfa index, National Association of Realtors, everybody showed similar numbers were every region was up. But importantly for your listeners and I emphasize this enough, local results are very different than national results. So even within markets where we're seeing prices go up, there are going to be neighborhoods where prices are going down and vice versa. So it's much more important for you to understand what's going on in your local market than to listen to a lot of these national trends. I will tell you that some of the markets that overheated during the pandemic, as people were moving out of high priced, high tax or highly congested areas, are seeing a bit of a clawback. So places like Boise, Idaho and Saint George's, Utah and Austin and Phoenix and Las Vegas, we're seeing those markets with the prices clawing back a little bit, a lot of price growth continuing the southeast.

Rick Sharga (00:19:04) - So and surprisingly now in the Midwest as well. So we are still seeing a bit of a migration from high price, high tax areas into lower priced markets. I tell folks, Keith, I have two adult kids living at home. My son's getting married in September. He's a teacher. His fiance is a lawyer, and they took me aside recently and said, hey, you follow this stuff. What states should we be looking at outside of California to move so that we can own a house?

Keith Weinhold (00:19:31) - Wow, that is really, really interesting that that would dictate their decision on where they live, if they have that much of a preference to own rather than rent. Recently, a lot of us in the industry learned that the average age of the first time homebuyer is now 36, older than ever.

Rick Sharga (00:19:48) - Yep. And these are two kids with good heads on their shoulders. They know there are benefits to homeownership, and they also know that the median price of a home sold in California last month was almost $800,000, and the First National Bank of dad ain't financing that acquisition.

Rick Sharga (00:20:02) - So I'm sure these conversations are happening in New York, in Chicago, in Miami and in San Francisco, and it's just the reality of today's marketplace. We talked about prices going up. We are seeing slightly more homes having a price reduction before they're sold. That always happens somewhere along the lines of 30 to 35% of homes listed wind up with a price reduction before they're sold. We're up to about 31% now, so we're still in the normal range, but we're a little higher than we've been in recent months.

Keith Weinhold (00:20:35) - This is interesting, a statistic we don't talk about very much, the percent of homes experiencing list price reductions.

Rick Sharga (00:20:42) - And it peaked in 2022. The highest number we've seen in quite a while was over 40%. And that was right after interest rates doubled. And so it's probably not a huge surprise. People were anticipating they were pricing based on the prior market. And I think we're seeing more rational pricing today. But again, that combination of prices just being as high as they are and interest rates being as high as they are, are creating some affordability issues.

Rick Sharga (00:21:05) - And for people that have to sell, they're taking price reductions. Now, keep in mind these price reductions are often very, very minimal. In California, for example, the average price reduction is less than a percent. So it's not a huge reduction, but it's still a reduction from what the list price was. You asked about new homes. So now I'm going to make you happy. We'll talk about new homes. New home inventory levels are increasing. We normally want to see about a six month supply of existing homes for sale. The new home inventory is usually between 7 and 8 months. And we're back to that number right now. Some of those homes available for sale are still under construction, but they are nonetheless available for sale. And we've seen that inventory improve over the last year as supply chain disruptions have minimized as builders are now more able to find laborers for construction. Those are two huge holdups they had over the last couple of years, and we've seen new home sales increase. And one of the reasons for that is they're available.

Rick Sharga (00:22:05) - So if you're a builder and you put a home in the market at the right price, you're going to sell it because there just aren't that many existing homes available for sale. And to your other point, Keith, new home prices are actually down 15% from peak. Existing home prices are up, new home prices are down. And in fact, if you look at the most recent new home pricing data put up by the Census Bureau recently, new home prices are at the lowest level since June of 2021. So they've really come down pretty significantly and are not that far away from existing home prices in many markets. So that median price of an existing home and the median price of a new home for sale are closer than they've been in years, partly because the builders are building smaller homes, partly because you're using less expensive fixtures. And the other thing that the builders have been doing, and this price is a lot of people, but it's brilliant on their part, is they're coming to closing with thousands of dollars and they're paying down mortgage rates.

Rick Sharga (00:23:01) - They're buying points and dropping the mortgage rate for their buyers. I spoke to a group in Denver recently where there was a local builder advertising mortgage rates of 4.99%. So think about that.

Keith Weinhold (00:23:13) - We have providers we work with here that are doing similar things. We're still seeing the rate buy downs happening, and that's why I've often told people, Rick, like, this is potentially a good time in the cycle when you're adding more rental property to really look at new builds or build to rent while these rate buy downs last. Now, I talked to a builder in Houston yesterday, and I learned a few interesting things. You talked about the smaller square footages. They could confirm that often times this builder offers either a bedroom or a study. You can get an extra bedroom or a study like a little office space. And more and more people are opting for the study. So they're starting to build homes more with the study in mind because more people are working from home and one less bedroom because people are having fewer children.

Rick Sharga (00:23:57) - Exactly right. It's the combination of both of those two things, either having fewer children or having them later. And many more people working from home than they were prior to the pandemic. And those studies become very, very useful., rooms to have in the house. Rick, what.

Keith Weinhold (00:24:12) - Is the lowest cost, new build, single family home that you see? I mean, is anyone even building in any parts of the nation, like a 225 K new build home? I haven't seen one.

Rick Sharga (00:24:26) - I haven't seen one. But I wouldn't be surprised if you're in a market in a state like Alabama or Mississippi and some of the more outlying areas, maybe some markets in the Midwest where home prices aren't as astronomical as they are elsewhere. But look, the builders are building judiciously. They're not overbuilding., we had a cycle in 2008 where we had a 13 month supply of homes available for sale and building Irish building. They got caught with overstock. But what they are building, they tend to build as move up homes because they're more profitable.

Rick Sharga (00:24:58) - So you're just not seeing an awful lot of entry level homes being built. And the hope is that as they build that first move up level home, some of the people with entry level homes will opt to sell and bring some of that inventory back to market. We are seeing more construction. We are seeing building permits,, going up on a year over year basis., most recent numbers are around 1.5 million permits. So the builders are bullish on the future. And housing starts were up in both January and February. Most importantly they're up most strongly in single family owner occupied homes. We're seeing housing starts to decline dramatically in terms of multifamily starts, right. But that's because there's about a million new apartment units coming online between last year and this year. And we don't need a whole lot more apartments., we need,, more single family homes. So if your listeners are seeing headlines talking about housing starts being lower, it's really because we're seeing fewer multifamily starts.

Keith Weinhold (00:25:54) - Last year was a big year for multifamily construction.

Rick Sharga (00:25:57) - All time high in terms of multifamily units under construction. And a lot of those are still coming to market this year. There are going to be some markets that are actually still oversupplied. So again, you have to be paying very close attention. When we talk a little bit about the rental market in the apartment category, we have seen apartment rents decline year over year in pretty much all categories. Whether you're looking at studio apartments, one bedroom apartments, two better apartments on a year over year basis, rents are actually in negative territory, according to Realtor.com and according to some data I've recently seen from RealPage. If you're looking at the actual price of rent and I know that's a little different than percentage increases or decreases, you're still seeing that rents about it's below peak. It's about 1.6% below the peak we hit in 2022,, when vacancy rates were just about nothing. But we are still below peak, and the median rent is ranging,, somewhere in the neighborhood of $1,700 a year for apartments, single family homes, which I suspect more of your listeners are actually,, renting out than apartments.

Rick Sharga (00:27:03) - Yes. Are doing better. We're seeing year over year rents continue to grow. They're growing modestly. They have not gone into negative territory, and they haven't,, during this boom and bust cycle that we've seen in the housing market. And if you're looking at,, price gains, according to some recent data from CoreLogic, if you're at the higher end of the single family rental market, prices are up about 3% year over year. At the low end, they're up about 2.9%. So very little difference depending on your price tier and also very little difference depending on whether you're looking at an attached single family residence or,, detached family single family residence. All those are up right around 3% year over year. And that's a good sign. Again, you're dealing with a as your your listeners know, you're dealing with a slightly different tenant in a single family home than you are in a, an apartment. And a lot of these people who would have been buyers or opting to rent stands to reason that,, they'd rather rent a house, particularly if it's in a good school district or in a good neighborhood than an apartment, because they have needs.

Keith Weinhold (00:28:06) - Rents are extremely stable historically. They just sort of plod up slowly. What happened about two years ago, three years ago, with that 15% plus rent increase, that's an aberration.

Rick Sharga (00:28:19) - Yeah, that's a good point, Keith. If we're looking at 3% rental growth year over year right now in the single family rental market that tracks with historic normals, usually you're somewhere between 1 and 5% a year. So threes, you know, smack dab in the middle of all that. And the growth rates also vary wildly by markets., just kind of give you a range if you're looking at a single family rental property in Honolulu, in the city, year over year, you're up about 6%. If you're looking at a unit in Miami, Florida, you're down about 2.5%.

Keith Weinhold (00:28:50) - So rental growth rates.

Rick Sharga (00:28:52) - Rental growth rates. So really just depends on where you are. That's pretty much your range from a couple points down to I think Honolulu actually had the largest,, increase in the CoreLogic study. A lot of your listeners are probably interested in buying foreclosure properties.

Rick Sharga (00:29:07) - We're not seeing a lot of foreclosure activity. Still, we are starting to see a little weakness in consumers. When we met last week, we talked a little bit about the strength of consumer spending, but we also talked about increasing amounts of spending on credit cards. And we're seeing consumer delinquency rates increase in pretty much every aspect of consumer lending, whether it's a loan, whether it's a credit card debt, whether it's an auto loan, whether it's a home equity line of credit, whether it's a mortgage, a mortgage, delinquencies are up a little bit. The only category we're not seeing an increase in delinquencies right now is student loans. And my theory on that is that people have only recently had to start making payments again on student loans, and we don't have any data to show that they're going delinquent yet. But the delinquency numbers we need to take with a grain of salt, because many of them are most of them are early stage delinquency. So somebody missed a payment, but then they catch up before they get 60 or 90 days delinquent.

Rick Sharga (00:30:02) - But we are seeing trends that suggest more delinquencies. And if you have more delinquencies, that leads to more foreclosures. Mortgage delinquency rates, according to the Mortgage Bankers Association, went up to about 3.8% in the fourth quarter, the historic average going back to the 1970s, which is as far back as the NBA goes, is about 5.25%. So we're still way below normal levels of delinquencies. As I mentioned, most of those are early stage delinquencies, and they're being resolved before they get more serious. Because of that, we don't have a lot of foreclosure activity. So this is no longer Keith government intervention. It's no longer government forbearance programs and foreclosure moratoriums. It's the fact that the economy's been so strong. Unemployment rates have a very strong correlation to mortgage delinquency rates. We got together last time I mentioned the unemployment rate was at 3.9%. I just told you that word delinquencies are at 3.8. Can't get much closer than that. And because of that, foreclosure activity is still down almost 30% from where we were in 2019 prior to the pandemic.

Rick Sharga (00:31:07) - And I should point out, the 2019 wasn't a particularly big year for foreclosures either. So I don't see us getting back to pre-pandemic levels of foreclosure activity until sometime next year. And what's important for people in this space to understand is that even though we're seeing roughly the same number of delinquencies that we saw back in 2019, fewer of those delinquent loans are going into foreclosure. Fewer of those foreclosures are getting as far as the auction, and even fewer of those are going back to the banks as REO properties or bank owned properties.

Keith Weinhold (00:31:40) - Delinquency occurs before foreclosure. We have low levels of both, and I would imagine that one substantial reason for that are these low fixed rate payments that so many people have. Minutes ago, you showed us that 90% of those with a mortgage have a rate in the fives or less. And then oftentimes when we talk about these sorts of things, we don't even consider the fact that more than 4 in 10 homeowners are free and clear. They don't have any mortgage at all. So it's difficult for people to get in trouble.

Rick Sharga (00:32:10) - Yeah. And when they do get in trouble, what's really a saving grace for a lot of these people? And I believe the reason we're seeing fewer foreclosure auctions and bank repossessions is that there's $31 trillion in homeowner equity in the market, and 90% of borrowers in foreclosure have positive equity. A huge percentage of those have at least 20% equity. So what's happening interesting is that many, many of these borrowers are protecting their equity by selling their home before the foreclosure sale. If they get to foreclosure sale, they run the risk of losing all their equity, or at least the overwhelming majority of their equity.

Keith Weinhold (00:32:48) - That's a great point with how this really works.

Rick Sharga (00:32:50) - And so if you're looking to buy a distressed property, if you're looking to buy a foreclosure property, you really need to be working directly with the homeowner in the earliest stages of foreclosure rather than waiting for the auction. And certainly rather than waiting for the bank to repossess the home and resell it. And some recent data from a friend of mine@auction.com tracking some numbers from Adam Data.

Rick Sharga (00:33:15) - 55% of the distressed properties that were sold through from June through to September of last year were sold in that pre foreclosure period prior to the foreclosure auction. That's wildly different than we've been in in years past. So really important for anybody looking to buy distressed property, to consider moving upstream and working directly with that homeowner. And it's a win win. You can help that homeowner protect their equity, have some cash to make a fresh start with and, and typically buy a home in pretty good condition and a home that you need to be part of your rental portfolio. So just kind of recapping some of the stuff we talked about, Keith, both today and last week, I still think that from an economic standpoint, there's still at least a good possibility we might have a short, mild recession sometime later this year. I don't see unemployment going much higher than 5%. Even if we do have a recession, if we don't have a recession, we'll only see the economy slowed down a bit. It might be hard to tell the difference.

Rick Sharga (00:34:10) - I'm expecting the volume of home sales to go up. I think we bottomed out in 2023, but not by a lot. Maybe we see a 10% lift over last year, which would take us to roughly 4.4 million existing homes. I wouldn't be surprised to see 700,000 new homes sold, really just depends on how quickly builders bring inventory to market. But if I'm right and mortgage rates go down slowly over the second half of this year, we'll see more home buyers come to market more quickly than sellers. We don't see a lot of sellers come to market until we get interest rates down to about 5.5% or lower, which probably won't happen until 2025. So more buyers coming to market than sellers means the prices will continue to go up. We continue to see investors account for 25 to 30% of all residential purchases. So I think we'll continue to see a higher rate, partly because investors are active, partly because a lot of consumers are waiting for market conditions to improve, but that limited affordability in today's market conditions, I really do think means more demand for rental units.

Rick Sharga (00:35:14) - And I think foreclosure activity stays below normal levels for the rest of this year, and REO inventory bank repossessions are going to remain even lower for even longer. I don't think we see REO activity come back to more normal levels for at least a couple of years, so anybody looking to buy these properties really does need to be moving upstream in order to make those purchases.

Keith Weinhold (00:35:34) - Yeah, with low affordability, hence more demand for rentals. I've already noticed that the homeownership rate, which is somewhat of a trailing number here, has already fallen from 66% to 65.7%. And with low affordability, it seems that that homeownership rate could fall even more, meaning the rate of renters would be higher.

Rick Sharga (00:35:54) - A friend of mine always complains that the government's somehow beside behind all of these trends, one way or the other, and and wonders why, with all the government programs aimed at increasing homeownership, we haven't seen that homeownership rate increase much. And I think sometimes things said to the natural level and our homeownership rate, really for the last 30 years, has been somewhere between 64% and 66%.

Rick Sharga (00:36:19) - And that might just be what the natural level for homeownership is in the United States. Will it dip a little bit as people can't afford to buy a house? Probably. Probably will. When market conditions improve for buyers, will it go up a little bit? Probably. But we hit 70% homeownership back in 2006. And it turned out that was the bad number and that not everybody's ready financially for the kind of commitment that homeownership requires. And so I've always said that the key isn't getting everybody into a home. It's the sustainability of homeownership for people that that we do get into that house. One of the best days of your life is when you get the key to that house, and it has to be one of the worst days if you have to give it back. So I hope we all keep that in mind as we move forward.

Keith Weinhold (00:37:03) - That's right. Government incentives is in the past saying there's a $10,000 first time homebuyer tax credit. Oh, we're not in an era where we need help. On the demand side, all you're doing is driving up prices.

Keith Weinhold (00:37:14) - And I don't know that you're helping out anybody in that case. But I think with really overall, one big takeaway here, Rick, is that if you the listener, if you're waiting for prices to drop substantially sometime or for interest rates to drop substantially sometime, that might not be worth the wait. You could be waiting a long time.

Rick Sharga (00:37:32) - I do expect mortgage rates will decline. I don't really go back to the sub for rates we saw a few years ago, but they're going to decline slowly and they may not decline enough to offset rising home prices. I mean, you have to get your calculator out and and figure out how that math works for you. But you're absolutely right, Keith. And I tell people today, even with mortgage rates being where they are, if you find a house you love or you find a house that's a good investment and you pencil it out and the numbers work, don't wait because the opportunity costs can be severe and you could wind up missing out on a property that could either be a good cash flow unit for you on rental, or it could be a property that you wind up living in for the next 30 years.

Rick Sharga (00:38:13) - So don't be afraid of today's market. Just be very prudent and judicious in the way you approach it.

Keith Weinhold (00:38:19) - Well, Rick, get resuscitation of followers and the nation have been a beneficiary of your housing market intelligence expertise for quite a while now. If someone wants to engage with you in the CJ Patrick Company, who are those types of people and how could you help?

Rick Sharga (00:38:36) - I appreciate the opportunity. Most of the companies I work with or companies that provide services to lenders, anybody who has a business that's in the real estate or financial services markets, who would benefit from my coming in to share with them industry data, or has data themselves that they would like to get out into the marketplace? Anything data related really, I tend to specialize in. So market updates and market overviews and market. Analysis or things that I do on a pretty much daily basis for companies.

Keith Weinhold (00:39:07) - How can they engage with you?

Rick Sharga (00:39:08) - They can find our website, which is C.J. patrick.com. They can find me on Twitter. I hide there under my name, Rick, or reach out to me on LinkedIn.

Rick Sharga (00:39:17) - And if you reach out to me on on a social media channel, make sure that you mention you know me through Keith, and you're not some crazy Russian bot trying to hack into my personal information.

Keith Weinhold (00:39:27) - Well, then, Rick, it's been great having you back on the show.

Rick Sharga (00:39:30) - I'm sure we'll do it again sometime soon. Thanks for having me.

Keith Weinhold (00:39:39) - Yeah, terrific Intel there. In this episode, Rick said that to still expect a lower amount of sales going forward and expect modest property price appreciation. Every region of the nation is seeing price growth now. And by the way, you remember that late last year, I unveiled Gray's home price appreciation forecast for this year, stating that prices should rise 4% and here in Q2, I still like how that looks. There is not much distress with current homeowners, but if you're looking to scoop up a foreclosed property cheap, you better get aggressive and work directly with the homeowner in the earliest stages of foreclosure. Don't wait for that property to go to auction. Rick also said more demand for rental units is coming, and I encourage you to engage with Rick.

Keith Weinhold (00:40:30) - Let him know you heard about him through me. If you want to go deeper and engage with some of the services that he offers, perhaps you work for a real estate company or a demographic company. You can do that at C.J. patrick.com. But most of you, the listener is an individual investor. So check him out on X where his handle is Rick Sharga. He is Rick Sharga on LinkedIn. Big thanks to Rick Sharga today. Until next week I'm your host, Keith Wild. Don't quit your daydream.

Speaker 5 (00:41:04) - 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.

Keith Weinhold (00:41:32) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

495: How Recessions Impact Real Estate with Rick Sharga Apr 01, 2024

Get our free real estate course and newsletter: GRE Letter

Our core formula here at GRE is simple, buy-and-hold real estate. Then where does your profit come from? I explain.

Where will your next tenant come from? Essentially, market intelligence analyst Rick Sharga & I answer this today.

We explore job growth, wage growth, and the condition of today’s consumer / tenant.

Rick Sharga doesn’t believe that mortgage rates will fall substantially until the Fed Funds Rate does. This isn’t likely to happen until at least June.

Consumers are exhibiting some distress signals. Credit card debt has swelled. We break it down.

Many economic indicators still show that they’ll still be an economic slowdown.

In most recessions, home sales and home prices both rise.

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Complete episode transcript:

Keith Weinhold (00:00:00) - Welcome to gray. I'm your host, Keith Weinhold. We aren't fooling around on April Fool's Day. How can you be assured of having rent paying tenants in the future? That's dictated by the economy, job growth and real wage growth above inflation. Well, how exactly does all that relate to the housing market? We break it down today with an expert 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 GRE to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

Keith Weinhold (00:01:16) - 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 to 66866.

Corey Coates (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.

Keith Weinhold (00:01:49) - What category? You're listening to one of America's longest running in most listened to shows on real estate investing, the Voice of Real Estate since 2014. This is get rich education. I'm your host. My name is Keith Weinhold, and you probably know that by now. But what we never truly know is the direction of the economy and how it shapes the housing market. Well, an expert and I are putting our heads together for you today to give you the best indication that we possibly can. I'll be with us shortly. And he is coming, armed with all of his best indicators and statistics. Last week here on the show, I got somewhat philosophical with you at times when I posited the question, do you want to retire? And I helped answer the question, what is retirement today anyway? I had a lot of good feedback on that show, but today we're talking about more concrete indicators with some numbers.

Keith Weinhold (00:02:50) - For example, historically in a recession, what really happens to real estate prices? We're going to answer that and more questions like it today. Now, I like to say that wealthy people's money either starts out in real estate or ends up in real estate, but there are so many ways to do it, so many ways to do real estate right? Hence so many ways to do it wrong as well. Our formula that we use here at GRE more than any other, is something we use because it is so simple that I think some people overlook it. It is buy and hold. Yeah, mostly long term buy and hold residential rentals. Now, we sure talk about some other things too, but that's really a cheap formula, something that we focused on since day one here. Now there surely can be some other good strategies as long as you execute, right? Flipping, wholesaling, Oreos, the birth strategy, self-storage units, RV parks and a lot more. But with buy and hold, I think some people know the real estate.

Keith Weinhold (00:03:58) - They might then ask, well, well where's your margin on that? Where does your profit come from if you just buy and hold? Or they might even think that that strategy is really slow and a 40 year game plan. Well, then they learn about the five ways and that changes that. It's largely about buying strategically and then managing your manager. I think most people dream of a life where they can just spend their time remotely managing their investments here and there. Now, for me, most months, I don't have anything to do with managing a property manager in a certain market. I just get the cash flow and then I do browse the monthly property statement. Some months had only been do that because from the amount of cash flow received, I can often see that nothing really went wrong for the month because from the amount of cash flow received, I can often see that nothing really went wrong for the month. Tax benefits as one of the five ways you're paid. That takes some management to and you know this tax time of year with my bookkeeper.

Keith Weinhold (00:05:11) - At times she emails me and asks me for this and that scrap of information. The mindset that helped me manage all the generous tax benefits of real estate is not taking my bookkeepers questions as an occasional annoyance, but rather taking the mindset of tax benefits or something that you can manage throughout the year. And that way when my bookkeeper goes an entire month without asking me for something, it can feel like a short break. Sort of like something was turned off for a month. And hey, first world problems, right? Downloading a document and emailing it to your bookkeeper ten minutes a month., today is also talking about where your next tenant is coming from, which really, at the end of the day, is what a real estate economics discussion is about. Well, it's also about giving tenants the housing that they want, meeting their desired lifestyle and the set of amenities that are both going to attract your renter in the first place and then retain your renter over the long term every year. Building,, the property management software company, they ask thousands of renters which amenities and property layouts would motivate them to choose one rental property over another.

Keith Weinhold (00:06:33) - That's what they're asking tenants. And what you imagine that renters might want could be different from the reality. For years now, renters are prioritizing their neighborhood quality. In the amenities that are actually inside the rental unit. Those things are more important than they are the shared community amenities like a pool, lobby, clubhouse or gym. Renters are gravitating toward neighborhoods that are safe and quiet, but yet are still convenient to stores and restaurants. And that led to half of the renters surveyed to rental properties that are located in the suburbs. Now, when it comes to the amenities within their rental unit that they're prioritizing, renters want a space with kind of all those comforts of home air conditioning and a washer and dryer to the option to own a pet. And these are the feature types of single family rentals, although some newer apartments can meet that too. And some condos community amenities. Then like a fitness center or a pool. I mean, they still hold some appeal to residents in these surveys, but lately they're seen more merely as perks instead of necessities for today's cost conscious renters.

Keith Weinhold (00:07:55) - So the bottom line here with this survey is that it's what's actually inside the unit that's become more important. And maybe that's a little too bad as people tend to get less social. They're using community areas less, they're prioritizing them less. And hey, maybe they just want to lie on the sofa and scroll their phone in a nice, comfortable place. Hey, you've got a suit and fit the world as it is, not as the way that you wanted to be, at least when you're providing others with housing. Hey, coming up here both on the show and on our YouTube channel, why do Western US homes cost more than eastern US homes on average? This seems geographically paradoxical. It feels backwards to a lot of people, because almost two thirds of the United States lives east of the Mississippi River, and yet that area comprises just over one third of all the land. You've got almost two thirds of people living on just over one third of all the land in the East. So to some more people on less area, oh, that would have to mean that eastern home prices are more costly.

Keith Weinhold (00:09:09) - No, it is exactly the opposite. In fact, coming up on a future show, I'll share eight plus reasons why. This is why Western US homes cost more than eastern ones. And this is also why many of the best cash flow markets, they tend to be in the eastern half of the US. They have those lower purchase prices also coming up in the future. I'm about to have a talk. This talk isn't going to be on the show here, but a talk with a conventional financial advisor about my own personal retirement. I've got an appointment with this person and this ought to be interesting. We'll see what he says about my situation. I'll try not to lecture him on how financially free beats debt free or anything like that. We'll see if I can hold off doing that. And if that meeting produces some interesting takeaways or just humorous ones, I'm going to share that with you in the future. And if you want to be sure to hear those upcoming episodes on subjects like that, I invite you to follow the show here on your favorite podcast.

Keith Weinhold (00:10:17) - And that way you won't miss any upcoming episodes. I only met today's guest about two years ago. We enjoyed that conversation and now we collaborate regularly. He helps provide crucial market updates that straight ahead. I'm Keith Reinhold, you're listening to episode 495 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 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 66866.

Keith Weinhold (00:11:31) - 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 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. This is Rich dad advisor Tom Wheelwright. Listen to get Rich education with Keith Reinhold and don't quit your daydream. You are going to get a fantastic real estate market update today, and you'll also learn lessons if you're consuming this 5 or 10 years from now. Our expert guest has been the executive VP of markets. Some of America's leading housing intelligence firms named it national lists of most influential real estate leaders. He's frequently quoted on real estate, mortgage and foreclosure markets, too.

Keith Weinhold (00:12:59) - He runs the real estate market intelligence firm, the C.J. Patrick Company. Hey, welcome back to Great Rick Saga. Always a pleasure to spend some time with you, Keith. Thank you for having me. Oh, same here, because, Rick, you've been with us here every six months for about two years now. You and I discussed the condition of the overall economy as well as the real estate market. I think of both of those as resilient today. Now, back when I was a new real estate investor, Rick, I didn't know to look at the broad economy at all. I was more concerned with if, say, on a vacant unit that I had, I had the drywall texture just right to try to attract a new tenant ASAP. Now that surely matters. But time gave me the perspective to know that what matters more is to have a local stable of tenants that are capable of paying the rent, and that's what matters more. So with that in mind, where would you like to begin? That's great counsel.

Keith Weinhold (00:14:03) - And it's really important for investors or even somebody looking to buy a house, understand what's going on economically, both across the country and in their region. So why don't we start by taking a look at what's going on in the economy? There's been a lot of conversation about potential recession. We can talk a bit about that, but if you're good to go, we'll start by just sharing some information about the US economy and some of the trends that we're seeing. Yeah, let's go ahead and do that. And yes, that dreaded our word may very well come up. That thing that we've all been waiting for but has never happened. Don't count your chickens just yet. But let's see what's going on. Because on average, recessions do happen every five years. It's just a normal part of the business cycle. Yeah, that's important to keep in context. I'm glad you brought that up. Recessions are a normal part of the business cycle and the economic cycle. We may be slightly overdue to have one at this point, although the last one that we had took very, very long to recover from, the Great Recession that started back in 2008 took a full decade to recover from, which is also very unusual.

Keith Weinhold (00:15:05) - So we'll take a look at some of these cycles and see where we are today. Keith, the basic metric that most economists look at when they're trying to figure out the strength of the US economy is is something called the gross domestic product, the GDP.

Rick Sharga (00:15:18) - We track that to see if it's growing, if it's declining. The technical definition of a recession is two consecutive quarters of negative GDP growth. And there's been a lot of talk about the GDP slowing down in the US. But really it's been mostly talk. In fact, if you look at the last quarter, we have data four, which was the fourth quarter of last year. You can see that the GDP grew by 3.2 3.3%, which was a much higher number than what most economists had forecast.

Keith Weinhold (00:15:47) - That resilient economy with a low unemployment rate, jobs being added and productive growth in the GDP.

Rick Sharga (00:15:54) - Yeah, we're going to get to all of that. And it's a great point. If you look at what makes up the GDP, about two thirds of it is comprised of consumer spending, right.

Rick Sharga (00:16:04) - So typically when you see strong GDP numbers, you're consumer is doing pretty well. And a lot of this probably has to do with consumers still having money to spend from the enormous amount of stimulus that the federal government poured into the economy to help prevent a recession or depression during Covid. About $15 trillion in all of the stimulus that was sent out to consumers and businesses alike. And that's probably helped us weather the storm of what normally might have been a slowdown in the economy. We are, however, Keith, in a globally interconnected economy, and it's important to note that not all of our peers are doing quite as well. Canada may already be in a recession. The UK is almost certainly in a recession. The eurozone barely escaped going into recessionary numbers in the last quarter, and even markets like China aren't doing as well as as expected. And I'm not saying that to gloat about how well the US is doing. I'm saying that is sort of a warning that if we do get into a situation where it looks like there's a global recession going on, it's very unlikely the US will come out of that untainted at all.

Rick Sharga (00:17:09) - So it's something to keep an eye on as we move forward.

Keith Weinhold (00:17:11) - Right. 100%.

Rick Sharga (00:17:13) - You mentioned unemployment a couple of minutes ago, Keith, and that's one of the other economic metrics we check. Unemployment went all the way up. And I say that facetiously. The 3.9% in the numbers, full employment is considered to be anywhere at 5% unemployment or lower. And we haven't been at 5% unemployment. Probably since about 2016, with the exception of the blip we had during the Covid pandemic, when the government shut things down and we had a huge increase in unemployment temporarily. But we are continuing to see very, very strong job numbers, both in terms of these low levels of unemployment and in terms of job growth. The January and February numbers again caught the economists who come up with these consensus forecasts by surprise. In January, about 350,000 jobs created. In February, about 250,000 jobs created. I should put an asterisk on some of these numbers. When you hear politicians talking about all the jobs they've created over the last few years.

Rick Sharga (00:18:15) - Keep in mind that during the Covid pandemic, we wiped out about 22 million jobs virtually overnight. A lot of the millions of jobs that have been created over the last few years were really those old jobs being refilled. We filled most of those within about two years, and we have continued to create jobs since then. We have more jobs than we have people looking for work. They're about 8.5 million jobs open, about 6 to 6.5 million people looking for work.

Keith Weinhold (00:18:43) - You can almost think that this is an over employed condition.

Rick Sharga (00:18:46) - And it almost is in most cases, not all cases, but in most cases, somebody who doesn't have a job right now just isn't looking for a job right now. And these are not all service level jobs. That's the other pushback I get when I'm out talking to groups sometimes. Oh yeah, but not everybody wants to work at Starbucks. Well, first of all, you get pretty good benefits of Starbucks free coffee healthcare. But let's not do a Starbucks commercial. These are government jobs.

Rick Sharga (00:19:10) - They're manufacturing jobs. They're construction jobs. They are some type of service level jobs. But these are jobs across the board. And because there are more jobs available than people are looking for work, we're seeing wages go up. The average hourly wage across the country last month was over $29 an hour, which is the highest it's ever been. And if you look at wage growth on a year over year basis, it's running at about 5%. And really, Keith, this is the first time in a number of years that we can say with certainty that wage growth is actually running at a higher pace than the rate of inflation, right.

Keith Weinhold (00:19:44) - And that really matters. That really helps pay the rent. One thing that detractors say with the unemployment rate, you talked about them not necessarily being consolidated in the low paid service sector area, is that a lot of people lament, well, aren't many of these part time jobs? Where are your thoughts there?

Rick Sharga (00:20:01) - There are a probably historically large number of part time jobs, but we also have an awful lot of people who have opted out of full time work for a variety of reasons, and are thrilled to be able to pick up some money working in the gig economy.

Rick Sharga (00:20:16) - So whether they're driving for Uber or Lyft, they're doing DoorDash or something else that's a part time job that they're doing just to either, in some cases, kill time or to make a little bit of extra money. This isn't an economy where the majority of part time workers are in part time jobs, because they can't find a full time job. That's simply not the case, and the data doesn't support that.

Keith Weinhold (00:20:41) - Now, if you, the listener and viewer here are wondering, well, this stuff doesn't apply directly to me. I'm good. I'm secure in my job. Maybe I don't even need a job. Keep in mind that we're talking about the financial condition of your tenant today.

Rick Sharga (00:20:57) - Yeah. When I'm talking to to real estate investors in general, I know that you were talking about drywall earlier, and sometimes you really can't see the forest for the trees. You're kind of overwhelmed or you're not sure where you should actually be looking. I tell them in many cases, to pay less attention to home prices and rental rates and more attention to some of the underlying fundamental economic conditions.

Rick Sharga (00:21:20) - Are you in a market where population is growing or declining? Are you in a market where there's job growth? Are you in a market where there's wage growth? If you're at a market where the population, jobs and wages are all growing, you're going to be in a pretty healthy market for real estate, whether it's owner occupied properties or its rental properties. On the other hand, if jobs are leaving your market, if wages are going down, if population is declining, those are warning signs. And it might be an indication that that's not a good market to start investing more in. So everything we're talking about really does get connected back to the housing market, whether it's rental housing or owner occupied housing. And it's important to see these trends for what they are.

Keith Weinhold (00:22:04) - And of course, we're talking about these factors on a national level. As we know, our real estate is local, and our audience is often interested in studying a metro market before they decide to invest there. So on that more regional level, Rick, or local level, do you have any favorite resources or websites or apps that you think are important for prospective investors to look at first within a certain region or MSA? Well, you.

Rick Sharga (00:22:33) - Can. Find a lot of local market data on some of the free housing sites that are out there. The Zillow's, the Realtor.com is the homes dot coms of the world. If you go beyond the basic home search, or if you dig deep into some of the information that they provide on local markets, within that home search, you'll find a lot of information there. There are third party companies. There's a company I'm familiar with it that works mostly with realtors, but has a lot of data that investors would probably be interested in. It's called keeping current matters. Yeah, they do an awful lot of reporting on this. But if you really want to do your own research and you don't mind doing a little bit of digging, I find that the Department of Labor and the Census Bureau and the Bureau of Labor Statistics, all government entities, have just copious amounts of local market information. You can find, you know, down to what does the local Pipefitter earn on an hourly basis in Peoria? There's all of that data out there for free on these government sites.

Rick Sharga (00:23:34) - You just have to be willing to do a little bit of research and dig through those sites.

Keith Weinhold (00:23:39) - Right. And sometimes the government websites don't exactly present their information in a beautiful, graphically rich way. But this is part of your research. Some people don't realize that, Fred, the Federal Reserve economic data has an awful lot of regional and local information, not just national information as well. Well, thanks for sharing some of those resources, Rick, and where you like to go and look, that can really help our audience. What else should a real estate investor know about today's overall economy?

Rick Sharga (00:24:08) - So we talked about consumer spending and the reliance our economy does have on consumer spending. And one of the things that I'm watching fairly carefully right now is an apparent disconnect between consumer confidence and consumer spending. So if you go back to when the pandemic hit and the lockdown occurred, consumer spending obviously fell off a cliff. There was just nothing to buy. And consumer confidence took a major hit with the announcement of the pandemic.

Rick Sharga (00:24:34) - Consumer spending as soon as the lockdown was over started to come back strongly and has never slowed down. It's hit an all time high today. Consumer confidence, on the other hand, was battered a little bit by subsequent waves of Covid, by threatened government shutdown in Washington, by the war in Ukraine, by the more recent war in the Middle East. And so the concern here is that if consumer confidence doesn't come back, we might see spending revert to the mean. And actually, as economists would say, and come back down, which would cause, at the very least an economic slowdown and at the worst, probably a recession. So it is something we're keeping an eye on. Consumer confidence has been improving a little bit lately, but historically it's gone hand in hand with consumer spending. And that simply hasn't been the case in recent months. So it is something we're keeping an eye on.

Keith Weinhold (00:25:25) - Now, one might wonder how do you measure confidence? Well, there are various surveys out there. And Rick, the way I think of it with consumers is that consumer confidence is more of a leading indicator, and then the actual consumption is more of a trailing indicator.

Rick Sharga (00:25:42) - I completely agree with you. The sentiment index that I follow most closely is one that's put out by the University of Michigan. Yeah, and it's been out there for decades. So there's an awful lot of history that goes with it. And generally speaking, on any index, you're looking for a number that's around or above 100 because that usually is your baseline. And some of the more recent months we've seen numbers down in the 50s and 60s. Now they've been trending up, as I said, in recent months. But that's something that's reported on very widely by the press. We were talking about sourcing things for investors. And I have to tell you, the just doing a basic Google search for something like, what's consumer confidence like today? You'd be surprised. The rich information that you can pull just from Google, that you can start to find some of these sources online. But that is one thing that we're watching. And, Keith, I think it's important to break out a little bit in more detail how consumers are spending or what they're spending with.

Rick Sharga (00:26:44) - And these are potential red flags for the economy, consumer credit card use. The amount of debt on credit cards surpassed $1 trillion in the third quarter of last year for the first time ever, and it got close to 1.2 trillion in the fourth quarter. That's an awful lot of credit card spending. Regardless of what you want to talk to me about, with inflation adjusted dollars, it's still $1 trillion. And that happened at a time when credit card interest rates had soared because of what the Federal Reserve was doing. So you're talking about people spending 1 to $1.2 trillion on their credit cards, when the average interest rate on a new credit card issued was between 25 and 30%. Gosh. Which, by the way, is a high enough number that it used to get you arrested for usury. And apparently now it's the new. Normal and it's okay. But this is concern. And one of the big concerns is because the cost of living has become so high and it's so difficult for so many families. The worry is that people might be starting to use their credit cards to make ends meet, to buy basic necessities, and that historically has not been a story with a happy ending.

Rick Sharga (00:27:52) - So we are watching credit card use. We're also watching personal savings rates. When the government stimulus came out, we saw a savings rates at all time highs. We then saw savings declined rapidly to all time low levels. They've recovered a little bit, but they're still on the low end of things, historically speaking. So the same worry here, Keith, which is that we're worried that families might be dipping into personal savings in order to make ends meet. And that combination, there's some research that suggests that, on average, the US household has more credit card debt than they have savings, and that's just not a healthy ratio for anybody to have.

Keith Weinhold (00:28:30) - Yeah, America has very much so they live for today mindset I think. So therefore it was a pretty predictable that after the Covid stimulus payments that savings levels probably would drop.

Rick Sharga (00:28:42) - Yeah. It's just that they drop further than what we had hoped they would. We're going to talk about inflation in the second. I have a bit of skepticism about some of the inflation numbers that we see reported from the government because of what they include or exclude, or some of the data is trailing by a long time.

Rick Sharga (00:28:56) - So I out of frustration, I created my own CPI. It's not the consumer price index, it's the Costco price index. And I look at one of my leading indicators is salmon because I buy my salmon at Costco. And a year ago that salmon cost 999 a pound. Today shopping a Costco, that salmon costs 1299 £1.30 percent. That's a 30% lift for all the talk we hear out of the administration about gas prices going down, I can tell you that where I buy my gas at Costco, it's a couple dollars more a gallon than it was just a few years ago. And I say this with a little bit of a chuckle, and I say this knowing that it's a nuisance for me. But I've been blessed. And it's not a life or death decision for me. But there are families out there who are deciding whether or not they can buy salmon this week. And I would submit that on average, your rental family's income is lower than your owner occupied houses, families, income. And so for all of your listeners who are landlords, this is something to be paying very close attention to, despite the fact that inflation is coming down.

Rick Sharga (00:30:02) - Keep in mind that these inflation rates are on top of very high prices that we have as a result of the previous cycle of inflation. So it's going to take a while, even with wages going up for those households to catch up here. And the hope is that wage growth will continue to outpace inflation growth long enough that they'll be able to do that.

Keith Weinhold (00:30:23) - Yes, that's a positive trend. Yeah. Rick, as long is in your Costco price index, Costco doesn't try to skimp, inflate and replace your wild elastic salmon with Atlantic farmed salmon. I'm sure you're going to be paying attention to that as well as you fill your own shopping basket and come up with what's really happening with inflation. Because for those that believe the CPI, it's been reported in the low threes lately and CPI peaked at 9.1% almost two years ago in June of 2022.

Rick Sharga (00:30:55) - And what the Federal Reserve has done is unprecedented. We've only ever seen rates go this high this quickly, once in the last 50 or 60 years. That was back in the 1980s, when inflation was really in runaway mode and out of control.

Rick Sharga (00:31:10) - And normally what the Federal Reserve does is very methodical, very thoughtful. They'll raise the fed funds rate a quarter of a point. They'll sit back and wait to see what happens. They'll raise another quarter point and give it some time to take effect and so forth and so on until they feel like inflation is under control. And then they'll then they'll drop that fed funds rate. In this case, they've admitted a few things that probably took a lot for them to say out loud. They admitted that they underestimated how high inflation would get. They admitted that they underestimated how quickly it would rise. And they also admitted that they underestimated how difficult it was going to be to get it under control. So what it did peak at about 9.1% a couple of years ago. They took unprecedented steps in terms of the size of of rate hikes and the rapidity with which they raised the fed funds rate. And now they're in a position where inflation is trending more or less in the right direction. It's in the low threes, as you said, it has not come down as much in the last couple reports as they would like.

Rick Sharga (00:32:10) - And that's probably going to result in them holding the fed funds rate at its current level for at least the first half of this year before they start doing rate cuts, because the last thing they want to do is cut too soon and see inflation start to come back up.

Keith Weinhold (00:32:25) - About one month ago, I did an episode titled Why the Fed should not lower rates. Rates are. Normal and the economy doesn't need the help. So if we do have this dreaded R-word, this recession, the most convenient tool for the fed to use is to cut rates. We don't want to use up that ammo while we're still in a good position like we are today.

Rick Sharga (00:32:47) - Yeah, I don't disagree with you. And there were some economists and mostly Wall Street, who had been predicting a fed rate cut as early as March and over the course of the year. And I thought they were all crazy great. And I've been saying at the earliest, May now I think it's probably not until June. The rates are a little higher than historic averages.

Rick Sharga (00:33:05) - I could see maybe three rate cuts this year, maybe four if the economy slows down significantly. We're not we're certainly not going back to the zero rates that we had for a few years. I think the fed will be very cautious and reserved in its approach to scaling back the fed funds rate. One of the the side effects of what they did is they cast a lot of uncertainty and doubt into the financial markets, which have caused mortgage rates to skyrocket, which have caused private lending rates to skyrocket. For your listeners who borrow from private lenders. And I don't think we see those rates start to come down significantly until after the fed does its first fed funds rate cut, I suspect, and so far I've been right, that until we see that rate cut, we're going to see mortgage rates on a 30 year fixed rate loan kind of bounce back and forth in a very narrow band between about 6.75 and 7.25% for the next few months. And that's really where they've been since January. And I think that will continue to be the case until we see that first rate cut, at which point the market will probably say, okay, they're serious now we can have that sigh of relief, and then we'll see a slow and gradual reduction in mortgage rates.

Rick Sharga (00:34:21) - I did want to touch on two things related to the fed actions and the current economic issues. Keith, because I often get the question about likelihood of a recession. If you go back in history all the way back to World War two, not counting this cycle, the Federal Reserve has raised the fed funds rates 11 times in order to get inflation under control. Eight of those 11 times, they've wound up over correcting as they raise the rates right. And that steered us into a recession. The three times that didn't happen, the three times they executed a soft landing, not a recession. All three of those cycles had something in common, and that was that the fed didn't have to overcorrect because they started early. They acted proactively when it looked like inflation was getting started, and they were able to keep inflation under control without a drastic increase in the fed funds rate this cycle. They've already admitted that they waited too long and inflation got higher than they expected. And because of that, they've had to raise the rates more quickly and more dramatically again than anything we've seen in the last 40 or 50 years.

Rick Sharga (00:35:25) - So historically speaking, it would seem more likely than not that we'd see at least a mild recession. The people who say, well, if we would have seen one through this cycle, we would have already seen it often overlooked the fact that it can take 24 months after the Fed's rate hikes are done, to see the full effect on the economy.

Keith Weinhold (00:35:45) - Economies are complex and cycles move slowly. They do so, historically speaking.

Rick Sharga (00:35:50) - That's one thing. I look at the other and without getting to Inside Baseball for your listeners, is something called a yield curve inversion. Yeah. And that's when when the bonds markets sense a disruption in the force and think that Darth Vader may be hitting the economy, but basically it's when the the yields on longer term investments like ten year Treasury bonds switch places with the yields on shorter term investments like two year Treasury bonds. So the yield on a two year investment is actually higher than the yield on a ten year investment. And when you have that inversion, that's what they call a yield curve inversion.

Rick Sharga (00:36:23) - And the last eight times that's happened we've had a recession follow not always a long drawn out recession, but there's always been a recession. And this particular yield curve inversion cycle is one of the deepest and longest ones we've had in a long time. And again, using history as a precedent. That doesn't seem to be really good reason for this cycle to behave differently than the last eight half. Having said all that, we may get lucky. The fed may pull a rabbit out of its hat and actually execute that rare soft landing instead of a recession. If they do, we'll still feel the economy slowdown that's almost a given. And if they don't, if we do have a recession, every economist I speak with tells me the same thing that it's likely to be a very short, very mild recession because all of the economic fundamentals underneath are still very, very strong. And, you know, employment, wages, productivity and so forth and so on. So likely to see some sort of slowdown this year, Keith, whether it turns into an actual recession or is just very, very slow growth, that's the most likely scenario for the rest of 2024.

Keith Weinhold (00:37:30) - Well, Rick, as we wind down here, the. Last thing I'd like to ask you about is in a recession, what typically happens to real estate, because you and I both study history and something that I often say here on the show is oftentimes you need to look at history over hunches, for example, I think it's easy to have a hunch that when mortgage rates rise while home prices are definitely going to fall. No, actually, if you look at history, when mortgage rates rise, home prices typically rise because rising rates typically mean the economy strong. And another one is when home prices are up. Well, a lot of people think that others want to then jump into the housing market and buy when they see that prices are up. So then when home prices are up, well, that means rents must fall since everyone's buying. But no, these two things typically move together home prices and rents. It's about history over hunches. So with that in mind, talk to us with your historical research on in recessions, what typically happens to the real estate market?

Rick Sharga (00:38:28) - Typically, home sales go up from the beginning of recession to the end of a recession.

Rick Sharga (00:38:33) - And in fact, with the notable exception of the last recession, the Great Recession, housing is very often helped the economy recuperate from a recession and recover. And that's particularly true in the new homes market. Home prices also typically go up from the beginning of recession to the end of a recession. So you could have some short term disruption. You could see home sales volume or home prices dip slightly at the beginning of a recession. But historically speaking, in every recession except the Great Recession, we've actually seen both home sales and home prices go up. And to your point, higher mortgage rates do not historically equate to lower home prices. What they do equate to is home prices going up at a slower rate. And this last cycle has been very unusual because historically, we've never seen mortgage rates double in a single calendar year until 2022. And in fact, that year rates didn't double in a calendar year. They doubled in a couple of months.

Keith Weinhold (00:39:33) - And tripled overall.

Rick Sharga (00:39:34) - And they tripled overall. So if you look at that, we did see home prices actually decline in some markets, although nationally the number never went negative.

Rick Sharga (00:39:44) - And we saw home price appreciation drop off pretty dramatically but still stay positive on a year over year basis. So it's been kind of interesting. This has been a very unusual cycle for a lot of reasons, but historically speaking, your spot on a recession does not spell doom and gloom for the housing market. Whether you're talking about owner occupied homes or rental properties.

Keith Weinhold (00:40:06) - Rick and I talked about the general economy today. Next week, Rick is going to join us again, and we're going to focus squarely on the real estate market. So no long goodbyes, Rick. We'll see you next week.

Rick Sharga (00:40:18) - See you soon, Keith.

Keith Weinhold (00:40:25) - Yeah. Strong insights from Rick, as usual. To help sum it up, recession or not, expect some sort of economic slowdown later this year. It's expected to be mild. That's what Rick shared with us. And if that happens, expect less rent growth. Then in a recession, home prices tend to go up. That's what really happens. Wage growth keeps outpacing inflation. Now the longer that trend continues, expect more rent growth in the future.

Keith Weinhold (00:40:57) - But of course the real rate of inflation is slippery to measure. I think you could still make the case that wage growth isn't really higher than inflation. So to me, that part's actually not that bullish. Rick believes mortgage rates will stay near 7% until the fed makes their first rate cut. We discussed monetary policy today. And you surely know that's what the fed does. They control the flow of money and interest rate policy. We did not discuss fiscal policy. We're not going to next week either. Fiscal policy is something that Tom Wheelwright and I often do together. And what is the difference? Well, fiscal policy is the tax and spend side. When you think of fiscal think tax and spend, and it's often congressional committees and elected officials that make those fiscal policy decisions, not the fed. They're making the monetary policy. That's the difference. This is get rich education. So after all, we do often have these learning moments. There's more of Rick Saga next week as we pivot from talking about the broader economy this week.

Keith Weinhold (00:42:05) - And then next week, we'll really drill down on the housing market, including more on property price growth prospects, which regions are growing or shrinking, rent growth prospects, and any warning signs that investors should take notice of today. Hey, what? I'd like to think that I don't ask much of you, the listener. I'd like to ask you if you can help me out with one fairly quick thing today. I'd really appreciate it if you get value from the show here. Whether that was, say, last week's episode on what is retirement anyway or from, say, a few weeks ago, why inflation is actually an immoral force, or the latest trends like the content of today's and next week's show, or my upcoming breakdown of why Western US homes cost more than eastern US homes and other content like that that you just aren't going to find anywhere else. I'm simply asking you for your feedback. This takes the show from one way communication to some two way communication. Please consider leaving me a podcast rating and review, whether that's on Apple Podcasts, Spotify, or wherever you listen to the show.

Keith Weinhold (00:43:17) - Just do a search for, for example, how to leave an Apple Podcasts review so you can see how to do it. And then I'd be grateful for that. Rating and review more next week on the future direction of the housing market I'm Keith Weinhold. Don't quit your day dream.

Speaker 4 (00:43:37) - 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 (00:44:05) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

494: Do You WANT to Retire? What is Retirement? Mar 25, 2024

Get our free real estate course and newsletter: GRE Letter

Time, health, and money are three key resources in your life. Learn about their trade-offs.

“It’s not at what age I want to retire, it’s at what income.” -George Foreman

I discuss at least three definitions of retirement:

1-The time of life when one permanently chooses to leave the workforce.

2-To remove from service.

3-When you become job-optional.

4-When you stop doing mandatory income-producing activities.

Social security, pensions, 401(k)s, and residual income from real estate and stocks are all discussed.

Compound interest is faulty. Compound leverage can help you retire young.

“After the first $2M-$3M, a paid off home, and a good car, there is no difference in the quality of life between you and Jeff Bezos.” We discuss.

I briefly cover the antitrust case against the NAR, making the 5-6% commission paid by the seller largely a thing of the past.

Rents are up 2% annually, the biggest gain in thirteen months, per Redfin.

Learn 15 reasons why single-family rentals beat apartments.

I discuss two specific addresses—one in Memphis and one in Little Rock. Our Investment Coaches help you free with these and other income properties and your strategy at GREmarketplace.com.

Resources mentioned:

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or e-mail: info@RidgeLendingGroup.com

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You get paid first: Text FAMILY to 66866

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Complete episode transcript:

Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Do you want to retire? What is the definition of retirement today, anyway? In fact, with just 2 or $3 million, would you be as happy as the world's richest man, Jeff Bezos? I'll break that down. Then I discuss key trends in the rental housing market 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 GRE to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.

Keith Weinhold (00:01:16) - 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 (00:01:33) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold (00:01:49) - We're going to go from Andover, England, to Andover, Massachusetts, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich education. Around here, we say that financially free beats debt free. And for many, financially free means retirement. Now, you might be far from retirement, but those with the most foresight are those that begin with the end in mind. And it can be rather dreamy for some to think about retirement and then others don't want to retire. I'm asking you, do you want to retire? Do you ever want to retire? In fact, we posed that very question to our general education audience. I've got those results that I'll share with you here later, and it is really interesting.

Keith Weinhold (00:02:41) - But let me give you some perspective. First, I think that some young people fall into the trap of daydreaming about retirement. Oh, you might want to retire someday, but look, you can't dream about it too much. You've got to live in the moment. Because if you retire a traditional retirement age, those people tend to look back on their younger years and regret the things that they didn't try when they were younger. Don't quit your day dream, but don't dream about older age too much when you're younger. With the wealth building concepts that we discuss here on the show every week, you don't have to be that old when you retire to me. What sets the stage for you being able to retire is when you reach the point of being job optional. At what point are you job optional? That is a key turning point and for you, as soon as you're job optional. You might want to retire at that point, but you don't want to retire so soon that things will be iffy on whether or not you run out of money before you run out of life.

Keith Weinhold (00:03:49) - The best way to avoid that situation is to build your residual outside of work income alongside you during your working years, and then you won't have to merely guess on if a certain lump sum amount is going to be accumulated and sufficient. Now, one definition that I like for retirement is that you stop doing income producing activities that you don't want to do. All right. That's one definition. What you've done there is that you stopped sacrificing today for some imaginary tomorrow. If you stop doing those mandatory income producing activities. Look, you've got three key resources in your life time, health, and money. When you're younger, you'll trade away your time and even your health for money. That's because you feel like you have an abundance of time and health and not much money yet. But as you progress through life continuing to make this trade, your time and your health become more scarce, resources no longer abundant ones, there will come a point in your life where working will cost you more than retiring. You don't want to get to that point.

Keith Weinhold (00:05:09) - Now. You probably see no sheets of paper with the squares that you can hang up. There's 52 boxes in a year and is divided into 90 sections, one for each year of your life. And it shows you graphically in your face how many weeks and years you really have left. And by the way, I cannot get myself to hang up one of those sheets. That is just too much of an in my face reminder of my own mortality. Okay, I'm not doing that, but what do you like to do? Do you like canoeing or reading books or running in five K races? Well, if you read five books a year and you're going to live 50 more years, let's just 250 books for the rest of your life. Now, that sounds like quite a few, but when you're done, you're done. Do you have some best friends that you see, say, once a year? Do you live a long ways from your parents and you only see them once or twice annually, or at this rate, then you might only see your friends, say 31 more times.

Keith Weinhold (00:06:17) - And if your parents are older, what if you only see them 18 more times? That might sound like quite a few, but when that's done, that is done. Now this can get a little depressing. But what I'm helping you do here is identify what's important to you in your life. A lot of people don't have any real hobbies outside of their jobs. People feel sad and unfulfilled and can never see themselves retiring when this is the case. Now, you might enjoy drinking with your friends. All right. Sure, but that's not a real hobby. Hopefully you have the ambition to know that there are a lot of things that you really want to do, and you need to find the time in order to do those things. Well, here's the good news you are the one that's in control of how much of your time on earth you spend doing those activities are spending time with those people. Now, I was chatting with one woman about retirement. Gosh, this was interesting. And she told me that she doesn't want to retire.

Keith Weinhold (00:07:23) - Okay, well, she justified her stance by saying, who wants to stay at home? And I'm thinking, who wants to stay at home? I found that a really curious answer. Why does retirement mean staying at home? Like if you don't go to work, you'd stay at home. So maybe this person didn't have any hobbies. I mean, I would think that retirement would include the time and ability to travel. Well. So retiring and staying at home or not at all identical to me. A few years ago we had financial expert Kim Butler here on the show. You might remember that really intelligent woman. She was a retirement detractor, not a fan of retirement. The definition of retirement to Kim, if you remember, is to remove from service. That was her definition, meaning that she'll no longer serve others. I'm not saying that's right or wrong. That's her perspective. Well, I think that you can still serve others in retirement. Take a leadership position at your church, coach kids baseball, volunteer at a homeless shelter.

Keith Weinhold (00:08:28) - And even if retirement does mean to remove from service, or you probably served others at a full time job for decades, probably even for most of your life. So it's okay to have others in turn serve you in retirement. Well, today I'm here asking you, do you want to retire and what is retirement and not giving you some food for thought, let me discuss some more formal definitions of retirement first before I continue here. Now if you go and Google what is retirement, the word age appears after that as a fourth word, suggesting that you might select what is retirement age. Well, the former boxer George Foreman, he said it well. He said it's not at what age I want to retire. It said what income. Yeah. The first retirement definition that you find though, is the time of life when one permanently chooses to leave the workforce. All right. Well, that's actually a good short definition. And it'll show you that the traditional retirement age is 65 in the US and a lot of other developed countries too.

Keith Weinhold (00:09:39) - But in the US today, full retirement age when you can collect full Social Security benefits is age 67. If you were born in 1960 or later, and the earliest that you can collect benefits is 62. But do you know what the average monthly Social Security check amount is today? It is $1,767. Now, that amount can vary a lot depending on the recipient type, but it gives you some idea that that is only a supplement to your other income that you've got to figure out. And a sad and paltry $1,767. I mean that right there. That may very well be a motivator to make you want to invest well elsewhere. The old standard is that retirees need 80% of the income that they had when they were working, but were more abundantly minded. Here at GRI, I'd like to think that your income could go up in retirement as you keep adding cash flowing assets. But in a recent survey of consumer finance, the mean retirement amount saved of all working age families, the complete family here, not just the individual, is just 269 K.

Keith Weinhold (00:10:58) - That's not per year as retirement income. That's just the lump sum to live off of. Now some workers, especially government employees, they have a pension. That's where you don't have to just draw from a lump sum at the end of your life, like you would at the end of your life, like you would with a 401 K. So a pension that's a predetermined livable amount that you're paid each year in retirement, it's often based on the percent that you earn during your working years, say 75%. That's why most people like a pension within a 401 K, because pensions are about the perpetual income, not the lump sum, where you just hope that it lasts. But pensions are expensive. So the private sector really started phasing them out beginning in the ninth. 80s. Really in the US retirement. What that used to mean is turning 65 and drawing a pension and Social Security. I mean, that's what you'll hear your grandparents talk about. Now for us in younger generations, remember, your 401 K withdrawals must begin between age 59.5 and 70, and you must begin paying tax on it at that time.

Keith Weinhold (00:12:13) - Now, there's been a flurry of research about advances in longevity. Some of the more optimistic ones even say that if you're currently under age 55 and you get to the age of 65 in good health, you're likely to live to be 125 plus, if that comes true or even partially true, that tilts toward not accumulating a lump sum in retirement, but having an income stream from something like income producing real estate or stock dividends. You really need to focus on that income stream. If you're going to live a few decades longer than the current life expectancy. Look, when you make the production of ongoing income part of your ongoing investment strategy, you don't need what many retirees think of as the 4% rule. You probably heard of it what the 4% rule is. That's a popular retirement withdrawal strategy that says that you can safely withdraw the amount equal to 4% of your savings during the year that you retire, and then you're supposed to adjust for inflation each subsequent year for, say, 20 or 30 years. Well, that imposes serious limits.

Keith Weinhold (00:13:28) - I mean, that is synonymous with the life deferral plan, like a 401 K, where you voluntarily reduce your income in your working years to participate in an employee sponsored plan that isn't even designed to produce income until you're older, trading away pieces of your 30 year old self to get pieces of your 80 year old self back, you're drawing down on your big pot that you have saved for retirement. And instead, if you've been adding income producing investments for a decade or more, what you won't have to draw down at the limiting 4%, you've got to, of course, figure out inflation. Those retirees that are tapping into one lump sum amount, like from an employer sponsored plan a 401 K or a 403 B, they just try to guess at the future inflation rate. That's all any of us can do. And a lot of times they safely assume 4%. Around here we talk about how the real world inflation long term is almost certainly higher than that. So if you've got income from real estate and say you even do want to have your real estate paid off in retirement, you may or may not want to pay it off since you're ten and services your debt.

Keith Weinhold (00:14:41) - Well, you know, when it comes to inflation, rents tend to stay indexed to inflation. So your residual cash flow is pretty well protected from erosion to inflation. I've got some good news. You might be able to retire substantially sooner than you think. That's because if you're age 20 or 30 or 40 or 50, whatever, most planners, they project your wealth from a lump sum that grows with compound interest or compound interest is faulty, as we know it's degraded down after you account for inflation, emotion, taxes, fees, and volatility. Luckily for you, you have more than weak, impotent, and deluded compound interest because in addition to your residual income, you're going to have bigger lump sums than others because you had compounding leverage, not compounding interest. Even if you had zero real estate cash flow in retirement and you've got leverage, you made lots of 20% down payments on properties that appreciated, say, 5% a year. That means you were leveraged 5 to 1 and you got a 25% return in that first year of each rental property that you owned and is any Gary devotee knows that 25% is one of just five ways you're paid.

Keith Weinhold (00:16:07) - This is why you can actually retire sooner than you're thinking. With help from leverage. What you've done is collapse time frames. Understand that when you're in your retirement years, most people they have a U shaped spending pattern. Yes, u shaped spending in retirement because you tend to spend a lot of money in your early retirement years. You're traveling, you're living it up, and then you get a decade or two older. You slow down, you stay at home and spend less the trough of the U. And then your expenses go up before end of life. Care. Yes, you shaped spending patterns in retirement are common. And I know I talked about slowing down there at the trough of the year, but of course you won't be slowing down. It's just that others have tended to. Now, a really interesting topic that has circulated among many lately, and I believe that this was first proposed and debated on Reddit or X, and that is this after the first 2 million or $3 million a paid off home in a good car, there is no difference in the quality of life between you and Jeff Bezos, the richest man in the world.

Keith Weinhold (00:17:29) - That's the topic. What do you think about that? 2 or $3 million is attainable. You might already be there or beyond it. And of course, this says nothing about an income stream. So let's presume that there isn't one. All right. Well, in response to this topic, Spencer here from Orlando says I strongly disagree. Private jets complete immunity to health care costs and the ability to donate sums that change lives are all heavy hitting things that you can't do with $3 million. Tug from New York says, I agree 100%. Things like vacationing on a private island or a superyacht they may be cool to experience, but these are not necessarily things I'm thinking of when I think of happiness and anonymous respondents says Bezos's 420,000 acres probably have several views. That would be my view. Glenn, from Florida, says I have a paid off 975 square foot home, a 2018 Honda Cr-V, and not much spare cash. But I do have a wife going on 49 years who loves me, so I am richer than most millionaires like Quay.

Keith Weinhold (00:18:43) - I don't know where he's from, Mike says. I disagree with the 2 million to $3 million thing. I have some wealthy friends and they say that the sweet spot is 10 million to 100 million. In this zone, you can live very comfortably, but you're also able to blend in easily enough with most of the middle class. When you eclipse $100 million, typically you're involved with something public invisible, and then security and other considerations become much more of a problem. All right, that was his take, Mike keys. And then we had a number of others point out that $2 million is not enough to fly private, which makes a big difference to your quality of life. And yes, they do have a point there. I have flown private once and there is a substantial difference. Finally, Tanner's got a good point here. He says, I agree there is no significant difference in quality of life. Having safety, security, education, some autonomy and growth potential is key. The difference between a regular vacation and a $50,000 vacation is negligible, and it is the same with cars, food, watches and anything materialistic.

Keith Weinhold (00:19:54) - That's what Tanner says. All right, well, to summarize that for you here, and this is also parallel with my belief is that I disagree with this Bezos thing, with the 2 to $3 million net worth in your necessities taken care of. There is a difference between that life and Jeff Bezos life. But remember, the claim is that there was no difference. However, that difference is not that vast. That's my opinion. And yes, one can say that no amount of money can bring you happiness, but with money, you can buy time that you can fill with happiness and those that you love. Now that you have some perspective in different viewpoints, maybe you're better able to answer that question that I asked you at the beginning. Do you want to retire? And here it is, our poll that was run on our Instagram Stories. It asked, do you want to retire and blow those words? It showed a happy couple on vacation holding hands and the result was yes, 58% of you want to retire and the nos were 42%.

Keith Weinhold (00:21:06) - If you've given extraordinary service to humanity, I say sure. Thank you for your great service to humanity. Congratulations. Go ahead and retire more straight ahead. As I discussed the most proven retire early vehicle of all time and key shifts in the real estate market, and how you can accidentally build wealth with it. Positive leverage. This is episode 494. You're just six weeks away from an unforgettable episode 500 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, 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.

Keith Weinhold (00:22:19) - 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 the 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 prequalification and chat with President Charley 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. What's up everyone? This is HGTV. Tarek Moussa, listen to get Rich education with Keith Reinhold and don't.

Speaker 3 (00:23:31) - Quit your day dream.

Keith Weinhold (00:23:43) - Welcome back. To Get Rid of Education. I'm your host, Keith Weinhold. You might want to know what I think about the ruling that was made ten days ago.

Keith Weinhold (00:23:50) - With respect to the antitrust case against the Nar. I was asked to speak on television about it. I put more about that in last week's newsletter, so I don't have too much more to tell you here. The high point is that the standard 5 to 6% commissions are gone. Sellers used to pay that completely. That commission amount was split between their seller raisin in the buyer's agent. What really happened here is that the lawsuits argue that the Nar and brokerages kept buyers and sellers out of the commission negotiation process, and that led to higher overall costs. And really, the result of this is that it should make some agents lower their fees in order to stay competitive. We should end up seeing lower sales costs when one sells a property. Some estimates are that agent commissions will be down about 30%. Perhaps half of America's 2 million agents will lead the industry. We'll see about that. But see, sellers are still going to want to get the most money for their property that they can, and they're still going to be using comparable sales.

Keith Weinhold (00:24:54) - So that's why it remains to be seen if it really affects listing prices at all. Overall, the Nar continues its waning influence in the real estate industry. Before we discuss the rental property market, you know, I find this kind of upsetting. I mean, do we need to politicize everything? Redfin recently reported that the majority of U.S. homeowners and renters say that housing affordability affects their pick for president. I mean, this is getting ridiculous. That's according to a Redfin commissioned survey conducted by Qualtrics, 3000 US homeowners and renters were surveyed. Those surveyed were worried about the lack of housing inventory and affordability. I mean, how do you really know which presidential administration to blame that on for who to give credit to? I mean, Biden did recently roll out a plan to help with housing affordability. And then, on the other hand, Trump is famously known as a real estate investor, after all. Let's talk about the single family rental market. Do you know what the typical rent range is for a single family rental in America today? Well, the John Byrnes Single Family Rental Survey shows us that most respondents report monthly rents in the $1750 to $2250 range.

Keith Weinhold (00:26:18) - There are about eight ranges here, and 54% of single family reds are in that range. So really close to $2,000. And yeah, I myself have many or even most of my single family rentals in that same range near $2,000. Rents are lowest in the Midwest and Southeast, where a lot of operators report average rents 17 to $1800, and then it almost $2,700. California rent outpaces much of the nation. And you know what? If you just heard that right there, you'd actually think that California is the place to invest and that the Midwest and Southeast or not. But it's just the opposite of that, because it's not about the absolute rent amount. It's about that ratio of rent to purchase price. And that's what makes the Midwest and Southeast the best places. And a third region that's an investment sweet spot is what I like to call the inland Northeast Pittsburgh, Harrisburg, Philadelphia, even Baltimore. Although Baltimore is getting a little coastal, it's the Inland Northeast that has the numbers that work, not the coastal northeast like New York City in Boston and those really high priced markets where rents don't keep up proportionally.

Keith Weinhold (00:27:39) - And of course, there are pockets of opportunity elsewhere, like Texas and some other markets. And note that no part of Pennsylvania is on the East Coast at all, not even Philadelphia. None of it touches the coast. I am indeed a native Pennsylvanian. You get these little geography lessons from me interspersed here at gray., Redfin tells us that rents in the US now this is both apartments in single family. Now we're just talking about single family. Earlier rents are up 2% annually. That's actually the biggest gain in 13 months. Yes, a pretty modest increase there as rent amounts have just been really pretty steady for the last year. And so much new apartment construction took place last year that there is quite a bit of apartment supply to soak up in certain metros, and you might even see concessions. On some of these. I mean, if a new apartment complex is just finished, you know what's sitting there? 250 vacant units all at once. So you're seeing some apartment owners try to entice renters with one month's free rent for a 12 month lease, for example.

Keith Weinhold (00:28:51) - The single family rental market is in better shape from a demand supply perspective than apartments are. See, what's happened, though, is that with the Airbnb market becoming both oversaturated in some markets and then cities cracking down on short term rentals in other markets, it's there's some STR owners have turned their single family homes from Airbnbs over to long term rentals, and that brought a little more supply out of the long term rental market. More places have bans on short term rentals, and gosh, I just had an awful short term rental experience last month when I stayed at one. I usually go for hotels and that's what I'll be doing for a while again,? Now, Adam data, they have some great stats for us here. They reported that rental margins are increasing in about two thirds of the nation. That's some good news. But the increase is still pretty small. And they show us the top five counties for single family rental yield. And they used three bedrooms in their single family rental yield comps. And they did it in larger markets of a million plus.

Keith Weinhold (00:30:03) - All right. So these are counties of a large population where you're getting the best cash flow today basically on single families. Fifth, and I'm surprised that this is Riverside County California. That's the Inland Empire. You sure want to check landlord tenant law in a highly regulated place like California. Fourth is Cook County, Illinois. That's Chicago. Third is Coahoma County, Ohio. That's Cleveland. The second best single family rental yield is Allegheny County, Pennsylvania. That's Pittsburgh. And first number one for rent yield on single families is Wayne County, Michigan. That's Detroit. We've discussed Detroit on the show before. It has a stigma. It seems like the only way to make the stigma disappear is to visit. And you're going to find Investor Advantage properties in a lot of those counties through our gray investment coaches here at Gray marketplace.com about single family rental homes. Now, some asset types like apartment buildings or perhaps self-storage units, they have economies of scale and some other advantages over single family rentals. But single families are a favorite.

Keith Weinhold (00:31:18) - They might have the best risk adjusted return anywhere today, even after 2008 Great Recession, those that had bought for cash flow persevered and even thrived. In fact, single family rentals have at least 15 distinct advantages over a larger apartment building, some that you probably never thought about before. And as I discussed this, don't think that I dislike apartment buildings. Okay, it's likely not the most advantageous time in the market cycle for apartments. It's tenant quality. Single family rentals attract a better quality of tenant. They take better care of the premises. Then there's the neighborhood. Single families tend to be in a better neighborhood. Then there's appreciation. Properties tend to appreciate better over time. Fourthly, there's the school district. They're more likely to be in a better school district. Then there's the retention. Tenants stay longer, creating less vacancy expense. And the aforementioned neighborhood and school districts are why they stay. And you've got common areas. A lot of people don't think about this single families. They don't have these common areas to clean and maintain.

Keith Weinhold (00:32:29) - Apartments have hallways, stairs, larger rooms, and common outdoor grounds that a custodian needs to service. And this is another overlooked profit drag that apartment investors miss in their PNL in their profit and loss projections. And I miss this expense on my first ever apartment. By then, there's utilities in single family rentals. Tenants often pay all the utilities. They even care for the lawn. The larger the apartment building is, the more likely you'll, as the owner, be the one paying utility costs like heat, electricity, water, wastewater, and landscaping. Then there's divisibility. What if you've got property that's not performing the way you hoped it would? Well, if you had ten single family rentals, you can sell the 1 or 2 that are not performing. And with a ten unit apartment building, you must either keep or sell all of the units. It's not divisible. Fire and pestilence. You know, fire and pests. They are more easily controlled in single family rentals where there aren't common walls, even if you're at.

Keith Weinhold (00:33:34) - Ensured these diffuse conditions. They often affect multiple units and families in larger complexes. Financing is a big deal. Income. Single family rentals. They have both lower mortgage interest rates and lower down payment requirements than apartments. You can secure ten single family rental loans if you're single, 20 if you're married at the best rates and terms through the GSEs, the government sponsored enterprises Fannie Mae and Freddie Mac, with 20% down payments and apartments, rarely, if ever, have 30 year fixed rate terms like 1 to 4 unit properties do, and you can get more than 10 or 20 of them. But the financing terms are not going to be as good. And what about vacancy rate? That's true that if you're a single family's vacant, your vacancy rate is 100%. If your fourplex has one vacancy, then your vacancy rate is only 25%. But the same is true if you own four Single-Family rentals in one is vacant. Then there's management. If you hire professional management, your manager would likely rather deal with higher quality single family residence.

Keith Weinhold (00:34:44) - If you're self-managing, this is a demographic that you would probably rather handle yourself to supply and demand. There aren't enough low cost single family rentals that make the best income producing properties. Demand exceeds supply, and this is going to continue in both the short and the medium term. Then there's market risk. This is another overlooked criterion. Yes, criterion. Does anyone even know that the singular of criteria is criterion?, you've got to keep your properties filled with rent paying tennis. They have jobs. So if you think you're going to be able to buy ten rental units in the near future with your tenured apartment building, that's only going to be in one location, leaving you exposed to just one geographies economic fortunes instead with, say, ten single family rentals, you could have four in little Rock, three in Dallas and three in Birmingham. And then your exit strategy, that's an important consideration, especially for newer investors years down the road when it's time for you to sell your income property, hopefully, after years of handsome profits, there's a greater buyer pool for your single family then there's going to be for your apartment building.

Keith Weinhold (00:35:58) - More buyers can afford the lower price, and then, unlike apartments, you even have access to a pool of buyers that might want to occupy your property themselves. To live there as an owner occupant, there might even be your current tenant that buys it from you. So those are some of the attributes of single family rental homes. Again, I really like apartment buildings too. I could go on with more advantages for apartment buildings. If you've been meaning to grow your portfolio, you know when you have this information, don't let it be like two well-meaning friends that meet at the gym. And then they say, hey, we should grab lunch sometime. You know what? That is a nonstarter. You got to put something on the calendar to make something happen. You can't make any money from the property that you don't own. You can just copy me and buy the same types of properties in the same places where I buy. Get pre-qualified for a mortgage loan and we'll help you find property. We talked about retirement earlier.

Keith Weinhold (00:36:58) - I mean, the earlier you get into real estate, the better off you're going to be. From that perspective, the best time is today as you get leverage working for you and inflation profiting working for you. What's going on today is with this lower affordability, first time homebuyers, they have often now got to spend years saving for a down payment while they rent. And in the meantime, you can solve their housing problem. They become your renter in these freshly renovated homes or new build homes. And I'll even give you two addresses before we leave. Today. Though in today's tightly supplied market, you know, sound income properties can seem more rare than a pop up. And that's actually useful. Supply is short overall, but because of our long standing relationships, we have a good selection right now. This first of two properties is on Crane Road in Memphis, Tennessee. It's a single family rental. The purchase price is $169,500. The rent's 1253 bed, two bath, 1265ft². The year built is 1964.

Keith Weinhold (00:38:12) - Ask your investment coach about the fresh renovations there. And the other one is in little Rock, Arkansas. And I think I told you that when I made my little Rock real estate visit, I had some extra time and I visited the Bill Clinton Presidential Library, which though, although it's called a library, presidential library, is there really like museums a tribute. To the past president. What I don't think that I did share is that in the entire Bill Clinton presidential library, I could not find one mention of Monica Lewinsky. Not one shred of evidence that that ever took place. Nothing.

Speaker 4 (00:38:50) - Let me tell you something. There's going to be a whole bunch of things we don't tell Mrs. Clinton.

Keith Weinhold (00:38:58) - Nothing whitewashed. All the evidence at all.

Speaker 5 (00:39:01) - Nothing there.

Keith Weinhold (00:39:03) - This property is on Duncan Drive in Little Rock, Arkansas. The single family rental has a purchase price of 117 nine. Rent is 975. Three bed, two bath, 888ft². In the year it was built was 1967. So these are some of the lower cost properties that you find at Gray Marketplace.

Keith Weinhold (00:39:25) - If you prefer brand new builds, brand new construction, we can help you with those two. You typically can't find these deals on public facing platforms that are broad like the MLS or Zillow, and it's completely free. Contact your gray investment coach and learn about these properties. Rehab details and others like them. Learn about their occupancy status and more. And if you don't have a coach, pick one. They'll help you out at Gray marketplace.com. Until next week. I'm Keith, landlord. Don't quit your Daydream!

Speaker 6 (00:40:02) - 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 yet Rich education LLC exclusively.

Speaker 7 (00:40:30) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

493: Why the Fed Should NOT Lower Rates, Spartan Summit Presentation Mar 18, 2024

Get our free real estate course and newsletter: GRE Letter

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:

Show Page:

GetRichEducation.com/493

Full Spartan Summit presentation video:

On YouTube

Freddie Mac mortgage survey:

https://www.freddiemac.com/pmms

Mortgage News Daily mobile app

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/Coach

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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.

492: Inflation is an Immoral Force Mar 11, 2024

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

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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.

491: A Savings Account That OTHERS Fund For You Mar 04, 2024

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

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

@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.

490: How to Invest in Timberland Like the Top 1% Feb 26, 2024

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

@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.

489: Strategic Loan Options for Real Estate Investors, Mortgage Rate Forecast Feb 19, 2024

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.

Resources mentioned:

Show Page:

GetRichEducation.com/489

Ridge Lending Group:

RidgeLendingGroup.com

Call 855-74-RIDGE

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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Our YouTube Channel:

www.youtube.com/c/GetRichEducation

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Keith’s personal Instagram:

@keithweinhold

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.

488: Why Does Bitcoin Have Any Value? Feb 12, 2024

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

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GREmarketplace.com

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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. 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.

487: Immigration Crisis Worsens—Severe Housing Impacts Felt Feb 05, 2024

Immigrants keep pouring into the US’ southern border.

How are we going to house them? We’re already millions of housing units undersupplied.

Some migrants get free housing. Yet there are homeless veterans.

Here’s what to expect from more immigration: more rental housing demand, more multigenerational dwellings, more homelessness, higher labor supply.

Get a simple explanation about title insurance.

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:

Show Page:

GetRichEducation.com/487

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:

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@getricheducation

Keith’s personal Instagram:

@keithweinhold

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.

486: Should We Eliminate the Property Tax? Featuring Tom Wheelwright Jan 29, 2024

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:

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GREmarketplace.com/Coach

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GetRichEducation.com

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Our YouTube Channel:

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Keith’s personal Instagram:

@keithweinhold

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.

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485: The Creeping Silent Depression and Current Economic Realities with Doug Casey Jan 22, 2024

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

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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.

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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.

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484: How to Avoid Living Below Your Means and Leverage Debt Jan 15, 2024

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:

Show Page:

GetRichEducation.com/484

Join our live, virtual event for Alabama income properties at: https://gremarketplace.com/webinar/

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

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GREmarketplace.com/Coach

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GetRichEducation.com

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Our YouTube Channel:

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Keith’s personal Instagram:

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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.

483: Five Jan 08, 2024

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

@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.

482: Will You Pay This Gigantic Proposed Tax? Jan 01, 2024

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

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GRE Investment Coach, start here:

GREmarketplace.com

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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, 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.

481: Is US Residential Real Estate Underpriced or Overpriced? Dec 25, 2023

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:

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GREmarketplace.com/Coach

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GetRichEducation.com

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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.

480: Goal Setting—The Key to Unlocking Your Riches Dec 18, 2023

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

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

@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.

479: How Inflation is Ravaging America Dec 11, 2023

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:

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Terrific inflation resource, charts:

https://www.officialdata.org/us/inflation/1776

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478: The Corporate Transparency Act is Coming. It Probably Affects You. Dec 04, 2023

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:

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477: Uncertain and Unsafe Nov 27, 2023

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:

GetRichEducation.com/477

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

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.

476: The Real Estate Market is Slowing, 5.75% Mortgages in Florida Nov 20, 2023

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

Join our Florida properties webinar, free,

Nov. 27th at 8:30 PM ET at: www.GREwebinars.com

For access to properties or free help with a

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Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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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.

475: Why Settle for 5%? How to Obtain 10-12% High Yield Returns. Nov 13, 2023

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:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

@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.

474: America's Eventual Recession Reckoning with Richard Duncan Nov 06, 2023

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.

Get a 50% Discount on Richard Duncan’s MacroWatch video newsletter. Use the code “GRE” at: RichardDuncanEconomics.com

Resources mentioned:

Show Notes:

GetRichEducation.com/474

Get a 50% Discount on Richard Duncan’s MacroWatch video newsletter. Use the code “GRE” at:

RichardDuncanEconomics.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

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

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@getricheducation

Keith’s personal Instagram:

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473: Multifamily Values Down 25%. Will it Hit Residential? Featuring Neal Bawa Oct 30, 2023

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

@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.

472: Pennsylvania's Secretary of Banking and Securities Joins Keith Oct 23, 2023

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

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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.

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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.

471: Real Financial Freedom, 4.75% Mortgages in Florida Oct 16, 2023

At age 20, you’re actually happy to trade your time for money.

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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.

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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!

470: The Collapse of American Cities with Doug Casey Oct 09, 2023

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:

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469: How To Work the Tax System Like a Billionaire Oct 02, 2023

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

@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.

468: Is This America's Best Cashflow Real Estate Market? Sep 25, 2023

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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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.

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467: Navigating Awful Housing Affordability - Rick Sharga Joins Keith Sep 18, 2023

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:

Show Notes:

www.GetRichEducation.com/467

Rick Sharga’s website:

CJPatrick.com

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

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@keithweinhold

(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.

466: Red Flags for an Economic Recession? Rick Sharga Joins Keith Sep 11, 2023

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”

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GREmarketplace.com

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GREmarketplace.com/Coach

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@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.

465: Unearthing the Wealth of Gold Sep 04, 2023

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

464: Avid GRE Listener Buys 11 Rental Properties in 4 Years. Here’s What Happened. Aug 28, 2023

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

463: America's Frightening Homeless Problem, Crazy Investing Manias—Tulip Bulbs, Beanie Babies Aug 21, 2023

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

@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!

462: How Often Do Home Prices Fall? Homeownership Rate, Join Our Live Event Aug 14, 2023

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

@getricheducation

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!

461: Skyrocketing Insurance Costs, The End of Free Money Aug 07, 2023

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

@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!

460: Real Estate Cash Flow vs. Stock Cash Flow Jul 31, 2023

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

@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.

459: Your Questions Answered: Raw Land, Debt Mindset, Controlling Repair Expenses Jul 24, 2023

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:

Show Notes:

www.GetRichEducation.com/459

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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www.JWBrealestate.com/GRE

Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866

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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.

458: How Scott Saunders Built a 64-Unit Portfolio of Single-Family Rentals Jul 17, 2023

Get our newsletter free here or text “GRE” to 66866.

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:

www.GetRichEducation.com/458

Scott Saunders’ resources:

ScottRSaunders.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

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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 (00:22:46) - 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.

457: Interest Rates Will Go Much Higher, According to Experts with Jim Rogers Jul 10, 2023

Get our newsletter free here or text “GRE” to 66866.

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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RidgeLendingGroup.com or call 855-74-RIDGE

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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.

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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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456: Why a Housing Crash is 100% Certain - with Keith Weinhold and Ken McElroy Jul 03, 2023

Get our newsletter free here or text “GRE” to 66866.

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:

www.GetRichEducation.com/456

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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

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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.

455: Disturbing Facts About Your Bank, Many Millennials Will Rent Forever Jun 26, 2023

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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.

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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!

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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.

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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.

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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!

454: How to Build Generational Wealth Jun 19, 2023

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:

www.youtube.com/c/GetRichEducation

@getricheducation

Keith’s personal Instagram:

@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

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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.

453: America's Awful Housing Shortage, Meet Our New Investment Coach Jun 12, 2023

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

452: Ken McElroy - Worse Than 2008? Commercial Real Estate Crash Jun 05, 2023

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

@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.

451: Racial Controversy May 29, 2023

Did you expect to hear this about Black people? We have a discussion about equality in housing.

First, if you close your eyes and wake up in 10 years, where do you want to find yourself? I explore.

For some reason, investors want to time the real estate market, yet they dollar cost average into stocks.

1% down payment mortgages are here.

Learn about the latest AI development. The maker of ChatGPT is developing “Worldcoin”. It would verify if you’re human by scanning your eyeballs.

Finally, there’s a long history of racial discrimination in both society and housing.

The Fair Housing Act—part of the Civil Rights Act of 1968—helped break down discrimination.

The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance.

Learn the difference between equality of opportunity and equality of outcome. The latter is difficult to administer.

Providing equal opportunity in housing is not just the law. It’s the right thing to do. I explain why it actually benefits you.

Resources mentioned:

Show Notes:

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:

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Get our wealth-building newsletter free—text ‘GRE’ to 66866

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Complete transcript:

Welcome to GRE! I’m your host, Keith Weinhold.

If you close your eyes and wake up in 10 years… where do you REALLY want to be? 1% down payment mortgages are here, profound AI impacts in your life…

Then, some contentious and even volatile discussion about racial discrimination and Black people… in housing. You’ll get my opinion on equality of opportunity. Today, on Get Rich Education.

____________

Welcome to GRE! From Allentown, PA to Glen Allen, VA and across 188 nations worldwide, I’m Keith Weinhold and this is Episode 451 of Get Rich Education… where we don’t live below our means. We grow our means.

If you’re being told that you’re crazy or that things aren’t going to work out… you know… hearing that right there can actually be a prerequisite to you being successful.

Are people raising their eyebrows at what you’re doing?

Yeah that could actually be some positive feedback on your direction, as long as your head tells you that it’s right and your gut backs it up.

Don’t trade away your authenticity for approval.

Look, if you close your eyes and wake up in 10 years, what do you want to see when you open your eyes? Awards for work?

I doubt it. Or is it kids, family and relationship-oriented?

Or is it, invisible footprints that you’ve left behind all over earth because you traveled or explored that much?

You DID raft the Grand Canyon, visit the Taj Mahal, see the Eiffel Tower, or dive the Great Barrier Reef?

Yeah, it’s probably those types of things.

Well then, why are you putting 90% of your effort into career-oriented stuff… if that doesn’t help you achieve that goal 10 years from now?

That’s a better set of questions for you to ask yourself.

That’s why we talk about generating residual income when you’re actually young enough to enjoy it here.

Rich people play the money game to win - that’s what we do here. While most people play the money game not to lose.

Real estate is not always easy. It’s not OVERNIGHT wealth, you’ll have your problems. But it can be amazing when you have a strategy and stick to it.

If you want me to make your financial life better in 30 days, maybe I can in some cases but that’s really not what we’re doing here, probably not even in a few months.

But in a few years… yes, definitely.

And I think it helps to remember something simple. The only place that you get money is from other people.

All your life, the only way that dollars have come into your hands or into your bank account is because it came.. from other people.

For many, that’s just one person - one employer that the money comes from.

With each rental property that you add, that is one more person that is paying you…

… that’s of tangible benefit to you in a world where the only place that you get money is from other people.

Now, as we dip into the mechanics about how to achieve that…

What would be different if you HADN’T taken action in RE?

Now, I don’t know what it is, but for some reason, people are trained to TIME THE MARKET in RE.

Yet people might put 10% of their salary - up to $22,500 is allowed this year - $30K if you’re over 50. They put that in their 401(k) - dollar-cost averaging - which is NOT timing the market.

I don’t know why that is. Why some people are predisposed to time the market in RE but yet they DCA in stocks - which is the opposite of timing the market.

Maybe it’s the cost of the property?

Treat RE the same way - DCA there too. Keep adding 1 or 2 a year or whatever you can.

When you consider 401(k)’s low returns and low liquidity, you might not even be putting money into it anymore.

You’ve got the wherewithal to know that very dollar you lock in a 401(k) is a dollar that can’t use OPM.

And it gets even worse.

Because with a 401(k), you are HOPING TO DIE before the money runs out. What kind of a retirement plan or life plan is that?

Doesn’t sound like diving the Great Barrier Reef to me. Ha!

Rocket Mortgage introduced a new 1% down home loan program. This is a new product for them. But some people to think it’s the first.

It’s not the first. It comes on the heels of rival United Wholesale Mortgage rolling out a similar program.

But this particular program is expected to reach a lot of people.

And here’s the thing. It also eliminates the monthly mortgage insurance fee. It deletes monthly PMI.

Now, even if we’re just talking about primary residences here, this affects you in the rental property market. I’ll tell you why in a moment.

But with this 1% down payment program, a buyer using this program who’s purchasing a single-family home, well, their income can be no more than 80% of their area’s median income…

… they are only required to make a down payment of 1% of the purchase price.

Then the lender covers the remaining 2% needed to reach the required 3% threshold for conventional loans.

So it’s not only going to reduce upfront costs, but that monthly mortgage insurance fee for the borrower is gone, which is typically a few hundred dollars a month…

That what they had to pay traditionally, if the buyer puts less than 20% down on their purchase. That’s going to help affordability.

So with 3% down being reduced to 1% down, then a homebuyer of a $250,000 home would only need a $2,500 down payment instead of $7,500.

Now, strict underwriting guidelines are still in place - you need income and credit and assets.

There aren’t really as many mortgage borrowers that put 20% down on a home as you might think. In fact, the average new purchase down payment amount in America is only between 6 and 7%.

But this 1% option, which it’s estimated that 90 million Americans will qualify for - over the long-term, that is just going to increase the available pool of buyers, of course, because more people that were on the edge of affordability can now qualify.

Now, in a normal market, a few of your tenants that were on the brink of qualification might be able to run off - and buy.

But you’ve still got those erstwhile strict underwriting guidelines and there’s still just such a lack of supply of this entry-level housing - like I updated you on last week.

You can’t move into what doesn’t exist. So this could create some tenant attrition, but it should be pretty limited for those reasons.

But, yeah, with this larger pool of buyers that now qualify, that puts more upward pressure on property prices.

When you make any good or any commodity MORE affordable in the short-term like this, with more buyers & more bidders, it makes that much LESS affordable long-term because that competition pushes prices up.

It’s just like decades ago, as soon as financial assistance came to the college enrollment world with Stafford loans and Pell grants and all that stuff, what did it do?

More people could afford to PAY MORE with more & better loan types and that made college costs skyrocket.

The same effect is happening here when you lower down payment requirements to just 1%.

Though, that factor alone shouldn’t make home prices skyrocket. They shouldn’t shoot up. But it’s just another tailwind on upward price momentum.

Typically when a tech CEO goes in front of a Senate committee, it gets embarrassing. Like, they end up explaining how to use email.

OK, Senate committees are not known for being tech savvy.

Not so a couple weeks ago, when Sam Altman, CEO of ChatGPT-maker OpenAI, testified on Capitol Hill on the future of AI and how the field should be regulated.

Now Sam Altman has a lot more going on than just ChatGPT. It’s possible that he’s the future wealthiest man in the world.

Now, this is where it gets scary.

He’s about to secure a $100 million funding round for an eye scan-accessible global cryptocurrency project, Worldcoin. That’s what the Financial Times told us.

Worldcoin is not totally unrelated to his signature project. The company’s goal is to verify whether users are human by scanning their irises to disburse universal basic income… to workers displaced by AI.

Now, I’ve explained before how technology actually creates jobs, not destroys them.

But the hearing continued with a discussion of the dangers of an unpredictable, evolving technology that can generate and spread misleading information without us even realizing it’s fake- like those famous fake images of the Pope in a puffer jacket or Trump running from police.

Well, for his cryptocurrency, Worldcoin, Sam Altman has already released a World App crypto wallet that can be downloaded to your mobile phone. And he’s got big plans for Worldcoin as the first-ever cryptocurrency to be held by every person on the planet.

It runs on the Ethereum blockchain. You don’t need to know what that means. In practical terms, Worldcoin will look (and trade) a lot like the cryptocurrencies that you’re already familiar with. So in that regard, Worldcoin isn’t breaking any new ground.

What makes Worldcoin stand out is the fact that it has aspirations to be both a cryptocurrency and a global identification system. With a tag line of "the global economy belongs to everyone," Sam Altman plans to distribute Worldcoin tokens to every single human on planet Earth.

And this is where things get really creepy. To pick up your free Worldcoin crypto token and sign up for a Worldcoin ID, you will need to give Sam Altman a scan of your eyeballs.

Yes, you heard that right -- Worldcoin has created a proprietary iris-scanning tool known as the Orb. Once you've had your eyeballs scanned with the Orb, you're good to go.

Altman says this step is necessary to verify that you are a real human and is not meant to be an invasion of your privacy. He won't even ask you for your name.

Yeah… I don’t know if people are going to go for that, especially Americans. Americans are more suspicious and have more resistance to authority than most places.

We’ll see what develops with WorldCoin but expect to hear more about Sam Altman.

If you want more real estate education, your source is GetRichEducation.com

For actually physical property addresses conducive to financial freedom, create one login one time like thousands of others have. You can get started there at GREmarketplace.com

More straight ahead, including a discussion and some contention about racism. I’m Keith Weinhold. You’re listening to Get Rich Education.

________

Welcome back to GRE. I’m your host, Keith Weinhold. As we’re about to get to racism, now, first…

It's no secret that I prefer investing directly in single-family rental homes and apartment buildings.

But when I look for real estate investments that are even more passive than turnkey...

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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.

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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!

450: What If I Gave You $10M? Real Estate Pays 5 Ways Revisited, Why Everyone Wants to Live Alone May 22, 2023

Get a 4.75% mortgage rate or 100% financing on new-build Florida income property. Start here.

If I gave you $10M, learn why that probably wouldn’t even help you.

We revisit how “Real Estate Pays 5 Ways”, a concept that I coined right here on the show in May 2015.

Some think real estate pays three, four, or six ways. I revisit why there are exactly five.

Real estate has many paradoxical relationships. I explore.

Americans are living in homes longer than ever, now a duration of 10 years, 8 months.

The active supply of available housing dropped again.

Get an update on the gambling industry. A major sports gambling platform has offered to advertise with us.

Take my free real estate video course right here.

Zillow expects US home values to rise 4.8% from April 2023 to April 2024.

Months of available housing supply is currently 2.7 per Redfin.

Resources mentioned:

Show Notes:

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:

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GetRichEducation.com

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Keith’s personal Instagram:

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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!

449: Live the Life You Were Created to Live, 12 Ways to Raise Rent and Add Value to Your Property May 15, 2023

Are you living the life that you were created to live? I explore.

People have harbored unfounded real estate fears for years. Here they were:

2012: Shadow inventory

2013: Boomers downsizing

2014: Rates spike

2015: PMI recession

2016: Vacant units

2017: Home prices above pre-GFC peak

2018: 5% mortgage rates

2019: Recession?

2020: Pandemic

2021: Forbearance crisis

2022: Rising rates

2023: Recession

US houses prices are heading up this spring. The latest FHFA’s Monthly Housing Report shows 4% national home price appreciation.

We explore apartment reputation scores. This is a great proxy for what’s happened in housing the past three years.

As an investor, you have a low “loss to purchase” with your tenants. It’s difficult for them to buy their first home.

I discuss 12 Ways that you can raise the rent and increase the value of your property.

Resources mentioned:

Show Notes:

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

@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.

448: How to Add More Income Streams to Your Life May 08, 2023

The average millionaire has 7 income streams. We discuss 2 income streams today—ATMs and Car Washes.

They’re low touch, more passive than turnkey real estate investing.

With ATMs, is cash use on the decline? Not among the demographic they serve. We discuss the future of cash use.

Some ATM users pay a $3 surcharge to access a $20 bill. That’s why it's profitable.

You can buy a unit of five ATMs. They’ve provided a 26.1% cash-on-cash return and high tax advantages. It’s returned $2,262 per month.

Learn more about ATMs at: GREmarketplace.com/ATM

Car wash profits are enhanced with a subscription model. Few on-site employees are needed.

You can invest alongside a tech-forward car wash franchise, Tommy’s Express Car Wash.

The WSJ stated that no business other than car washes can create this much profit on a one acre lot.

As society changes, EV, gas-powered, and diesel cars must all go through the car wash.

ATMs and car washes demonstrate high operating margins and many tax advantages. You must be an accredited investor.

Learn more about car washes at: GREmarketplace.com/CarWash

Resources mentioned:

Show Notes:

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

@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.

447: Unlocking Secrets of Income Property Loans Today May 01, 2023

Learn how to harvest equity without giving up your low, fixed-rate mortgage.

Today, I discuss: conventional loans for single-family rentals, DTI, refinancing, accessing equity, student loan debt, and down payment requirements for income properties with Ridge Lending Group President, Caeli Ridge.

Learn what’s better for a second mortgage—the pros and cons of a HELOC vs. Home Equity Loan.

You also get a mortgage market overview.

We discuss changes in cash-out refinance seasoning requirements.

Caeli also describes where she believes mortgage rates are headed later this year.

Resources mentioned:

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Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: info@RidgeLendingGroup.com

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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.

446: Why I Rejected my Grandpa's Advice, RE Market Heats Up in Florida Apr 24, 2023

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

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”

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

**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) - . 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? , 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.

445: Your Questions Answered: Overleveraged, House Hack vs. Turnkey, Hyperinflation Apr 17, 2023

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

@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.

444: Ominous Threats to Housing Prices Apr 10, 2023

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

Get our wealth-building newsletter free—text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

@getricheducation

Keith’s personal Instagram:

@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!

443: Star of HGTV Flipping Shows, Tarek El Moussa Apr 03, 2023

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

442: How Inflation Stole Your Time, Florida New-Build Incentives Mar 27, 2023

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.

A 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

@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!

441: The Real Estate Guys - Robert Helms and Russell Gray on Syndication Mar 20, 2023

You can afford an $8M apartment building. Perhaps you just haven’t really asked: “How?”

The answer: syndication.

Today’s guests are The Real Estate Guys, Robert Helms and Russell Gray. They’ve had a profound influence on me.

If you’re an active real estate investor with some experience, caught the real estate bug, and want to go full-time, Robert and Russ are masters at helping you go bigger, faster with syndication.

You can aggregate other investors’ money to buy a deal that you could not afford on your own, like a large apartment building, self-storage unit, or car wash.

You must find both deals and investors.

Syndicators must follow SEC rules.

When you find a deal, the numbers must work for investors. But it helps that your project has a deeper story and meaning. Russell Gray provides an example.

The Real Estate Guys Radio Show - Real Estate Investing Education for Effective Action

Twice annually, they host the live, in-person Secrets Of Successful Syndication event.

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

440: When’s the Crash? 2023-2024 Housing Forecast with Rick Sharga Mar 13, 2023

Housing intelligence analyst Rick Sharga joins us.

Learn about: plummeting home sales, delinquency and foreclosure rates, future home prices, interest rate direction, housing demographics, builder incentives to buyers, lender repossessions, and homeowner equity levels.

I ask Rick: “Is a home price crash imminent?”

70% of mortgage borrowers have an interest rate of 4% or lower. They’re rarely motivated sellers.

America should have a housing shortage for at least 5 to 10 more years.

FHA borrowers are exhibiting financial distress. Overall, delinquency and foreclosure rates are low.

We discuss recession prospects, and what will happen when student loans must be repaid.

Home prices are stable or should increase modestly in many areas of the Midwest and Southeast.

Home price declines should continue in: many western US areas, high-end homes, and Zoomtowns. They could correct 10% in California.

Today, you can get mortgage rates in the 5s on new-build income property.

How? With builder incentives for buyers, especially in Florida, at GREmarketplace.com. Want free coaching? GREmarketplace.com/Coach

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

439: Grappling with Rising Property Expenses, Defensive Investing Mar 06, 2023

High inflation has a downside for real estate investors too.

Property insurance costs are up 17% year-over-year. Turnover costs have surged 15%. Utility costs up 10%, property taxes up 4%.

The obvious way to deal with higher property costs is to raise the rent.

I see more lease agreements where tenants must pay for $200 worth of repairs per occurrence.

ChatGPT wrote real estate rap lyrics for me and even a podcast script. But I tell you why I won’t use either one.

M.C. Laubscher, the Cashflow Ninja joins us. He tells us how to avoid big financial mistakes, earn tax-free returns with liquidity, and the defensive investing strategy mindset.

He tells us why future tax rates will probably be higher. High cash value life insurance can help, sometimes known as the “Infinite Banking Strategy”.

Learn why liquidity is so important for today’s RE investor.

We discuss how much cash you should hold onto. Is 6 months’ worth of expenses enough anymore?

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

438: Why Not Do Turnkey Real Estate By Yourself? Feb 27, 2023

Why can’t you do it all yourself? That is, identify, acquire, manage a rehab, place a qualified tenant, and manage a rental property long-term.

We talk with the Founder and Investment Coordinator of who may be the oldest turnkey provider in America today, Mid South Home Buyers.

They make ugly houses pretty.

They only acquire houses that the Founder would be proud to own himself.

Mid South Home Buyers’ Terry Kerr and Liz Brody have repeat GRE buyers for their 2nd, 5th, and 9th investment houses in Memphis and Little Rock.

They’re passionate about how they’re not snatching away homes from prospective first-time home buyers.

They transform and improve neighborhoods.

4 years is the average tenant duration here.

MSHB’s rehabs are extensive: new roof, new HVAC, updated electrical and plumbing, all-new flooring and new cabinetry.

With national supply chain issues and inflation, they’ve doubled their inventory of supplies.

Memphis International Airport is an astounding distribution hub for the types of jobs that make great long-term tenants. It’s often the highest volume cargo airport in the world.

They also offer new-build properties in Little Rock.

What about prices and rents?

Memphis Rehab SFRs: Rent $780-$1,400 | Price $95K-$160K

Memphis Rehab Duplexes: Price $180K-$220K

Little Rock Rehab SFRs: Rent $850-$1,500 | Price $110K-$170K

Little Rock New SFRs: Rent $1,300-$1,400 | Price $190K

80% of their buyers finance. 20% pay all-cash.

They’re so proud of what they do that they offer monthly bus tours.

Learn more. Get started at: GREmarketplace.com/Memphis

Our GRE Instagram Poll results show that 65% of you have your tenants pay you through the legacy banking system. I reveal all the results on today’s show.

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

437: NYC Real Estate is Absurd Feb 20, 2023

New York City real estate has distinctions and quirks that you’ll find almost nowhere else in the world.

Is it unreal estate?

This includes: super skyscrapers, air rights, apartments with doormen, co-ops, pencil buildings, and rent control.

Can you actually make money in NYC real estate?

Incredibly, the national or world capital of all these are in NYC: banking, finance, communication, advertising, law, accountancy, fashion, arts, architecture, media, and more.

1 in 18 Americans live in the NYC metro area. The population is growing.

Guest Beth Clifford joins us.

She has an impressive set of experiences, including on Wall Street, with startups, and as an international real estate developer. Beth is a former NYC resident.

Beth describes: how “air rights” are really development rights, pencil buildings, which apartments have doormen, and more.

There’s a short-term rental arbitrage strategy in NYC where you could make money. But is it legal?

Join Thursday, Feb. 23rd’s GRE Live Event for Philadelphia, Pittsburgh and Baltimore properties. Ask me questions live. It’s free. Register now at: GREwebinars.com.

Resources mentioned:

Show Notes:

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

@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.

Until then, I’m your host, Keith Weinhold. Don’t Quit Your Daydream.

436: Home Prices are Falling. Will it Continue? Feb 13, 2023

I get political today. But first, I discuss jobs. How far will home prices fall?

Innovation creates jobs. It does not destroy jobs.

American innovation is one reason that we added over a half million new jobs just last month.

All this new job growth and a robust GDP reading will keep us out of a recession for the next few months, maybe much longer.

Both the US median home price (Case-Shiller) and inflation peaked last June.

The US median home price fell 2.5% from its peak.

Where are they falling? Where are the rising? We explore experts’ outlook for home prices.

Five expert opinions all range from 2023 home prices rising 5% to falling 4%.

Volatile, coastal markets are correcting down a little. Many stable markets in the Midwest and South are stable or rising a little.

Beware of those that say, “It’s never been a better time to buy real estate.” That’s wrong. 2012 was better.

2021 was the worst time to buy real estate recently.

Even these past few years, and today, it’s hard to find a better place to put your investment dollar than carefully-bought income property.

This won’t last long. At GREmarketplace.com now, providers are often giving buyers 2% of the purchase price as cash at the closing table and free Property Management for two years.

Resources mentioned:

Show Notes:

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

@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.

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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:

Charlotte
Cleveland
Tampa
Dallas
Nashville
Jacksonville
Kansas City
Miami
Atlanta
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!

435: Big Real Estate Prediction, How to Analyze Deals Feb 06, 2023

Learn my new outlook for 2023 and 2024 home prices.

First, I follow up on my real estate prediction of 9%-10% appreciation for last year. You learn exactly how I performed.

Why aren’t real estate prices expected to rise or fall substantially in the near future?

Affordability is an upside constraint to home price growth. Low supply protects against a substantial price downside.

So many have wrongly predicted a recession by now. (I have never said any such thing.) The latest GDP and jobs numbers beat expectations, frustrating gloom-and-doomers.

It’s even possible that the Fed engineers a “soft landing”.

Not all is well. 64% of Americans live paycheck-to-paycheck. America has galactic-sized debt. We have a labor shortage. Inflation is still high.

Mortgage rates have hit a five month low, now near 6%.

There are three ways you can save thousands of dollars in today’s real estate market.

1 - Many sellers are crediting income property buyers 2% of the purchase price at the closing table. You can use this to buy down your interest rate.

2 - Free property management for up to 2 years.

3 - Rent guarantee. This means that if your property is vacant, the seller pays rent until the property is occupied.

The third one above is the only one expected to last long-term.

On your next income property purchase, our free in-house Investment Coach can help you get these incentives. Start with Naresh at: GREmarketplace.com/Coach

Hayden Crabtree, founder of My Property Stats joins me.

His real estate deal analysis software helps you organize your existing real estate portfolio and analyze future deals.

He’s also a successful author and specializes in RV & boat storage properties.

GRE listeners get a 10% discount on his real estate analysis software at MyPropertyStats.com/GRE. Use Discount Code ‘GRE’ for 10% off your first year.

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

434: Should You Invest in Detroit? Jan 30, 2023

Really… Detroit? It’s in America’s cash-flowing Midwest. But is there a stigma involved? Does it matter?

In the 1950s, Detroit was the wealthiest city in the entire world, led by the manufacturing and automotive industry.

But it endured a horrific economic and population downfall late last century due to aging manufacturing plants, high taxes, overregulation, poor services, corruption, and lack of public administration.

Detroit even filed for bankruptcy.

Between 2010 and 2020, the population of the Detroit Metro grew 2%+, per the US Census Bureau.

Time magazine named Detroit one of the World’s 50 Best Places To Live—one of just five US cities.

Our own COO, Aundrea Newbern, MBA, recently chose to move to the Detroit Metro.

The average Detroit income property from today’s guest provider rents for $1,100 to $1,200 and costs about $120K.

These are renovated single-family homes, often brick.

The Big 3 auto manufacturers are all headquartered in Michigan today.

Detroit’s substantial employment sectors today include: manufacturing, automotive, engineering, IT, medical, trade & transportation, technology, and finance.

The income property provider is aware that Detroit has a stigma. They encourage you on an in-person tour. Get started at: GREmarketplace.com/Detroit

Often, you’re buying property at less than replacement cost.

This provider encourages buyers to do independent third-party property inspections first. (I love this!)

If you’d like to learn more, start at: GREmarketplace.com/Detroit

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

433: Beginner’s Guide to Real Estate Investing Jan 23, 2023

Learn the beginner's mistakes to avoid.

Is setting up a real estate LLC even worth it?

Learn how to build the right credit score for a mortgage loan, including why you actually don’t want a score over 800.

If a cash flowing property is so great, why would anyone sell it to you? I outline a myriad of reasons.

Should you make a lowball offer to a real estate seller? Learn negotiation techniques.

Earnest money procedures are covered.

The real estate buying process is slow. From the time that you make the offer, it can often take over 30 days to close the deal.

Once your offer is accepted, I recommend a professional third party inspection. It can cost you $300 to $500 for a single-family income property up to $1,000 for a fourplex inspection.

I cover property appraisals and how they verify the quality of the bank’s collateral.

Learn how to get a good feel for your property manager and what their duties are.

I discuss the Management Agreement between you and your manager.

Be sure to tell your insurance provider that this is a rental property, not your primary residence.

A mobile notary meets you at your home, workplace, airport, or even a restaurant in order to complete the paper-and-ink closing process. This wraps up the deal.

Get started with income property at: GREmarketplace.com.

For free coaching to help get you started, contact our free Investment Coach, Naresh, at: GREmarketplace.com/Coach

Resources mentioned:

Show Notes:

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

@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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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!

432: Everyone is Secretly Moving Here, Should You Rent or Own Your Home? Jan 16, 2023

Everyone is moving here. Where is “here”? You get an answer that you never expected.

Among those that move, it’s not for job-related reasons. It’s housing-related.

The American mobility rate has declined from 20% in the middle of the last century to 8.4% today. Learn three reasons why more Americans are staying in-place.

Lower domestic migration can have positive results like: less stress, more community formation, longer tenancies, and a boon for the remodeling industry.

The negative impacts include headwinds for real estate agents and mortgage loan companies.

Should you rent or own the home that you live in?

Learn 18 rent vs. own trade-offs.

Paying rent is NOT the same as throwing money away.

Join me live on tomorrow’s webinar about car wash cash flow. You can ask me questions. Register free now at: www.GREwebinars.com

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

431: Panama Coffee Farm Investing—Struggles and Opportunities Jan 09, 2023

What happens when a real estate investment goes sideways?

An international business was impacted—Panama coffee farms.

The pandemic disrupted coffee supply chains and labor. Erratic weather affected crop yields.

It’s been about four years since we’ve discussed this on the show.

The Panamanian government shut down many businesses. There was little or no government assistance for idled workers.

The co-founder explains Panama coffee problems and opportunities.

Learn why the coffee parcel deed issuance has been slow for investors.

There’s a new distribution partner going forward, named Typica. They help sell the coffee.

This is all high-end, specialty coffee, like the geisha variety.

Coffee farm parcels are in the volcanic soil highlands of western Panama, near Boquete. It’s shade-grown.

The provider has acquired their 12th coffee farm. If you’d like to learn more about the investment, start at GREmarketplace.com/Coffee

There are upcoming group tours in March and May.

Resources mentioned:

Show Notes:

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

430: The Most Important Question in the Investing World Jan 02, 2023

Answer this one question and you won’t have money concerns for the rest of your life.

The Dow Jones once fell so hard that it didn’t recover for 25 years

Japan’s NIKKEI peaked in 1989 and still has not recovered.

I discuss the differences between an economic recession and depression.

During the 2008 housing crisis, national housing values only fell 19%.

Originally, 401(k)s were called “Salary Reduction Plans”. They had to scrap the name to foster participation.

Some investing questions are:

How do I max out my 401(k)?

How can I attend my dream college?

How can I become a millionaire?

After building context, I reveal the most important question in the investing world.

Learn how to keep emotions separate from investing.

The vital question is: “Will this property secure an income stream?”

Resources mentioned:

Show Notes:

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

@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!

429: Are Rich People Greedy? Dec 26, 2022

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

@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.

428: Essentials of Real Estate Wealth-Building Dec 19, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

427: Future of Real Estate, 2 of 2: The Metaverse Dec 12, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

426: Future of Real Estate, 1 of 2: Homebuilding Technology Dec 05, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

425: Short-Term Rental Tiny Homes Nov 28, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

424: Why Landlords Get Sued Today - Garrett Sutton & Ted Sutton's Father-Son Succession Plan Nov 21, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

423: Housing Sales Crash, Mortgage Rate Prediction with Caeli Ridge Nov 14, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

422: Time vs. Money, Financial Mistakes To Avoid in Global Instability with Victor Menasce Nov 07, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

421: This Feels Illegal Oct 31, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

420: Crashing Rent Crisis? and Baltimore, Philadelphia, Pittsburgh Markets Oct 24, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

419: How To Quit Your Job with GoBundance Founder Tim Rhode Oct 17, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

418: How To Build A Home Oct 10, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

417: Laptop Landlords Oct 03, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

416: War Against STRs, Tenant Retention, Mortgage Lessons Sep 26, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

415: Car Wash Cashflow with Dave Zook Sep 19, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

414: How To Invest Like A Billionaire (Timber) Sep 12, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

413: GRE Listener Grows Her Means Sep 05, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

412: Housing Crash Imminent? and 18 Life Lessons Aug 29, 2022

“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

@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:

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.

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.

Work To Learn. After that, work to earn.

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.

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.

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.

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.

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.

Learn About Investing In Real Estate. Everyone needs it. It's made more ordinary people wealthy than anything else.

Keep Real Estate And Emotions Separate. Facts trump feelings. It's 99% about: market, management, and income exceeding expenses.

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.

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".

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.

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.

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.

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.

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!

411: What Does Life Want From You? Rentflation, Housing Market Normalizes, Available Properties Aug 22, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

410: Are We In A Recession? IRS Audits Increase with Tom Wheelwright Aug 15, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

409: Negotiate As If Your Life Depended On It with Chris Voss Aug 08, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

408: Every Investment Compared To Real Estate, Safety, Florida New-Builds Aug 01, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

407: Housing Market Debate with Kathy Fettke Jul 25, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

406: How The Rich Pay Zero Tax with Tom Wheelwright Jul 18, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

405: Fixed 12% Income Returns through Real Estate Funds with Dani Lynn Robison Jul 11, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

404: Financial Independence Day Jul 04, 2022

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

@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!

403: How To Build Your Personal Brand with Steve Sims Jun 27, 2022

“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

@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!

402: Rents Surging Faster Than Home Prices, Inflation & Interest Rates Soar, Investor Resources Jun 20, 2022

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

@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!

401: A Greater Depression Is Ahead with Doug Casey Jun 13, 2022

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

@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!

400: How To Be A Person Of Value & Build Relationships with Hal Elrod Jun 06, 2022

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

@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…

399: Why Stocks Don't Create Wealth, STRs, Build-To-Rent May 30, 2022

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

@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!

398: Recession Fears, Fate Of The Housing Market, What Really Matters May 23, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

397: Mortgage Rate Shock with Caeli Ridge May 16, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

396: How Blockchain Will Disrupt Real Estate with Neal Bawa May 09, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

395: Rents Are Skyrocketing—Here’s Why May 02, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

394: Are We In A Housing Bubble? Apr 25, 2022

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

@getricheducation

Keith’s personal Instagram:

@keithweinhold

393: Real Estate's Undiscovered Niche Apr 18, 2022

One niche that people are passionate about is investing in self-storage facilities (SSF).

SSFs are recession-resilient and there’s less to maintain. Your “tenants” are often cardboard boxes, not humans. This makes it easy to manage.

Tenants often expect to stay for 6 months, but stay for 3 years.

A 10 x 10 storage space might rent for $200. You could increase the rent by 10% to $220. They won’t move out due to a $20 increase, but you got a 10% rent hike across all your units.

The best SSF locations are accessible, for example, near an expressway interchange.

SSFs are little more than 4 pieces of sheet metal, a floor, and a door.

You can invest alongside today’s SSF expert guest, Dave, at: www.gremarketplace.com/selfstorage

This business model: Buy property from a mom-and-pop operator, add size and scale, and sell to a REIT, all in a 3 to 6-year span.

One must be accredited and invest at least $50K. Investors receive reports quarterly.

SSF cash flow is modest, typically 3-7%. This is an equity play, where you could 2-3X your funds on the sale at exit time.

Learn more and get started at: www.gremarketplace.com/selfstorage

Resources mentioned:

Show Notes:

www.GetRichEducation.com/393

Get started. Learn more about self-storage investing:

www.GREmarketplace.com/selfstorage

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

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

392: Why Home Prices Are Soaring, Interest-Only Loans, Should You Buy Now? Meet Naresh Vissa Apr 11, 2022

Why are home prices surging? I’ve got 10 big reasons and break down every one. Some reasons are not obvious.

America’s residential loan-to-value ratio is just 31%.

Interest-only loans are my favorite loan type. You don’t need to make any principal payments.

Most people think interest-only loans awful. I explain why they’re often so advantageous.

You meet GRE’s Investment Counselor, Naresh Vissa. For off market property, e-mail him at naresh@getricheducation.com.

Naresh’s service is free to you. He guides you through the purchase process.

He owns 8 properties in 4 states himself.

Contact Naresh. GRE has 50+ properties available today - SFR up to 5-plex, LTR, STR, and more.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/392

E-mail GRE’s Naresh Vissa for off-market property:

naresh@getricheducation.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

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

391: Recession Warning, Uncertainty, and Destroying Wealth with Richard Duncan Apr 04, 2022

Uncertainty is high. Inflation is spiking, supply chains are unreliable, and COVID keeps hanging around.

Russia’s invasion of Ukraine threatens to make inflation and supply chain reliability worse.

Amidst this backdrop, today’s guest, Richard Duncan, discusses prospects for a US recession.

Richard reiterates that the US needs credit growth of at least 2% annually (inflation-adjusted) to avoid a recession.

In a recession, nearly every asset class would be affected.

The wealth-to-income ratio’s importance is discussed.

The Fed has begun hiking interest rates. They soon plan to begin destroying dollars with quantitative tightening.

Richard wrote a new book, The Money Revolution. It includes a history of the Fed, and points out that China is positioned to become more powerful than the US.

But the US can stay in power if it creates tons of money in order to finance infrastructure, green energy, biotech, nanotech, and more innovation.

Richard maintains that capitalism no longer drives the economy. It’s “creditism” and “consumerism”.

I ask Richard about the risk of creating more dollars than production and innovation.

Contrary to seemingly everybody, Richard believes that the Fed is a force for good.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/391

Get MacroWatch for a 50% discount with the code “GRE”:

www.RichardDuncanEconomics.com

Richard’s new book:

The Money Revolution

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 “RICH” to 307-213-3475 or:

eQRP.co

By texting “RICH” 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.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

390: Inflation, Florida Short-Term and Long-Term Income Property Mar 28, 2022

Now you have to earn your money twice. The first time is when you work for it, the second time is when you must invest it to beat inflation. My explainer on why higher interest rates slow inflation.

“Inflation is legalized counterfeiting. Counterfeiting is criminalized inflation.” -Robert Breedlove

When wages don’t keep pace with inflation, I explain why it destroys families.

We compare short-term (STR) and long-term rental (LTR) property in southwest Florida. Get started with buying properties yourself at: https://gremarketplace.com/SouthwestFlorida

Of course, Florida is an in-migration hotbed. Home price appreciation and rents are both 10%-20%+ year-over-year.

Today’s LTR tenants seek: infill lots, more square footage, an extra bedroom / den, and grocery store proximity.

STR tenants want a pool. You really make your money November through April.

LTRs have more recession resistance than STRs. LTRs have more predictable, year-round income.

STRs often have $4,000-$5,000 a week of rent income. They have a 20% management fee. You can charge the tenants a cleaning fee. You owe utility costs and ~$100 monthly yard maintenance.

Single-family rental properties are 1,500-1,900 sf on a ¼ acre lot, LVP flooring, granite countertops, stainless steel appliances, 9’4” ceilings, and concrete block exterior walls.

Pricing is in the low $300Ks to low $400Ks. Long-term rents are $2,000-$2,400 / month.

To get started with buying single-family homes and duplexes (long-term and short-term rentals) in southwest Florida, start at: https://GREmarketplace.com/SouthwestFlorida

Resources mentioned:

Get started with SW Florida long-term and short-term rentals:

https://GREmarketplace.com/SouthwestFlorida

Show Notes:

www.GetRichEducation.com/390

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 “RICH” to 307-213-3475 or:

eQRP.co

By texting “RICH” 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.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

389: Real Estate at Bitcoin Beach Mar 21, 2022

Bitcoin Beach is a real world place. It’s in the tropics and has zero property tax. It’s on the Pacific Ocean.

It reminds many of coastal California, but without the sky-high prices.

Both bitcoin and the US dollar are legal tender here. Unlike the US, there is zero capital gains tax on bitcoin.

A beautiful 40-acre property is being developed on a hill overlooking Bitcoin Beach.

Besides luxury homes, condos, and tiny homes, the property plan includes Pacific views from every unit. Home sizes can range from 300 sf up to 10,000 sf.

Novel concepts are planned in the community: a gym that powers energy for bitcoin mining, earth embed homes, aquaponics eco-farm, orchards, gardens. More common amenities like a pool, restaurant, and bar are planned.

Get started with Bitcoin Beach real estate at: https://gremarketplace.com/BitcoinBeach

There’s an option for residency in a second nation for you.

Resources mentioned:

Get started with Bitcoin Beach real estate:

https://gremarketplace.com/BitcoinBeach

Show Notes:

www.GetRichEducation.com/389

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 “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

388: Conflict: Free Market vs. Government Mar 14, 2022

Today’s high inflation rate is poised to go higher. The latest CPI was up 7.9%.

Home prices hit an all time high of $364,000 per Redfin, up 16% annually.

Safety factors, building restrictions and the environmental movement all contribute to higher home prices and more homelessness.

Larry Reed, the longtime former President of FEE - the Foundation for Economic Education - joins us.

He believes that free market principles incentive the best of human behavior - prudent risk-taking, hard work, innovation, and ethics.

Larry is an expert on the Great Depression. He relates those lessons to today’s economy.

We discuss real estate, economics, inflation, interest rates, and taxes.

Learn about the danger of the government “giving away free stuff”.

One fault with government intervention is favorable short-term action that results in long-term destruction.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/388

Foundation for Economic Education:

www.fee.org

Lawrence W. Reed’s website:

www.lawrencewreed.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 “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

387: How To Make Millions With 1031 Exchanges Mar 07, 2022

The greatest tax gift that your government gives real estate investors could be the 1031 Like Kind Exchange. This allows you to defer your capital gains tax and depreciation recapture.

There is no limit to the number of times that you can do this during your lifetime. You can make millions more with 1031 Exchanges.

But there are some specific rules to follow, like the 45-day identification period and 180-day timeframe in which to close upon replacement property.

You must use a Qualified Intermediary (QI) to facilitate your exchange.

Learn the pitfalls that nullify one from doing an exchange.

This is a highly educational show.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/387

Get started with a 1031 Exchanges:

www.GREmarketplace.com/1031

www.GetRichEducation.com/Letter

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 “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

386: Today’s Mortgage Lending Landscape with Caeli Ridge Feb 28, 2022

Residential and warehouse real estate have been two hot sectors.

With spiking house prices, investors are pushing out first-time home buyers. This increases the size of the renter pool.

Historically, when mortgage rates rise, so do home prices. It’s the opposite of what most people think.

For income property loans, get started at: RidgeLendingGroup.com

Learn what it takes to qualify for a conventional loan on investment property: down payment, credit score, debt-to-income ratio, etc.

There’s an update on today’s refinance climate.

Appraisals are generally keeping up with today’s hotter appreciation rates.

Learn about the easiest loan to qualify for that you’ve potentially ever experienced - the “DSCR”.

Resources mentioned:

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 877-74-RIDGE

www.GetRichEducation.com/Letter

Show Notes:

www.GetRichEducation.com/episode/386

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

385: Will Higher Mortgage Rates Crash Housing? Snowballing Effect Of Growing Your Portfolio Feb 21, 2022

Inflation hit its highest since 1982. The government admits that the CPI is now 7.5%.

Even if your wages don’t keep up proportionally with inflation, learn about how to profit from inflation with real estate.

What happens when your tenant can’t afford today’s higher rents? You get answers.

Get my prediction on what will happen in a higher interest rate environment.

Our COO Aundrea Newbern, MBA, joins us. She tells us about the snowball effect of scaling up your real estate portfolio.

In a tight market with low real estate inventory, rather than the buyer waiving their inspection, it’s often better to shorten your due diligence period.

Aundrea tells us how to pay yourself a W-2 salary through your LLC. This helps you qualify for more mortgage loans.

E-mail Aundrea about finding Georgia income property at: info@getricheducation.com

Resources mentioned:

www.GetRichEducation.com/Letter

Show Notes:

www.GetRichEducation.com/episode/385

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

384: How To Own A Piece Of Margaritaville Feb 14, 2022

A laid-back lifestyle in a tropical climate typifies “Margaritaville”.

Margaritaville is a popular and flourishing real estate brand. There’s also short-term rental income stream for you here.

A new location is opening in Belize. It is closer to more of the US than Hawaii, and with warmer water.

It has the largest reef in the hemisphere, good for snorkeling, diving, and fishing.

This under-construction project has Caribbean beachfront.

The partners with the development are the largest private employer in Belize and the nation’s largest law firm.

Learn more about owning a Margaritaville villa in Belize at: www.GREmarketplace.com/belize

My guest & I discuss the lifespan of tourist locales. They emerge with visits from young backpackers. Later in the cycle, once “discovered”, it matures into visits from affluent tourists.

This is a rare opportunity for an everyday investor to partner with a strong brand - Margaritaville.

You can own a villa, use it for a few weeks a year, and rent it out for the remainder of the year. You can leverage Margaritaville’s STR management partner.

Prices start in the low $200Ks.

Real estate contracts are brief and written in English. In Belize, you don’t need title insurance. The government backs all titles.

In-person tours are available and encouraged. Our show guest really wants to show you Belize.

Learn more and get started at: www.GREmarketplace.com/Belize

Resources mentioned:

Get started with this opportunity at:

www.GREmarketplace.com/Belize

Show Notes:

www.GetRichEducation.com/episode/384

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

383: What I'm Afraid Of - Interview Gets Personal Feb 07, 2022

Housing prices surged 20% annually. Rents have now caught up, rising 19.3%.

New homebuilding hit a 45-year high.

There are three ways to measure housing market vibrancy: months of available inventory, sale-to-list price ratio, and days on market (DOM).

The level of available housing is now just one-fifth of what it needs to be.

A new poll shows that “work from home” trends benefit both bosses and employees.

I tell you about my Ecuador trip.

Our Operations Lead, Aundrea Newbern, MBA interviews me about real estate and my personal life.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/383

Today’s American housing supply:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Video: Fitness & Financial Freedom, Age:

https://youtu.be/jqxjEFC_CYM

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

382: Dismal State Of High School Financial Education Jan 31, 2022

A high school teacher reveals the sad state of financial education today. Most students still think the path is: go to school, get good grades, go to college, get a job, work until you’re 65, and then start enjoying life.

Dan Sheeks is a Denver, Colorado-based high school teacher and real estate investor.

He enjoys working with teenagers. He also volunteers for the Colorado Attorney General to advance financial education.

Just last month, Dan released a book with Bigger Pockets: “First to a Million: A Teenager’s Guide to Achieving Early Financial Independence”. See it here.

He discusses solutions for teenage financial independence:

1) When you turn 18, get your first credit card

2) “House hack” real estate by age 21

3) Good debt vs. bad debt - do teens understand?

4) Mindset

5) Avoiding mistakes like “meme coins”

6) Saving

Dan tells us the two main reasons why there’s a pathetic lack of financial education in school today - funding and politics.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/382

If you have a child, get Dan’s book:

First to a Million: A Teenager’s Guide to Achieving Early Financial Independence

Dan Sheeks’ online community for young people:

www.SheeksFreaks.com

Dan Sheeks’ e-mail (It’s OK to message him):

dan@sheeksfreaks.com

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

381: The Most Resilient Real Estate Market In America Jan 24, 2022

There are two main ways to create wealth. Debt-free is not one of them. If you only use your own money, you’ll stay small.

Learn why most investments are like baseball cards.

One market in America has such astounding resilience that prices were hardly dented in the 2008 financial crisis.

Median home prices are still below $300K here today.

Dallas-Fort Worth now spans 11 counties, with 7.6M people.

This real estate provider focuses on the DFW suburbs. That’s where the growth is happening.

Importantly, they use a plan for mitigating their higher Texas property taxes.

Housing here appears undervalued and underpriced. People are often underhoused.

Due to supply shortages, next day appliance delivery has disappeared.

This real estate provider has plenty of available inventory right now. They offer you in-house property management at 6.5%. SFR prices are $160K-$225K.

This is an actionable resource where you could buy property and benefit from the five ways you’re paid at: www.GREmarketplace.com/Texas

Resources mentioned:

Show Notes:

www.GetRichEducation.com/381

Get started with Texas property:

www.GREmarketplace.com/Texas

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

380: Does This State Have The Most Profitable Properties? Jan 17, 2022

You’ve been making $438 each night in your sleep. That’s one result if you’ve been following my plan.

I compare real estate’s annual performance to: stocks, gold, silver, bitcoin, bonds, and oil.

This state ranked 3rd in Moody’s Housing Affordability Index, has the 7th-largest domestic economy, and is a two-hour flight from 75% of the US & Canada.

This state is also home to offices for Google, Facebook, Carvana, and more. In 2020, it ranked 4th of 50 states in U-Haul’s net in-migration.

You can still achieve a full 1% rent-to-value ratio here. Get started at: gremarketplace.com.

Today’s guests own a turnkey company with three models:

Signature Series - fully renovated

Instant CashFlow Series - occupied, not rehabbed

Equity Advantage Series - vacant, not rehabbed

This provider has stopped charging leasing fees for property management. Remarkable.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/380

Get started with Ohio property:

www.GREmarketplace.com/Cincinnati

www.GREmarketplace.com/Dayton

Check out Flip & Dani Lynn’s new podcast:

Freedom Through Passive Income

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

379: The President of the Mises Institute Jan 10, 2022

A homeowner’s average equity position is now $294K. That’s what the median home value was not long ago - now it’s one’s equity.

I give a quick recap of major economic and real estate events this past year.

Last year, there was an average $56,700 of equity growth per property.

Our new website, GREmarketplace.com is rolling out. Register and get access to all of our: turnkey providers, pro formas, and sample properties. See videos of us interviewing property managers too.

Jeff Deist, President of the Mises Institute joins me.

The Mises Institute champions liberty and free market principles. Learn more about them at www.Mises.org

Jeff & I discuss: real estate and rental markets, inflation, work from home, cash, low interest rates, debt.

I ask Jeff how long he thinks we’ll see real price inflation through the 2020s decade, and prospects for a double dip recession.

Get our free wealth-building “Don’t Quit Your Daydream” Letter. I write it myself: www.GetRichEducation.com/Letter

Resources mentioned:

Show Notes:

www.GetRichEducation.com/379

Mises Institute website:

www.Mises.org

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREmarketplace.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

378: Happy New Fear: RV Ratios, Property & Crypto Taxes with Tom Wheelwright Jan 03, 2022

With higher property prices, what rent-to-value ratio makes sense today? I answer this thoroughly.

Lower RVs make sense today due to: lower interest rates, new-build properties, the timing of equity harvesting and more.

GRE Marketplace is coming soon.

Tom Wheelwright joins us to help you reduce your property tax and cryptocurrency tax.

Learn why some states have higher property tax than income tax or vice versa - CA, TX, NY, NJ, AK, and more.

Many property tax professionals only get paid based on how much they reduce your property tax.

Learn what works in actually getting your property tax reduced: comparables.

In cryptocurrency, you are taxed on either a sale or an exchange - not just a sale. For example, if you trade bitcoin for ethereum, you have a tax consequence.

If you buy a $3 cup of coffee with crypto, that is usually taxed.

Miners of crypto are taxed when they mine it, not only when they sell it.

Crypto is taxed at capital gains tax rates.

Tom does not believe that crypto will be outlawed in the US. Rather, it will be regulated through taxation and reporting.

Get our free wealth-building “Don’t Quit Your Daydream” Letter. I write it myself: www.GetRichEducation.com/Letter

Resources mentioned:

Show Notes:

www.GetRichEducation.com/378

Tom Wheelwright’s website:

www.WealthAbility.com

Tom’s popular book (I’ve read it):

Tax-Free Wealth

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

377: I Sold An Apartment Building, MMT In Today's Economy with Dr. Randall Wray Dec 27, 2021

I sold an eight plex apartment building for $789,000 last week. Learn lessons from my sale.

Dr. Randall Wray joins us to discuss where our economy is headed. He tells us about inflation, taxes, interest rates, and supply chain disruption dynamics.

Is Modern Monetary Theory (MMT) a utopia or disaster?

Taxes remove currency from the economy. This reduces inflation.

What about Universal Basic Income (UBI)? This basically means writing regular monthly checks to every citizen. Dr. Wray has strong opinions here.

Rapid currency creation and inflation is explored.

Dr. Randall Wray provides his recipe for full employment and stable prices.

It includes his answer of a “job creation program”.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/377

Learn more about Dr. Randall Wray:

www.levy.org

Bill Mitchell’s MMT blog:

http://bilbo.economicoutlook.net/blog/

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

376: Alarming Tax Changes Can Hurt You with Tom Wheelwright and Damion Lupo Dec 20, 2021

Tax The Rich. Learn how this theme is gaining traction in Congress.

Wealthability’s Tom Wheelwright joins us.

Which taxes make sense: property tax, consumption tax, flat income tax, progressive tax?

In Tom’s opinion, learn why flat taxes will never happen.

Oh no! A new 3.8% net investment income tax on business owners appears likely.

Will the 1031 Exchange benefit survive?

Next, The eQRP Company’s Damion Lupo joins us.

He tells us that the Checkbook IRA has been outlawed.

The eQRP is the retirement plan answer. It has: 10X the contribution limits of Traditional and Roth IRAs, zero UBIT tax, and you can invest in real estate, bitcoin, gold, or your own business.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/376

Tom Wheelwright’s Wealthability:

Wealthability.com

To learn more about eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

CashFlowAndGrowth.com

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

375: How To Build A Real Estate Company with Mid South Home Buyers Dec 13, 2021

To get a rent increase, learn what NOT to tell tenants.

Memphis, Tennessee’s Mid South Home Buyers has supplied more property for GRE followers in history.

The longest-tenured GRE providers, Terry Kerr and Liz Brody tell us how they built and maintain this 20-year-old turnkey real estate investing company.

They start with buying the ugliest house on the block.

Rents & prices on SFRs in Memphis, TN: $675-$1100 and $79K-$120K

Rents & prices on SFRs in Little Rock, AR: $800-$1300 and $90K-$130K

You can get started with buying investment property yourself at: MidSouthHomeBuyers.com. They’re popular. There’s a wait list.

Resources mentioned:

Mid South Home Buyers:

www.MidSouthHomeBuyers.com

Show Notes:

www.GetRichEducation.com/375

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

374: Freedom Means Nothing Now - Doug Casey's Take Dec 06, 2021

Doug Casey tells us that freedom and liberty don’t mean much anymore.

“America is no longer the land of the free.” -Doug Casey, GRE Podcast 374

He believes that a tax protester is a patriot. Doug also believes that roads, bridges, ports and schools should be run by the private sector, not governments.

“Regulation is the enemy of landlords and tenants.” -Doug Casey, GRE Podcast 374

Doug is a prolific author. He produces the International Man website, blog, and newsletter, and a YouTube podcast called “Doug Casey’s Take”.

Resources mentioned:

Doug Casey’s website:

InternationalMan.com

Show Notes:

www.GetRichEducation.com/374

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

373: Keith's Housing Predictions | When Mortgage Rates Rise, Home Prices Rise & Supply Falls Nov 29, 2021

Learn why I believe US home prices will rise 9-10% next year.

That’s higher than historic norms and lower than this year.

Expect higher mortgage interest rates too.

Counterintuitively, higher mortgage rates correlate with higher housing prices. Higher rates also correlate with lower supply.

Today, inflation (6.2%) is double of mortgage interest rates (3.1%).

This means that when you repay the bank, those dollars debase on them twice as fast as the bank’s interest charges can accrue on you.

Since 1994, mortgage rates have risen six times. House prices rose every time. Next year, the same thing is expected to happen; it will be seven in a row.

I explain why higher rates correlate with lower housing supply.

Housing supply has dropped an astounding 63% from two years ago. That’s the housing crash; it was a supply crash.

Resources mentioned:

Today’s low housing supply:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Show Notes:

www.GetRichEducation.com/373

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

372: The New US Geography In A Pandemic World with Peter Zeihan Nov 22, 2021

Real estate investing and geography are both: location, location, location.

Economic guru and geopolitical strategist, Peter Zeihan, walks us around each US region to describe its economic strengths, weaknesses, opportunities, and threats.

“The next 24 months will be the greatest period of change that we have seen… at least since the second World War.” -Peter Zeihan

Get your map out.

We discuss the US: New England, Mid-Atlantic, Southeast, Deep South, Great Lakes, Ohio, Texas, Great Plains, Intermountain West, California, Pacific Northwest.

Learn the three best states that are attracting foreign direct investment.

Peter loves Houston, Texas’ economic future.

Resources mentioned:

Learn More About Peter:

Zeihan.com

Show Notes:

www.GetRichEducation.com/372

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

371: Passive 6-12% Cash Returns with Real Estate Private Lending Nov 15, 2021

I talk with the person who I lend money to in order to rehab distressed properties. We discuss how it works and the 6-12% annual returns.

Importantly, many properties are secured in stable, cash flowing Ohio and around the Midwest and South. SFHs are common.

You are the lender, not the borrower.

Get started at: GetRichEducation.com/Lending

Unlike owning a rental property where a tenant pays you to live there… a private lender program means that someone pays you to “rent out” the use of your money, typically for a year or less.

The operator, Dani Lynn Robison of Freedom Capital Investments in Springboro, Ohio, tells us how she has never lost an investor’s money.

They have always paid back the lenders’ initial investment, plus interest, as agreed.

Learn about investing on the “debt side” of real estate rather than the “equity side” with private money lending at: GetRichEducation.com/Lending

Resources mentioned:

Learn More & Get Started:

www.GetRichEducation.com/Lending

Show Notes:

www.GetRichEducation.com/370

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

370: How To Buy Giant Apartment Buildings Nov 08, 2021

Buying a huge $5M apartment building is daunting to most people.

We discuss how you get the money and experience for this.

Investor vocabulary explained: Capital stack, General Partner, Limited Partner, Non-recourse loan, Acquisition fee.

Owning a duplex is different from owning a 200-unit building. With the latter, you’ll have private investors, an on-site manager, and perhaps Yelp reviews to manage. Advertising is different.

Our guest, Michael Blank, emphasizes the importance of doing your first deal - big or small. Do it. That’s when the real learning begins.

Michael excels in teaching you how to find other investors to fund your big apartment deal. To start, merely educate others. Don’t ask for money.

Get started in learning more with Michael at: GetRichEducation.com/Apartments

Resources mentioned:

Get started with Michael:

www.getricheducation.com/apartments

Show Notes:

www.GetRichEducation.com/370

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

369: This Is Real Estate's Path of Progress Nov 01, 2021

Will Rogers said, “Find out where the people are going and buy the land before they get there.”

Florida in-migration has been a persistent trend since the late 1800s. Again, Florida led US in-migration between 2020 and 2021.

I interview a Florida property provider that I have heard other developers comment about, saying: “I don’t know how they deliver such low prices.”

You don’t have to pay agent markups. Buy direct.

These are new-build SFRs up to four-plexes. Get the report and connect with the provider at: GetRichEducation.com/SunshineState

These Build-To-Rent properties are in central Florida, including Palm Bay (halfway down the Atlantic coast), Ocala, The Villages (both nw of Orlando) and more.

Growth of industry has been both varied and substantial: medical, technology, finance, international trade, agriculture, aerospace, and more than just tourism. Amazon, Space X, and Blue Origin all have a substantial presence.

This is path of progress real estate investing.

Recent sample property: New-build SFR, 3/2/2, 1,400 sf, concrete block construction, $225K sale price and $249K appraisal. (Appraisals don’t always exceed sale price; that’s a wider gap than usual.)

Build-To-Rent advantages: everything is new, warranties, higher tenant retention, location, provider buys in bulk, built-in equity, lower insurance cost.

These new-build properties are on both infill and contiguous lots on tracts of land.

SFR communities often have amenities like pickleball courts, swimming pools, and gyms.

Tenant demand is so high that this provider gets first & last month’s rent for you in addition to security deposit.

Get actionable. New-Build Florida income property (with property management) is available here: GetRichEducation.com/SunshineState

Resources mentioned:

Show Notes:

www.GetRichEducation.com/369

New-Build Florida income property is here:

GetRichEducation.com/SunshineState

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

368: How To Buy Your First Rental Property: Step-by-Step Oct 25, 2021

One question that I’m asked is: “How do I actually buy an investment property?”

I’m going to walk you through it all today, step-by-step.

You know, even after I bought my first property, it would have been difficult to recite all the steps. This is partly due to the process's 30-60+ day duration.

Though real estate has made more ordinary people wealthy than anything else, it is illiquid.

[Watch the video version of this podcast here: https://youtu.be/9jH4_-Bwujs ]

It takes more time to buy and sell real property.

There's no brokerage "point-click-done" or Robinhood swipes here.

This is both a good and bad thing.

Because there are several steps involved, there is no panic selling in real estate.

This illiquidity keeps real estate prices more stable than nearly any other asset class.

This stability (via illiquidity) is one reason why real estate comprises the heart of so many wealthy peoples' portfolios.

Real estate prices are a smooth, glassy lake compared to the raging sea storm of volatile gold, silver, cryptocurrency, oil, and stock markets.

In under 28 minutes, I lay out every step that you must know for buying rental property.

This masterclass-level instruction comes to you without paywalls or logins. I've made it public and free. It includes:

Myriad mistakes to avoid

Improving your credit report and score

A clever way to show a higher income to underwriters

Where I get my loans

Market selection

Property due diligence

Making an offer

Get an inspection (Always!)

Appraisal

Signing a Management Agreement

Property Closing

Own and collect rent (Cha-ching! Finally.)

Resources mentioned:

Show Notes:

www.GetRichEducation.com/368

Watch the video version of this podcast here:

https://youtu.be/9jH4_-Bwujs

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

367: What Happened After The Eviction Ban with Ken McElroy, Alabama Markets Oct 18, 2021

I’m in Birmingham, Alabama for a real estate field trip today.

Alabama is an investor-advantaged real estate market: low cost of living, some of the nation’s lowest property taxes.

Mindset: I tell a story on affording the time.

One of the most prolific real estate authors, Ken McElroy, joins us.

I ask him about what happened to his 2021 housing crash prediction.

Ken & I discuss why there haven’t been more evictions since the national eviction ban ended.

We explain why don’t believe this will be massively disruptive. It matters. But to me, evictions will be a diffuse condition, not a sudden one.

Sadly, if a tenant owes their landlord tens of thousands of dollars, they’ll rarely pay.

Ken describes how he’s actively buying big real estate deals in today’s environment.

Ken gives a new “mark my words” prediction today.

Resources mentioned:

Learn more about Ken McElroy:

www.KenMcElroy.com

Birmingham, AL investment property:

www.GetRichEducation.com/Birmingham

Huntsville, AL investment property

www.GetRichEducation.com/Huntsville

Show Notes:

www.GetRichEducation.com/367

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

366: 9% Stable Cash Flows with Mortgage Note Investing Oct 11, 2021

Landlords collect rent payments. "Lienlords" collect mortgage payments.

Learn how to obtain a stream of mortgage payments by owning the note (an IOU).

I tell you why banks would sell mortgage notes.

Learn the difference between performing and non-performing mortgage notes.

Bob Fraser from Aspen Funds joins us to tell us more.

Fewer borrowers defaulted on their mortgage payments in-pandemic due to forbearance.

Learn why a bank will sell you a mortgage note at a discount.

What happens when a borrower stops paying their mortgage.

There are either first lien or second lien positions to occupy. You wouldn’t expect this, but second liens can often be better due to their deep discounts.

Resources mentioned:

Learn more about Aspen Funds:

www.AspenFunds.us

Get mortgage loans for investment property:

RidgeLendingGroup.com

Show Notes:

www.GetRichEducation.com/366

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

365: Mortgage Rates Drop Full 1% For Income Property with Caeli Ridge Oct 04, 2021

Learn how to qualify for an income property loan today.

We discuss what just made mortgage interest rates for investment property drop 1% overnight.

First, I discuss the difference between adequate safety vs. too much safety for tenants in investment properties.

Too many safety regulations have a cost that gets passed onto tenants and even increases homelessness.

Caeli Ridge, President of Ridge Lending Group joins me.

A few weeks ago, mortgage interest rates for income property fell a full 1% due to the suspension of added risk layers that were added back in March.

For an income property loan, you need: 1) 15-20% down payment and ~4% closing costs. 2) Credit score of 680 or better, 3) Show sourced & seasoned liquid assets, and 4) 50% maximum debt-to-income ratio.

There are pros and cons of paying monthly PMI.

Today’s “typical” income property interest rate = 3.75%.

What happens when you try to get more than 10 income property loans? We discuss the terms, called “non-QM” loans.

Get started on your income property loan at: www.RidgeLendingGroup.com

Resources mentioned:

Get mortgage loans for investment property:

RidgeLendingGroup.com

Show Notes:

www.GetRichEducation.com/365

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

364: The Future Of Interest Rates, Inflation, the Dollar with Brien Lundin Sep 27, 2021

When money supply is high, this lowers interest rates. I explain why.

Interest rates & inflation are positively correlated.

Interest rates are usually higher. This upside-down today.

When interest rates rise, real estate prices rise too (Yes, not fall). Learn why.

Join me this Thursday, Sept. 30th, for a live Texas Properties webinar. Learn more here: www.GetRichEducation.com/Texas

Brien Lundin, organizer of the world’s longest-running investment conference, joins me. It’s the 47th Annual New Orleans Investment Conference. He’s also editor of the Gold Newsletter.

I will attend the event in-person.

Meet me Oct. 19th to 22nd. Sign up here: New Orleans Investment Conference.

Brien does not believe interest rates will rise appreciably anytime soon, nor will the Fed taper. He feels that this will be good for real estate.

The Fed must continue with massive currency creation.

Like many, Brien feels that inflation is not transitory.

Why isn’t the gold price higher than $1,700 - $1,900 per ounce?

Brien likes owning physical bullion. He thinks that crypto is worthwhile.

Resources mentioned:

Brien Lundin’s Gold Newsletter:

www.GoldNewsletter.com

Show Notes:

www.GetRichEducation.com/364

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

363: Tight Rental Market, Housing Construction Update Sep 20, 2021

Should you buy for negative cash flow? Afterall, rents are rising fast; maybe they will catch up. I have a firm answer for you.

With a tight rental market, landlords can skimp on repairs because tenants have few alternative places to live.

Do the right thing. Make repairs. Don’t be a slumlord.

Property bidding wars are subsiding.

Meet me in-person Oct. 19th to 22nd at the New Orleans Investment Conference.

A provider of brand new construction Florida & Georgia investment properties joins me to discuss industry trends, including the challenge of supply shortages.

Developing vast tracts vs. infill lots.

Tenants love living in a new construction. This provider builds SFRs up to 13-unit buildings with vinyl plank floors and stainless steel appliances.

They sell investment properties to individual investors like you, with SFRs in the $200Ks. Start buying property at: GetRichEducation.com/Southeast

Resources mentioned:

Buy new-build FL & GA investment property. Start:

GetRichEducation.com/Southeast

Show Notes:

www.GetRichEducation.com/363

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

362: Real Estate's New Space Race, Should You Obtain Your RE License? Sep 13, 2021

Steep rent increases are spreading like a… pandemic.

Some metros are seeing annual rent increases of 10% to 15%.

It's all part of real estate's new "space race".

It’s easier to get big rent increases *between tenancies*, not with your long-term tenants.

GRE’s own Aundrea Newbern joins us to answer, “Should you become a real estate agent?”

Aundrea has her RE license in GA and is now training in her new home state of MI.

Pros of obtaining your license: more information, better access to MLS, training, networking, and income from representing buyers & sellers.

Cons of obtaining your license: your time, upfront cost & ongoing fees, splitting commissions with your broker, disclosures and liability, traditional licensee activity has little to do with investors.

Summary: You need to use your license for at least 2-3 deals per year to potentially make it worthwhile.

For real estate in MI and GA, e-mail Aundrea at: aundrea@getricheducation.com

Resources mentioned:

Show Notes:

www.GetRichEducation.com/362

Contact Aundrea:

aundrea@getricheducation.com

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

361: This Guest Is The Biggest Failure That I Know Sep 06, 2021

Rents are skyrocketing, up 11.4% just since the start of this year per Apartment List.

Increases like this could mean a 25% increase in your cash flow.

Rod Khleif has made big failures. I mean that in the best way. Ultimately, he was willing to fail often in order to become the giant success that he is today.

He lost $50M in the 2008 crash, even though his properties were at 30% LTV (70% equity).

Rod is a multifamily apartment building investor and syndicator. He motivates many with his successful seminars.

We discuss “The Law Of The First Deal”.

Who you spend time with is who you become.

He’s an active RE buyer now, with 296 units under contract in San Antonio.

However, he sees an economic contraction coming.

To hedge against a potential RE market downturn, Rod likes to avoid C-Class property. He likes investing in “A” and “B” areas in southern states.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/361

Rod Khlief’s website:

RealEstateWithRod.com

Rod’s podcast:

Lifetime CashFlow Through Real Estate

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

360: GRE Listener Eric Schodowski Expands His Means Aug 30, 2021

Today’s guest has been a GRE listener since 2019.

He’s an MBA and Industrial and Manufacturing Engineer at a Fortune 500 Company. He still works at this full-time job.

Eric Schodowski learned about GRE and listened from Episode 1. Leverage, arbitrage, and inflation-profiting were new concepts to him.

When he switched jobs, he was able to access 401(k) and pension funds. Then, rather than living below his means, he expanded his means.

Eric Schodowksi has added 11 rental units: a four-plex in his home market of Baton Rouge, LA, and turnkey properties in: Memphis, west Florida, and northwest Indiana.

His returns have been as high as 120% per year.

Eric prefers turnkey real estate investing because it’s “hands-off”. Turnkeys are designed to perform for investors.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/360

Eric’s e-mail address:

Eric.LaBlue@gmail.com

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Const. Florida SFHs & multifamilies:

www.B2Rdirect.com

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

359: The Real Crash In Real Estate, Wealth Without Wall Street Aug 23, 2021

A 60% housing drop is what I’m talking about today. That's the real estate crash.

What has driven housing prices 23.4% higher year-over-year? Scarcity, utility, and demand.

I’m talking about a housing *supply* crash, not a price crash.

The guys from Wealth Without Wall Street, Joey Mure and Russ Morgan, join us.

They discuss why Wall Street makes money managers profitable, not individual investors.

Most individual investors are so used to abandoning what they really want, that it’s difficult to remember what their dream even is anymore.

Racing to “zero debt” is a losing game for most people.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/359

WWWS’s financial passport resource:

WealthWithoutWallStreet.com/Passport

CNBC: Rent Prices Rising Faster:

https://www.cnbc.com/2021/08/11/rental-bidding-wars-

heat-up-as-economy-improves-in-tight-housing-market.html

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

358: Robert Kiyosaki - 50th Anniversary of the Fiat Dollar Aug 16, 2021

Fifty years ago, money changed forever. Robert Kiyosaki joins us. He’s the “Rich Dad, Poor Dad” author.

President Richard Nixon effectively removed the dollar from the gold standard on August 15th, 1971. We play the audio clip.

Inflation ensued, exceeding 10% in the 1970s and 1980s.

What is money, anyway? I answer.

Gresham’s Law - bad money drives out good.

Kiyosaki tells us why he promotes freedom and economic decentralization.

My solutions to monetary inflation: 1) Real estate debt. 2) Gold. 3) Bitcoin. 4) Spend.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/358

Nixon removing dollar from gold standard:

https://www.youtube.com/watch?v=4-cB1Z9qceI

Jerome Powell on dollar printing:

https://www.youtube.com/watch?v=lK_rYS8L3kI

Buy real estate:

www.greturnkey.com

Buy gold:

www.apmex.com

Buy bitcoin:

www.coinbase.com

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

357: A New Investor City Is Revealed Aug 09, 2021

Homes in car-dependent areas have appreciated at 33%; mass transit areas 16% over the last eighteen months. Suburban real estate wins.

Alabama and Tennessee have: net in-migration, low cost of living, high rents with a low purchase price, low property tax, jobs, and housing affordability.

SFRs and duplexes are offered in: Chattanooga, Birmingham, and Huntsville.

In many Alabama markets, low income areas have appreciated more than high income areas.

Chattanooga duplexes: $2,200 rent / $240,000 price. 0.9% RV ratio.

SFRs are 3 bed, 2 bath: $1,300-$1,500 / $160K-$210K price.

Get the report & connect with the provider at: GetRichEducation.com/Chattanooga

Resources mentioned:

Show Notes:

www.GetRichEducation.com/357

Alabama & Chattanooga Investment Property:

GetRichEducation.com/Chattanooga

GetRichEducation.com/Birmingham

GetRichEducation.com/Huntsville

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

356: How To Reduce Property Insurance Costs Aug 02, 2021

You achieved 95% total rate of return if you bought a turnkey property one year ago, on average.

How can that be true? It’s the “Five Ways Real Estate Pays” revisited.

Get our free, wealth-building “Don’t Quit Your Daydream” newsletter. It’s the real estate industry’s best at: GetRichEducation.com/Letter

Doug Fudge joins us. He’s President and CEO of Fudge Insurance. They are a brokerage where customers get a choice of insurance provider.

Fudge provides insurance in: CA, CO, FL, GA, NC, TN and KY.

He suggests higher deductibles and lower premiums for well-off investors.

Doug & I discuss trade-offs between replacement cost and actual cash value insurance.

Vacant land is generally not insured.

Every policyholder in Florida has had a rate increase in the last year. This is largely due to frivolous lawsuits.

Get a lower insurance rate with property that is: new-build, concrete block (not frame), further inland (not coastal), hip roof (not gable).

Flood and earthquake coverage are separate policies.

We discuss how to administer renters’ insurance and umbrella insurance policies.

Learn which insurance document you should never sign.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/356

Fudge Insurance:

www.FudgeInsurance.com

(407) 965-4253

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

355: Home Prices Stall, Tom Wheelwright on Green Energy Tax Breaks Jul 26, 2021

Housing inventory could finally be turning the corner. There are now more available homes (549K) today than one month ago (504K) and two months ago (492K).

56% of homes still sell above their asking price.

Get our free, wealth-building newsletter. It’s the real estate industry’s best at: GetRichEducation.com/Letter

I provide a condensed history of the income tax. In 1913, the top income tax rate was 7%.

Tom Wheelwright joins GRE for a record 21st time on green energy tax breaks.

Wind, solar, hydrogen, geothermal, nuclear, and car charging stations will likely receive more tax incentive support under Joe Biden.

Oil & gas tax deductions could be limited or eliminated.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/355

Tom Wheelwright’s network:

Wealthability.com

Watch Tom & I on YouTube:

GetRichEducation.com/YouTube

Active Listing Count Of Homes:

https://fred.stlouisfed.org/series/ACTLISCOUUS

The Income Tax Since 1913:

https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx#

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

354: Rents Are Skyrocketing, Tom Wheelwright on Biden Taxes Jul 19, 2021

Rents are shooting up in many metros, including GRE cities.

Cyclically, housing prices shoot up first. Rent raises follow.

Inflation is hot: CPI is up 5.4%, PPI up 7.3%.

Tom Wheelwright, CPA of Wealthability joins us. Topics:

Will income tax and capital gains tax increase?

The 1031 Exchange is at risk!

How to contest your property taxes.

Involving your children in your business for tax breaks.

A more active tax audit climate.

This is Tom’s record 20th GRE appearance.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/354

Tom Wheelwright’s network:

Wealthability.com

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

353: Landlords Get Vilified, Housing Market Update with Damion Lupo Jul 12, 2021

Society and media often lambaste landlords.

I discuss an absurd article titled: “Landlord System Morally Unethical… Contributing Nothing To Society”.

Some slumlords exist, but many landlords are responsible.

Many landlord critics think money is inherently evil.

Damion Lupo joins me to discuss what happened at the latest Real Estate Guys’ Investor Summit.

The homeownership rate is expected to decrease, meaning more renters.

It will take at least a decade to raise housing supply to meet demand.

We discuss whether inflation is here to stay or not.

Damion provides you with the best retirement plan that I’ve ever heard known - the eQRP. Make gains truly tax-free, have $100K+ annual contribution limits, and invest in virtually anything - real estate, crypto, your own business.

Learn more. Text: “EQRP” to “72000”.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/353

Chantilly News on landlords:

https://chantillynews.org/7141/opinions/landlord-system-morally-unethical-contribute-nothing-to-society/

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

eQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

352: Rich People Have The Most Debt Jul 05, 2021

Paid-off properties have an opportunity cost that few consider.

Wealthy celebrities that choose mortgages are: Mark Zuckerberg & his wife, Elon Musk, Megan Markle & Prince Harry, Beyonce & Jay-Z, Chrissy Teigen & John Legend, and Charlie Sheen.

I personally have held millions in mortgage debt from a young age. I’ve long had the ability to pay it off, have not, and will not.

Good debt defined: 1) Secured. 2) Low mortgage interest rate. 3) Payments outsourced to tenants.

How your bank sees your debt: 1) You have insured their collateral. 2) When you improve the property, you improve their collateral. 3) 1-4 unit properties - comparables. 5+ properties - income & debt coverage ratio.

The risk of high mortgage debt is being overleveraged. This means you cannot service the debt payments.

Chris Naghibi joins me. Though he dispenses financial guidance to celebrities, he helps everyday people qualify for mortgages.

We discuss mistakes to avoid with your credit score and debt-to-income ratio.

Learn about today’s appraisal environment.

Today, on average, homes sell for more than the asking price. That’s weird!

The average credit score is now 786 for mortgage borrowers.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/352

Chris Naghibi:

TikTok: @ChrisNaghibi

Instagram: @ChrisNaghibi

YouTube: Chris Naghibi

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

351: Jim Rogers - Inflation & Your Economic Future Jun 28, 2021

Legendary investor and business mogul Jim Rogers joins us from Singapore.

Inflation is on the rise. I was just asked to leave a tip at Subway for the first time.

Inflation nudges most people toward poverty. It moves GRE listeners toward prosperity.

Rents for detached SFHs are up 7.9% year-over-year.

The NAR just told us America is 6.8 million housing units short of demand.

World governments are printing, spending, and driving interest rates to all-time lows. Historically, this has led to higher inflation.

I ask Jim Rogers about inflation and the prospects for U.S. hyperinflation.

He believes interest rates will go higher “in the next few years”. He likes tying up 30-year fixed rate mortgages.

Jim thinks the free market might take control of interest rate policy away from The Fed (wow!).

“The next recession is going to be the worst in my lifetime.” -Jim Rogers

Jim Rogers & I also discuss: MMT, agricultural real estate, cryptocurrency, and advice for a young person.

I explain what CBDCs are - Central Bank Digital Currencies.

Resources mentioned:

Jim Rogers’ resources:

www.JimRogers.com

SFH Rents See Huge Gains:

https://www.cnbc.com/2021/06/15/rents-for-single-family-homes-just-saw-the-largest-gains-in-nearly-15-years.html

America Is Short 6.8 Million Homes:

https://www.businessinsider.com/housing-market-short-millions-homes-homebuilding-real-estate-nar-report-2021-6

Show Notes:

www.GetRichEducation.com/351

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

350: Blair Singer - Why Sales Solves Nearly Every Problem Jun 21, 2021

Rents are up, up, up. This is because surging home prices are displacing the first-time affordable homebuyer.

Rich Dad Sales Advisor Blair Singer joins us. He helps you get that “little voice” in your head to tell you the right thing.

When you master your little voice, you more often move from employee to business owner or entrepreneur. It takes self-belief. Begin with the end in mind.

Blair tells you why you don’t have to be an attack dog in sales. Just help others!

I try my sales pitch with Blair, then he tells me that my sales style is a retriever.

In a selling situation, the person with the highest energy wins.

Resources mentioned:

Blair Singer’s resources:

www.BlairSinger.com

Show Notes:

www.GetRichEducation.com/350

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

349: Rent vs. Price Relationship, House Prices 1963-Present Jun 14, 2021

Learn the housing price level every year from 1963 to present with an entertaining retrospective - from $18K to $372K.

Top takeaways over time: 1) Real estate usually goes up. 2) Real estate does not always go up.

Housing rents and prices often correct toward each other.

Home prices are rising globally. The highest: Turkey, New Zealand, Luxembourg, and Slovakia. Some of the lower rises are in East Asia.

Canadians can hardly believe that Americans get 30-year fixed rate mortgages, 1031 Like-Kind Exchange.

Redfin CEO Glenn Kelman believes that high housing demand is cooling off and the market is normalizing.

Building a home has never been more expensive.

I cover a case study for you about how new-build Boise single-family ranch homes had a sale price increase of $472K up to $747K over the last two years.

Your tenant is probably doing better this year than last. Unemployment is down to 5.8%.

Rent amounts are more stable than home prices.

I draw the line. Current rent vs. own dividing lines are 0.7% RV ratio and $250K purchase price.

You can still find decent $100K - $150K properties in: Memphis, Little Rock, Cincinnati and Dayton.

Resources mentioned:

Median New House Prices (Census, HUD):

https://fred.stlouisfed.org/series/MSPUS

Bloomberg: Global Home Price Rise:

https://www.bloomberg.com/news/articles/2021-06-03/global-home-prices-rise-most-since-2006-fueling-bubble-concerns

Music samples used with permission.

Show Notes:

www.GetRichEducation.com/349

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

348: How To Raise Rents, Update On Florida Income Property Jun 07, 2021

With only small rent increases, your cash flow can rise 20-50%. Learn how to successfully achieve these small rent increases.

Also, learn what to never say to your tenant. It’s a mistake that I made.

Make gradual rent raises and provide justification for the increase.

Florida’s surging net in-migration provides tons of rent-paying tenants. The numbers work here for out-of-state investors.

Learn more & get properties at www.GetRichEducation.com/CentralFlorida

These new construction SFRs are often $200K. Investors must come in all-cash and do a cash-out refinance later.

This BRRR is: Buy, Rent, Refinance, Repeat. (No rehab.)

Rent-to-price ratios are near 0.8%. Insurance premiums are often extremely low on these brand new builds.

Renter demand is astounding. There are more than 1,000 tenants on waiting lists for these new-build Florida SFRs on quarter-acre infill lots.

Get started with new construction Florida income property at: www.GetRichEducation.com/CentralFlorida

Resources mentioned:

Find new-build Florida income property:

www.GetRichEducation.com/CentralFlorida

Show Notes:

www.GetRichEducation.com/348

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

347: Will Cheap 3-D Printed Homes Devalue House Prices? May 31, 2021

Will the rise of 3-D printed homes make housing construction so cheap that values of all existing homes will depreciate?

I explore this with you.

It’s the third installment of our 3-part housing supply crisis series.

3-D printing uses lots of concrete. It is the world’s most popular building material.

No matter how one builds, there are still costs of: labor, land, materials, design & planning, architecture & engineering, site work & drainage, and regulation.

A recent NAHB study shows that the regulatory cost of building a new single-family home is a staggering $94,000.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/347

$94K Regulatory Cost To Build A New Home:

https://www.nahb.org/news-and-economics/industry-news/press-releases/2021/05/regulatory-costs-add-a-whopping-93870-to-new-home-prices

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

346: This Could Crash The Housing Market, REI Mindset with Aundrea Newbern May 24, 2021

What one thing could crash the housing market … even more than expiring forbearance? It’s something that NO ONE is talking about.

Is the economy REALLY coming back?

Where is inflation headed?

Hyperinflation & real estate is discussed.

I tell you what surprising investment I personally made last month.

Then, what’s an important part of your investor mindset that you probably haven’t thought about before?

Through Q3 of last year, homeowners have an all-time inflation-adjusted high of $257K in equity.

Some NYC mayoral candidates have embarrassing perceptions of Brooklyn housing costs.

Aundrea Newbern from GRE Operations & I review a book we like: “NOT Your How-To Guide To Real Estate Investing” by Ali Boone.

My new 5-part Video Course on the “5 Ways Real Estate Pays” is free and open to all. Go to “Get Rich Education” YouTube now.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/346

Get mortgage loans for investment property:

RidgeLendingGroup.com

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

345: Housing Supply Crisis - Building With Shipping Containers May 17, 2021

A shipping container costs less than $5,000. Why doesn’t America build more housing with them?

Gregg Cohen of JWB Real Estate Capital in Jacksonville, FL reveals how their 18-unit shipping container apartment complex created financial loss.

The shipping container apartments are 320 square feet each.

Learn about: what a vertically integrated company is, build-to-rent homes, turnkey real estate, the pros and cons of shipping container housing, permitting, and zoning constraints.

Making shipping containers livable adds expense: windows, heating, cooling, electricity, water, ventilation and fire safety.

JWB blew their budget! $1.3M budget vs. $2M reality.

Gregg estimates that shipping container building costs them 20-30% more than conventional wood frame construction.

Their non-pandemic rent collection = 98.5%

In-pandemic rent collection worst = 97%

2020 rent collection total = 98%

JWB has available inventory of Jacksonville income property now - during the housing supply crisis. How can they do that? He tells us.

If you seek more income property, start at: www.CashFlowAndGrowth.com or phone (904) 677-6777.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/345

JWB’s available Florida income property:

www.CashFlowAndGrowth.com

JWB’s Facebook Group:

www.JWBFacebookGroup.com

Get mortgage loans for investment property:

RidgeLendingGroup.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

344: Biden’s Tax Increases & Real Estate - with Kristin Tate May 10, 2021

Kristin B. Tate (FOX News, CNN, MSNBC) joins me to discuss Biden tax and housing policies, inflation, and investing.

President Joseph R. Biden, Jr.’s bill to create a $15,000 first-time homebuyer tax credit is wrong. It helps the demand side. America needs help on the supply side. I give ideas.

Biden wants to severely limit the 1031 Tax-Deferred Exchange for real estate investors. Only your first $500K of gains would be exempt from capital gains tax.

This would cause a rush of sales in the real estate market. It would also hurt long-term liquidity for larger apartment buildings.

Zumper’s National Rent Report shows substantial rent increases in many Midwest and South real estate markets. I detail them.

Next, Kristin B. Tate tells us why printing trillions of dollars means that investors should get out of the dollar.

We discuss Joe Biden’s proposed increases to both income tax and capital gains tax.

Kristin favors buying real estate assets to hedge against inflation: real estate, physical gold & silver, and cryptocurrency.

Resources mentioned:

Kristin B. Tate on Twitter:

@KristinBTate

Kristin B. Tate’s website & books:

www.KristinBTate.com

Show Notes:

www.GetRichEducation.com/344

Zumper National Rent Report:

https://www.zumper.com/blog/rental-price-data/

Get mortgage loans for investment property:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

343: Housing Shortage Crisis Deepens - Case Study With A Developer May 03, 2021

Today, available homes are as scarce as a rare earth mineral.

Under 500K homes are available for sale today, well below the historic 1M-1.5M at any given time Source: Federal Reserve.

High demand exists independent of low inventory.

Developers and homebuilders need years to help us build our way out.

The development team of Rob Fuller and Jared Garfield tell us how today’s developers cope with the rising cost and unpredictable supply of: copper, lumber, PVC and other building materials.

Their project in Colorado Springs, CO is in the path of progress. In 2019, U.S. News & World Report named the area the #1 Economy In America.

The Denver Post stated that by 2050, Colorado Springs will be larger than Denver. (Wow)

The project is 800 acres of higher-end homes on 2.5-acre lots. Homes start in the high $600Ks. That does not work for cash flow via direct ownership.

This is not “spec building”. Homeowners have already funded with non-refundable earnest money.

You can project a construction loan to the project yourself. Cash-on-cash returns are 9% to 15%, depending on the investment amount. $100K minimum. Learn more about this project at www.GetRichEducation.com/ColoradoSprings.

Investors have substantial guarantees and financial buffers.

This is an A+ real estate asset class.

You can view weekly project drone footage. On-site visits are available. I might attend one where you could meet me in-person in Colorado Springs.

Resources mentioned:

Private Lending in the Path Of Progress:

GetRichEducation.com/ColoradoSprings

U.S. Active Home Listing Count:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Show Notes:

www.GetRichEducation.com/343

Get mortgage loans for investment property:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

342: Ken McElroy - Inflation, Mortgage Rates, and Home Prices Apr 26, 2021

Three reasons NOT to buy income property: 1) It is illiquid. 2) Speculative mania without cash flow. 3) You want zero involvement.

With that understanding, direct ownership of rental real estate still has the best risk-adjusted return today.

President Biden wants to keep people in their homes. He doesn’t want residents removed from their homes under his watch - both homeowners and renters.

Higher mortgage interest rates lead to both higher prices and lower supply. This is counterintuitive to many. I explain why.

The last six times that interest rates rose in America, housing prices rose too.

I read the menu prices from McDonald’s restaurant in 1974. It makes inflation’s effect apparent.

Then Ken McElroy joins me. Together we discuss how inflation affects consumers and real estate investors from an in-person video at his Scottsdale, AZ office.

Ken reminds us how high inflation can go. It was 15% for a time in the 1980s.

Resources mentioned:

KenMcElroy.com

Show Notes:

www.GetRichEducation.com/342

Get mortgage loans for investment property:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

341: Affordable Tiny Homes In Tropical Highlands Apr 19, 2021

These homes are tiny, eco-friendly, and affordable, with the option of having smart home technology.

Panama has friendly people, safety, a low crime rate, and robust economy.

Organic food is grown on-site, recycled graywater waters your garden, there are community orchards, hiking trails, a yoga area, bird-watching stations, pool, river, and a sense of community.

This tiny home community in the highlands often experiences temperatures in the 70s and 80s fahrenheit. It is a lush greenscape, not close to the beaches.

These tiny homes have 300 - 600 sf of interior space.

Rachel Jensen joins us to tell us more. Only a few tiny homes are available now at: www.getricheducation.com/tinyhomes

Foreign owners can get full title to their property.

You can earn rental income from your tiny home, with in-house property management.

You can fund your property via: all-cash, 50% loans, 80% loans, IRAs, gold, or cryptocurrency. Property prices start at $119K.

Second residency in Panama is an option for property owners. The next property tour is June 23rd - 27th, 2021.

Learn more and get the report at: www.getricheducation.com/tinyhomes

Resources mentioned:

Panama Tropical Tiny Homes:

www.GetRichEducation.com/TinyHomes

Show Notes:

www.GetRichEducation.com/341

Get mortgage loans for investment property:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

340: Do Homeowners Really Build Wealth? - with Daniel Amerman Apr 12, 2021

Your home is a liability, not an asset.

That’s according to Robert Kiyosaki. This is because your home takes money out of your pocket every month. An asset puts money into your pocket.

Today’s guest, author and economist Daniel Amerman, has a different perspective.

He states that forces like inflation and a mortgage (leverage) make your primary residence a strong investment vehicle.

Daniel’s research shows that historically, homeowners nearly double their equity in three years, triple it in seven years, and quadruple it in ten years (80% LTV loan).

We discuss whether home price increases are derived from appreciation or inflation.

First, I remind you why financially-free beats debt-free. Convert equity to cash flow. Extra mortgage principal paydown does the opposite - it converts cash flow to equity.

Classically, on a balance sheet, your home is an asset.

Remember that a homeowner’s return is not generated from equity. It is generated from the local housing market.

Hear my rant about how carpet beats hardwood floors.

Resources mentioned:

Daniel Amerman’s website:

www.DanielAmerman.com

Show Notes:

www.GetRichEducation.com/340

Get mortgage loans for investment property:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

339: Low Mortgage Interest Rates For Income Property with Caeli Ridge Apr 05, 2021

Learn how to bring as little money as possible to the property closing table.

Ridge Lending Group President Caeli Ridge tells us how to do this. She also predicts the future interest rate direction.

Mortgage interest rates hit all-time lows three months ago. Freddie Mac has tracked rates since 1971.

The 30-year fixed rate mortgage debuted in America in 1948. It’s an incredible tool that few, if any, other world nations have.

Before this, it took a 50% down payment and refinancing every 3-5 years.

Mortgage rates have been falling for 700 years! From the year 1311, we look at interest rate history in the French Crown, Spanish Crown, Italian merchants in Milan, Genoa.

The latest marker of today’s low housing supply is the fact that there are currently more real estate agents than available homes.

Is rush hour traffic a thing of the past? We explore this.

Caeli Ridge helps us understand the ominous new 7% Fannie Mae funding limit on single-family mortgages on second homes and investment properties. Result = higher loan prices.

Does it make sense to pay discount points at the closing table? Discount points are like prepaid interest. We explore pros and cons.

Often, a seller can pay up to 2% of your purchase closing costs.

Caeli predicts the future direction of interest rates. I’m refinancing properties with Ridge myself right now. Start at: www.RidgeLendingGroup.com

Resources mentioned:

Get mortgage loans for investment property:

RidgeLendingGroup.com

Show Notes:

www.GetRichEducation.com/339

Early 1900s Mortgage Rate Charts:

https://www.thetruthaboutmortgage.com/check-out-these-mortgage-rate-charts-from-the-early-1900s/

Interest Rates Have Been Falling For 700 Years:

https://www.visualcapitalist.com/700-year-decline-of-interest-rates/

There Are More RE Agents Than Homes For Sale:

https://www.wsj.com/articles/new-realtors-pile-into-hot-housing-market-most-find-it-tough-going-11616328002

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

338: Why Asset Prices Should Keep Surging with Richard Duncan Mar 29, 2021

The Fed is about to unleash a tidal wave of liquidity that you probably don’t know about.

I was recently at my favorite Mexican takeout restaurant. It was the first time they began asking for tips. This is inflation. It is likely not measured in CPI or Core PCE.

Richard Duncan from MacroWatch joins us to discuss how the coming monetary tsunami will stoke asset prices.

This can continue the “price runup party” in real estate, stocks, crypto, and other assets.

Key learning: The Fed changes inflation policy when they see wage price growth, not commodity price growth.

Inflation won’t be high enough to cause interest rates to rise anytime soon.

We know that the Fed currently creates $120B per month. What few know about is the new, simultaneous $900B that the Fed is releasing from their Treasury General Account by the end of June.

More currency + monetary velocity = inflation? No. Richard says there’s more to it, like credit expansion.

The newly passed $1.9T American Rescue Plan, plus a new Biden-proposed multi-trillion dollar infrastructure bill could stoke inflation in the short to medium-term. Richard does not believe high inflation is sustainable long-term.

Get 50% off Richard Duncan’s “MacroWatch” when you use Discount Code “GRE” at: www.RichardDuncanEconomics.com

Though consumer price inflation should stay low, a lot of asset price inflation should continue.

Richard also reveals a scenario where interest rates could decline.

Resources mentioned:

Get 50% off MacroWatch. Use Discount Code “GRE”:

www.RichardDuncanEconomics.com

Show Notes:

www.GetRichEducation.com/338

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

337: Where Has All The Housing Gone? Here. Mar 22, 2021

With shrinking national housing supply amidst surging demand, some investors cannot find sufficient inventory.

People are moving to places like: Texas, Tennessee, and Florida.

Suburban properties have higher appeal with today’s work-at-home trends.

New construction properties in infill areas have advantages: an established area, neighbors with equity.

Learn about a system to help keep your property taxes discounted.

With all this in mind, learn about what capitalizes on all of these trends - and there’s available inventory.

Purchase prices are from the $140Ks & up - new construction - SFHs up to fourplexes and larger. Who knows how long this will last? Get started at: GetRichEducation.com/Texas.

You will receive a report and an invitation to a live Texas properties webinar with me this coming Friday, March 26th at 3PM ET.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/337

Learn more & attend Friday’s Texas properties webinar:

www.GetRichEducation.com/Texas

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

336: It Begins With Honesty. I’m Sorry. This Is The End. Mar 15, 2021

I hope that it changed you.

Don’t quit your daydream.

-Keith

Resources mentioned:

Show Notes:

www.GetRichEducation.com/336

First American Real HPI:

https://www.firstam.com/economics/real-house-price-index/

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

335: Ken McElroy - How To Get Money For Your Property Mar 08, 2021

To get money for real estate, you don’t always have to save up every dollar yourself.

You can use:

Equity from another property - my favorite

Seller-paid closing costs

Seller financing

House hacking

Rent income from duplexes and fourplexes

Lease-Purchase Agreement

Mortgage assumptions

Seller-held second mortgages

Syndication

Partnerships

Ken McElroy joins me to discuss how to attract investors to your real estate deal and more.

He outlines borrowing from your 401(k) and using your retirement plan for real estate.

Teach others about what you know. Just give with nothing in return expected. People will trust you later when you have a real estate deal.

Resources mentioned:

Ken’s free resource:

www.kenmcelroy.com/getricheducation

Show Notes:

www.GetRichEducation.com/335

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

334: Is A Housing Crash Imminent? Mar 01, 2021

Will a housing price crash occur when homes can be foreclosed upon again?

Sean O’Toole of PropertyRadar.com and I compare 2007’s housing crash with 2021’s health crisis-related recession.

“Home prices never go down.” That’s what many people said in 2005! Wrong.

Learn the housing differences between the last recession and the current one: lending standards, housing supply, regulatory change, construction labor force, construction supply disruptions, household formation.

Sean tells why we will not have a big dump of housing supply on this market anytime soon.

There will still be some delinquent homeowners after the forbearance period ends.

The Biden Administration plans to work with borrowers that have federally-backed mortgage companies and provide them with repayment plans.

Prediction from Sean: mortgage rates will dip below 2%.

Resources mentioned:

PropertyRadar.com

Show Notes:

www.GetRichEducation.com/334

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

Ali Boone’s Recommended Book:

https://amzn.to/2NsMVlF

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

333: High-Yield Cash Flow through Private Lending with Dani Lynn Robison Feb 22, 2021

If you hold a savings account, you’re a lender. You lent money to the bank and they pay you under 1%.

You can lend for real estate, get a 6-12% cash yield with low hassle, and hold real estate as collateral.

This is some of the most passive, hassle-free income in all of real estate.

Learn more at: www.getricheducation.com/lending

Typically, a real estate company seeks to: buy a distressed home for $50K, pay another $20K to rehab it, then sell it for a profit. That $70K is what they seek private lenders for.

This means that the real estate company can provide the distressed seller with a quick, all-cash closing. (Remember, these properties can’t be financed with banks.)

Loan duration is often twelve months.

Dani Lynn Robison of Springboro, Ohio-based Freedom Real Estate Group tells us how Private Money Lending works.

Everyday investors like you can fund this with cash, retirement accounts and HELOCs.

Resources mentioned:

Begin with Private Lending at:

www.GetRichEducation.com/Lending

Show Notes:

www.GetRichEducation.com/333

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

332: Financial Freedom With Four Single-Family Homes Feb 15, 2021

Today’s guest reveals how he gets $10,755 of monthly cash flow with four SFHs. They’re long-term rental tenants.

Get our free newsletter here: www.getricheducation.com/letter

I tell you why a man with $20 million of debt is a financial winner, making analogies to Brett Favre and Cy Young.

Ryan Chaw of Sacramento, CA joins us. A full-time pharmacist, he’s age 29, on track to retire from real estate income by age 31.

Unusually, he invests in California single-family homes (SFHs). It’s not an area known for cash flow.

He rents them to carefully-screened college students. He self-manages, but hasn’t visited his properties in over a year.

In areas like Stockton, CA, he gets $3,000 rent from a $300K SFH.

Ryan uses his “PRIME” Method: Placement of ads, Review applicants’ social media, Identify tenant type, Measure responsiveness, and Ensure proof of income.

He has 17 tenants in four SFHs.

Ryan gets money for down payments with his W-2 job. He also uses a HELOC to reset his leverage and create arbitrage.

He travels the world too. He won’t delay all gratification.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/332

Ryan Chaw’s free guide:

www.NewbieRealEstateInvesting.com

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

331: How To Never Leave Money On The Table - Negotiating with Chris Voss Feb 08, 2021

Hear a mock negotiation between Chris Voss & I for a fourplex building today!

The former lead international hostage negotiator for the FBI, Chris is now America’s top negotiation coach.

In a negotiation: Who goes first? Does “anchoring” work?

In real estate, terms are often more important than price.

“Never be so sure of what you want that you wouldn’t take something better.” -Chris Voss, today's show

He does not use the term “win-win”. It’s a giveaway that someone is trying to pick your pocket.

The “other side” always has hidden cards that could benefit you.

Be curious. A positive mind frame makes you 31% smarter.

At times, it helps to address “fairness” at the beginning of a negotiation.

Let the word “no” out softly.

If there’s an elephant in the room, address it.

Chris uses the “mirroring” technique on me. He makes me think that conceding was own idea! Amazing.

He has free negotiation resources for you. For his newsletter, text blackswanmethod to 33777. Outside the U.S., go to: www.blackswanltd.com

Silence and humor are effective negotiation techniques in certain situations.

I tell Chris my favorite negotiation line and get his opinion: “What flexibility do you have?”

Resources mentioned:

Show Notes:

www.GetRichEducation.com/331

Get free newsletter from Chris Voss:

U.S.: Text blackswanmethod to 33777

Outside U.S.: www.blackswanltd.com

Chris Voss’ book:

https://www.amazon.com/Summary-Never-Split-Difference-Analysis/dp/1683784391

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

CashFlowAndGrowth.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Best Financial Education:

GetRichEducation.com

Get our free, wealth-building “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

330: How To Grow Your Property Portfolio Feb 01, 2021

After your first 10 rental properties, what comes next?

Buying more than 10 financed properties of 1-4 units often incurs an interest rate about 2% higher.

Apartment buildings of 5+ units is an option.

You can become a real estate syndicator. It is sophisticated. This means you identify a big real estate complex and attract other investors’ money to the deal.

Syndications often SEC-regulated. To attract investors, you must also build your brand.

You can be a private money lender with a stable 10% cash-on-cash return. Real estate is your collateral. See: www.getricheducation.com/lending

With agricultural real estate, the trees are the tenants. They don’t vacate the property and they’re low maintenance. The asset literally grows; land is titled to you. See: www.getricheducation.com/teak

“Family offices” manage wealth for affluent families and individuals. They might cost $1M per year, meaning you’d often need assets of $100M+.

Direct real estate investors “feel the bumps”. I recently had a truck accident-damaged property that was in disrepair for 9 months!

This year, John Burns RE Consulting predicts existing home prices to rise +8%, new homes +9%.

It took Tesla 17 years to make a profit. You often do this in 1 month with real estate.

Damion Lupo drops by with crucial eQRP updates. An eQRP lets you: invest your retirement funds in nearly anything, $58,000 annual contribution limit, no custodian, and avoid a 37% UBIT tax hit (like you have with SD-IRAs).

Resources mentioned:

Get the free eQRP book; text “EQRP” in all capital letters to: 72000

Great turnkey provider for beginners:

www.MidSouthHomeBuyers.com

Rare provider with 1% rent-to-price ratio:

www.GetRichEducation.com/Dayton

Private Money Lending:

www.GetRichEducation.com/Lending

Teak hardwood trees:

www.GetRichEducation.com/Teak

New fourplexes in West:

www.GetRichEducation.com/Fourplex

New fourplexes in Southeast:

www.GetRichEducation.com/Southeast

Turn $100K into $300K in five years:

https://www.getricheducation.com/turn-100k-300k-five-years/

Show Notes:

www.GetRichEducation.com/330

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

329: Ken McElroy - What Real Estate Investors Must Know Today Jan 25, 2021

Joe Biden’s economic plan for real estate investors is detailed.

Expect: higher income tax, extended eviction & foreclosure moratoriums, $15 minimum wage, $15K first-time homebuyer tax credit, more stimulus checks.

Can landlords still evict tenants for non-payment of rent? Yes. I explain how.

With all this money printing, I expect inflation to stay low due to low velocity.

Ken McElroy joins me again today. He’s the Rich Dad real estate advisor.

Migration patterns per U-Haul favor these top 5 states: TN, TX, FL, OH, AZ. #1 for out-migration last year was CA.

72% of people move within the same state, per Ken.

Today’s tenant trends: Larger units, security gates, pets, outdoor lighting, small yards, remote rent collection. Proximity to central business districts is less important. Pets attract seniors.

Ken has increased income by embracing pets, and reduced expenses by requiring that tenants have Renters Insurance.

Learn about how he handled recessionary apartment income disruptions for his investors.

Resources mentioned:

See Ken McElroy’s predictions video:

www.KenMcElroy.com/GetRichEducation

Show Notes:

www.GetRichEducation.com/329

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

328: Why Today’s Hottest Housing Niche Is Build-To-Rent Jan 18, 2021

My housing prediction for the next few years is revealed at the beginning of the show.

Learn why higher interest rates mean less housing supply.

Learn how to buy new construction income properties as inexpensively as $169K at: www.getricheducation.com/southeast

Last year: Real estate was up 11%, mortgage rates fell from 3.72% down to 2.67%, inflation fell from 2.5% to 1.4%, S&P 500 up 16%, dollar weakened, bitcoin surged 400%+, gold & silver had their best years since 2010, oil down 21%.

“Build-To-Rent” (B2R) means that properties are constructed with tenant-occupants, not owner-occupants.

Durable finishes are used, like cement hardie board, vinyl plank flooring, and granite countertops.

B2R single-family homes as low as $169K (new construction). Duplexes, triplexes, and fourplexes are also offered in Florida and Georgia at: www.getricheducation.com/southeast

Tenants in these B2R properties often have incomes of $100K+.

Today’s renters want a yard, even if it’s small. They don’t want a fireplace. With remote working trends, proximity to an urban area is now less important.

Resources mentioned:

Build-To-Rent FL & GA property:

www.GetRichEducation.com/Southeast

Show Notes:

www.GetRichEducation.com/328

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Chris Voss on Masterclass:

www.Masterclass.com

327: Debt-Free Is Dumb Jan 11, 2021

Has “debt-free” now become a poverty marker?

Debt is good when: 1) The interest rate is lower than inflation, and 2) When tenants pay your debt for you.

Get our free “Don’t Quit Your Daydream” Letter at: www.getricheducation.com/letter

Home equity is: unsafe, illiquid, and its rate of return is always zero.

If you pay an extra $100 toward your mortgage principal, you just converted your cash flow to equity. That’s the opposite of financial freedom.

Learn myriad reasons for removing equity from property: a litigious society, natural disasters, job loss, and more.

Paying down your low interest rate debt won’t create wealth. But using debt to create residual income streams can.

More equity = more risk.

Why would you even want to be debt-free?

Resources mentioned:

Show Notes:

www.GetRichEducation.com/327

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

326: Why Fourplexes Are Special Wealth Creators Jan 04, 2021

The largest building you can buy with the best loan terms is a residential four-unit building.

Noticing high fourplex demand years ago, one savvy developer has been successfully providing new build-to-rent fourplex communities in the U.S. Intermountain West.

Get the report and connect with the provider at: www.getricheducation.com/fourplex

These often have a price point of $750K or more, and require a 25% down payment. You’re rewarded with Fannie / Freddie 30-year loans at low interest rates.

High-growth Utah, Idaho, and Arizona markets are served with these new construction fourplexes.

Learn how a developer selects land tracts at the edge of metro areas.

I use what is considered a profane term in the industry.

Resources mentioned:

New Build-To-Rent Fourplexes:

www.GetRichEducation.com/Fourplex

Show Notes:

www.GetRichEducation.com/326

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

325: A Remarkable Year In Housing, How You Can Achieve Any Goal Dec 28, 2020

A summary of major housing and economic stories this year.

Then, a framework for how you can achieve any goal is revealed.

Our own Aundrea Newbern joins me.

She describes her concrete goal of going from her current $10K up to $30K of monthly residual real estate income.

Get our free “Don’t Quit Your Daydream Letter” here: www.getricheducation.com/letter

Resources mentioned:

Show Notes:

www.GetRichEducation.com/325

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

324: How To Find Deals At Property Foreclosure Auctions Dec 21, 2020

Learn mistakes to avoid and how to buy a distressed property at a discount at a foreclosure auction.

First, the average borrower now has $194K in home equity due to high recent home price appreciation. Only 3% have a negative equity position.

Freddie Mac shows home prices up 9.7% year-over-year.

First American’s Real House Price Index accounts for home prices, interest rates, inflation, and affordability. The surprise? Real prices are down 26.8% since January 2000.

Today’s guest, Colin Murphy, is an acknowledged expert in buying properties at foreclosure auctions. He reveals how it works in some Florida counties.

Death, divorce, drugs, and unemployment can all lead to a borrower missing mortgage payments and having their property fall into foreclosure.

Foreclosure auctions have moved online in states like Florida (but not Texas). Often, you must give a 5% deposit at bid time, 95% balance paid same-day.

2 minutes of bidding per property.

Learn how high one should bid on a foreclosure property. You can find mortgage, lien and permit information online. You must know how to estimate renovation costs. Assume the worst.

Foreclosure moratoria have created low inventory levels in the market.

Resources mentioned:

More about Colin Murphy:

ColinInvestments.com

FATCO’s Real House Price Index:

https://www.firstam.com/economics/real-house-price-index/

Recent Homeowner Equity Gains:

https://www.cnbc.com/2020/12/10/homeowners-gain-1-trillion-from-pandemic-driven-housing-boom.html

Show Notes:

www.GetRichEducation.com/324

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Get our free “Don’t Quit Your Daydream Letter”:

www.GetRichEducation.com/Letter

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

323: How To Qualify For A Mortgage Today with Caeli Ridge Dec 14, 2020

The deal is the debt. Why? Because mortgage rates are at all-time lows. People are buying property like crazy.

Learn why 30-year fixed rate mortgages are a great deal for the borrower and a bad deal for the lender.

Caeli Ridge, President of Ridge Lending Group, tells us about qualifying for income property loans today.

Your first 10 loans single / 20 loans married for 1-4 unit properties have the best rates and terms: 20-25% down, 50% max. DTI, super low interest rates.

For more loans, called “non-QM” loans: $135K minimum size, 75% LTV, higher interest rates.

Opinion: Fannie & Freddie will stay in conservatorship, keeping mortgage rates low.

Conforming loan limits will increase from $510,400 to $548,250 (SFH), and higher for 2-4 unit properties.

Rate & term refinances - SFH: 80% LTV | 2-4 unit: 75% LTV

Cash out refinance terms - SFH: 75% LTV | 2-4 unit: 70% LTV

We get an update on appraisal climate. I educate you on the three appraisal approaches: cost, income, comparison.

Ridge does loans in 43 of the 50 states, all except: AK, ME, ND, NY, VT, WV, WY.

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

Phone:

(855)747-4343

E-mail:

info@ridgelendingroup.com

Show Notes:

www.GetRichEducation.com/323

Top Properties & Providers:

GREturnkey.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

322: Real Estate vs. Bitcoin Dec 07, 2020

How would you value a four-plex in bitcoin?

The world’s largest cryptocurrency, bitcoin, needs more stable pricing to gain faith for widespread currency use.

Crypto pros: Generational, international, blockchain, increasing faith.

Crypto cons: Security, not widely accepted, short history, volatile, government intervention fear, no price bottom.

Learn the pros and cons of buying rehabbed & tenanted turnkey property vs. doing it all yourself. Find property here: www.GREturnkey.com

Three big reasons people don’t invest in real estate:

They don’t understand the rates of return.
They don’t know about turnkey real estate.
Many think you must be a flipper or landlord.

Turnkey pros: Save time & hassle, leverage economies of scale, leverage professionals, geo-diversification.

Turnkey cons: Higher initial cost, risk of suspicious pre-placed tenants.

I explain why it’s best to own properties in 3 to 5 different markets from www.GREturnkey.com.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/322

Top Properties & Providers:

GREturnkey.com

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

321: Booming Home Price Appreciation and Record Prices Nov 30, 2020

A crystal ball prediction for the housing market does not exist.

The best measure may be the forward-looking Homebuilder Confidence Index. It just hit an all-time high for optimism.

Interest rate direction has little to do with housing prices. But it helps.

Real estate is not an asset. Real estate derivatives are assets, whether it be a mortgage or a lease.

Gregg Cohen of JWB Real Estate Capital joins us. He’s a longtime provider of new construction turnkey rental property in Jacksonville, FL. See their properties at: CashFlowAndGrowth.com

We discuss how appreciation makes long-term real estate investors more money than cash flow, amortization, tax benefits or inflation-profiting.

Resources mentioned:

Jacksonville new turnkey property:

CashFlowAndGrowth.com

FHFA Home Price Index:

https://www.fhfa.gov/DataTools/Tools/Pages/FHFA-HPI-Top-100-Metro-Area-Rankings.aspx?

Suburban Rents Rise:

https://www.realtor.com/news/real-estate-news/race-for-space-pushing-up-suburban-rents/

Show Notes:

www.GetRichEducation.com/321

CNBC on home price rise:

https://www.cnbc.com/video/2020/11/13/rise-in-home-prices

-will-be-tremendous-for-builders-analyst.html

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

320: Wealth Destroyers: Inflation and Taxes with Tom Wheelwright Nov 23, 2020

Learn how to keep insidious thieves from stealing your wealth - taxes and inflation.

Higher taxes = lower inflation. I tell you why.

The IRS does not recognize inflation in regard to capital gains.

I discuss property tax, income tax, and sales tax state-by-state. Many coastal states have high property tax and income tax; southern states have high sales tax.

A recent Harris poll showed that work-from-home types value saving money on lunch and gas more than being with their family or having extra time! (Geez.)

Subscribe to our Don’t Quit Your Daydream Letter here.

Tom Wheelwright joins me. Tax brackets are marginal, so use your childrens’ lower tax brackets.

The last dollar you earn is taxed at your highest taxable rate.

The first dollar of a tax deduction comes off your highest taxable rate.

Tax credits beat tax deductions.

Reducing your property tax can be fairly easy.

Resources mentioned:

Connect with Tom:

www.Wealthability.com

Show Notes:

www.GetRichEducation.com/320

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

319: How To Own A Tropical Tiny Home Nov 16, 2020

Before you buy foreign property, consider: access in rainy season, infrastructure, water pressure, safety, community, and developer track record.

Learn about a real estate performance bond and why it’s important.

Own tropical tiny homes, including over-the-water property, as low as $92K. Start here: www.getricheducation.com/tinyhomes

Subscribe to our Don’t Quit Your Daydream Letter here.

These exotic, affordable homes in vacation destinations are in Belize, Nicaragua, and Panama - both beaches and mountains.

As a foreigner, you can own full title to these Central American properties.

These homes are truly “tiny”, often 300 - 400 square feet, a little larger than an RV.

You can live in the property, or rent it out.

The developer has been in business 20+ years. I personally met them nearly 5 years ago.

You can get 50 - 80% financing. Use self-directed IRAs, gold, or crypto for purchase.

To get started, get the Tropical Tiny Homes Report and contact the provider through: www.getricheducation.com/tinyhomes

Resources mentioned:

Tropical Tiny Homes Report & Provider Contact:

www.GetRichEducation.com/TinyHomes

Show Notes:

www.GetRichEducation.com/319

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

318: The Highest Cash-Flowing Investment Known Nov 09, 2020

In this recession, people still ask me how housing prices and demand are surging. I explain.

Then, I discuss the highest cash-flowing hands-off investment I’ve ever heard of. Learn more here.

Subscribe to our Don’t Quit Your Daydream Letter here.

Cash use is increasing, not declining. In fact, the CEOs of PayPal and Venmo even say that cash will be in use for decades.

An individual investor like you can own a lot of 6 ATMs.

ATMs are profitable because some users pay a $2-$3 surcharge to access a $20 bill.

$2,184 is your monthly cash flow. The operator has never missed a monthly payment nor their pro forma projection. ~19% ROI plus tax benefits like bonus depreciation.

In the pandemic, some ATM locations have fared worse, like airports; some better, like a Walgreens. Many people want to withdraw & store money in the pandemic.

If you’re an accredited investor, learn more about ATM investing and contact the provider through: www.GetRichEducation.com/ATM

Resources mentioned:

For ATM Report & Provider Contact:

www.GetRichEducation.com/ATM

Show Notes:

www.GetRichEducation.com/318

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

317: Hal Elrod Turns The Impossible Into The Inevitable Nov 02, 2020

“Miracle Morning” author Hal Elrod tells us that to turn the impossible into the inevitable, you need unwavering faith and extraordinary effort.

Subscribe to our newsletter here.

“The Miracle Morning” has been translated into 37 languages and sold more than two million books. More than 500,000 people actively practice his work daily.

Hal overcame a car accident where he was clinically dead, then a rare form of cancer. This made him genuinely grateful for every moment thereafter.

In your life, you will pursue what you feel is probable, not possible.

The purpose of your goal is not to reach a goal.

It’s to attain the qualities and characteristics of becoming the best version of yourself on your way there.

Hal’s new book is called “The Miracle Equation”.

Resources mentioned:

Show Notes:

www.GetRichEducation.com/317

Hal Elrod’s website & books:

The Miracle Morning

Book recommended by Hal:

Man’s Search For Meaning - Victor Frankl

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

316: Why The Housing Crisis Will Worsen - Keith’s Prediction, Guaranteed Rent Income with GRE’s Aundrea Newbern Oct 26, 2020

Will home prices stop rising soon? No. I tell you why. It’s my prediction.

Subscribe to our newsletter here.

Four reasons home prices will keep rising in the short and intermediate-term are:

Undersupply. America is already undersupplied 2.5 - 3.3 million housing units.
Pent-up demand. More 18-29 year-olds live with their parents now at any time since The 1930s Great Depression. When they get jobs & move out, pent-up housing demand will be released.
Homebuilder roadblocks. The top factor is wildly elevated lumber costs that has made some builders stop building.
Population growth. America grows at 4,800 people every day, nearly 2 million annually.

Many Americans have been suffering from a lapse in federal pandemic stimulus relief. Hear a Nancy Pelosi clip about this.

I discuss hands-on ways to improve your properties’ appeal: paint, flooring blemishes, light fixtures, cabinets, vanities, front door.

GRE’s own Aundrea Newbern joins us. Learn about finding properties and tenants with guaranteed rent income.

You can find these properties and tenants at: GetRichEducation.com/Section8

Concerns about the HUD Section 8 Program are: you must screen tenants harder, property inspections from the HUD case manager.

Section 8 tenants have more motivation to pay rent because they don’t want to lose their housing voucher. They have longer tenancies and are less demanding during tenancies.

If you’re pre-qualified for a mortgage loan and want investment property with guaranteed rent income, start at: GetRichEducation.com/Section8

Resources mentioned:

Show Notes:

www.GetRichEducation.com/316

Find Section 8 properties & tenants:

www.GetRichEducation.com/Section8

Get the Don’t Quit Your Daydream Letter:

www.getricheducation.com/letter

CNN: Blitzer, Pelosi on stimulus:

https://www.cnn.com/videos/politics/2020/10/13/nancy-pelosi-intv-stimulus-bill-trump-offer-coronavirus-tsr-vpx.cnn

Post free to find Section 8 tenants:

GoSection8.com

U.S. and World Population Clock:

www.census.gov/popclock

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

315: How To Avoid Real Estate Scams with Garrett Sutton Oct 19, 2020

Learn how to avoid getting ripped off from a:

Vacant land scam

Foreclosure relief scam

Loan flipping scam

Escrow diversion scam

Rental ad scam

Common consumer scams

Subscribe to our newsletter here.

Asset Protection Attorney Garrett Sutton joins us for the fourth time on the show.

His new Rich Dad Advisor book, Scam-Proof Your Assets, releases this month.

Scammers sell other scammers lists of names of gullible people.

Tell scammers that you want to share their deal with your attorney or CPA. They’ll run away.

Those that get scammed tend to be: less educated, vain, both young & old, crave a good deal, feel isolated, and are more impressionable.

Scammers are often someone you already know; they’re close to you.

Resources mentioned:

Garrett Sutton’s New Book:

Scam-Proof Your Assets

Corporate Direct for LLC Formation:

1-800-600-1760

CorporateDirect.com

Report and track scams at:

ftccomplaintassistant.gov

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

314: How To Find Your Real Estate Vision and Strategy Oct 12, 2020

Your goal might be $15K of monthly real estate income and a $3M net worth within twenty years.

To achieve this, I explain why getting trapped in the future is as bad as getting trapped in the past.

Start early, understand there will be bumps in the road, don’t overanalyze, the worst case scenario almost never occurs, and don’t “time the market”.

Today’s guest offers both rehabbed and new construction rental homes in a thriving market where the numbers work - west Florida.

If you’re pre-qualified for a mortgage (or paying all-cash), get started buying investment property at: GetRichEducation.com/WestFlorida.

Buying one property, one time won’t change your life.

When you’re young, you’re more likely to want a low-priced rental property with higher cash flow and higher maintenance = existing construction.

When you’re older, you’re more likely to afford a higher-priced rental property with lower cash flow and less maintenance = new construction.

House flippers have spending money; buy-and-hold investors build real wealth.

At its core, it’s simple - rent houses to people.

Resources mentioned:

West Florida Income Property:

GetRichEducation.com/WestFlorida

Mortgage Loans:

RidgeLendingGroup.com

EQRPs: text “EQRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “EQRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

CashFlowAndGrowth.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

313: Trump vs. Biden Tax Plans with Tom Wheelwright Oct 05, 2020

Learn how income tax rates, capital gains tax rates, the 1031 Exchange, the estate tax and more will change - or not.

The outcome depends upon whether Donald Trump gets a second presidential second term or Joe Biden is elected as the new president.

Subscribe to our weekly newsletter here.

Tom Wheelwright, the most recurrent guest in show history, joins Keith.

He’s the world’s foremost expert at reducing your taxes permanently. He can help you at Wealthability.com

Resources mentioned:

Tom’s company:

Wealthability.com

The Tax Foundation:

www.taxfoundation.org

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

312: Bubble Danger, Money Is An Abundant Resource, Real Estate Tech with Dr. Michael Ehrlich Sep 28, 2020

You can only have one job. But you can own as many rental properties or vending machines as you want.

Trillions flow through the economy. Build a device to divert this flow to you; you'll see that money is an abundant resource.

Dr. Michael Ehrlich from NJIT’s Martin Tuchman School Of Management joins us to discuss asset bubbles and real estate technology.

We discuss financial bubbles, narrowing credit spreads, debt, overleveraging, NYC overbuilding and financial technology.

Dr. Ehrlich is a general advocate of borrowing for cash-flowing residential real estate today.

Solutions to avoid bubble damage include: residential real estate, water, agriculture, even connectivity.

I discuss real estate technology: 3-D printed homes, autonomous cars, iBuying, indoor drones, virtual tours & staging, remote online notarizations.

Subscribe to our weekly newsletter here.

Resources mentioned:

NJIT’s Martin Tuchman School Of Mgmt.:

https://management.njit.edu/

Dr. Michael Ehrlich e-mail:

ehrlich@njit.edu

iBuyer:

Opendoor.com

Virtual staging:

Rooomy.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

311: Get Ready For The Bidding Wars with GRE's Aundrea Newbern Sep 21, 2020

What does the CDC eviction ban really mean to you?

Learn how to win home price bidding wars in today's hot market.

GRE's own Aundrea Newbern joins us!

Besides working with GRE, Aundrea is an active RE agent in Brunswick, GA. She owns 28 rental doors and has her MBA in Finance.

She owns long-term rental SFHs and apartments, including some Section 8 tenants. She self-manages.

Rock & Roll Hall Of Famer Flavor Flav “drops in” to congratulate the show on 3 million listener downloads.

Aundrea tells you nine ways to avoid being outbid in today’s hot real estate market:

1 - Pick a buyer agent that’s courteous to the selling agent.

2 - Write a letter or send a video to the seller.

3 - Agree to use the seller’s preferred title agent, lender.

4 - Offer more than the asking price.

5 - Offer more earnest money than the customary 1-2%.

6 - Add an escalation clause.

7 - Simply ask what it takes to get your offer accepted same-day.

8 - State that you’ll pay out of pocket in case there’s a low appraisal.

9 - Consider waiving the inspection. (This is risky.)

Subscribe to our weekly newsletter here.

Resources mentioned:

CDC Eviction Moratorium:

https://www.nytimes.com/2020/09/16/business/eviction-moratorium-renters-landlords.html

Aundrea Newbern email:

Aundrea@GetRichEducation.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

310: A Real Estate Winner Today: Florida New Build-To-Rent Homes Sep 14, 2020

The pandemic has fueled remote work.

A New Yorker paying $4,000 rent in a 1 BR apartment can now work from Florida, paying $1,500 rent in a 3 BR & 2 BA single-family home.

Central Florida benefits from this in-migration.

Florida has law that favors landlords, zero state income tax, a low cost of living, beach proximity and of course, warm weather.

Get the report and learn more at: www.GetRichEducation.com/Orlando

These Central Florida Build-To-Rent properties are brand new.

They often appraise for $5,000 to $10,000+ more than your purchase price. That’s built-in equity.

Your rent-to-price ratio is often 0.8% to 0.9% for single-family rentals. The average tenant stay is 3+ years in this new construction.

Get the report and learn more at: www.GetRichEducation.com/Orlando

The growth and economic diversity in the region is astounding.

The time is likely “now”: brand new construction, high rent occupancy, cash flow, low interest rates, low insurance premiums, low $160K - $220K property cost.

Resources mentioned:

Central Florida Build-To-Rent:

GetRichEducation.com/Orlando

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

309: Is Homeownership A Scam? (Rent vs. Own) Sep 07, 2020

Should you rent or own your home?

Host Keith Weinhold reveals the biggest homeowner myths.

Complete episode transcript below. Read along.

Subscribe to our weekly newsletter here.

Resources mentioned:

Business Insider: Rent vs. Own:

https://www.businessinsider.com/buying-a-home-instead-of-renting-isnt-always-better-for-your-savings-2017-11

Housing Wire: Homeowners Wish They Were Renting:

https://www.housingwire.com/articles/49743-quarter-of-us-homeowners-wish-they-were-renting-instead/

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Welcome to Get Rich Education. I’m your host, Keith Weinhold. Is homeownership a sham? Is it a rip-off?

When it comes to the home that you live in yourself, is it better for you to pay rent to a landlord, or own that home yourself?

For your primary residence, what should you do in your specific life situation? You’ll learn today … on Get Rich Education.

——————-

Welcome to GRE! From Syracuse, Sicily, Italy to Syracuse, New York and across 188 nations worldwide. I’m Keith Weinhold, this is Get Rich Education.

Usually on this show, you learn about how buy-and-hold rental property, when bought strategically - produces wealth. We’ll return to that next week, but today ...

… it’s about your primary residence. And, when we talk about, should you own your home or is it better for you to pay rent to a landlord - think about how important this is.

Because whether I’ve had the chance to meet you yet or not, there’s one thing that I definitely know about you, and that is, you are always going to live … somewhere.

Your housing expense is one of the biggest financial expenses in your life.

Despite that it’s such a substantial financial decision for you, some people revert to orthodoxy - this FLAWED orthodoxy where they think that owning is always better. That’s not true.

I really want you to watch your mind as I tell you this today, because there are very likely a few tripwires installed there … and I am about to hit some of them. So do your best to remain calm … if you must.

Though more people are waking up to the fact that renting is sometimes better, I still think that popular culture has long reinforced this misplaced notion that owning is always better.

“Are you a homeowner, Greg? No. I rent. Oh.”

Haha! That’s from the classic comedy movie “Meet The Parents”. Owen Wilson & Ben Stiller - while Robert De Niro - the future father-in-law was party to that chat where he’s thinking that the homeowner is the more apropos suitor for his daughter than the renter is.

Look, if you can OWN a home and your monthly housing payment is $2,500, but you could instead PAY RENT on an equivalent home for $1,500 - now your cash flow has increased by $1,000. That’s money in your pocket today that could be re-invested at a rate of return.

Now with your $2,500 housing payment in this example - that’s more than just a mortgage payment remember.

When you own, your HOUSING payment consists of mortgage principal & interest, property tax, property insurance, maintenance, repairs, utilities and more. You’ve got to add all that up to get to $2,500.

What about that TIME it took you on HOW to repair the leaky faucet when you owned the home? Factor that in.

Now, the homeowner might reply, but at least part of my $2,500 payment is building equity for me. Yes, it is. A minority of that payment is building equity. You’d rather have equity - you’d rather have principal paydown than lose it to interest.

And you’d rather have equity than nothing.

But, as I’ve discussed extensively elsewhere - so I won’t do that again here - home equity is unsafe, illiquid, and it’s rate of return is always zero.

You can probably repeat that to me at this point - ha!

Also, what’s more important in your life? Cash flow or equity? Cash flow is what creates financial freedom. As an investor in the pursuit of freedom, in fact, you want to CONVERT your equity to cash flow.

Remember, in this $1,500 rent payment vs. $2,500 housing payment scenario on your primary residence … it’s the renter that has the additional $1,000 cash flow and the homeowner that builds the equity.

Let me remind you. If you would like to READ along as you listen to the show today or you know someone that’s hearing impaired, you can read the complete transcript to this episode at GetRichEducation.com/309.

That’s GetRichEducation.com/309 to see all the Show Notes and the entire written transcript for this episode.

Well, some people think that buying & owning their primary residence is: "LIke paying rent. Except you get to keep it." Well,that has caused millions of people to buy houses that they later regret.

I know a young, married couple - Jerome and Jessica - they’ve got two kids. They wanted to move from snowy Anchorage, Alaska to Las Vegas, Nevada. They had lived their entire lives in Anchorage and were tired of the snow and wanted some heat.

You think that they might discover an overcorrection problem, btw? Vegas is in the middle of the Mojave Desert. But anyway ...

They had owned their Anchorage home for five years before they put it up for sale. That was the first home that they ever owned - starter home.

Had they been renting that home - they could have moved where they wanted to in as little as a month.

But as homeowners, by the time they made all the make-ready repairs to the home, got it listed for sale, had to repeatedly prepare their home for showings - meaning they had to intermittently get their home in pristine condition to make it look good for showings - uprooting their lives every time … they finally sold it in 4-½ months by the time their buying got their financing in order & inspections & appraisal & the deal actually closed.

If Jerome and Jessica had been renters instead, they could have been on their way in a month.

Plus, over the five years, their home appreciated a little, but not enough to offset the 4% closing costs when they had bought five years earlier, all the maintenance & repairs that they had put into place DURING the five years they lived there, plus then they then had to pay a real estate agent a 5% commission when they sold.

They not only lost money by owning, they lost time, they lost mobility. They didn’t have liquidity.

For Jerome and Jessica, they got a lesson. “Paying rent is not the same as throwing money away.”

Well, I can tell you, Jerome and Jessica moved to Vegas one year ago now. They have been renting from Day One there, they’re still renting, and they have no plans to buy in Vegas anytime soon.

“Paying rent is not throwing money away” because you get the BENEFIT as using that space as a home, a place to sleep, prepare food, eat, shower, study, entertain - how in the world is that throwing money away? It isn’t.

You know that I’ve told you on this show before that paying rent is not throwing money away just like the five hour flight that you took from Boston to Phoenix last year wasn’t throwing money away.

No one called it throwing money away when you paid $500 to “rent” that airline seat for five hours. Why, because you had the BENEFIT of travelling somewhere.

Sheesh, how far are people going to take it with this nonsense that “Paying rent is like throwing money away?”

Your gym membership is $50 a month. But you didn’t get to take a set of the 40-pound hex dumbbells home after six months of membership did you?

Gosh, how far would you take this nonsense line of reasoning?

You like to go mini-golfing? I’ll bet that you paid some portion of your fee to rent the put-put club and a little orange golf ball for two hours.

How are you going to think - that you now expect to own equity in a put-put golf club that’s all nicked-up and was used by 80 different people? Sheesh, that’s ridiculous.

You had the benefit of a gym membership because you’re healthier. You had the benefit of mini-golfing because you like some recreation. You didn’t throw money away.

What about renting an RV for a week? You didn’t throw money away. You had the benefit of using it.

This whole misguided notion that paying rent for a place to live is throwing money away is a … replete farce.

But that also doesn’t mean that renting your primary residence is always better than owning either.

Well, let me give you some numbers here. This will help you debunk that notion that - ad infin-I-tum, homeownership is better.

Look, in a place like Manhattan’s Tribeca neighborhood, a small apartment has, just for simplicity, say a rent-to-value ratio of three-tenths of one-percent.

That’s a lousy deal if you’re the landlord and an awesome deal if you’re the renter.

So, what that means is that market rent is only $300 per $100K worth of property. That’s that three-tenths of 1%.

That ratio might then be $3,000 of rent on a $1M apartment in Tribeca, Manhattan.

But look, in a place like Memphis, Tennessee or Little Rock Arkansas, the rent-to-value ratio might be a full 1%.

Now see, if you’re a renter here, you’d have to pay $1,000 for every $100K worth of property. (Not $300 like Manhattan)

Well, in that case, it makes more sense for you to own your home.

BTW, it also then, makes sense for you to own Memphis real estate & rent it to others - because for every $100K of Memphis property you own, you’d RECEIVE $1,000 in rent. You’d RECEIVE a full 1%.

Generally, on the coasts, it’s better to pay rent for your primary residence - and in the heartland, it’s better to own that real estate - whether you’re renting it to others OR living there yourself.

But there are so many more considerations here than just numbers and geography. So, what else makes sense to your specific situation?

And before I go on, please don’t think that I’m “against” the real estate AGENT industry. That’s not true. Gosh, I’ll stand up for a GOOD real estate agent when it makes sense.

For example, when it comes to selling your home, you might not want to pay a 5 or 6% sales commission to an agent. Some people would rather sell it themselves and pay 1 or 2%.

But what some sellers fail to consider is that an agent might help you get 4% more for it because they know how to reach more buyers, and do it fast, and save you a lot of hassle and uncertainty.

So, there’s just one example of how I’ll stick up for agents when it makes sense.

But, getting back to should you own or rent your primary residence, I’m here to help you decide what’s best for you. You’ve ultimately got to decide.

I WILL tell you when it’s better to be a homeowner than rent shortly. But first ...

A recent survey from Freedom Debt Relief shows that homeowners have many regrets when it comes to the purchase of a new home, mostly because they are largely unprepared for the initial cost and the ongoing financial responsibility that comes with homeownership.

Of the 1,028 people surveyed, 29% said homeownership makes them feel anxious and stressed, while 26% said the cost of owning a home is a burden and they wished they were renting instead.

When it comes to affording house payments, it was Millennials and Gen Z homeowners who said they are struggling the most. Half of these homeowners said property taxes turned out to be higher than they expected, while 52% said their monthly mortgage payments are too high.

With renting comes an always-available maintenance team and the ability to call the landlord when there is a problem.

Conversely, homeowners have to mow their own lawn, paint their own walls and fix their own leaky faucets.

And some of these tasks have homeowners shelling out more cash than they planned, with 59% saying maintenance and repairs are more costly and require more effort than expected, and 60% saying they cannot afford needed upgrades.

That said, it seems the idea of owning a home is still attached to the concept of what it means to succeed in this country, with 59% of homeowners saying they believe that owning a home is still part of the American dream.

I’d like to add that the survey was conducted “pre-pandemic”.

Most people think that owning a home is a financial asset.

That's debatable.

The Rich Dad school of thought is known for saying that, "A home is a liability, not an asset".

An asset puts money into your pocket every month. A home is a liability because it takes money out of your pocket every month.

Of course, in the conventional sense, a home is in your asset column and it’s mortgage is in your liability column.

Though owning a home is often a poor financial investment, you still tie up a lot of money in your humble abode.

You really have more than two choices in how you live - it’s actually more than just rent or own.

You have four choices in how you live: you can own your home, pay rent to a landlord, be homeless, or live with your parents – ha!

We’re only discussing two here: Rent vs. Own.

Fannie Mae associates “Home ownership with the American Dream.” in their marketing slogan.

In America, how many people own their homes vs. rent their homes anyway? About 2/3rds own and ⅓ rent. The homeownership rate is currently about 68%.

Well, I’ve probably got your wheels turning now on “rent vs. own”.

Let’s break things down further. I’ve got 16 factors that I came up with here for you to consider, many of which you’ve never thought about before - on this.

Often it’s an exercise in pros vs. cons for you. Often, it’s rationalizing a series of trade-offs for you.

The first of these 16 factors is ...

Mobility. Many people move more often than they expect. Renting keeps you nimble. With a new job opportunity or life change like marriage and kids, your mobility is an asset. A homeowner that moves a lot gets eaten up and beaten up with closing costs, make-ready expenses, and sales commissions. Kinda like where I told you about Jerome, Jessica, and their two kids.

Choice. There are more homes for sale than there are rentals, especially at the higher end. See if you want to rent a high-end place, they’re often really hard-to-find, especially in a more rural area. Renting of high-end homes limits your choice. You might feel like you HAVE to buy to get what you want.

Equity Buildup. Equity is the difference between what your home is worth and how much you owe on a mortgage. Homeowners build equity; renters don’t. Equity is like a forced savings plan. But equity is an awful investment with zero return. Your return is zero because the presence or absence of home equity has nothing to do with whether or not your home appreciates. (Yet you would rather have equity than nothing.) Houses make terrible “banks” - they’re bad places to store cash.

Liquidity. Though most homeowners build equity, it’s difficult to access. To tap your home equity, you must prove to a bank that you qualify again, wait months, incur costs, and you still might be denied access to the equity.

Opportunity Cost. Many tie up a 20% down payment or more in home equity. As I’ve stated, those equity dollars are low-use, zero return dollars. Instead, your chunk of money can be earning a return for you elsewhere.

Sunk Cost. This is an overlooked killer for homeowners. I mentioned some of them already. Mortgage loan closing costs, constant home maintenance and repairs, property taxes, utilities, landscaping, snow removal, leaf raking, rototilling, replacing obsolete fixtures and appliances, roofing, and painting costs are never fully recouped when you go to sell it. Renters bear almost none of these sunk costs. Renters aren’t losing time at Lowe’s & Home Depot either.

Control. Homeowners have a big advantage here. The peace of mind of knowing that a landlord can’t tell you to move is priceless. You have a feeling of belonging, an anchor. As a homeowner, you can knock out a wall, renovate your kitchen, or add a fence. Make it yours. Control is a big homeowner “plus”.

Appreciation. Renters don’t experience price appreciation. They commonly even have to endure rent price increases. Homeowners with loans benefit from financial leverage, which can amplify your wealth in an appreciating environment (though you’re lucky if this offsets ongoing opportunity cost and sunk cost). Inflation becomes your friend for homeowners - and when you’ve only got a tiny down payment into a home that you own - leverage AND inflation are both your friend.

Now, a homeowner may also get an unusually outsized equity benefit if they buy in the right place at the right time. For example, if they had bought 10 or more years ago in a place that’s appreciated a lot - for example in Charlotte, Nashville, Austin, or Boise. That could be a homeowner boon there.

But if you buy a home and it’s value doesn’t appreciate - or even goes down - plus each month you paid more than you would have as a renter - plus you’ve lost time doing repairs & maintenance, then you’re REALLY lost out as a homeowner.

Tax Advantages. Homeowners often get the mortgage interest deduction. But this is just one small consideration. As our most recurrent guest in GRE history, Rich Dad Advisor Tom Wheelwright says, “Don’t let the tax tail wag the dog.” To say that “I’m buying instead of renting for tax reasons.” That’s a really weak argument.

Low mortgage rates. Homeowners can tie up long-term fixed interest rate debt at these historically low rates. Economists believe they’ll stay low for a long time into the future. This is a homeowner advantage.

Price and Rent-To-Value Ratio. If a home costs less than $250,000, own it. If it costs more, pay rent. If the monthly rent is under $700 per $100,000 of home, rent it. If rent costs more, own it. That’s that approximate seven-tenths of one percent rent-to-value ratio - or rent-to-price ratio. This formulaic approach indicates how much “home” you have the benefit of living in per dollar paid. Regional and other factors can skew these numbers. Of course, when we get that general with the numbers, there are going to be more exceptions.

Community formation. Owning your home provides both you and your neighbors a feeling of “belonging.” Homeowners are more likely to look out for the common good of the neighborhood. That helps everyone. People feel more fulfilled when they’re part of something greater than themselves.

Travel. This is so simple yet everyone overlooks this. Have you been to New York City? New Hampshire? Iowa? Arizona? Florida? Alaska? Ecuador? If you haven’t even gotten out to see the very world that you live in, be a renter until you’ve found the place that fits your interests.

Some people find themselves owning a home for a few years, then later realize that they don’t even live in a region that fits their interests.

Maybe you don’t want to move far away because you want to be close to family. That’s legit. Family can be a good reason for NOT making a distant move. It’s about what’s important … to you.

Personal cash flow. If it costs substantially more to own a place rather than rent that place, then rent it…and vice versa. Homeowners that divert too much of their income into housing payments are what’s known as “House Poor.” This stifles your opportunity to travel, invest, and provide opportunity for your family.

Natural disasters. Areas subject to frequent earthquakes, hurricanes, and floods clearly tilt to the renter’s advantage. Even if you’re adequately insured as a homeowner, these catastrophes are worse for homeowners. No one thinks about that stuff until it happens.

Consumer advantages. Owning rather than renting can give you higher credit card limits and more favorable insurance rates.

Those are the 16 factors that I compiled to help you figure out what makes sense for you.

A decided stigma still exists with renting. But you don’t live your life for the Joneses, you live it for you.

I’ve got more for you on: “Should you rent your home or own your home.?

Hey, have you had something on your mind that’s made you want to write into the show, but you just haven’t done it yet?

Well, I think that it’s been a while since I mentioned our Contact Page here on the air.

You can get ahold of us at GetRichEducation.com/Contact.

What you can do there is either send us a WRITTEN message - or you have the option of leaving some audio - basically leaving a voicemail.

I really like it when you leave us a voicemail personally, because it’s something that I might be able to play & answer on the air for you.

I like to hear your voice.

We get a ton of messages - and we’re grateful for them. But understand that we sure can’t give personal replies to every one of them.

You can either write in OR leave a voicemail, again, at GetRichEducation.com/Contact.

More on rent vs. own, next. I want to try to help you make the best decision that you possibly can. I’m Keith Weinhold. This is Get Rich Education.

____________________

Welcome back to Get Rich Education. I’m your host Keith Weinhold.

Homeowners have a higher net worth than renters.

The average homeowner net worth is $195,000.

The average renter net worth is only $5,000.

That is a substantial gap. The means that homeowner net worth is nearly 40 times what renter net worth is.

Does that alone mean that owning is better? No. I think that it does TILT toward owning.

But see, to even BE a homeowner and qualify for a mortgage, you would have already needed to have assets and income … in order to cross that threshold.

I don’t think these figures are a good reflection of WHERE the homeowners wealth actually came from - was it equity building through leveraged appreciation & principal paydown or how much income they earn from their job?

That’s information that I’d like to see.

Of course, in the greater context of Get Rich Education - net worth matters. Not as much as cash flow, but it matters, because net worth can be converted into cash flow.

Nonetheless, that net worth stat still tilts to the homeowner favor, just not as much as one thinks.

"People often say that buying a home was the best investment they ever made," that’s what Ne ela Hummel said - the chief planning officer at financial planning firm Abacus Wealth Partners.

"The problem is that their return as investors is often worse than they think.

When calculating how much they made on a home, most people do not include the out-of-pocket costs they incurred through things like replacing pipes, repairing roofs, or numerous other unexpected expenses that come up. As a tenant, your costs are fixed, but as a homeowner, you are on the hook for any repair that comes up."

That’s the end of what they said.

Those needed repairs to your home may involve you doing a lot of research online - and watching YouTube videos - to find a solution or simply paying a repairman to remedy the issue.

Either way, you’re on the hook for investing more time and money into your home when something breaks.

Now, I’ve got another test on renting vs. owning your home.

Is a home an “investment”? Do you see your primary residence as an “investment”.

Well, what is an “investment” anyway? What is the definition of “investment”.

We are an investing show - and we take deep consideration of both the value of your time and your money here, so …

The definition of “investment”, per the Oxford dictionary is … “the action or process of investing money for profit or material result.” That’s it.

So is your home an investment? I think some people see it that way.

Like I’ve said, if you’re rather lucky and buy the home in the right place and at the right time - you could profit from it. Though that’s more the exception than the norm … probably.

What I like to say is that in general, your primary residence is a poor FINANCIAL investment. But it is a good LIFESTYLE investment.

See, in this way, your primary residence is like a vacation.

That is because, think about the money you spent on your last vacation. Whether you went to the beach or the ski slopes or French vineyards, it was not a good strict FINANCIAL investment, but it was a good LIFESTYLE investment.

You improved your quality of life. You improved your standard of living.

A home is typically a good lifestyle investment and a poor financial investment.

Now, look, we’re all somewhat biased based upon our own set of experiences. That goes for me too. I am an 18-year real estate investor.

I grew up in a home that my parents … owned. They even had the mortgage completely paid-off early.

In fact, I think I shared with you before that my parents still live in the same Pennsylvania house that they’ve owned continuously since 1974.

But when I grew up in upstate Pennsylvania, all my friends’ families OWNED their homes. No one rented.

Later, I’d go on to learn about socioeconomic stratification and how I’d just be less likely to associate and even meet kids from renter households.

There was one notable outlier. When I was about 14 years old and the Petroski family moved to town - they were some pretty nice, relatable friends that were into sports & baseball cards - and I learned that they rented.

And that was the first time that I ever remember hearing the word “landlord” in my life … when the Petroskis talked about their landlord, Mr. Hosley.

I’ll tell you, my parents owning their home might have help stabilize my childhood. I’m not really sure, because I can’t compare what it’s like to move as a kid, because we never moved.

If you’ve got kids, is uprooting them to move damaging to them?

Or does it help them become more adaptable later in life? I truly don’t know the answer. I haven’t read about that at all.

But all the kids knew where I lived & could count on me for getting together.

I had an awesome childhood, raised with two married parents, playing wiffle ball in the yard, catching crayfish in the creek, going camping, and collecting Star Wars action figures. All that great kid stuff. And part of that is … well ...

Home felt like home. If it’s important for you to build a legacy for your family and have your home incorporated into that - then perhaps only homeownership will give you those … nostalgic feelings.

For me, it was knowing how my brother & I’s Christmas stockings were going to be hung from the mantle in the living room next to our wood-burning stove.

The love from my parents is the most important thing for sure. But knowing that everything was going to be in the same place every year too?

You need to understand something. That right there brought me a FEELING, an emotion, that concern for a rent-to-value ratio NEVER could. That’s stuff’s got NOTHING to do with math.

If you can’t feel at home, at home, then where you can feel “at home”?

Remembering that spot on the living room floor where I was watching the television when the Phillies won the World Series. Yeah, I can still go there and show you that in my parents’ home.

See, if I go much further down this track, I’ll soon get teary-eyed here with you.

So, with rent vs. own, is there a hybrid approach? No, there’s not really. There’s something called a lease-purchase. But those agreements are uncommon.

One somewhat hybridized approach is … one that I’ve taken.

I own the home that I live in. I’ve lived in that home for 8 years. But see, what I did is, knowing what we know about equity, is that I decided to own my home but have a low equity position.

I made a 5% down payment with a conventional loan.

See, now I’ve got 20:1 leverage, very little skin in the game, and still have control, plus I got a 3.5% interest rate back in 2012.

See, instead of putting 20%, with 5% down, now I have that difference of 15% of the value of the home … out working for me as equity levers in other income properties in other states.

And no, I pay ZERO monthly PMI despite putting 5% down with a conventional loan. I’ve given you detail on how I pulled that off on previous shows, and you can too.

The short story is, make a strong offer on your buy price and put it into the contract that your seller pay upfront PMI for you.

Now, there are some other distinct things happening in my geography where - if someone wanted to come buy my primary residence from me, but yet I could keep living here as their renter …

… and it was written into the contract that they couldn’t make me move, and I know I would pay them a lower rent amount than I’m currently paying in my mortgage & all those other homeowner expenses, I WOULD consider doing that.

Those situations are hard to find.

Yep, I would convert my mortgage payments to rent payments if I could get that arrangement.

And why do this? Because the lower rent payment would increase my personal monthly cash flow, plus it would free up any dead equity that I have in the home.

Part of the rationale there is that my home market has few prospects for substantial appreciation in the next few years.

Well, in rent vs. own, what’s the bottom line with what makes the most sense for you financially? (Just … talking financial only here)

Be a renter in a high-end home and then buy low-cost income properties in investor-advantaged markets in the Midwest and South - that you rent out to others.

See, if you’re a renter in a high-end home, now you’ve got zero dead equity tied up in your home - and instead, it’s leveraging property in sensible markets.

In fact, I know a few other people - savvy people - that understand rent-to-price ratios and do exactly that.

They’re FAIRLY wealthy people that are renters by choice - and own lots of rental property in low-priced markets.

But there’s no one definitive OVERALL factor in your Rent vs. Own decision because this is where finances and feelings intersect.

So here’s hoping that you’re finding a few considerations that you’ve never thought about before!

To be clear here and to summarize overall ...

Is homeownership a sham? Is it a rip-off? No.

Is homeownership overrated? Yes, it still is.

Many people that are renting should own. These people seem to know that.

Conversely, many that are owning would actually be better off renting. Few seem to know that and they’re even willing to take up an argument with you.

They’ve heard the same “Paying rent is like throwing money away.” thing for so long, that they’d rather argue than really think it through.

Well, the reason that I did this show today - though it’ll be just as relevant if you’re listening 5 to 10 years from now, is pandemic-related.

It’s because the COVID-19 pandemic is appearing to increase the migration rate as people look for less dense housing.

Whether you’re migrating or not, now you better know whether renting or owning your home makes the most sense for you.

Next week here on the show, we’ll discuss what we usually do - INCOME property - property that you don’t live in, but instead, rent to others - and just exactly why the investment makes more ordinary people wealthy than anything else.

If there’s one thing that I know about you, it’s that you are always going to live somewhere.

And you know what else, so is everyone that you know.

Every person that you know - may or may not own rental property - but everyone that you know is always going to live somewhere too.

Do you think that this show would benefit them?

This episode in particular might save your family and friends SO much time and money.

I love it when you share the show with others. So I’d be grateful if you took a screenshot of this episode and shared it on your Facebook, Instagram, Twitter, LinkedIn, or even through an email or text with those that you care about.

I always endeavor to make things clear to understand here on the show. I’m Keith Weinhold.

Don’t Quit Your Daydream!

308: Stocks Set To Fall By 80%, Home Prices Surge Above $300K - with Harry Dent Aug 31, 2020

Where are the big investment risks today? Economic forecaster Harry Dent tells us.

Despite pandemic-driven unemployment, tenants are largely paying the rent.

The price of an existing American home is now $304,100, surging 8.5%.

Lumber prices for a new home are up $16K since April. This increases the value of your property’s replacement cost.

The new 0.5% adverse market condition fee for refinances is annoying. Learn how to avoid it.

In the pandemic, real estate keeps shining.

Harry Dent is fired up. He joins me to tell us why he thinks most assets are in a bubble: economics and demographics.

His latest book is “Zero Hour”.

Baby Boomers find renting to be more acceptable today.

Harry predicts when stocks will fall 80-85%, a crash occurs, and about the profligacy of the Fed printing trillions in the pandemic.

Resources mentioned:

Harry Dent’s website:

HSDent.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

307: Why The Rich Are Getting Richer Aug 24, 2020

The wealthy are enjoying federal monetary stimulus. Meanwhile, unemployed tenants can now be evicted nationally (check your local law).

Own assets? Great. Mortgage interest rates are at historic lows; the S&P 500 is at an all-time high.

(Entire episode transcript is below. Read as you listen.)

In the pandemic, tenants want single-family homes more than communal apartments.

Fannie Mae & Freddie Mac want to add a 0.5% refinancing fee.

Homebuilder sentiment is high? Why? High demand, low inventory, low rates.

Stagflation is explained. It is a stagnant economy with high inflation.

There are signs that inflation is poised to increase.

Resources mentioned:

Inflation Triple Crown video:

https://youtu.be/dZojl686fU0

Section 8 turnkey property:

www.GetRichEducation.com/Section8

Stagflation video:

https://www.youtube.com/watch?v=YaC_PNKu_Cg&feature=youtu.be

Elevator Anxiety:

https://www.axios.com/elevator-anxiety-reopenings-9a474985-4786-43a3-8b64-5119ff7f2267.html

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete Episode Transcript:

Welcome to Get Rich Education. I’m your host, Keith Weinhold.

The rich are getting richer and the poor are getting poorer. I can’t think of any one time in my life where that’s been happening more than it has been than right now.

I’ll tell you why - and what you need to do to get on the right side of that.

What is going on in the real estate market and what are the real estate economics that matter? Then, a discussion about inflation. Today, on Get Rich Education.

____________

Hey, you’re inside GRE. From Manila, Philippines to Managua, Nicaragua and across 188 nations worldwide, I’m Keith Weinhold. This is Get Rich Education.

The rich are getting richer, the poor are getting poorer - and I can’t think of any one time in my life where that’s been happening more than it has been than right now.

Because Americans living paycheck-to-paycheck might now be ... paycheck-less. Some of them are laid off - because of the pandemic - and now they're concerned that there's no national eviction ban.

That’s right. In most states, non-paying tenants CAN be evicted at this time. Now, you’ve got to check your local law.

Well, when is Congress going to do something to relieve those that the pandemic has left unemployed?

Well, they don’t even reconvene until after Labor Day.

Some people are wondering - “Where is the CARES Act 2?” Where are those updated forbearance options, eviction moratorium, the PayCheck Protection Program, and the $1,200 stimulus checks and the stepped-up weekly unemployment compensation?

In fact, Richmond Fed President Thomas Barkin had good metaphor. He said: “Months ago, when we did the first stimulus, we thought the economy faced a pothole and the stimulus put a plate over it so we could navigate.

Now escalation of the virus may be making that pothole into a sinkhole and creating a need for a longer plate.” That’s the end of what the Fed President said.

Now, look, I think there’s a lot to be said for just letting the free market do it’s job.

But it’s a little hard to be in this laissez-faire, Austrian economics school of thought when some people could be suffering.

So that you know what I’m talking about, “lay-say-fare” basically means no government intervention into the free market.

Meanwhile, the rich are bingeing off Federal Reserve policy and liquidity injections that keep mortgage interest rates at historic lows and the S&P 500 at an all-time high.

Mortgage rates recently dipped below 3%, which is just amazing.

You don’t even have to be THAT rich … to benefit. If you’ve got substantial exposure to the real estate market or the stock market, chances are, that those assets are doing alright.

One thing that you need to keep in mind as an investor, is that, when the Fed puts rates on the floor, it affects more than just MORTGAGE rates - it affects other rates too - like savings account rates.

Just look at the rates at bank savings accounts.

Even if you’re in one of these online banks that give better yields than traditional brick-and-mortar banks - we’re talking about online-first banks like Ally Bank and Popular Bank - they were paying two-and-a-half percent on savings accounts not all that long ago.

Even those banks are now down to about three-quarters of one percent - probably less than the real rate of inflation.

So because savers get punished worse than ever right now, that, in turn, forces more people INTO things like real estate, because you’re in search of that yield.

Even retirees can’t rely on the paltry income from three-quarters of one percent yield so they have to go to the markets to chase yields too - sometimes unwillingly.

Well, when all these people that got negative REAL yield on savings accounts and CDs - and aren’t going to stand for it anymore, it forces more demand … and money into markets and consequently, floats the price of everything up.

That’s what’s going on now.

Now, I personally don't really like this deepening canyon between the "rich” and the “poor". But I know which side I'd rather be on.

Besides the investment properties, a lot of people want to move and shake-up their living situation like never before - their primary residence - and filter their new home-buying criteria on pandemic ways of life.

Bidding wars are rampant for single-family homes. How rampant are they? Well,

Zillow just reported their highest daily active user count ... ever.

Now, though property data can move even slower than your last 1031 Exchange did, Real Estate Economist Daren Blomquist just compiled THESE year-over-year price changes through quarter two.

You’ve heard Daren Blomquist on the show here. He broke this down this way:

City real estate is up +4% - again, this is all year-over-year through the second quarter.

Town +4%

Suburban +5%

Rural +11%

The two sources are ATTOM Data Solutions and the U.S. Census Bureau.

So rural is appreciating the best. City and town is appreciating the least.

With time, I expect urban areas and apartments to slump. Of course, urban areas and apartments kind of go together.

In the pandemic, living in a lot of large apartment buildings has become about as fashionable as Jazzercise and The Atkins Diet.

Of course, at GRE, we've long focused on rental single-family homes. We’ve talked a little about apartments and you know that I started out with a four-plex & got my start in real estate that way.

This week, NAR Chief Economist Lawrence Yun noted:

" ... (There's) an oversupply of apartment buildings, especially in city centers given the evident recent shift in consumer preference for single-family homes in the suburbs.

Lawrence Yun continued: "Apartment rent growth could therefore be tough going ahead.

The rise of single-family units is welcome, as overall inventory of homes for sale are down 19% from one year ago and there is intense buyer competition in the market as a result." That’s the end of what Lawrence Yun said.

As long as your tenant can pay the rent, this is welcome news for your existing single-family rental homes - like the ones that you’ve acquired through GREturnkey.com.

It puts upward pressure on the price. So congratulations there.

The appetite for real assets, especially desirable rental single-family homes, now propelled by low inventory and low interest rates has put you in good shape if you’ve acted.

But of course, the COVID pandemic isn’t over. We don’t really know how all of this is going to turn out. And even when a vaccine is developed, remember that it will probably take … at least a few months to distribute it.

In my OWN portfolio, all of my single-family rental homes are occupied - 100%. But my apartment building vacancies are unusually high right now.

When we talk about apartment buildings and office buildings as well - Axios recently reported about how residents and workers are experiencing what they call “elevator anxiety”. I’ll put that in the Show Notes for you.

An elevator is one of the most physically, uncomfortable awkward places to be in the pandemic.

If you’re wondering about how that real estate looks - we’re generally talking about buildings that are four or more stories in height.

In fact, the ADA - the Americans with Disabilities Act - stipulates that properties with four or more stories generally are going to need to have an elevator.

I’ll tell ya - if apartment buildings are as unfashionable as the Adkins Diet these days, then being inside an elevator is about as hip as Jane Fonda workout videos, NordicTrack, and Sweatin' To The Oldies with Richard Simmons.

https://youtu.be/na9ZZ4ZjVa8?t=28

Oh geez. Did that really just happen? I guess it did. So … while we’re all processing that, getting back to real estate here.

Now, Fannie Mae and Freddie Mac recently said that they will start charging a 0.5% “adverse market fee” on all refinances, including both cash-out and non-cash-out refis. They were trying to put that new fee into effect for next month.

What a drag that would be. So for every $200,000 you refinance, you’d have to pay an additional $1,000 fee - or maybe your lender would pay it.

What Freddie Mac said is: “As a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty, we are introducing a new … what they call ... Market Condition Credit Fee in Price”. Freddie sent in their notice to lenders.

Wouldn’t that be an annoying fee?

Well, almost immediately, the National Association of Mortgage Brokers struck back. They launched a campaign to reverse that newly announced one-half of one percent refinancing fee. We’ll see where that goes.

Now, things are really good for homebuilders these day. An index measuring homebuilder sentiment matched its highest level ever yesterday. Why? I mean, it’s simple. There is a healthy amount of DEMAND from buyers and not enough homes to meet it.

Also, the 30-year fixed mortgage rate bottomed out at 2.88% in August, the lowest point on record. Those low borrowing rates are boosting homebuyers' appetites … obviously.

There really are a few recent stories that are de facto microcosms - reflections of this appetite for a work-from-home arrangement and less dense housing.

For example, it’s really telling to look at what the outdoor clothing and gear company, REI just did.

Do you like REI? I like shopping there. Even if you aren’t into outdoor stuff, you can always find a cool water bottle or something at REI.

Well, they just announced plans to sell the lavish corporate campus that they had just finished building near Seattle.

REI executives concluded that employees were able to collaborate remotely better than the company originally THOUGHT ...so a massive physical HQ just wasn’t worth the cost any longer. So REI is selling what they had just built.

Other real estate segments falling out of favor - are those high-density places, like you might expect - New York City and San Francisco.

StreetEasy reported that Manhattan home values dropped 4.2% since last year and homes are lingering on the market more two months longer … than they had just last year.
San Francisco list prices are down 5% annually, while inventory is up 96%. Yes, a near doubling of available inventory in San Francisco.

NYC and San Francisco were already the most expensive housing markets in the country BEFORE the pandemic. And life under lockdown has given people that nudge they had already been considering for years.

And then, single-family homes in outlying areas are the real beneficiaries here. There have been a number of notable milestones.

COLORADO SFH sales rose 21% July-over-July. The median price statewide in Colorado is now $444,000. Just looking at Denver, Denver just broke the $600K mark for the first time ever.

So, a few months into the pandemic, we’re getting a clearer sense of who the winners and losers are - a lot of them are what we expected.

If I had to slim it down to just a 3-word answer for you on why the rich are getting richer, those 3 words are: Federal Monetary Stimulus.

And the stimulus is disproportionately benefitting … asset owners.

Well, the pandemic hasn’t affected some real estate investors at all. Others, feel more reliant on the next government stimulus program to give their tenants the wherewithal to pay the rent.

Well, if you, as an investor want to have the majority of your rent income payment guaranteed to be made by the government to you over the long-term, well, that’s what landlords of tenants with HUD-funded “Section 8” housing have enjoyed for decades.

You have guaranteed rent income.

I think you remember that I had a turnkey provider that specializes in Section 8 housing here on the show on Get Rich Education Episode 297. So just ten show ago, which was 10 weeks ago.

Like any investment, Section 8 Housing is best viewed through a prism of pros and cons.

Section 8 is not for everybody. Some love it, some don’t … but this provider manages the Section 8 administration FOR you. They’ve got a great relationship with the housing authority.

That’s something that most landlords of this government-subsidized housing never had.

“Guaranteed rent income” has a nicer ring to it than it did just a year ago.

Get the provider report and learn more at GetRichEducation.com/Section8

That’s our Richmond, Virginia provider. In fact, CNBC named Virginia as the most business-friendly state in the entire nation.

I’m Keith Weinhold and I’m coming back to talk to you about inflation.

Again, learn more at GetRichEducation.com/Section8. This is Get Rich Education!

_________________

Hey, you’re back inside Get Rich Education. I’m your host, Keith Weinhold.

Both the pandemic-driven CARES Act, and whatever other monetary stimulus acts that follow … are injections of trillions of dollars into the economy.

In fact, it’s now driven our national debt to nearly $27 trillion dollars.

Of course, this has the effect of … money printing. It’s not literal money printing. The more you learn about it, it’s often U.S. government bond issuance.

A bond really just means that the government issues an I.O.U. that someone else, like China buys.

Those are some of the semantics behind, what we you can really more closely think of as “currency creation” rather than money printing.

Will this result in inflation? That’s the big question. Well, longer-term, many think, “yes”. Short-term, “no”. We are in a low demand environment.

Of course, as a real estate investor, you want inflation. You might have seen on the Get Rich Education YouTube Channel where, I have visually mapped out how you win “The Inflation Triple Crown”.

In fact, if you just Google the three words, “Inflation Triple Crown”, you can probably see me - as the first hit on Google - and you can watch me doing the whiteboard video.

As you’ll remember, real estate investors win the Inflation Triple Crown because inflation provides you with: #1 Asset Price Inflation, #2 Debt Debasement and #3 Cash Flow Enhancement - that all works terrifically when you’re leveraged.

There are more signs of inflation out there in the economy right now than we’ve seen in the recent past. Though I still expect it to be mild as long as we’re in this pandemic-driven low demand environment …

The consumer price index rose six-tenths of one percent last month. That beat the two-tenths expectation that economists had had.

Food are prices up substantially, and then, a substantial input to homebuilder pricing and therefore the future value of homes - is lumber - and lumber prices have been soaring higher.

Treasury Secretary Steven Mnuchin said that the administration is unfazed with these historically obscenely high levels of government spending … thanks to the nation’s very low interest rates.

See, the Fed is less concerned about mounting debt when the interest rate that THEY pay on their debt is low … much like you’re less concerned about your debt when the interest rate is so low - you might be looking to take on more debt now.

Of course, YOU’VE got a better deal on your real estate debt than the Federal Government does, because the Federal Government doesn’t have tenants to service their debt for them like you do in an occupied rental property.

Could America reach a STAGflationary state again like it did in the 1970s? We haven’t discussed the economic phenomena of stagflation before.

Do you know what that is? Stagflation is a stagnant economy with inflation. That’s what it means.

OK, usually a more stagnant economy - like we’re in now - is characterized by low inflation due to lower demand not running up the prices of consumer goods and household staples.

But again, stagflation means that there’s a stagnant economy WITH high inflation. Could THAT happen this decade?

To reinforce your learning here, let’s listen to the audio from this explainer video from One Minute Economics about stagflation.

This is less than a minute & a half in length.

https://youtu.be/YaC_PNKu_Cg

Yes, well, if we get stagflation, meaning again, a stagnant economy that we have high inflation, I don’t know that we’d have another Fed Chief like Paul Voelcker - who, 40 years ago, brazenly raised interest rates so aggressively to combat inflation that mortgage rates were 18% forty years ago.

I don’t know that anyone would prevent inflation from running away at that point.

But again, that’s STAGFLATION.

Now, I know what you might be thinking. Maybe you’re thinking that all of the Fed currency creation to pull us out of 2009’s Great Recession didn’t produce high inflation, so why would it be any different this time, with all these CURRENT cycles of massive dollar creation once again?

That would be a valid thing for you to think.

At least based on the official government numbers, we’ve only had about 2% monetary inflation in recent years.

Well, see. Though high inflation wasn’t the RESULT ten years ago, it might have actually been CREATED and you just didn’t know it. So, here’s what I mean.

Say that the expansion of globalization and technological advancement REALLY meant that we had NEGATIVE 5% inflation - another way to say that is that what if we WOULD HAVE had 5 points of deflation if they’re WEREN’T any excess dollar creation?.

But yet, all of the dollar creation after the Great Recession caused 7% inflation.

Well then, 5 points of DEflation offset by 7% INflation resulted in ... 2% inflation.

Think about it that way. Maybe something like that is what really happened … and that is why all of today’s currency creation COULD result in high inflation. We don’t know that it will. But that’s just one reason why it COULD.

Now, overall, to pull back and look at the state of housing in this pandemic-driven recession.

Housing has been - and continues to be - substantially better off in this recession THAN it was in the 2008 Great Recession - that event - twelve years ago, had a housing COLLAPSE as a driver. People left the keys and walked away from their homes back then.

Now, instead, we’ve got bidding wars for housing.

I want to temper that with a reminder that the pandemic is not over yet, and it could still take an unforeseen turn.

The bad part about this recession is that we’ve got higher unemployment than we did back then.

Now, the reasons that real estate is BETTER OFF in this recession compared to the last one is:

Housing Demand Exceeds Supply - that was in the OPPOSITE state last recession.
Responsible Lending Prevailed - again, that was OPPOSITE of last time.
We’ve Got Low Mortgage Rates - lower than they’ve ever been.
And We had No “Bubbly” Price Run-up before this recession, unlike what happened in the 2008 Great Recession.

They are … the key differences.

Coming up on a future episode here - we’re primarily a show about how buy-and-hold residential INVESTMENT property produces wealth for you - and how to avoid mistakes.

But so many people are re-evaluating their primary residence situation lately, that, coming up on the show, I’m going to go deep on - “Should You Rent Your Home Or Should You Own Your Home?”

There is some counterintuition and paradox here.

I’m going to give you a new twist on the fact that - if you pay rent, that is NOT The Same As Throwing Money Away

Also, some people seem to think that homeownership is like: "Renting. Except you get to keep it." That is false and that has caused millions of people to buy houses that they later regret.

Is your primary residence an investment? Do YOU consider it an investment? Well, in almost EVERY case it is a poor financial investment, but it could be a good lifestyle investment.

So, “Should You Rent Your Own Home Or Own Your Own Home that you live in.” That’s coming up on a future show.

Well, regardless of your living situation, pandemic-driven unemployment might have made you realize that … you need a durable, long-term 2nd source of income - if you don’t already have one.

Even if you aren’t losing your job, circumstances have hit close to home for a lot of people.

You can either let other people make money off your money, like the bank paying you 1% on your savings.

Or you can make money off OPM (like borrowing at a 5% mortgage to invest at 11% - or hopefully, a lot more than 11% with the (up to) five profit centers that real estate has.)

RE is that instrument of arbitrage.

As they say, you can either teach a man to fish or give a man a fish. Well, why not do both? That IS the abundance mindset afterall.

At GetRichEducation.com, we teach you how to fish.

At GREturnkey.com, we give you a fish too.

What is going on at GREturnkey?

Well, first, get your mortgage pre-approval at a reputable lender that specializes in investment property like Ridge Lending Group.

You’ll see at GREturnkey.com that Birmingham and Huntsville, AL have investor-advantaged numbers that work.

Pockets of Huntsville may have better appreciation if they’re tied to employment in the space industry.

Gosh, love him or hate him, Elon Musk gave us something to actually celebrate in an otherwise tough 2020 as he led the first private company to launch astronauts to space - emblematic of the burgeoning space industry - both Huntsville, AL and Orlando, Florida there at GREturnkey pick up on some of that.

We just discussed Chicago here last week. Chicago and Dayton, Ohio are two markets that keep sourcing existing inventory that they beautifully renovate, and both markets have rent-to-price ratios that are typically OVER 1%.

When you’re over 1% and mortgage interest rates are this low, it makes your affordability as an investor REALLY advantageous. That’s Chicago and Dayton.

Des Moines, Iowa is sourcing a little inventory lately - not as much as some of the other providers. That’s a stable place.

Florida is a bright spot for new construction turnkey property - Jacksonville, Tampa, and the aforementioned Orlando all sourcing brand new construction property.

When it’s NEW construction, your insurance cost is often really low too.

Memphis, Tennessee and Little Rock, Arkansas are both the SAME provider there at GREturnkey - and that provider name is MidSouthHomeBuyers. There you have lower price points and MidSouth Home Buyers is so good with beginners.

And then, Oklahoma City - the numbers work and some media outlets have named Oklahoma City as the most recession-resistant market in America. You’re getting a 1% rent-to-price ratio there too.

Finally, Richmond, Virginia - I mentioned them earlier. They specialize in knowing the ways and means of how to optimize Section 8 tenancies because they have a great relationship with the housing authority there.

Most, or really all of these markets that I mentioned are in the United States Midwest & South.

Florida - oddly enough - is not culturally the South - though it’s the most southeastern state there is - their history of net-in migration makes them culturally disparate from what we think of as the south, but …

… all these markets I mentioned are in investor-advantaged metros where you generally have more stable prices, and landlord-tenant law that favors your rights moreso than the tenant’s rights.

So these markets are hand-chosen pretty carefully for you.

Once you’re pre-qualified for a loan, find all those providers & a few more at GREturnkey.com.

I am honored because you have given me something … and that is that I have had the privilege of having your time today.

Until next week, I’m your host, Keith Weinhold. Don’t Quit Your Daydream!

306: Homelessness and Real Estate, Chicago Is World Class Aug 17, 2020

You contribute to homelessness. I do too. The problem goes right through real estate.

Factors include: NIMBYism, minimum wage, salamanders, smoke detectors, and rent control.

(Complete transcript on homelessness segment below.)

Then, Chicago is a world class city with lots of economic diversification. Chicagoland’s numbers make sense for real estate investors.

In northwestern Indiana (suburban Chicago), you avoid the high cost of Illinois property.

A typical SFH has $1,350 rent and a $125,000 purchase price.

If you’re serious about building your cash-flowing portfolio, learn more and see property at: www.GetRichEducation.com/Chicago

Resources mentioned:

Chicagoland turnkey property:

www.GetRichEducation.com/Chicago

Environmental regulations & housing:

https://www.huduser.gov/periodicals/cityscpe/vol8num1/ch5.pdf

NIMBYism:

Reason.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Welcome to Get Rich Education! I’m your host, Keith Weinhold, with a two-part show.

Real estate is a substantial input into homelessness. Why are people homeless - and why might you & I be partly RESPONSIBLE for it, in fact?

The second part - in general, world class cities don’t make any sense to invest in for cash flow - New York, LA, DC, London, Singapore … but we’re going to discuss one “world class” city that actually DOES. Today, on Get Rich Education.

__________________

Here it is - hey! You’re inside GRE. From Sarasota, Florida to Sarajevo - in Bosnia and Herzegovina - and across 188 nations worldwide.

I’m Keith Weinhold, this is Get Rich Education.

Even in the affluent United States, there is a large and growing population of vagrants - homeless people … more than half a million of them … and you & I … unknowingly play a role in keeping them homeless.

Why are people homeless? Well, the #1 reason is real estate-related. So that’s why I’m talking about it in the first of two show segments here.

Let’s look at the Top 5 cited reasons that people are homeless.

5th most common - Substance abuse - drugs.

4th - Mental illness.

3rd - Poverty ...OK, that’s sort of an obvious one.

2nd - Unemployment

1st - Lack of affordable housing

Lack of affordable housing is the #1 reason that people are homeless. Well, one mission here at GRE is that we PROVIDE society with affordable housing.

But, it’s generally not the same kind of Class D, lowest-end housing that there is - and that homeless people are looking to get into.

We focus on properties just below the median housing price in some of the lower-cost U.S. metros - B-class and C-Class. That’s a notch or two above where those on the brink of homelessness would be.

The homeless population is more visible in my own home city since the pandemic - and perhaps yours too … now that the unemployment rate is 10%.

I’m going to tell you what contributes to homelessness - and a lot of this has to do with real estate: contributors are carbon monoxide detectors, minimum wage, salamanders, NIMBYism, and over the long term: rent control.

Now, before we unpack that. Let’s define homelessness.

One of the better accepted definitions is - a condition where people lack "a fixed, regular, and adequate nighttime residence". That’s “homelessness defined”.

I think you & I can agree that “homeless” is not the best technical term - right? Because even if someone lives under a bridge, that IS their home.

Houselessness would actually be more accurate.

Vagrancy is an even better way to say it. A vagrant is a person without a settled home or regular work who wanders from place to place and lives by begging.

That’s what we’re really talking about here. But homelessness is the widely understood term, so I’m going to it.

Now, HUD - the U.S. Department of Housing and Urban Development has a lot of statistics on the homeless, and ...

… as of 2018, they reported there were roughly 553,000 homeless people in the United States on a given night,[2] or nearly two-tenths of 1% of the population.

That’s about 1 in 500 Americans then. Well, many people - me included - believe that the real number of homeless is greater than this 553,000.

In fact, private & local reports tell you that the homelessness have increased 40% per annum in recent years - yeah, 40% per year!

A big mistake is that people think about the homeless as all one type. But there are so many different types of homeless.

There are the temporary homeless - passing through that 553,000 number.

Some are voluntarily homeless. Others are really couch-surfing because perhaps they were in a divorce or domestic violence situation.

Then you need to realize that about 2/3rd of their population is sheltered, and ⅓ unsheltered.

Consider too, that there are at least 40,000 homeless veterans. To think that a person could have served this country - and maybe even risked their life for this country - but don’t have a home in this country … can be heartbreaking to think about.

Now, though I’m not sure, I don’t believe that a digital nomad would be considered among the homeless - the laptop entrepreneur that stays at a different AirBnB location, say monthly.

Before we bring in the real estate angle, let’s get some historical context. Just talking about the U.S. here ...

Homelessness emerged as a national issue in the 1870s.[6] Early homeless people lived in emerging urban cities, like New York City.

Into the 20th century, the Great Depression of the 1930s caused a substantial rise in unemployment and related social issues and distress and homelessness.

In the 21st century the financial crisis of 2008 and resulting economic stagnation and downturn has been a major driving factor and contributor to rising homelessness rates.

That is probably happening again, right now, in the COVID pandemic.

A Zillow report found that people in communities where the average renter spends more than 30 percent of their income on rent — meaning that they can be described as being “rent-burdened” — are particularly vulnerable to rapid increases in homelessness rates.

Eviction obviously creates homelessness.

Now, some naively think - can’t we just raise taxes to build permanent housing for them & move them all in there? I really doubt that that’s a viable long-term solution.

Because at some point, if taxpayer funded housing is just “provided” for people, then people don’t have incentive to work & pay the rent.

That’s in general. Right, maybe someone has a disability that prevents them from making a living.

Some think - maybe we SHOULD impose rent control. Rent control means capping the amount of rent that a landlord can charge.

I’ll tell ya - that could reduce the number of homeless people in some areas that HAVE enough housing. But long-term, rent control is a terrible plan.

Because now an income property owner like you has zero incentive to improve the property any longer.

Long-term, rent controlled areas fall into serious dilapidation.

And because homelessness is concentrated in inner cities. It’s those exact same big cities - like New York - that have tried rent control.

It doesn’t work. So many areas that have tried to impose it, have to repeal it, because it eventually turns areas into ghettos.

What if you own property in an area where rent control were imposed? Even if you did improve your property - not only would you NOT get more rent for it - but you had better believe that property owners all around you wouldn’t be improving their property … and the entire condition of the neighborhood would be on a loooong downhill slide.

You might remember that I devoted an episode to the rent control topic. You can look that up on Get Rich Education Episode 192 if you’re further interested there.

One factor that contributes to higher housing costs - which prices people out of having any shelter and creates more homeless people are … environmental regulations that limit development in certain areas.

Sometimes you need to leave a development buffer for streams or you can’t build in areas that are wetlands in order to protect flora and fauna.

A rare orchid, or a spotted salamander or a threatened egret or an endangered heron. They say, you can’t build in their critical habitat areas. You’ve got to protect them.

But yet, often, the same type of people that want more environmental regulations are the same people that say that they want more affordable housing options.

Well, when you limit where you can build, now you’ve reduced the housing supply. Real estate pricing is highly susceptible to supply/demand factors, of course.

All these wildlife protections limit supply. That makes prices go up. That prices people out.

Now, maybe you’re thinking I’m anti-environmentalist? No, I’m not taking a side either way.

It’s just that one needs to understand the cost and the longer-term ramifications of decisions that limit development in protecting the spotted salamander.

I think it’s easy to make a case that more biodiversity is better than less biodiversity. But the better question is: “At what cost should we protect species? How far do we take it?”

Environmental regulations in the United States are intended to improve the quality of the environment; preserve ecosystems - that includes wildlife; and protect human health too.

But these regulations are often written without considering how much they will cost.

Another contributor to homelessness is excessive safety regulations.

Again, some safety regulations are good. But how far do we take it?

My gosh, when an area needs to build more affordable housing for people - which is something that would reduce the homeless rate … and ...

Sheesh, a new home today might need fourteen smoke detectors and five carbon monoxide detectors … then the detectors need to be connected to each other so that they can communicate with each other … and all these devices and this added complexity increases the cost of housing.

That makes mortgage payments higher, rent payments higher, and it just prices more people out of the real estate market. The lower end of the income spectrum gets priced out of affordable shelter.

I’m not anti-safety. But at some point, one has got to ask the question, “How much safety do we really need?”

Even - “What is the cost of a human life?” There actually is an answer to that question. In fact, the EPA pegs the cost of a human life at $10M - one of the highest of any federal agency.

And then, there’s the entire question of how can you ever monetize the value of a human life. You can make the case … that it’s priceless. That’s a different discussion.

But the point is, all these safety regulations increase the cost of housing and increase homelessness.

Minimum wage does, in many instances, increase homelessness long-term.

This might come as a surprise to you. You would think that raising the minimum wage would have to DE-crease homelessness - because a higher wage would mean that low-income workers could now afford housing.

Well, long-term, besides higher wages in an area creating inflation & soon making the cost of everything go UP - including housing …

Think about it from the perspective of if you’re an employer & you have to pay your workers a higher wage - now that minimum wage is higher.

If someone that works for you makes $9 an hour - but they only produce $12 an hour worth of productivity for you...

And a new minimum wage of $15 an hour is implemented, you’re losing money if you retain that worker. So you would lay them off.

You would find ways to automate - or make a machine do the work that that employee used to do for you. That layoff increases homelessness.

Just look at the number of self-serve checkout kiosks in grocery stores. Those lanes used to be staffed by humans that earned a wage.

With a hike in the minimum wage up to $15 an hour, you’d begin to see a trend where more fast-food restaurants have self-serve kiosks. You’ll have fewer humans there.

That’s because some employers can’t afford to pay people $15 an hour. Every self-serve digital kiosk that you see represents a laid-off worker.

Talk to your parents or grandparents and they’ll tell you that gas stations used to be attended by humans that would pump your gas for you, check your tire pressure, check your fluid levels - that’s been gone for a couple generations.

Now, an increase in the minimum wage would help get some people out of homelessness short-term … yes.

I’m giving you insight so that you can see both sides & see the long-term consequences of government intervention into the free market.

Let’s say that you’re an employer at a warehouse, the minimum wage is $15 an hour and you want to hire someone to help you sweep floors & do odd maintenance jobs around this warehouse that you own.

Well, now it’s illegal for you to hire them at $12 an hour. You’d love to give a kid a job and help him learn - and you can’t make the numbers work at $15 an hour.

So now he’s unemployed because the government said, “No. You can’t hire him at $12 an hour.” That’s what a $15 minimum wage says. Try looking at it from that angle.

Another phenomenon that keeps people homeless is NIMBY - Not In My Backyard.

NIMBYists are the ones that say, “No, I don’t want you to build low-cost housing in my neighborhood, because I’m afraid that it’s going to ruin the character of my neighborhood and it’ll stifle the rate of home appreciation here.”

Lafayette, California is a wealthy San Francisco suburb. It is nestled in Contra Costa County, where its residents fight to stop what they call a "very urban," "unsightly" 315-unit housing development

It was recently profiled by The New York Times.

Over in the suburban community of Cupertino, California—we’re talking Silicon Valley now—local activists spent years trying to stop the development of an abandoned mall into apartments, half of which would be rented out to lower-income tenants at below-market rates.

In Berkeley, California, activists often argue against new housing on the grounds that it will threaten their community's sustainable character.

Well, what is another example of NIMBYism?

At a recent Zoning Adjustment Board Meeting in Berkeley, I think one resident summarized NIMBYism really well - and this was published in the New York Times - they said "Berkeley needs to prioritize a livable, sustainable environment for people who already live here” …

… when they were opposing a 57-unit development of student housing. They went on to say: "We are not obligated to sacrifice what is best about Berkeley to build dorm rooms." That’s the end of what they said.

NIMBY - this “Not in My Backyard” opposition to new housing development - centers on concerns of property values and crime and gentrification and environmental sustainability.

Even though it’s often not their intent, the result of NIMBYism is that less housing gets built, housing costs go up and homelessness … rises.

So, let’s draw some conclusions here and look at some actionable ways that you can make things better.

Though it isn’t immediately apparent - carbon monoxide detectors, minimum wage, salamanders & egrets, rent control, and NIMBYism - all go right through the heart of real estate investing and contribute to the long-term cycle of homelessness.

A giant takeaway for you here, is that, what is the common denominator in ALL of these factors. There is one common theme.

You know what that is - it is Government intervention.

Government intervention and interference in the free market - is the contributor here - excessive safety, minimum wage, protecting salamanders & egrets, rent control, and NIMBYism.

Every single one of them.

And now, maybe if you’re a new Get Rich Education listener - especially - you might be wondering, am I some anti-government guy where I think that the answer to EVERYTHING is free market economics.

Well, though I think that less government would be better.

I’ll tell you that SOME government regulation is good - just less than what we have now.

For example, look at all the smoky, hazy pollution in Pittsburgh, PA in the 1970s. It was a hazard to your health just to walk Pittsburgh then.

You might have heard about this: famously, in the summer of 1969 - An oil slick in Ohio’s Cuyuhoga River caught on fire.

Companies were committing rampant pollution such that it was a hazard to human health.

Well, government regulations like the Federal Clean Water Act Of 1972 helped to clean that up.

So, that regulation helped. Government has a role, but it’s often overly intrusive.

When it comes to you helping the homeless directly, I like the campaign slogan that says, “Give real change, not small change.”

That means, don’t give money directly to panhandlers on the street. Where do you think that your goes then? Probably straight to cheap monarch vodka in those plastic bottles.

Also, if you don’t want to see homeless people in your neighbourhood, don’t give to them if they’re on your city’s street corner - like they are mine - because you’ve just given them an incentive to show up there again & do the same thing.

So instead of small change, give real change. When you donate to your local homeless shelter or soup kitchen, your money is going to do MORE REAL GOOD for the homeless.

It’s going to provide them with shelter, or educational resources, or a computer so that they might be able to apply for a job. That’s real change.

You want to help the homeless? I think that’s great. That’s kind. Give real change, not small change.

When it comes to NIMBYism and the environment, there’s a great saying out there.

What do you call a developer – someone who wants to build a house. Well, what do you call an environmentalist – someone who already owns the house, [LAUGHING] because they don’t want anyone else to build there, right?

Well, we avoid investing in coastal areas here at Get Rich Education. They’re what I call the volatile markets - they have a history of more regulation, more rent control, and more laws that are disadvantageous to property owners.

Just more reason … as to why we invest in the U.S. Midwest & South. They’re what I call the stable markets.

You’re listening to Get Rich Education, Episode 306.

We are your source for independent groundbreaking, original content on really three main topics: real estate investing is what we major in - with minors in both wealth mindset, and real estate economics.

Get Rich Education is not affiliated with any large media conglomerate.

And we’re here to enrich you - and sometimes even rescue you & help you survive in this widening difference between the “haves” and “have nots” - that continues to broaden in pandemic times.

This show is also when you can find all your finance heroes - that have come onto the show to run alongside me for an episode.

Check our shows published over the years to find me here with the best-seller finance author of all-time Robert Kiyosaki, the world’s leading sales trainer Grant Cardone, global wealth mindset magnate T. Harv Eker, and other economic minds and thought leaders Jim Rogers, Jim Rickards, Sharon Lechter - all your favorite thought leaders are here on this show.

We have more of them coming onto the show in the future, including the upcoming Get Rich Education debut of success thought leader Hal Elrod and others.

There is so much real estate & economics news that the pandemic is providing to us ... more & faster than before.

We bring you that here. Also, be sure to subscribe to the DQYDD Letter. That’s our wealth-building email letter that you can get at GetRichEducation.com

A lot of times, I can write you something in the letter faster than I can get it out here on our weekly show. Yes, I do write the letter myself - and email it directly to you.

Never any spam - never sharing your email address with others, of course.

Also, would you like to join me on a live webinar? We’re looking at doing some of those soon. Look for those announcements - in the Don’t Quit Your Daydream Letter as well.

Information, actionable resources, and education -

Get ahold of that completely free - at GetRichEducation.com

Again, What do you call a developer – someone who wants to build a house. What do you call an environmentalist – someone who already owns the house.

Kind of exciting next - A world class city where the real estate numbers actually make sense for you … straight ahead.

I’m Keith Weinhold. This is Get Rich Education.

305: How To Survive A Horrific Economic Contraction with Anna Myers Aug 10, 2020

GDP fell 33% annually, the unemployment rate is high, and even the Tokyo Olympics have been postponed, all pandemic-driven.

Housing continues to hold up well. Nearly all assets are - gold, stocks, crypto, and some commodities. This is partly due to a weaker dollar.

The gap between “haves” and “have nots” widens in the pandemic.

15-year mortgage rates fell below 2%.

VP of Grocapitus, Anna Myers joins us to discuss real estate trends, market analysis, and where to invest for economic survival.

Neither she nor I see a “V-shaped recovery”. I’ve been saying this for five months.

Anna & I discuss real estate’s winners and losers in the pandemic.

With more people having shakier job situations, fewer qualify for loans. This increases the renter pool.

Winners: smaller cities, suburbs, e-commerce, tech, warehouses, places like Salt Lake City, Raleigh-Durham, Memphis

Losers: high density places, hospitality, medical, oil, long-term college.

Resources mentioned:

Grocapitus.com

MultifamilyU.com

https://www-housingwire-com.cdn.ampproject.org/c/s/www.housingwire.com/articles/uwm-now-offering-15-year-fixed-mortgage-rate-as-low-as-1-875/amp/

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

304: How Money Really Affects Your Happiness, Design Your Lifestyle Through Real Estate Aug 03, 2020

Income over $75K-$95K does not increase happiness.

Earning over $105K actually decreases happiness.

This is based on studies from Princeton and Purdue universities.

Then what’s the point of building wealth? You get answers.

These surveys do not consider replacing your active income with passive income.

Matt Bowles of Maverick Investor Group joins us to discuss: market due diligence, pandemic changes, and how to use real estate to build lifestyle design.

We also discuss changes to the rental market from 2007 to today. Ten years ago, you could buy properties for less than replacement cost. No longer.

Markets like Phoenix, Dallas, and Atlanta have largely lost their investor-advantaged status.

Check out Matt’s podcast, called: “The Maverick Show”.

Resources mentioned:

How Money Really Affects Your Happiness:

https://www.cnbc.com/2020/05/26/how-your-salary-and-the-way-you-spend-money-affect-your-happiness.html

Maverick Investor Group

The Maverick Show:

Podcast on Apple Podcasts, Spotify, etc.

Remote due diligence:

WeGoLook.com

NeighborhoodScout.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

303: Do-It-Yourself Property Management Jul 27, 2020

We compare do-it-yourself vs. professional property management.

New home price annual sales volume spiked in June. There’s a scarce inventory of suburban SFHs.

The co-founder of Avail, Laurence Jankelow joins us. Avail.co streamlines life for DIY property managers.

Avail is free. It enables you to centralize your: rental listings & applications, tenant screening, credit / criminal / eviction reports, rent collection, maintenance tracking, and even rent price analysis.

Becoming a landlord is like becoming a parent. There’s no certification course or degree required.

You cannot violate Fair Housing Laws. Giving one tenant a break - and not another - could violate Fair Housing Law.

Smart home technology often still does not exist for the most profitable long-term rentals.

Rent collections during the pandemic continue to be greater than most people anticipated.

Avail is best for landlords with 1-9 rental units.

There is a general minimum standard for what landlords must furnish to tenants. It’s called an “Implied Warranty Of Habitability”.

This includes: access to clean water, heat, electricity, sanitation, rodent-free, fire-safe, and meets local building codes.

Resources mentioned:

DIY Property Mgmt. Software:

Avail.co

New construction Florida income property:

GetRichEducation.com/Orlando

GetRichEducation.com/Jax

GetRichEducation.com/Tampa

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

302: Five Ways Real Estate Pays You, Offensive vs. Defensive Investing Jul 20, 2020

Learn how real estate pays you up to five ways simultaneously.

Should you be playing offense or defense as an investor now?

Learn how a return of less than 20 to 25% is disappointing.

We’ll add up all five ways you’re paid and see what your Year One return is from: Appreciation, Cash Flow, Return On Amortization, Tax Benefits, Inflation-Profiting.

See brand new construction SFRs and duplexes in central Florida at: www.GetRichEducation.com/Orlando

Central Florida rent-to-price ratios are about 0.8%. Interest rates are at historic lows.

What does late rapper Notorious B.I.G. have to do with real estate investing? You’ll see today. Kind of.

**Complete episode transcript below. Read along as you listen.**

Resources mentioned:

New construction Orlando income property:

GetRichEducation.com/Orlando

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Welcome to Get Rich Education. I’m your host, Keith Weinhold. There are seasons in your investor life where you either play offense or defense. What should you be doing now? … as we refresh the “Up To 5 Ways That Real Estate Simultaneously Pays You.”

Anything less than a 20 to 25% rate of return in buy-and-hold real estate investing is disappointing. How can that be? Today, on Get Rich Education.

______________________

Welcome to GRE! From Asmara, (Air-UH-tree-UH) Eritrea to Ashtabula, OH and across 188 nations worldwide. I’m Keith Weinhold. This is Get Rich Education.

Thanks for being here, but you’re not here for me. You’re here for you.

In your investor life, are you playing offense? Or are you playing defense right now?

Or, in general, longer-term, are you a more offensively-oriented investor, which correlates with more risk-taking for higher returns.

Or are you more defensively-minded - where you’d rather have less risk and lower return?

Are your mindset and actions aligned toward offense or defense?

Well, I’ve got an answer for you here, and you’re going to have a really valuable takeaway.

Anything less than a 20 to 25% annual rate of return in real estate is really … actually … disappointing.

“What choo talkin’ ‘about, Willis?”

What I’m talking about … Will - is ...

Really, this all comes back to how - when you buy income property the right way - you are paid up to five ways simultaneously.

A stock typically only pays you one way, perhaps two.

I think that the easiest way for you to understand the five ways you’re paid - and even celebrate these five ways you’re paid - because … this ... is ... pretty compelling - is to use an example.

I’ve discussed this before. So if you’re a longtime listener, I’m going to put “The 5 Ways” through a new filter for you.

And if you’re a newer listener, say in the last year, this could completely change your investing thought paradigm for the rest of your entire life.

In fact, compound interest is lame and rarely, if ever builds real wealth in real life. I’ll tell ya what does here.

And yes, I know that this is abject heresy. It is replete blasphemy to criticize “compound interest” in the finance world.

I am surely guilty of committing financial profanity right there.

This is really fundamental stuff I’m about to share with you here - and yet the real paradox is that most real estate investors don’t even understand this.

This is pretty fun to do. We’re going to add up the five ways you’re paid and determine your total rate of return here.

Let’s say that you purchase a $100,000 property - $100K. And, no worries, if that’s too “small time for you”, this is all based on ratios, so it scales up to a $1M or $10M property.

(Ha!) And sometimes I wonder how much longer a $100K property will even be a feasible example as inflation makes $100K properties less common all the time.

But with your newly-bought $100K rental single-family home, you buy it with a tenant already residing there, where the monthly rent income exceeds the monthly expenses - that’s a big part of “buying right”.

With your 20% down payment, you have $20K out of pocket then, and an $80K loan.

The first of five ways you’re often paid is ...

1 - Appreciation Let’s just say that your property appreciates from $100,000 to $106,000. That is just commensurate with real estate’s historic appreciation rate of 6%. But here’s the big “a-ha” moment.

Your $6,000 gain is based on only your $20,000 down payment.

Well, that’s your ROI formula - your gain divided by how much you have invested. Well, your $6K divided by $20K is a 30% return to you. Really? How did that happen exactly?

How do you have a 30% return from just this first of five ways you’re paid?

This is because you achieved a 6% return on both your $20K of skin-in-the-game and the $80K borrowed from the bank. This is what is known as financial leverage. Financial leverage means that your return is 30%.

No wonder that I’m known for saying that compound interest is lame and leverage builds real wealth. More on that soon.

2 - The second way you’re simultaneously paid is with Cash Flow It’s your monthly rent income minus all the expenses (like mortgage, vacancy, insurance, maintenance, taxes, utilities, management). We’ll be conservative and say that leaves you with only $100 of residual income in this case.

Annually, that’s $1,200 more for you, divided by your $20,000 down payment.

Yes, it’s $1,200 still divided by that same $20K of skin you have in the game.

This another 6% return for you. This portion is what is known as the Cash-On-Cash Return.

So, so far you’ve got a 30% return from leveraged appreciation PLUS a 6% cash-on-cash return from that monthly cash flow & we’re still going.

3 - Loan Paydown Unlike your own home where you pay down your principal mortgage balance with money that you had to earn, well, here, your tenant pays the monthly principal portion of your $80,000 loan on this property!

At a 6% interest rate (and you know you can do better than that today, but we’re being conservative here) on a 30-year mortgage, that’s about $1,000 that the tenant pays down your loan for you annually.

Divided by your (still the same) $20K of “skin-in-the-game” means that’s ANOTHER return for you of: 5%. This portion is known as your ROA - your return on amortization. We are still going - still adding up all the ways you're often paid in real estate.

4 - Tax Benefit You can have a mortgage interest deduction, an ability to pay zero capital gains tax with a 1031 Exchange, and tax depreciation - which can tax-shelter part of your rent income.

This is hard to measure. We’ll conservatively call your investment tailwind another 5%. There’s something else called “bonus depreciation” that can certainly make this 5% tax tailwind higher, but let’s just leave it there.

And the fifth and final way is what I call Inflation-Profiting. Few people understand this.

Like inflation erodes the value of your lump of savings, it also degrades your mortgage debt balance.

How is that? It’s because your $80,000 loan today gets easier to “pay back” as wages and prices escalate over time. Your bank only asks to be repaid in nominal dollars (while your tenant pays the interest), not real, inflation-adjusted dollars.

So just say that over a few years, you had 10% cumulative inflation. Well, then rather than paying back the bank $80K, you really only need to pay them back $72K in inflation-adjusted terms.

Inflation has been low lately. We’ll call this benefit a return of another … just 2% to you.

Well, there were all five ways. Let’s add them up to see what your total rate of return is. You got a return of:

30% from leveraged appreciation, then…

6% from cash flow - which is that portion known as your cash-on-cash return, plus another

5% from your ROA - that Return On Amortization, where you tenant pays down your loan for you. Then another …

5% from tax benefits …

2% from inflation-profiting ...

And your first year total Return On Investment from this income property is 48%

You just achieved a 48% return - and without taking any INORDINATE risk. Now, your real-life return probably won’t be exactly that - it’ll be higher or lower.

A few other caveats here. I think you probably realize this example is simplified.

If we had 18 spreadsheets, then we could probably get an exact number, like rather than a 48% total rate of return for you - then it might be 46.16% or something like that. …

… but eighteen spreadsheets doesn’t work in audio format as we’ve just broken it down here on Get Rich Education Episode 302.

1) Note that in the example, we did not factor in your buyer mortgage loan closing costs (the seller can often help you pay these).

Of course, risk still exists. If you buy property in a losing job market, or hire a disreputable property manager, for example, your return can erode.

3) You will still have SOME inevitable problems along the way. It just happens in real estate.

Also, note that your property insurance premium WAS considered in the example. That hedges you from a lot of major loss types.

And that your management cost was considered here, meaning your income is largely passive.

Also, be mindful that after your 48% return in Year One of this hypothetical example, your return typically DROPS in future years.

Maybe it’s down to 38% in the second year and 29% in the third year.

Why is this? Well, primarily due to the fact that equity accumulates in the property, and equity has zero rate of return.

Compound interest? Well, you’re typically not leveraging other people’s money with compound interest.

In the example we used - you’re not just growing from the return on your own money.

You achieved that return because you got to use BOTH your own money plus three other parties’ money at the same time:

the bank’s for the leverage

the tenants for the income and the return on amortization … and

… the govt’s for the tax incentives - plus, really the government’s policies for the inflation-profiting benefit too … if ya think about it.

With just a 20% down payment, you got access to getting the return on OTHER people’s money all over the place.

Another risk is to be mindful of overleveraging. Overleveraging means that you’ve borrowed so aggressively that, say you get in a situation where the tenants rent income no longer meets or exceeds the monthly property expenses.

That’s negative cash flow from overleveraging.

With these five ways ...

Now you understand how real estate makes ordinary people wealthy!

Now you know how to actually “keep score” with real estate investing.

Now you understand how less than a 20-25% Total Rate Of Return is disappointing.

This is LEVERAGE rather than compound interest.

Long-term, one’s hopes for compound interest get eroded and worn down to nothing after applying - something that longtime listeners can almost repeat after me - applying those deleterious effects of inflation and emotion and taxes and fees and volatility.

If you understand what I just described, you understand something that Billionaire RE investors do NOT understand.

Billionaire real estate investors don’t understand what you now know.

So, when it comes down to, are you playing offense or defense as the theme for your own investing strategy?

The answer is, when you’re paid five ways, you have the ability to constantly do BOTH - you’re playing both offense and defense - at the same time, all the time.

By the way, they say that offense wins games but defense wins championships. It was legendary Alabama football coach Paul “Bear” Bryant that’s credited with saying some version of that.

I don’t know whether that’s so true or not, but here you have multiple offenses and defenses.

But what I’m talking about here, is, with the 5 ways you’re paid:

Appreciation - That’s playing offense

Cash Flow - That’s more predictable than appreciation, and that’s playing offense too

Return On Amortization - That’s defense. It’s slow, predictable, and it builds illiquid equity

The fourth way, taxes - that’s defense too. It’s kind of built-in, predictable, and really just recurs when you do your annual taxes.

And the fifth way, inflation-profiting - That’s defense too.

So, there you go, with one single-family rental home or apartment building, you’ve played offense two ways and defense three ways … all at the same time.

And when you’re paid five ways, if one or two stop providing you with yield, well, then you’ve still got three or four ways that are.

But, yeah, these return sources aren’t apparent to a lot of people.

You know, I was recently doing a review of one of my larger apartment buildings with an experienced investor, because the cash flow basically dried up.

And, for example, this apartment building has $2,100 of tenant-made mortgage principal paydown every month. That’s $25K per year in equity buildup.

$25K divided by my $475K in equity is a Return On Amortization of about 5% on this particular apartment building.

So I think that the real takeaway here is - invest in something where you’re paid multiple ways, where you can invest in offense & defense at the same time, and it pays you income so that you can begin enjoying your life now, not “maybe someday” - which correlates with more of a compound interest approach.

If you think about it, a central theme of this show is how to optimize the 5 Ways You’re Paid - and avoid mistakes.

This is really a huge part of the compelling “why” for real estate that is so often missed.

You want to own the real property yourself to make sure all five of these benefits aren’t diluted.

You also want to be sure to have a good loan on your property to amplify your ROI over the long-term.

As you know, I am “pro-good debt”. I have no interest in paying down low interest rate debt, that the tenant pays down for me and inflation even further debases.

Instead of using that dollar to pay down debt, you could use that dollar as a down payment on another property - expanding your empire.

Gosh, with interest rates this low, it puts an exclamation point on the fact that you don’t want to be paying down your debt … here in the early 2020s decade.

Paying down good debt is one of the last things that I would do with my money. You lose leverage every time you do that.

Turning a liquid dollar into equity just transferred cash into equity.

Financial freedom achieved when you do the opposite - when you transfer equity into cash flow.

The probability that I’m going to wake up tomorrow and start accelerating paydown on low-rate, fixed mortgage debt tied to this cash-flowing property - is about nothing.

It’s about the same as the chance is that my Dad wakes up tomorrow and starts listening to the Notorious BIG with Junior MAFIA.

“I chill … “ to “ … you know”.

Haha! Yeah, not happening!

Not for my Dad, anyway. Not his style. Sounds alright to me. I might drop that in during a workout or something.

You’re listening to a more detailed discussion about the Five Ways That Real Estate Pays You and we’re talking about it through a fresh lens of “offense vs. defensive” investing here on Get Rich Education Episode 302.

I strongly believe: It is very difficult to get wealthy without debt. Often won’t achieve freedom without debt. It’s going to be alright ... when your debt is reliably outsourced to others.

You know, at one point in my life, when I still worked for an employer. (The last day job I ever had was working in the QA section for a state DOT, by the way).

At one point, I realized that every dollar I lock in a stock or 401(k) is a dollar that I can’t use to leverage OPM. That epiphany was a real turning point.

Checking the RobinHood app every 15 minutes isn’t going to build real, durable wealth for you.

And, sometime before that, it was the realization that for me - and for you - to get more out of life, you can’t live below your means, you’ve got to expand your means.

To achieve financial freedom, it sure isn’t going to happen by cancelling Netflix $10 for month.

That’s not going to happen if you save $80 on air tickets by adding an extra layover on your trip itinerary. You just added three hours of low-quality time to your life - and you’ll never get that time back.

That’s cheesy. That’s unattractive.

It’s not about saving money on your Butterball turkeys or car gasoline.

I’m not saying you can NEVER do those things. Sometimes you gotta do what you gotta do.

But people need to stop being congratulated for being cheap or even focusing on frugality. Gosh, that stuff can make people miserable.

People that say, “I want to live frugally.”, they don’t REALLY want to live frugally. They actually want to say, “I want to live well.”

But they don’t know how to do that. They don’t have a vehicle to move forward with.

It’s kind of like, when we had T. Harv Eker here on the show here a few years ago - it’s about setting your mental thermostat higher, so that you can get greater wealth & freedom for yourself …

And with the “five ways you’re paid” like I described earlier, hopefully, I’ve charted a substantially clearer path forward for you so that you can do that.

Well, with “The Up To 5 Way That Real Estate Often Pays You”, that’s something that I first started talking about more than five years ago. I’ve never heard anyone else talk about it before. So, as far as I know, I guess I’ve “coined this” or whatever.

But since I began talking about it, I hear other people talking about it too - even other educational platforms.

Now, I do own three real estate trademarks, so what do I think about OTHERS now teaching the “5 Ways You’re Paid”. I’ll discuss that in just a few minutes here.

I’m also going to discuss who influenced ME - and give them some credit. And this includes a couple people that you’ve surely never heard about before.

If you would like to see the “5 Ways You’re Paid” in one easy-to-read infographic - that all fits on one sheet - so that it’s REALLY cear to understand - I’ll send you a colorful electronic “5 Ways Infographic” all you’ve got to do is go to GetRichEducation.com/Book.

That’s got to be one of the greatest deals anywhere. That’s where you can opt-in to get the electronic version of my int’l bestselling book, free, emailed right to you.

Then a few weeks later, the “5 Ways You’re Paid Infographic” is automatically sent to you too.

That’s at GetRichEducation.com/Book

More next. I’m Keith Weinhold. This is Get Rich Education.

________________________

Welcome back to Get Rich Education. I’m Keith Weinhold.

Hope you like our humorous moments to lighten up the show here. Hey, you run a little math on audio and … it begs for some embellishment to spice things up.

When it comes to the up to five ways you’re paid in real estate investing. Yeah, since I first discussed this more than five years ago, I’ve noticed that other REI educators now teach the same thing.

I don’t know whether they credit that to me or not - and you know what - I don’t really care whether they do or not. I mean, it’s cool if they do, but …

… the more important thing to me is that conscientious people get the information. Share it. That is so much more important than anyone getting the credit.

So just … share it.

“Helping the people” is more important than “getting the credit”.

I think that the world would be a better place - imagine if everyone put “helping the people” before “getting the credit”.

I don’t own trademarks so that I can go after people that say the same stuff that I do. That’s just not in my nature. I’d rather do productive things with my time.

The trademarks are thre just because I wouldn’t want someone else to swoop in and tell me that I can’t use something that I might have come up with in the first place.

When it comes to “helping the people” and “getting the credit”, now, everyone has influences - things they learn from others. You & I are no different that way.

Even those that influence you were influenced by someone else before them.

Well, I DO like to give credit to those that I learned from, so ...

Though I know he’s a polarizing figure to some people, credit is due to Robert Kiyosaki and the Rich Dad Company. Learn more about them at RichDad.com

The most important lesson that I learned there is “Don’t live below means. Expand your means.”

It’s more important to increase your income than cut your expenses.

Don’t make a budget. You’re just tearing things down.

Instead, build a cash flow statement. Now you’re constructing. Now you’re making more of yourself, not less. These are really Rich Dad principles and helped develop my mindset.

Now, as for who helped turn this mindset into something actionable? I’ve got to give props to “The Real Estate Guys” - Robert Helms and Russell Gray. Learn more about them at RealEstateGuysRadio.com

That’s the first place that I learned, for example, that in real estate, the market is more important than the property.

Look, you can’t very well be in your crib with your trading app and just order up real estate - even though people are building online marketplaces.

But one mistake people make is that they buy property because the numbers look good based on some YT video they watched on how to crunch the numbers - but they know nothing about the market or the team.

Then they buy it. Then only after they go buy it, NEXT they go looking for a PM and hope there’s a good one that can handle it.

Then next, they try to figure out the market that they already bought in.

That does not work. They’ve got it backwards. If the market and your property manager check out, then & only then do you get the property in that market.

It’s sad when people get that wrong. That’s why people walk away from RE & they say that RE doesn’t work.

Well, no, that investor wasn’t very strategic. But you CAN understand how that happens to people.

And it was great to have both authors of the “Rich Dad, Poor Dad” book Robert Kiyosaki and Sharon Lechter - and The Real Estate Guys all here on Get Rich Education with us multiple times.

Another set of influencers are two guys that you’ve never heard of before.

Their names are Chris and Raj. They are simply two longtime friends of mine that bought four-plex buildings.

That got me to make my first-ever property that seminal four-plex building where, with a 3.5% down payment I lived in one unit, rented out the other three, and that started it all for me.

These otherwise “regular guys” reinforce the quote from the late Jim Rohn, “You Are The Average Of The Five People That You Spend The Most Time With”.

Today, I’m a collector of real estate - most of it in the United States. Being the geography guy that I am, did you know that I have a world map on the wall of our garage …

… and I have a little red sticker - little red dots on top of those areas where I own property. Yeah, it makes this real estate collecting kind of visual. Maybe you want to try that too.

Well, one part of the world that I’ve been adding more red dots to lately is where I’ve been buying - across Florida.

Areas around Tampa, Orlando, and Jacksonville all make sense from a cash yield perspective.

A lot of BRAND NEW construction properties have numbers that work there, especially where our Orlando provider - that’s Greater Central Florida really - have been actively sourcing brand new construction property in Sebring, Florida, among other nearby places.

Sebring is pretty much smack dab in the center of peninsular Florida, south of Orlando.

These single-family homes that make great rentals have a metal roof, they’re 3 bed, 2 bath, and the prices really are remarkable - $179,900 and $159,900.

Yes, that’s for new construction in Sebring, Florida.

The rent-to-price ratios are a very attractive eight-tenths of one percent or so. Quite good for new construction, plus you’ve got the tailwind of extremely low interest rates as well.

And when it’s new construction, the PROPERTY INSURANCE premiums are so reasonable too.

If you’d like to learn more about those, you can do so at GetRichEducation.com/Orlando

It isn’t just single-family rental homes. New construction duplexes are available too.

That’s GetRichEducation.com/Orlando

You know that I often like to leave you with something actionable like this at the end of an episode.

And knowing and doing are two very different things.

How do we already know that? Well ...

Many people aren’t at their ideal body weight … and it isn’t because they don’t know what to do, they just aren’t doing it.

You also need time to figure out what you want to do. I like eating pizza, for example, but it took me eating different foods in order to find that out. I had to try and do.

Learning is best done by trial-and-error but it doesn’t have to be YOUR trial-and-error.

Learn from me. I’ll even eat your pizza for you!

I help give you the information you need to make an informed decision.

I connect you with property teams with proven track records - many of whom I invest with myself.

You ultimately choose your investments.

There’s risk with anything … anything in life.

You either take the risk or lose the chance.

I think it’s helpful too, that you follow someone that’s been through a recession.

I’ve been investing for … nearly 18 years … it’ll be 18 years next month … since I bought that landmark four-plex building.

Teach you how to fish or GIVE you a fish? Well, why not do both? You can get the fish at GetRichEducation.com/Orlando

Have you ever wondered where your money is? Well, the world already has your money. You just need to go out and claim it.

I’m Keith Weinhold - grateful, as always for your listenership. I look forward to chatting with you again next week.

Don’t Quit Your Daydream!

301: Will You Escape From A Depression? Inflation vs. Deflation with Richard Duncan Jul 13, 2020

Stocks, real estate, gold, oil, inflation rate, and interest rate valuations are all updated after the first half of the year.

Housing Wire tells us rents are up in: Memphis, St. Louis, Greensboro, Jacksonville, Columbus, Tampa, Cleveland, Kansas City, and Virginia Beach. I discuss where they fell.

San Francisco rents just plunged 12%.

Macroeconomist Richard Duncan of MacroWatch joins us to discuss depression chances, and inflation vs. deflation.

For a 50% subscription discount on Richard’s MacroWatch video newsletter, use Discount Code “GRE” at: RichardDuncanEconomics.com.

Fed intervention has prevented a COVID-induced economic depression (so far). We will need more to prevent depression.

Hordes of dollars can be created by the U.S. because dollars are not tied to gold. Many Americans still don’t understand this.

Recent currency creation has not caused high inflation. The Fed usually hit below their 2% inflation target.

Could consumer price deflation create asset inflation? Yes.

I describe deflation vs. inflation as a “tug of war”.

Deflationary tugs: globalization, technology.

Inflationary tugs: currency creation.

Bottom line: Be invested in something that pays you five ways like real estate.

Resources mentioned:

Richard Duncan’s MacroWatch newsletter:

RichardDuncanEconomics.com

Use Discount Code “GRE” for a 50% discount.

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

300: Today’s Hottest Rental Type, Why Money Is A Taboo Topic Jul 06, 2020

Homes with many small bedrooms are hotly desired today.

Why? In an economic rough patch, people need roommates. Secondly, home offices are more popular than ever.

Residents increasingly want yards today too. Gardening is popular as a hedge against disruptions in the food supply chain.

This all makes single-family homes more popular than apartments.

*The entire episode transcript is below.*

The debt-to-income ratio requirement is positioned to be removed from qualified mortgages.

Three listener questions are answered:

1) What about CapEx expenses?

2) What about all these property notices I get in the mail?

3) What happened to the coffee and cacao providers?

I give you four reasons about why money is a taboo topic.

Learn the least likely money topic that people are willing to discuss.

The most I ever made at my day job was $108,000.

People must stop equating net worth with self-worth.

Resources mentioned:

April Home Prices Grew 5.5%:

https://www.housingwire.com/articles/u-s-home-prices-grew-5-5-in-april-despite-pandemic/

Why Money Is A Taboo Topic - Ally Bank survey:

https://media.ally.com/2015-11-24-Holiday-Tip-Most-Americans-Say-Social-Conversations-About-Money-are-Taboo-According-to-Ally-Banks-Money-Talks-Study

The Atlantic:

Why Americans Don’t Talk About Money

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Top Properties & Providers:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Welcome to Get Rich Education. I’m your host, Keith Weinhold.

Talking about today’s hottest rental type, then my favorite guest is here on milestone Episode 300 - because that guest is you - as I help with your listener questions about your rental property operations, then “Why Money Is A Taboo Topic” (why DO people hide their salary?), and finally a little Episode 300 bonus. All today, on Get Rich Education.

_____________________

Hey, you’re inside GRE. From Phoenix, AZ to Phoenixville, PA and across 188 nations worldwide. I’m Keith Weinhold.

This IS that show that’s created more financial freedom than nearly any show in the world.

You’re listening to milestone Episode 300 of Get Rich Education. More on that later.

The hottest INCOME PROPERTY housing type today could very well be single-family rental (SFR) homes that have many small bedrooms.

Four bedrooms is often better than three. Three is better than two.

Yeah, today, a high number of small bedrooms is being favored over fewer large bedrooms.

For one thing, this is because as the economy is in a rough patch, more people seek roommates to share housing costs.

Also, with more people working from home now, they want the extra bedroom for quiet office privacy.

You probably already understand that more residents prefer SFRs over apartments to avoid common areas like laundry rooms and hallways and even elevators.

Another reason boosting SFR demand today is something that you might be overlooking when it comes to rental property … because often, you’re thinking about things INSIDE the property like amenities, and square footage, and layout.

But another reason renters increasingly want single-family rentals are yards. Now sometimes, duplexes might have a fenced yard for each side too, of course.

But … why are yards more desired today?

Well, there are a few reasons. In the pandemic, people have discovered gardening like the hunter-gatherers did.

Yeah, gardening as a hedge against these disruptions in the food supply chain.

In fact, Burpee Seed Company recently had the highest sales in its 144-year history.

People are gardening. In fact, the homeowner’s association in my own neighborhood recently put it to a vote among residents about “OK’ing” having a second detached building in your backyard (only 1 maximum is allowed now) and that’s because more people want to have a greenhouse today.

Gardens and greenhouses - these are most conducive to single-family rentals.

People are even buying egg-laying chickens like never before. It’s kind of a back-to-basics subculture that’s emerging.

Yes, humans are mammals and mammals need sustenance! Haha.

You need food and you need real estate.

In the midst of The Great Shutdown, people want to do more with their lawns.

Lowe’s & Home Depot are doing really well - and they’re selling home-dwellers a lot of things like Inflatable pools, patio furniture, and trampolines.

Then back indoors, yeah, you may very well want to tilt your new property buys into SFRs with more small bedrooms.

Sometimes, older SFHs can have four or even five bedrooms. One reason for that is that families had more children generations ago.

Family sizes are smaller now. So if you still have a 4-5 bedroom place, it can work well for either roommates or home offices.

If you're the "hands-on" type, building a wall to divide a large bedroom has rarely been more lucrative than it’s been lately.

Now, one 300 sf bedroom is pretty big. Dividing it into two bedrooms of 150sf each is paying off more than it has in the past.

They are some housing trends in the pandemic - demand for SFR with more small bedrooms and a yard for a garden.

In the pandemic, the broader economy is getting "bailed out" more often than a bank behaving badly.

It's not just quantitative easing, dropping interest rates on every loan type, or loosening bank reserve requirements or putting free checks into unemployed people’s hands.

Many real estate investors are getting support … almost like they had opened their own GoFundMe account.

Low supply keeps housing prices buoyant. Low mortgage rates keep demand high. Forbearance keeps borrowers from defaulting - so that further supports prices.

Now, the debt-to-income ratio (DTI) requirement is positioned to be removed from qualified mortgages.

This means borrowers that have higher existing monthly debt payments on everyday things like their car or their credit cards could now qualify for new mortgage loans - when they couldn't previously.

Well, what this does is that it creates a larger buyer pool. More people have the capacity to qualify and buy property.

This larger buyer pool serves to further push up real estate prices - and that’s both investment property and primary residences.

Well, eliminating the DTI is great news if you want to lock up more property at these historically low interest rates.

But there can be too much of a good thing. It's a call-to-vigilance to be sure we don't return to those loosey-goosey days of, say, 2005.

That's when virtually anyone with a name and a signature could get a loan. Borrowers lied about their income on loan applications and the income wasn't checked - it wasn’t even confirmed in underwriting.

So then, people with historically low-paying jobs like movie theater ushers & dishwashers & pedicurists could sometimes own a fairly lavish home back then.

When appreciation stopped in 2007, liar-borrowers had no equity to remove for servicing the payments … and that whole thing didn't end well.

We're nowhere near that point. But watch that pendulum swing.

If you’re buying for resilient cash flow, you’re not so price sensitive anyway.

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The first one of your listener questions today comes from Chad in Saline, Michigan.

Keith, I like your easy-to-remember VIMTUM explanation of expenses but why are you excluding CapEx expenses from the cash flow calculation?

OK, thanks, Chad.

Let me translate if you, the listener, are uninitiated on this.

The easy way to remember how to calculate your monthly cash flow is to take your rental income and subtract out your mortgage (that’s principal & interest) and your operating expenses, which I call your VIMTUM. V-I-M-T-U-M.

That’s just an acronym I use for your regularly, recurring operating expenses and VIMTUM stands for Vacancy, Insurance, Maint., Taxes, Utilities, and Mgmt. V-I-M-T-U-M

What Chad is asking about are CapEx - which a shorthand way of saying Capital Expenditures.

CapEx means large, IRregular expenses that an investor or even a homeowner - often incurs with their property over longer periods of time.

An example is, what happens when your roof needs to be replaced? A lot of roofs have a 25-year life expectancy.

Now, your property’s water heater has more like a 10-year life expectancy.

Chad is basically asking me how I’m accounting for that when figuring cash flow. I think I addressed this on a prior episode, but it’s been a long time so I’ll bring a fresh angle to the answer.

First of all, I’ve mentioned previously that it's prudent to keep 3-5% of the TOTAL value of your property portfolio in a liquid side fund.

So if all your properties are worth $1M, you’d have $30K - $50K in cash or cash equivalents.

If you’ve just got your, say first turnkey at $100K - have $3 to $5K set aside.

Note that when you qualify for a mortgage in the first place, mortgage loan underwriting typically requires that you have reserves already.

And, by the way, this liquid side fund should be in addition to any overall liquid emergency fund that you have in your life.

But, Chad, on your CapEx question, you might still be thinking ...

Yes, I want to take some of those dollars that you’ve felt compelled to put in a liquid side fund account monthly and factor THAT in to your property ROI. I get that. Here’s the thing.

If you follow … really … the entire wealth formula espoused here on the show, your CapEx expense should be limited. You’re going to pay less in CapEx expenses than other investors.

Why is that?

It’s because at the 8-to-10 year mark, which is before a lot of major CapEx items need attention, you’re going to sell your property and 1031 Exchange it into the next one - or hopefully into two at that point.

That is all driven by the fact that, after most any 10-year slice in the housing market, you’re going to have appreciation, hence accumulated equity.

As you know, home equity is unsafe, illiquid, and its rate of return is always zero.

So it’s really due to math and the loss of leverage that makes you move your property along before CapEx expenses kick in.

And with SFRs, you can sell to an owner-occupant buyer that typically get emotions behind the home and isn’t at all concerned that you were the one that enjoyed the new roof in its first ten years of use or whatever.

Now, if you have substantial enquiry accumulation after 10 years on a property that performs really well and you want to hold onto it, then you might do a cash-out refi and have CapEx expenses like a new water heater.

So, thanks for your excellent question, Chad.

One other thing I’d like to mention that a lot of real estate people don’t like to talk about are to, in general, run your cash flow projections fairly conservatively.

That is because, in real estate, unexpected expenses are more common than unexpected income.

Thanks, Chad.

The next question comes from Lori in Pasadena, CA.

Lori says, “Keith, love listening to you. You’ve got the most relevant real estate show out there. Wow, thanks for that. Things are going fairly well with the properties that I buy through GRETurnkey.com but with each buy, I get more & more of these various letters in the mai that I have to deal with.

The latest one is an annual property rental fee statement from Florida. Things like this continue to cut into my time … umm … and then Lori goes on to give another example.

OK, Lori. Yeah, what she’s talking about here … is that the Florida municipality - the town - where her rental SFH is located has this annoying little administrative charge.

They charge a whole $50 per year to Lori for this property because she’s an out-of-area investor that has the “privilege” of owning Florida rental property in their town.

This is basically like a tax excised by the town where she owns her property.

What something like this really is Lori is … a nuisance. Just reading the form, and figuring it out what it is, and seeing how that Florida town accepts the payment. It IS annoying. It cuts into your time.

In fact, I got a piece of nuisance mail for one of my apartment buildings just yesterday.

This is from a utility provider - the natural gas provider to the building. Basically, the natural gas company is working on a high-pressure gas transmission pipeline, and the R-O-W for the pipeline is apparently within ⅛ of a mile of this apartment building of mine.

The letter said that the property residents should be informed.

Well, Lori, with the piece of nuisance mail that you received and the one that I got, here’s what you do. Get it out of your life. Get that nuisance mail out of your life.

Now, I don’t mean “throw it away”. This all comes down to one word - and that word is “manager”.

What I did was get out my phone, I took a photo of this letter, sent the letter image to my Property Manager right away.

I asked them to handle it - and also asked the manager to make sure to tell the letter sender that any future correspondence like this be sent to the manager, not me.

You know what we just did, Lori. We both just increased our ROTI. Yes, we just increased that all-important investor metric that’s even more important than ROI.

ROTI is your Return on Time Invested.

I’m a big proponent after having a professional Property Manager. Remember, it’s their job to handle communications with your residents like this - and it doesn’t cost you anything extra.

Remember to outsource these little nuisances to your PM.

Lori, I don’t know how many properties you have, but just say you have a total of ten rental doors.

With a portfolio that size, some months, you might have what investors call “a perfect month” - that is, a month with zero repairs or maintenance in your portfolio.

But whenever you do, sometimes you might wonder - well, what did I pay the manager for?

Well, you still paid your manager to collect the rent and pay your bills and itemize your statements, and just have the peace of mind that your tenants can’t get ahold of your DIRECTLY at an inconvenient time.

But ensuring that your manager handles all your nuisance notices such that you don’t even know that you got one … that increases your Return on Time Invested.

Be that responsible owner. Do good in the world. You want a nuisance tax notice to get paid, you want your tenants to be informed about nearby utility work - but be sure to outsource it and keep your quality of life.

Like I’m fond of saying, “Be sure your quality of life exceeds your cost of living”.

Bottom line is - Use your manager. Thanks for the question, Lori!

The next question is from Brian in Austin, TX. Brian says:

Hi Keith,

I am an investor with $7 million in value across 32 properties. (Nice job there, Brian). I noticed you are not promoting coffee and cocoa any longer and was curious if there was concern or a reason behind it? Thanks, Brian.

Alright, Brian. What he’s referring to is that at GREturnkey.com - where our list of cash-flowing property providers is, there used to be a page for coffee investing there and a page for cacao investing there - and they’re both currently gone.

Brian, what happened is that, with the provider there - and its the same provider for both types of agricultural investment - that is, where you, the investor, get cash flow from the ANNUAL harvest of coffee and cacao is that that provider is having trouble with the deeding process where those parcels are located - namely, in Panama.

The provider is still delivering the land deeds to all the investors. But working with the municipality there is taking so long that this long, drawn-out deeding process was frustrating to some investors.

In fact, it might have taken me … something like two years to get my deeds for my coffee farm parcels. I don’t really remember - but it took awhile.

Anyway, those offerings aren’t currently on GREturnkey.com because the provider is changing their model, in part because of the slow deeding process. They’re listening to your input and responding. They’re doing, really, what you would want them to do.

So they are moving toward a Private Placement model. That way, they can issue the share certificates in a matter of weeks, not years like it is with the deeds, and they can focus their time and effort on actually developing, growing and operating the business.

Another is that under the deeded model, they couldn’t accept IRA funds any longer.

So, expect coffee and cacao to be back on GREturnkey.com at a later time. That’s why they’re not there now. There aren’t any more deeded parcels available - and they’re changing their model.

But, of course, they’re still working on getting the deeds for those that have bought those farm parcels in the last few years & still don’t have their deeds.

The main reason that you’ll see a provider be removed from GREturnkey.com is that they’ve run out of INVENTORY in that market.

If a provider doesn’t have inventory & doesn’t actively source it, then there’s no reason to waste your time & have it there at GREturnkey.com.

That is all for our listener questions today.

Homes prices for April grew 5-and-a-half percent year-over-year despite the pandemic. Yes, real estate is slow moving and we’re still looking at April data here near mid-summer.

That article is in the Show Notes for you.

My guess is that I wouldn’t really expect an appreciation rate that high over the NEXT year.

But one thing that is supporting prices are those “erstwhile” mentioned low, low mortgage interest rates that are even lower than the ocean floor at this point.

Let’s look at mortgage interest rates decade-by-decade. Gosh, this is just remarkable.

It gives you perspective sort of like a while ago when I played those cornball television commercial ads from the 1980s where you could finance a car for an 11% APR - and that was touted as a great deal.

Well, let’s look at the average 30-year fixed OO mortgage rate that was issued in the 1970s.

It was 8.9% then. That was the average rate. Inflation was increasing.

By the 1980s decade, inflation had reached a crescendo. This was the Voelcker Era - where Fed Chair Paul Voelcker famously raised interest rates to try to stomp out runaway inflation.

And Voelcker’s bold move WAS successful. But this helped result in a 1980s decade mortgage rate of 12.7%. Gosh, 12.7%.

By the 1990s, they settled down to 8.1%.

By the 2000s decade, down to 6.3%. Yeah, that sounds about right - I bought my first ever property in 2002 at right about that rate - it was 6-⅜%.

By the 2010s decade, we had low interest rates to pull us out of The Great Recession and they stayed low. In fact, the average for the 2010s decade was … 4.1%.

That felt unprecedented at the time. Well, today, take another full percentage point off that yet. Mortgage interest rates are 3.1% today … as we’re here early in the 2020s decade.

Just astonishing. 3.1%.

Now, interest rates correlate with inflation. So today we’re in a low inflation environment and hence, a low interest rate environment.

Well, coming up here on the show next week, one of the world’s most prominent economists will be on the show with me and we’re going to discuss Inflation vs. Deflation.

Which side is winning … and what is going to happen next. Of course, we’ll discuss the state of the broader real estate economy and so much more as well. That’s next week.

I hope that you are doing well. We’ve been largely sheltering-in-place here at our home in Anchorage, Alaska. I’m coming to you from Anchorage today.

Next week, if all goes as planned - it’s an awkward time for cross-continental travel, but I’ll be flying into Buffalo, New York, and then spending a good chunk of this month in both western New York State and mostly Pennsylvania … as I’m visiting family.

I think I’ve told you before that I feel like I won the “parent lottery”.

My terrific parents have lived in the same upstate Pennsylvania home since 1974. They've also had the same phone number for all 46 years.

And when I visit them, I still sleep in my same bedroom that I slept in as a baby. I love Curt & Penny Weinhold - and I am so grateful and inspired by their example of goodness and stability.

As far as events - if you want to meet in-person. I had hoped to do meetups in New York City and Philadelphia this summer, as well as a Harrisburg, Pennsylvania real estate field trip. But COVID has wiped out all of that.

Of course, as always, you can keep up-to-date on all of that GetRichEducation.com/Events

Some other live speaking events have gone virtual. For example, I’ll no longer be speaking in Birmingham, Alabama at the Spartan Summit this coming October.

But I will be speaking at their “event gone virtual”. In fact, I’ll be the speaker KICKING OFF The Spartan Summit. Again, learn more at GetRichEducation.com/Events.

I hope to do some or all of the live New York City, Philly and Harrisburg events next year.

For milestone Episode 300 here, do you like the Get Rich Education … theme music? Or did you at least, wonder where the now-familiar-to-you music comes from.

Well, we don’t purport to be any type of music channel. This is an investing show.

But this one time, for Episode 300, we’re going to play all of it - it’s two minutes long - at the end of the show today.

We own the royalty-free track. This show launched in 2014, and this track has been our theme music since late 2017. It’s from a DJ named Wicksford and it’s called “Cannot Be Stopped”.

But first - why don’t people talk about money? Why are other people so secretive about their salary? Why is money considered a taboo topic, then anyway? That’s next.

I’m Keith Weinhold. You’re listening to the wealth-building Get Rich Education.

___________________

Welcome back to Get Rich Education. You are listening to milestone Episode 300.

We’ve been talking about some of your harder real estate investing skills today.

Well, what about mindset?

Why Don’t People Talk About Money? Why is money a taboo topic - one of those things that you just don’t talk about? It’s taboo stuff - right up there with politics, sex, and religion?

Well, if people would stop equating self-worth with net worth, then talking about money would not be this big taboo thing.

According to a survey conducted by Ally Bank, 70% of Americans think that it’s rude to talk about money.

Just, get this - Research shows people would rather talk with a stranger about an STD than their salary. Oh geez.

You’d rather tell someone you have an STD than tell them how much you make?

People would rather admit to contracting gonorrhea than fessing up that they only make $54,000 a year. Sheesh!!

Oh, gosh … and did I really just use that word on the show. Especially here on Milestone Episode 300?

So … well why this … society-wide gag rule?

Why does this taboo exist? I think that it all boils down to about four big reasons.

People don’t talk about money because, most people don’t have much money. So there’s this negative association.

Talking about money is proportionate to talking about problems. If you’ve had more financial success in life, then it can be easy to forget that so many people think this way.

The second reason that “money talk” and especially “salary talk” is taboo is that because if you have a lot of money … you know what can happen to you?

Someone might ask you to borrow it. Well, lending money to family or friends is a great way to strain relationships.

If they’re late to pay you back, then it’s rude for you to even ask someone when they’re going to repay you.

Another reason that there’s a prohibition of “money talk” … at least in America here … is because many Americans put a higher value on PRIVACY than other societies do.

Now, I think that there are gradations of what money TOPICS are acceptable to discuss and what are not.

I’m pretty sure that I’ve told you on a previous show - though at this point, 300 episodes, sometimes I can forget - but I’m pretty sure that I told you that the most that I ever made at my day job before quitting it more than five years ago was $108K.

At times, I had to work more than forty hours a week for that.

Now, that might be $125K in today’s inflation-adjusted dollars, but that salary was no longer that interesting to me when my real estate provides value to people with very little of my involvement.

Now, I’m kind of a rare person for me to even mention - a past salary like that - even though it was kind of in a former life of mine.

In America, if something costs even more than a few hundred dollars, MAYBE you shouldn’t mention it. If your friend bought a canoe for the lake - you might want to know how much it cost, but you’re hesitant to ask them the question.

When we talk about gradations of cultural acceptance, I think that if you inquire about the cost of your friend’s lunch yesterday—that’s a transaction with pretty limited connections to the past and future—and that generally isn’t off-limits.

Now, in Israel, people OPENLY discuss salary. Why is that? Well, there are a couple reasons. It’s because a place like Israel historically places a lower cultural premium on privacy.

Another reason … is that a place like Israel and other places in the world have higher levels of labor unionization. You see, “once it’s collective bargaining, it’s not as personal”.

When you’re a member of a labor union, you often know each other’s job classification and that job title is rigidly tied to a fixed and publicly-viewable salary or wage.

And then, really another reason for the cultural “Money talk taboo” in America, is because asking someone what they earn means that you are indirectly questioning their personal worth.”

“By contrast, in China personal worth is not primarily indexed to financial worth, but rather one’s ‘quality’ or what they call “SUZZ-eee” (suzhi).

Your moral and ethical values cannot be reduced to economic value.” Yeah, I really respect that.

Getting back to the Ally Bank survey - what they found is that when people DO discuss finances socially, nearly one half of the survey respondents said they prefer to keep it neutral - for example, talking about price comparisons on goods and services like granola bars or a manicure, or where to find a better interest rate on a savings account."

It also found that younger people are more open about discussing money

More than any other age group, millennials (59 percent of them) acknowledged talking with others about their income, savings and debt, even though nearly two-thirds agreed it is rude or inappropriate to talk about money in a social setting.

In fact, almost half say they disclose their income to others, and 62 percent say it is important for them to surround themselves with people who they feel are financially secure.

So, even kind of the second-youngest generation today, Millennials, would rather be around people that are financially-secure. Hmmm … that’s really “telling”.

Now, what I found interesting is that the survey revealed that:

The majority of respondents said they discuss sensitive money matters with family is 69 percent, with financial professionals is 26 percent, and with friends is only 22%, while only 8% percent said they discuss sensitive money matters with work colleagues.

That shows more there that when you to talk about it - it’s deemed to be a real breach of professionalism to discuss this stuff at work.

People are most likely to disclose their income (39 percent) over savings (30 percent) or debt (29 percent) to family and friends. That tells you that disclosing debt is the most embarrassing for people.

Of course, that’s mainstream society.

Here at Get Rich Education, displaying the amount of good debt that you have probably says something rather positive about your real estate portfolio size.

Now, in WORKING-CLASS communities, the money taboo can be weaker there.

Jennifer Silva is a sociologist at Indiana University and she researched the coal-producing region of Pennsylvania.

The bottom line is that the working-class families she’s interviewed didn’t hesitate to disclose specifics about their income, rent amount, or expenditures.

“People would say, ‘I’m an open book,’ and they’d be straightforward, open, not ashamed.”

They freely discussed “the challenges or even impossibilities of supporting a family on minimum-wage work” and almost acted a little proud of their resourcefulness, like “how they would make their budget stretch, such as buying ground meat in bulk and freezing portions to make it last.”

You know, from my personal vantage point, sometimes you will BE around people that you know make substantially less money than you, And you know what, you DO find yourself tilting the conversation so that person isn’t made uncomfortable.

What about when you go get your hair cut?

I mean, the 15-minute conversation that takes place between me & the person that cuts my hair … it’s like, if they ask me what I did this weekend - and I stayed in a resort and they already told me that they played basketball with their kids or something else - even though basketball with your kids might be a GREATER activity in a sense than staying at a resort … I don’t mention staying at a resort because it sounds hoity-toity … a little snobbish. Kinda unrelatable to them.

So then maybe I’ll tilt that chat to NBA Basketball or something.

Chat about something that’s not so socioeconomically stratified. You can always find that common ground somewhere.

You know, another personal anecdote, in my life, I do a lot of these 5K running races & other events like that.

The race event makes my time publicly available. The local news outlets might even pick up those races times and publish them.

Anyone can see it. Well, that is a measure of my fitness on that day.

There are clearly plenty of runners that rank both above me and below me.

So, that’s made public? But yet salaries are not?

Somehow, American society does not equate physical fitness nearly to the degree that we evaluate and stratify how much money you make. I don’t know that it should be that way, but it is. I think that’s rather weird.

Revealing how much money you make, to many people, “exposes how you’re valued by your employer and how your contribution is valued even more broadly, by the community.”

That makes an ounce of sense, sure, but why such a high value? I don’t get that part.

Few people would think “You are worthless because you haven't broken the 20-minute mark in a 5K yet.”

But for some reason, WAAAY more people would equate you with having a lower worth if, say they learned that you only made $54,000.

Now, Eli Cook - he’s a history professor at the University of (HIGH-fuh) Haifa and the author of a book on the topic, says that this money taboo has been going on for about 150 years in America.

In the late 1800s and early 1900s, he says that many Americans internalized the lessons of mainstream neoclassical economics, which suggested, through [the economist] John Bates Clark’s theory of marginal productivity, that everyone earns what they in fact produced.”

So … that’s one opinion on about HOW LONG this has been taking place.

Really, what a lot of this comes down to is that the everyday conversations that you have with others are filled with questions about what people buy, what they do for a living, or how long they’ve been investing in real estate, and where they went to school.

And once you know all of those things about someone else, the salary or net worth or cash flow are less important … because all of this is CONTEXT that you have about others - and these are all really proxies for class position anyway.

When we can stop equating net worth with self-worth, money has a chance of no longer being a taboo topic … and that really is, the big takeaway.

I trust that you’ve been enjoying MILESTONE Episode 300 of Get Rich Education.

As always, to get the Show Notes, you can go to GetRichEducation.com/300 - since that’s the episode number.

In fact, this week, you’ll find the entire transcript to the episode if you would like to read along … or you tell someone else about the show and tell them about the option to read as they listen.

Above all, I have got to thank you for listening. I hear from so many people that tell me when they discover this show, they want to go back & listen to all 300 episodes …

… usually because I hear one of two things. They say it makes actionable real estate investing more CLEAR than anywhere else … or that it's changed their investor MINDSET more than anything else.

Remember, if you’re interested, hang around until the very end of the show today to hear the entire uncut theme music … as a little Episode 300 bonus.

More importantly, if you’re one of those people that STILL has not bought your first property.

You can’t TIME the market, and you can’t make any money from the property that you don’t own.

As long as you’ve been educating yourself for a while, then, if you think that inexperience is the only thing holding you back, well, then the only way to GET that needed experience and learning is to act.

Some people wait for ALL blue sky and everything to be perfect before they begin. Well … that really never happens.

You’ll either change what you’re doing … or you’ll keep what you’ve got.

Teach a man to fish … or give a man a fish?

Well, here, we do both. At Get Rich Education, we TEACH you how to fish.

GREturnkey.com is our sister website where we GIVE you a fish too - with top national turnkey providers.

Get your mortgage pre-approval and download a provider report. We give you all 8 main steps at the top of the page there.

View available properties, make an offer, please get a third-party property inspection, then comes the appraisal, then sign a Property Management Agreement …

… have your property closing, and finally, own the property and enjoy the collected RENT that your PM auto-deposits into your bank account. Get started at GREturnkey.com

I’m your host, Keith Weinhold and I’ll be back next week and every week to help you build your wealth. Don’t Quit Your Daydream!

299: Turnkey Behind-The-Scenes, Predictable Cash Flow via Private Lending Jun 29, 2020

Turnkey RE providers must acquire distressed property at a discount in order to stay in business.

We go behind-the-scenes and see how these companies really operate.

They take risks, maintain relationships with myriad parties, coordinate contractors, bear holding costs, buy & store materials, screen & place tenants, and operate a management division.

It’s a ton of work that investors can outsource to turnkey providers. They are professional fix & flippers.

The “consumer-profit chain” helps you understand this.

Dani Lynn Robison of Freedom Real Estate Group near Dayton, Ohio offers private lenders like you 8-10% cash-on-cash returns at www.GetRichEducation.com/Lending

The funds are used to purchase and rehabilitate distressed property. They’re transformed into turnkey property.

Your loan collateral is tied to a specific address. A note and mortgage is produced. You have first lien position.

This provider has performed 300+ fix-and-flips since 2015.

Get the report and connect with the provider for predictable 8-10% cash returns for four to twelve month terms at: www.GetRichEducation.com/Lending

Minimum investment amount is $50K. You DON’T need to be an accredited investor.

Resources mentioned:

Private Lending with 8-10% cash return:

www.GetRichEducation.com/Lending

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

298: Financially-Free At Age 24, Hayden Crabtree Jun 22, 2020

Learn how to “get rich for sure” versus “get rich quick”.

You must diverge from the herd to get more out of life.

Today’s guest, 24-year-old Hayden Crabtree, found that he owned more property than his college real estate professor.

After college, he worked to learn rather than earn. He worked for free for over a year! That’s how he attracted a real estate mentor - by providing immediate free value, not “taking”.

Hayden also values relationships, and structuring “win-win” deals.

He authored the new book, “Skip The Flip”.

House flipping is not real estate investing.

Hayden, based in Athens, GA, focuses on self-storage units.

Some family and friends will critique you for being different. Few understand financial freedom.

He uses debt (leverage) to create wealth.

Hayden is giving away his e-book free at: HaydenCrabtree.com/freebook

Resources mentioned:

Hayden’s book is free:

HaydenCrabtree.com/freebook

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

297: Guaranteed Rent Income with Section 8 Housing Jun 15, 2020

Pros and cons of getting paid a permanent government housing subsidy are explored.

But first, I discuss your future in light of the current pandemic crisis - housing supply, 2020 vs. 2008 recession differences, economic “vaccine”, current 13.3% unemployment rate.

“Section 8” is the primary federal government program that subsidizes three groups: low income, elderly, and disabled. It is HUD-sponsored.

Cons: Tenant screening is vital, inspections.

Pros: Longer tenancies, higher rent amount, lower vacancy rate, tenant wants to keep voucher.

Learn more about owning renovated Section 8 housing with a manager that deal with the housing authority at: www.GetRichEducation.com/Richmond

The housing authority typically pays most, not all, of the tenants’ rent.

CNBC named Virginia of the #1 business state. Richmond is the capital of the 12th-most populous state.

In Richmond, $1,300 rent and $145,000 purchase price (0.9% RV) is typical for SFRs suited to Section 8.

Connect with the provider for “guaranteed rent” property at: GetRichEducation.com/Richmond

Resources mentioned:

Property with “guaranteed rent”:

GetRichEducation.com/Richmond

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

296: Pandemic-Era Property, The Geography Of Real Estate Jun 08, 2020

College real estate is in deep trouble.

Commercial leases of all types are in trouble because they often have 10-year terms. Who wants to make 10-year decisions today?

Residential B and C-class SFHs up to four-plexes in the suburbs make a lot of sense today.

We’ve had 33 recessions since 1860. They’re common.

Mortgage rates hit all-time lows again, forbearance loosens, and entry-level housing supply is tight.

Fed Chair Jerome Powell says negative interest rates aren’t being considered.

He admits to printing money out of nothing (wow!) - and we listen to the audio.

Redfin CEO Glenn Kelman tells us about urban-to-suburban migration.

I discuss “The Geography of Real Estate”, clearing up many misconceptions about U.S. geography.

Learn: Why the West Coast is warmer than the East Coast, the geography of property taxes and credit scores, NYC geography & air rights, Mississippi River importance, sinking cities, Texas facts, Pacific NW’s sparse population, California and Alaska myths.

Trivia question: What is the world’s most populated island?

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

295: This Is Your Last Life Ever Jun 01, 2020

Making a lasting impact is rare. Get comfortable with being uncomfortable.

You get more focus time by opting-out of life's needless direct message notifications.

You get more cash flow by minimizing the amount of real estate principal that you pay down.

The author of the popular new book, The Wealthy Gardener, John Soforic joins us. It is about lessons for prosperity between father and son. The book could make a great Father's Day gift.

John has $20K of monthly real estate cash flow.

Don’t strive for happiness. Strive for satisfaction; more happiness will result as a by-product, and you’ll be significant.

John’s grandfather worked his body into the ground in a coal mine, 60 hours a week for 40 years, dying of black lung disease. John vowed to live a more meaningful life.

John reveals: a 5-year crusade for wealth, why working a 40-hour job is not a sacrifice, how to stop selling your time for dollars.

The top excuse why people don’t do more is: fear, not laziness.

Resources mentioned:

The Wealthy Gardener book:

Amazon link

Wealthy Gardener Website:

https://wealthygardener.com/get-rich-education-with-keith-weinhold/

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

294: Is This America's Most Recession-Resilient Market? May 25, 2020

Deflation is occurring before long-term inflation is expected.

When people stop buying things, manufacturers can’t charge enough, so they stop making products. This results in more layoffs.

Our national debt is $26 trillion. It’s doubtful that it will ever be repaid. This is why The Fed must inflate.

MidSouthHomeBuyers.com has provided our listeners with more cash-flowing property than anyone.

They’ve renovated 2,600+ homes in Memphis, TN and Little Rock, AR. They then place a tenant and manage the property for you.

In the pandemic, renters prefer single-family homes over apartments.

What makes Memphis so resilient? Shipping, distribution, transportation, medical.

Memphis’ rental sweet spot is $660 - $990 for this class of property. Sale price: $60K - $95K. These are decent homes. I’ve been inside them with both guests.

In 2009, Memphis saw no rent drops or occupancy drops.

Last year, they expanded into Little Rock, Arkansas.

You can start with a Memphis home for just $14K-$19K with down payment and closing costs. Expect a wait list. This reputable, longtime provider is popular.

Resources mentioned:

MidSouthHomeBuyers.com

USDebtClock.org

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

293: Learn How To Increase Your Intelligence with John Assaraf May 18, 2020

You really can gain intelligence in order to achieve wealth and success. Guest John Assaraf guides us in learning how.

John is an expert in helping people achieve more. He grew RE/Max of Indiana to nearly $5 billion in sales.

Success often comes from making “non-conforming” choices.

I give you three examples of my own non-conforming decisions: moving from PA to AK, buying a four-plex, and even launching this show.

“We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” -Jim Rohn

Commitment drives beliefs, which drive habits, which drives behaviors.

How “you see yourself” matters.

Strengthen your strengths and manage your weaknesses.

You own the most powerful biocomputer in the world - your brain. Few exercise it enough.

Learn how to manage fear. It’s one of your strongest emotions. Financial and emotional safety are being preserved.

When you control your fear, you can respond rather than react.

Resources mentioned:

John Assaraf Websites:

JohnAssaraf.com

MyNeuroGym.com

John’s book “Innercise”:

Amazon link

Check out John’s:

Twitter: @johnassaraf

IG: @johnassaraf

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

292: Interest Rates Hit All-Time Low, Drive An Oldsmobile In Winnipeg, CARES Act with Damion Lupo May 11, 2020

Learn the history of interest rates, 1971-2020. Mortgage rates just hit all-time lows.

Tenants are generally reliably paying the rent during the pandemic. Why? Government pays their income; expenses are lower because they can’t travel anywhere to spend. They have more to spend on the rent.

Unnecessary businesses are collapsing: spas, salons, theatres.

More than half of mall department stores could be closed by next year, like Macy’s, JC Penney, Lord & Taylor.

If you don’t have multiple income streams, the pandemic is harder on you.

Chase and Wells Fargo have shut off new HELOCs. Learn about first and second lien positions, subordination.

Will car sales tank? No.

I play three cornball TV commercial ads from the 1980s about interest rates - GMAC financing, a car dealer in Winnipeg, Manitoba.

Chicago is the rare world-class city where investor numbers make sense.

I provide street addresses of two available turnkey properties in NW Indiana (Chicagoland).

Damion Lupo joins us. With the CARES Act, you can access 401(k) funds more easily, and direct them into an eQRP.

eQRPs can invest in: real estate with or without debt, syndications, rentals, flips, domestic land, foreign land, mobile homes parks, precious metals, mortgage notes, oil & gas, private money lending, options, franchises and more.

Resources mentioned:

QRPs: text “QRP” in ALL CAPS to 72000 or:

eQRP.co

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

‎Financial Underdogs on Apple Podcasts

Two Chicagoland Turnkey Properties:

GetRichEducation.com/Chicago

Throwback TV automobile ads:

https://youtu.be/nlSNeQtN208

https://youtu.be/Eo6znwMWSac

https://youtu.be/aBX0rjKAJ-Q

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

291: Could Home Prices And Rents Fall? May 04, 2020

Can you count on rent collection in the pandemic?

Could home prices drop?

Is it better to buy property today, or say, six months from now?

If you think that the pandemic will drag on for years and badly affect the economy, stay on the sidelines.

Most think it'll bounce back this summer.

I talk with guest Gregg Cohen, who helps manage 3,500 rental units in Jacksonville, FL for insight.

Forbearance stabilizes housing values. Without it, some would have to sell their home.

Many Florida residents are paid more from unemployment compensation than if they worked. This assists in rent collection.

Gregg & his company offer you new construction Jacksonville, FL property. If your tenant cannot rent, they will pay your mortgage for you up to six months. This is only for GRE listeners that use this link: https://www.getricheducation.com/jax/

Resources mentioned:

Jacksonville new construction property:

GetRichEducation.com/JAX

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

290: Free Money? Mortgage Forbearance And You Apr 27, 2020

You can postpone mortgage payments with forbearance.

If you collect rent payments from your tenants, can you pocket it all and not pay your mortgage? What a windfall!

(Complete episode transcript is below. Read along as you listen.)

In crisis times, your cash flow is your cushion.

Last year, the publication “Emerging Trends In Real Estate” forecast that the chances of a pandemic roiling the economy were low.

The CARES Act’s effect is discussed.

Payments follow five links in a chain: employer - renter - investor - mortgage servicer - mortgage-backed security holder.

What’s the difference between a lender and a mortgage servicer?

Ethics and greed.

Are there deleterious consequences of forbearance?

Resources mentioned:

Read episode transcript at:

www.GetRichEducation.com/290

CFPB Video on CARES Act:

https://www.consumerfinance.gov/coronavirus/

cares-act-mortgage-forbearance-what-you-need-know/

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete episode transcript:

Welcome to Get Rich Education. I’m your host, Keith Weinhold. You can potentially collect your rent income from tenants and then, turn around and NOT pay the mortgage loans on those properties for a few months, pocketing a nice profit. But should you?

In the pandemic-induced world of eviction moratoriums and mortgage loan forbearance, there will be winners and losers. I’m helping you sort that out so that you can be one of the winners - and more - today on Get Rich Education.

____________________

Welcome to GRE. From Olympia, Greece to Olympia, Washington and across 188 nations worldwide. I’m Keith Weinhold, this is Get Rich Education, and we are all living in strange times.

The squeeze for some of us, I think is encapsulated in Jerry Constantino of Queens, New York’s situation.

He’s talking with owners of the roughly 500 units that he manages, who are worried what’s going to happen if the rent checks stop coming in.

As part of his Property Management duties, Jerry is talking with tenants, many of whom he assumes will be delinquent this month because they either lost their jobs or they’re just choosing not to pay.

Jerry’s a hard-working guy and he knows that the tenant in Unit 31-A has paid his yet, and it’s a few days past due.

But yet Jerry knows that this tenant hasn’t lost his job and ought to be able to pay rent on time like he always did before the pandemic.

Jerry sees this tenant from Unit 31-A in the hallway and says, “Don’t mess with me dude, where is the rent?”

And by the way, Jerry got a little gruff and his words weren’t exactly “Don’t MESS with me…” but that’s the version that you get here on this unapologetically squeaky-clean lyrics show.

And besides MANAGING property for others, Jerry is also in discussions with banks, trying to figure out how he’ll make mortgage payments because he’s got properties that HE owns HIMSELF during this worsening global health crisis.

And, a lot of people find themselves in a situation similar to what Jerry is in.

Some large property owners have already rolled out payment plans for their tenants - and halted evictions - because they legally have to - as the coronavirus outbreak roils the economy.

Many apartments in the U.S. are essentially small businesses that tend to have less financial flexibility and will need some help ... in the coming months.

Now, there are some choices for the millions of Americans who lost their jobs and have no clear prospects for when they’ll get them back.

Three things that are aiding TENANTS right now, helping them pay the rent are: eviction moratoriums, unemployment benefits and cash payments - like those $1,200 stimulus checks - from the federal government that can help many keep a roof over their heads.

Nearly half of the nation’s 44 million renter households were already stretched financially: before the pandemic.

The University of Chicago found that ONE-THIRD of adults can’t cover necessities after missing just … one ... single paycheck.

One in four tenant families pay over half of their income just to make the rent payment.

We’re basically going to break down Jerry Constantino - the King Of Queens’ - situation here, being mindful that ....

In general, the average Get Rich Education listener is better off than the average real estate investor for a number of reasons.

For starters, one of our core principles here is that we invest predominantly in residential real estate. That is due to its durable utility.

Coronavirus has changed a lot in society, but it has NOT changed the fact that people still need a place to live.

You’ve got to be grateful that we focus on residential because it’s recession resilient.

Most landlords are still getting 80 to 90% of the rent income, even 100% if you’ve got a small portfolio.

Just think about how many businesses aren’t getting nearly 80-90% of their income now? The restaurants, and bars and gyms, airlines, cruise ships, hotels, on & on … are they even getting 30%?

Though it’s the exception, some businesses, like large retailers might be getting 105% of their usual income now.

We also focus on investor-advantaged markets here at Get Rich Education - with the principle that the market is more important than the property.

And so many people get that backwards.

We discuss the advantages of being invested in multiple markets so that your tenant income streams are from diverse employers. Anyone that doesn’t adhere to that is in more trouble.

Also, we focus on buying property that cash flows on the day that you buy it - where the monthly income exceeds the monthly expenses on your settlement day - on the day that you buy - not “maybe it’ll cash flow sometime in the future”.

Look, in times of crisis, your cash flow ... is your cushion.

Here’s what I mean. To keep it simple, if every one of your properties rents for $1,000 and has $800 in monthly expenses, you’ve got a $200 monthly cash flow on each one.

You’d have to lose - just outright lose - and never recover wholly 20% of your income and then you’d still break even on a monthly basis.

This is what I mean that in crisis time, your cash flow becomes your cushion.

If you have a 10% rent loss, your cushion is half-eaten, and your cash flow becomes $100 per door. You can’t kick tenants out for a while because there’s an eviction moratorium.

But, you can also be granted loan forbearance and not have to pay your mortgage. So you might be able to profit wildly at this time.

Each of these things - an eviction moratorium and mortgage loan forbearance are part of the recently-passed CARES Act. I’ve got way more on that later … whether you’re in Jerry’s situation or you’re better off.

Let’s pull back and look at how unlikely this Black Swan Event known as the coronavirus pandemic really is, first.

Here’s some perspective. Last year, the publication called “Emerging Trends In Real Estate” launched a survey that’s just so, so interesting now that we have the benefit of hindsight.

They launched a survey last year called “The Importance of ISSUES for real estate in 2020”. They were FORECASTING the following year - this year.

A pandemic was NOT forecast to be an important issue at all for real estate this year.

In fact, the #1 survey answer was predicted to be the political landscape. That could make sense as this is an election year, and divisive partisanship sure is not abating.

The #2 predicted factor was … government & budget issues.

The issue forecast to be the 3rd-most important real estate issue for this year was .... immigration. OK, makes sense. That was a hot topic for a while. And greater immigration creates more housing demand, sure.

#4 was Global conflict. OK, makes some sense. We had growing trade tensions with China, political tensions with Iran and North Korea.

The real estate issue predicted … last year … to be the fifth most important for this year was … Income inequality.

How long do you think that it will take us to get to a pandemic … or epidemic. No one foresaw this.

Sixth was Rising education costs. That definitely intersects with housing as giant student loan debts increasingly prevent people from forming a first-time homebuyer downpayment, which keeps them in the renter pool.

The seventh most-important real estate issue for this year was predicted to be Social inequality.

Eighth was terrorism. That’s going lower on the list as major terrorist acts in America continue to recede into memory, gratefully.

And number nine - yes, last year, what was predicted in “The Emerging Trends In Real Estate” survey for THIS year is … Epidemics.

All those other factors were deemed to be more important.

And that’s from a pretty respected publication. That source, Emerging Trends in real estate, is partly compiled by the Urban Land Institute.

So, it just goes to show you that, no one, not me, not you, not the expert economists that come here on the show with us - no one really knows.

Now, there was one Get Rich Education episode where I had a “glass half-empty” segment, maybe one year ago, where I was talking about all the things that could go WRONG in real estate investing.

I did mention a plague. I used the word “plague”. And what I was thinking about was, what if an awful bubonic-like plague wiped out, say 20 million Americans - which would be more than 5% of our population.

Well, that sad event would reduce housing demand, of course, if there are substantially fewer … live humans.

And as sad as COVID-19 is, no one is predicting that it will be fatal to even one-half of one-percent of our population.

And I certainly wouldn’t have predicted that by this year we’d be practicing things like sheltering-at-home or social-distancing. It still all seems like some sort of bad dream.

We’re talking about, “Do you get free money? Should you take mortgage loan forbearance?” here on Get Rich Education Episode 290.

In fact, if you’d like to read along while you're listening, the entire written transcript for today’s episode is in the Show Notes. You can access those at GetRichEducation.com/290 and follow along that way if you like.

In order for you to understand mortgage loan forbearance - and forbearance means that you can postpone making payments, understand the big picture.

You can best understand this as part of the five links of a chain.

Yes, forbearance allows you to BREAK a chain.

The five links in the chain follow the money. They follow the payments through:

Payment goes from Employer … to Renter... to Property Owner... to Loan Servicer... to finally, the MBS Investor. They are the five links.

Now, let's look at what happens here.

The first and second chain links involve that payment from Employer (first link) and the Renter (the second link).

Economically … how bad is it? We don’t yet really know how high the unemployment rate will get, though we expect it to be substantially higher than that of the Great Recession of 2008, when it was 10%.

Chain Link 2 to 3 is the Renter’s payment to the Property Owner. This is a link that you’re clearly quite concerned with. This is your rental income. This is the income that Jerry from Queens is trying to scrape together.

We don’t yet know what the eventual rent payment DEFAULT RATE will be, of course that’s going to vary among geography and asset type and many other things.

But be aware that at this point, about 75% of Americans have lost at least 25% of their income. About ¾ of Americans have lost ¼ or more of their income.

As you know, during coronavirus, most areas have an eviction moratorium. Meaning that if the tenant can’t pay the rent, you can’t kick them out for a while.

Now, what if you - the income property owner - Link 3 - don’t have enough rent income to pay the mortgage to Link 4, which is your bank or your loan servicer?

If this is your situation, you want to call the company that you pay the mortgages to. You pay your mortgages a mortgage servicer.

Now, what is a “mortgage servicing company”, anyway?

A mortgage servicer is the company that handles the day-to-day administrative tasks of your loan.

They send you your monthly statement, they receive your payment, and they manage your escrow accounts.

This is different from your mortgage lender. Your lender is the financial institution that gave you the property loan in the first place - back on your closing day.

So that is the difference between a mortgage LENDER - and the servicer whom you’re dealing with now.

Now, a mortgage servicer could either be a bank or a non-bank.

A bank “mortgage servicer” would be names that you’ve heard of like Chase or Wells Fargo.

A non-bank “mortgage servicer” could be a name like Suntrust Mortgage or AmeriHome. They’re names that you’re less likely to have heard of.

So, to review, money flows from your tenant’s employer, to your tenant, to you (the investor), to the fourth chain link, which is this mortgage servicer.

Now, if your mortgage is backed by the government (those would Fannie Mae, Freddie Mac, VA, FHA, or USDA - and it often is) - if you tell your mortgage servicer you're having financial trouble because of the pandemic, your mortgage servicer has to let you stop paying your mortgage for up to 180 days - that’s six months - with the possibility of another six month extension after that - and you will not have to pay late fees, and there will not be any foreclosure on your property, and there will not be a ding on your credit score either.

It gets even better than that. Because at last check, there isn’t any additional interest beyond your scheduled amounts accruing on your missed payments while you’re in forbearance either.

Now, you WON’T magically see a portion of your principal balance disappear though.

This all pertains to both primary residences and your rental properties for government-backed loans.

If your loan isn’t government-backed, you still might receive some similar-type of relief.

This is what is being granted to you during these exceptional times. And the mortgage servicer isn’t going to ask you for a bunch of paperwork or documentation of your hardship either.

But they might just ask you some questions over the phone - details about your income, expenses and other assets, like cash in the bank.

They’re just granting you the forbearance - letting you postpone your mortgage payments.

Now, that must sound great. And it is a good start.

Look, if you CANNOT make your payment due to economic hardship, then you should ask for the forbearance.

And don’t just stop making payments if you CAN’T make payments. Alright, you can’t do that. You DO have to ask for forbearance. But it will be granted.

Now, what if you CAN make your mortgage payments and you call up your loan servicer and ask for forbearance.

In this case, say that your total monthly rent income is $10,000 but you only got paid $9,000 of rent this month due to pandemic layoffs.

And your total mortgage payments are only ... $8,000.

Well, you could make the payment but you don’t have to.

So … could you pocket your $9,000 of rent this month and skip out on paying your mortgages completely & then have a $9,000 cash flow month instead of your normal $2,000 cash flow month?

Yes, you probably could! And this could totally feel like a windfall to you!

But … that would be dishonest - and it could come with consequences.

I’ve talked to two mortgage lenders this last week to find out what’s REALLY going on out there.

I learned about one case where, a borrower asked for forbearance, they were granted it, it didn’t ding that borrower’s credit SCORE.

However, on their credit REPORT, it is marked “Forbearance” on that report.

Hmmm … you wonder if this will impact that borrower’s creditworthiness in the future.

Here’s the other potential negative consequence if you are granted forbearance.

Again, forbearance means the ability to postpone payments.

What’s going to happen in the future? Well, no one really knows with any of this. This is uncharted territory and I can’t underscore that enough as we deal with the economic fallout of the pandemic. The situation changes quickly here.

When are you going to have to MAKE UP those payments? If you get six months of forbearance, would you owe six months of payments all at once - only six months from now?

If so, that probably won’t help you out. Because if your tenant - God forbid - missed six months of rent payments, they’re not going to make one lump sum rent payment for six months worth of rent.

However, for you, if you get forbearance, it appears more likely that your payments - will just get tacked on to the end of your loan - without any interest on top of what’s scheduled.

Now, that outcome would be … pretty awesome.

Alright, so we’ve established that you can take a pause from paying your mortgage loan servicers.

But here’s the crazy thing. The fifth and final link in the chain is the Mortgage-backed security holder. They get their money from the mortgage servicer.

Well, where is the servicer supposed to get the money if people like you - the property owner - declare forbearance.

No one knows that answer. That hasn’t been worked out yet.

Right now, the total share of loans in forbearance is 6%.

But, that number is going to go higher so the mortgage servicing industry has been crying out for help - your SunTrusts and AmeriHomes of the world.

Last week, a plan had come together such that mortgage loan servicers would only have to forward four months of missed payments to MBS investors.

But a lot of servicers don’t have that kind of money lying around.

Now, Wells Fargo, obviously, is a big bank and they do some servicing as well.

There's still lots of big banks servicing mortgages. And the big banks are actually in pretty good shape right now. They have enough money that they can deal with this situation for a while. They're stronger now than they were in the 2008 financial crisis.

And since the financial crisis, nonbanks have been taking a bigger and bigger share of the mortgage servicing business.

And these nonbanks - like SunTrust and AmeriHome - have much less money on hand than banks do, and they're not allowed to borrow from the Fed like a bank.

And even in the good times of the past few years, there were all these reports coming out saying, you know, if the economy were to ever turn down and people stopped paying their mortgages, these nonbank servicers are going to be in trouble.

This is what needs to be fixed right now - this connection between chain links 4 and 5 - from servicer to MBS Investor. The aid for servicers will probably be there.

The government is typically there to save most anything to do with homeownership.

Well, those are the five links in the follow-the-money chain - from employer to tenant to you, the investor, - to the mortgage loan servicer - and finally, to mortgage-backed security holder.

There’s more that I can explain there, but I won’t, because it could be speculation - so we’ll see what happens next there.

Let’s get back to you. I said that I suggested mortgage loan forbearance if you need it. Should you get a mortgage forbearance if you don’t need it?

No. If you don’t need it, don’t take it.

Now, why would I say that? Well, there could be some upsides to taking it.

But it puts you at some risk, like I mentioned and there is more that is absolutely vital for you to consider. I’m going to talk about that in a few minutes.

We’re talking about following the money along five chain links, and mortgage loan forbearance here on Get Rich Education, Episode 290 … as the world gradually has more & more bad haircuts as the coronavirus pandemic inches on … and you’re wondering if you’ll have “actual weekend plans” in your life ever again.

Coming up in the next few weeks here on the show, we’ve got a lot of great material. New York Times bestselling author John Assaraf will be here with me on Get Rich Education as we take a deep dive into abundance mindset during tough times …

… and a lot of other integral shows here as I focus on providing you with actionable guidance that you can use on economics and real estate amidst the pandemic.

I primarily reach you in two ways. There’s our audio show here, which as you know is released every Monday. You’ve probably been listening for years.

The other way is through The DQYDD Letter, which is e-mailed out about weekly. And lately the valuable letter is being sent to you on either a Wednesday or Thursday.

There is so much fast-changing news amidst the pandemic that the “Don’t Quit Your Daydream” Letter really supplements this show here well.

That’s why it’s never been more important for you to subscribe.

The letter is free, and all you’ve got to do is sign-up now at GetRichEducation.com

I’m coming back with more. I’m Keith Weinhold. THIS is Get Rich Education.

(RESOURCE PROVIDER SLOTS)

Hey, you’re back inside the show that’s created more financial freedom for busy people just like you than nearly any show in the world.

This is Get Rich Education. I’m your host, Keith Weinhold.

Should you get a mortgage loan forbearance if you don’t need it?

No. If you don’t need it, don’t take it. That is my opinion.

Now, why would I say that? Well, there could be some upsides from you taking it if you don’t need it.

But it’s not quite like it’s free money.

It puts you at some risks, like I mentioned and … some of this comes down to a question of ethics & greed.

Now, I don’t know what Jerry, the property manager & investor from Queens, New York that I talked about at the top of the show - is going to do with his situation.

Me, I have … gosh … it guess it’s not quite one hundred thousand dollars worth of mortgage payments that I make monthly …

… but it’s well into the tens of thousands every month. I still have a good monthly rent collection. But I have some tenants that can’t pay due to losing their job from coronavirus.

But … I CAN make all of my mortgage payments, so I don’t have any plans to get forbearance now or anytime in the foreseeable future.

If I have agreed to pay someone, and I can afford to pay someone, then I pay THAT someone. That’s just treating other people well.

What is greed, anyway?

Wanting more money is not greed. You want financial betterment just like I do and most anyone does.

But padding your own cash reserves by pocketing your tenants’ rent and then not paying your mortgage loan servicer - that’s greed.

Because I’d be profiting from hurting others.

If I don’t make a payment, there are people counting on that payment - in either that fourth or fifth chain link - that servicer or that mortgage-backed security investor.

Do you know what’s really happened recently?

I know about an investor that closed a mortgage loan (and mortgage loans are still closing here in the pandemic, of course, but under tighter lending guidelines) - but this investor closed, then declared forbearance almost immediately - as soon as he practically could.

So he missed his very first payment, and then the bank put him in a status of what’s called “first payment default”.

Well, then the lender can’t sell that loan to a servicer & and then that bank has got to keep that losing loan on THEIR books.

Also, that “first payment default” status is tied to that borrower … and will that come back to bite them? I don’t actually know, but it’s probably not going to help them.

Could that borrower have made payments if they were able to qualify for the loan at the closing table just a few weeks ago? Yeah, probably.

If that impacts that borrower’s creditworthiness down the road, it’s pretty hard to feel sympathy for them.

It’s times of adversity like this when one’s ethics show through. Cheating the system tarnishes your character and it screws up the system for the honest people … where the taxpayer might have to end up paying for it.

So, either I can be part of the problem or part of the solution. I know what side I’d rather be on … and you can decide for yourself.

You can call it what you want, “karma”, or whether you’re religious or not, from Christianity, “The Golden Rule” is “treat people how you would want to be treated.”

It’s a maxim in other religions too. But it’s really just being a decent human being.

We don’t want to take advantage of a crisis by disadvantaging others. That’s what looters do.

Fortunately, we have an audience here that does want to do the right thing. Like I say, do the right thing before you do things right.

To summarize part of what you’ve learned today. There are five chain links in the follow-the-money path that the pandemic is pressuring - they are employer … to renter ... to property owner … to loan servicer ... to finally the MBS Investor.

Loan forbearance means that you have the ability to postpone your mortgage payments - and that’s on both your primary residence and your rentals.

Forbearance is being easily granted on most loan types - with some clear guidelines for gov’t-backed loans.

But you must ask.

If you need it, please DO ask.

If you don’t need it, please DON’T ask.

As a reminder, news changes fast and one mortgage loan servicer might outline different terms for you than another servicer does.

In fact, there is so much fast-changing news amidst the pandemic and strange economic aberrations like oil prices going negative last week. There’s such a glut of oil supply, that oil is being treated like junk.

Just like you would have to pay another person to take your junk, oil producers are having to pay people to take their oil.

About ten days ago, Chase stopped accepting new Home Equity Line Of Credit applications. Customers with existing HELOCs will be able to continue to draw funds on those lines of credit, but the bank is not accepting applications for new HELOCs.

Of course, the stock market has been more volatile than usual. Housing is way more stable, but it’s still too early to look at pandemic effects on housing PRICES.

Early indications show that there is even less housing SUPPLY on a market that was already undersupplied, so that’s substantial.

There is so much changing more quickly now, that the “Don’t Quit Your Daydream” Letter really supplements this audio show here. I don’t think it’s ever been more important for you to subscribe.

For example, in some good news, a recent letter informed you that any 1031 Exchange that you do with a deadline between April 1st and July 15th of this year is now moved to July 15th, and other things like that.

Get the “Don’t Quit Your Daydream Letter" free, at GetRichEducation.com

I’m Keith Weinhold and I’ll be back next week to help you build your wealth. Don’t Quit Your Daydream!

289: Make Money By Following Migration Trends Apr 20, 2020

Real estate investors should know something about Florida. Why? Migration.

Navigating today’s property market takes more care than it did last year due to the pandemic.

Primary residence buyers are being shut out. Investment property buyers are better off because “wannabe” homeowners must become renters due to higher mortgage qualification standards.

To profit today, focus on your tenants income source and positive migration trends.

Florida leads the U.S. in positive migration; it’s likely that the trend will continue.

Why do people keep moving to Florida? Low cost of living, no state income tax, sun & warmth, job diversification & growth.

New construction homes for investors are on infill lots, 4 bed, 2 bath homes are $250K.

Greater Orlando & Central Florida attracts nearly 10,000 new residents every week - from The Space Coast in the east to Polk County in the west.

Learn more at: www.GetRichEducation.com/Orlando

New const. SFH prices start at $139,900 3/2/1 on ¼ acre. Duplexes and townhomes are also offered.

__________________________

Resources mentioned:

Get report & connect with provider:

www.GetRichEducation.com/Orlando

Ray Dalio on coronavirus economy:

Video link

Community & neighborhood ratings:

niche.com

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

288: Is An Economic Depression Coming? Apr 13, 2020

You get a clear answer to that question from both me and the Chief Economist of the oldest investment firm of its type in America, as he joins me today.

Recession and depression differences are defined.

Learn what created the 1930s Great Depression and 2000s Great Recession.

You’re now living in what I call: “The Great Shutdown Of 2020”, induced by the coronavirus. This is an economic crisis on top of a health crisis on top of an oil shock.

The Spanish Flu Pandemic of 1918 created a 7-month U.S. recession.

Real estate flippers and developers are more at-risk than buy-and-hold investors.

A doubling of the U.S. currency supply is possible in the next year or two, stoking inflation.

I introduce the “Inflation Triple Crown” concept that benefits leveraged real estate investors.

Brian Beaulieu, CEO and Chief Economist at ITR Economics since 1987, joins us to forecast your economic future amidst the current coronavirus pandemic.

He says we’re in a recession now, thinks the economy begins growing again by 2020 Q4 with a “V” shaped recovery, and inflation accelerates in 2023.

Brian forecasts interest rates’ direction, and tells us if we’ll have negative interest rates.

He is bullish on buying real estate.

I think that since America keeps writing checks for everything, then they should fund an initiative to rebuild our infrastructure. We need that anyway, and it puts people to work.

Then, you would want to own real estate near those public works projects - new bridge, interchange, or port.

__________________________

Resources mentioned:

ITR Economics:

https://itreconomics.com/itr-economics-podcasts

ITR Economics’ Free 90-Day Forecasts:

Text TR_TRIAL to 33777

Insurance For Rent Payment Default:

Rhino: https://www.sayrhino.com/

Steady: https://www.steadymarketplace.com/

Core: https://corehomeinsurance.com/

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

287: How To Invest In Timber Apr 06, 2020

It grows through recessions. No tenants. No loans.

Own trees and the land beneath it, titled how you choose.

Experience growth in both the timber size, and often, value of your investment.

A long-revered timber type is teak. Its natural oils make it unusually resistant to fire and termites.

Demand - Today, teak is used in flooring, countertops, veneer, furniture. It’s been used in boatbuilding 2,000+ years. It was used on The Titanic.

Supply - Teak is being harvested at 10x its replanting rate.

I first learned about lumber in my youth when I spent a summer doing forestry and timber-marking work in upstate Pennsylvania.

You can own teak trees and the land beneath it, ¼ acre at a time. Get started with your free Teak Resource Guide at: www.GetRichEducation.com/Teak

Trees grow through recessions, wars, stock market crashes, and real estate market crashes.

Teak expert and friend Rachel Jensen joins me in discussion.

Plantation teak grows well in Panama and Nicaragua. Teak is native to southeast Asia and India.

You can own teak at age: 0, 14, or even 20-year-old teak. Cash, bitcoin, IRA funds may be eligible for funding. There are discounts for GRE listeners.

Teak field tours are offered.

Investors have the option of gaining second residency in Panama or Nicaragua. It is a nice “Plan B”.

__________________________

Resources mentioned:

Free Teak Resource Guide:

GetRichEducation.com/Teak

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

286: How To Protect Yourself Financially During The Pandemic, Collecting Rent, Mortgage Update Mar 30, 2020

A 10-step plan to ensure that your tenant pays the rent is revealed.

In order, they are: proactivity, commitment, empathy, requirement, options, late fee, installments, security deposit, assistance, documentation.

Real estate investors have time to react to the pandemic. Stock investors often didn’t. They lost 10%, 20%, 30% within weeks.

Learn how volatility hurts stock investors.

If the pandemic were as visible a threat as a fire-breathing Godzilla, more would adhere to shelter-in-place orders.

For active real estate offers, pay more attention to where the tenants’ income originates. Large retailers are hiring, small retailers are firing.

Caeli Ridge, President of Ridge Lending Group joins me to tell us about how coronavirus has changed the mortgage lending landscape.

Jumbo loans and non-QM loans are no longer offered.

Credit score, DTI requirements could soon become more stringent.

Verification of employment now occurs right before loan funding.

Mortgage rates still hover near historic lows.

Loan forbearance, loan modification discussed.

__________________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

285: Your Pandemic Investing Strategy & Mindset Mar 23, 2020

Unemployment is rising. Mortgage rates hit record lows two weeks ago. Stocks have fallen 32% from recent highs. Oil has fallen with a thud.

Your life has changed in order to control the spread of the novel coronavirus.

(**The entire episode transcript is below. You can read along as you listen.)

Fannie Mae, Freddie Mac, and HUD have suspended foreclosures and evictions for at least 60 days. This could soon be extended to a year.

The IRS tax filing deadline moved from April 15th to July 15th.

There are opportunities for you today that you’ve never considered before.

Recessions are normal. They occur every 7 years on average.

In three of the last five recessions, real estate values appreciated.

Consider drawing against your HELOC before it’s frozen.

Bill Gates’ epidemic prediction audio clip played.

Stocks: the bull market died of coronavirus.

I discuss my recent chats with national Mortgage Loan Officers.

Good news? Shelter-in-place means you might have the time with your family that you’ve always wanted.

__________________________

Resources mentioned:

Coronavirus forbearance is here:

Housing Wire article

RE appreciated in 3 of last 5 recessions:

Article & Graph

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

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Best Financial Education:

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@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete episode transcript:

Welcome to Get Rich Education, I’m your host, Keith Weinhold. As the pandemic unfolds, how do you best position yourself as an investor to be profitable and mitigate loss?

We’re talking about the real estate market, the stock market, and specific, actionable things that you can do for your family and your real estate. Today, on Get Rich Education.

_________________________

Welcome to Get Rich Education, I’m your host, Keith Weinhold and no matter where you’re listening to us - any of the 188 nations - your life has changed … due to the pandemic.

Just when you learned to replace your handshake with an elbow bump, now you can't do either one.

Yes, your life looks different now. We are here in the social distancing era.

With major events all cancelled and the closure of businesses & schools, & entertainment venues; it is clear that the global efforts to slow the spread of the coronavirus is an unprecedented experience for you and I.

With people needing to stay home, it creates some new ways of socialization.

For my haircut this week, I don’t think I’m going to go out to get it. I’m hoping that my wife can cut my hair at home.

I can’t go to the gym. Thank goodness that I have a home gym - modest as it is. This is literally life-changing - altering the patterns and habits of you & I’s daily life.

You might see more of your spouse now. You might be homeschooling your kid now.

This is an emotional process for you and I - your relationships with people & things have changed.

You’re now more likely to be listening to me from home rather than out & about - not from work.

But wait. Now, for you, maybe work ... is ... home. Kinda.

If you’re working from home, you’re now ...

... about to find out which meetings really could have instead been ... an email.

Yes, it's simply a strange time to be a human being.

The pandemic has stirred up more uncertainty than just social faux pas and awkwardness.

It's created a breathtaking 32% stock market drop - more on that later. The slowing economy means that oil prices have fallen with a resounding thud. Mortgage rates hit record lows two weeks ago.

The combination of those things might make you, the REAL ESTATE investor, giddy with your predicament.

You might even have - what feels like - an extended adult Spring Break at home with your family.

But the larger economic slowdown can ensnare everyone - yes, the real estate investor too. Some help is on the way.

Just last week, Fannie Mae and Freddie Mac announced that they are suspending foreclosures and evictions for at least 60 days - so we’re talking about a lot of conventional loans there.

HUD is doing the same thing. HUD basically means FHA loans.

So I guess that property owners don’t have to pay their mortgages and tenants don’t have to pay their rent for a little while either.

That was followed by the state of New York declaring that certain borrowers in the state could forgo their mortgage payments for up to 90 days.

And there’s just so much NEWS about payment forgiveness and everything else related to the economy and the pandemic that it can be difficult to keep up.

I’ll tell you, I’ve had to scramble - more than normal this week - to pull together the more relevant stories that affect you - because so much is changing so fast.

Treasury Secretary Steve Mnuchin said just last Friday - three days ago - that the deadline for Americans to file their taxes would be pushed back from April 15 to July 15.

That’s got to be welcome news!

In fact, Mnuchin tweeted: "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

That’s what he said. That’s a 90-day extension. Some relief from the IRS for you.

Now, how long will this kind of alternate society that we’ve now reluctantly formed linger on?

How long will it last?

Self-isolation and playing the ol’ Risk board game or Battleship with your kids might be kinda cool at first - but it gets a little old after a while.

It really gets old once you find that your kid is improving at chess faster than you and he’s starting to beat you.

Well, no one really knows. No one in the world knows how long it’ll last.

So therefore, it’s hard to know whether people are overreacting or underreacting to the news. It’s really hard to know.

Will this last one month? Six months? Or even longer?

The best, most trusted source, I know of thinks that this will probably be with us … through June. Yeah, that’s three more months.

Now, it might peak before that time, but who knows? And a lot of forecasts change … because, again … there are a lot of unknowns here.

But there are a few things that I do know. So let’s think about what we do know.

There will always BE an economy - even if things got far worse.

There will always be an economy as long as there’s a civilization.

Sheesh, there’s an economy in Leavenworth - a maximum security prison.

When this thing ends, if you’ve got a friend or a tenant or yourself that’s been laid off - you’re probably going to return to your job.

But some people might never return to their job. You might see this - as an opportunity.

If you have - or have had - a job that you’re not in love with - this could give you time to find out what you’re good at & what you like doing rather than working for a paycheck.

Use this time to ultimately find out what you want. Then learn some new skills at the Khan Academy online - or somewhere else. See this as an opportunity.

There’s an old saying. If your neighbor loses his job, it’s a recession. If you lose your job, it’s a depression.

And more people are probably thinking about that today ...

But recessions are indeed - a frequent occurrence in the modern economy. This 11 year economic expansion, was an all-time American record.

In response to the pandemic, The Fed is effectively printing tens of billions of dollars - and more - to help keep banks liquid.

This is a process … that devalues the dollar. This is inflationary - which is good for borrowers long-term, and this dollar printing makes investors scurry for real assets that can hold their value.

Yes, real things that can’t be inflated away with profligate monetary policy. I’m talking about assets like water, and timber, and real estate - especially residential real estate.

Now, if for any reason, your income is disrupted, either because you’re out of work or your tenant is having trouble making rent payments ...

If you're losing income and must play defense, and you’re a homeowner, you might have something to work with.

Relief can come from your Home Equity Line Of Credit (HELOC). You can make withdrawals for emergencies.

Sure - I’ve been talking for years here about how if you’ve got excess equity in your home, you can originate a HELOC.

Since home equity is unsafe, and illiquid, and it’s rate of return is always zero, you can use that excess equity in your home. MAKE it liquid.

The HELOC can come in the form of a second mortgage. At last check, on a primary residence, you could get an 80% combined loan-to-value ratio HELOC.

How that works is if you have a $500K home, you could have $400K of debt against it. That’s the 80%.

So then if currently, your home has a $300K loan balance, you can potentially get a HELOC second mortgage for another $100K.

OK … your $300K first mortgage plus $100K HELOC has a sum of $400K - which is 80% of your home’s value.

So now, you’ve got $100K out of your home.

The way that this $100K HELOC works is that your interest rate generally follows the Federal Funds Rate - which the Fed has essentially dropped to 0%.

Now, you’ll pay a margin on top of the Fed Funds Rate - but HELOC rates are really low now.

Their interest is often tax deductible - and you can spend the HELOC funds on anything at all.

You also have the flexibility of making interest-only payments on the HELOC - or paying back extra toward the principal if you prefer. Nice option there.

And I’ve gone deep on how HELOCs work on prior shows, so I won’t do that here.

But here’s the message if you think that you need some - or want some - liquidity.

Originate your HELOC and consider drawing against it - which means pulling the money out - before the bank FREEZES withdrawals from your HELOC funds.

Look, here’s what happened during the 2007-2009 Great Recession. Homes were losing value then, and banks flash-froze HELOCs. It happened to me.

I still remember getting the letter - it was from a major bank that you’ve heard of.

I do remember getting that letter from the bank because I was frustrated that they froze my funds - which was equity in my home that I had previously had access to.

So, I’ve told you on past shows, that I can’t think of any reason not to have a HELOC second mortgage on your home, as long as you have adequate equity in it. That way you can choose to either use it by drawing against it - or not.

My point today is - consider making a withdrawal on that HELOC before its frozen.

Now, say you do that and you’re paying a 5% interest rate on that money.

Maybe wherever you put those borrowed funds, now you’re making more than 5% on them because you’re taking those funds and putting them on offense.

If so, that’s great. That positive arbitrage. Gotta love that.

But what if you take those HELOC funds that you’re paying 5% interest for and you’re playing DEFENSE, and you have them invested in a vehicle that’s MAKING less than 5% interest for you.

You know what I would say? What you’re doing is like … you’re paying an insurance premium.

You’ve got access to the funds, you’re keeping them liquid, you could be hemorrhaging a bit each month, but it’s like paying an insurance premium in order to have access to your funds.

I don’t like to tell people what to do. I like to tell people what I do, and I provide ideas and information here.

Now, if you don’t need funds or want funds, well, then there’s less reason to tap your HELOC.

Remember too, a high mortgage balance is a great asset protection tool against a bank foreclosure.

In an adverse circumstance, the bank doesn’t want to come after you if you still owe $400K on the loan.

But they’ll come after the family that only owes $40K on their loan - because the bank could get the property as collateral, and only lose out on the $40K that they would have had coming to them.

See, the bank doesn’t want to foreclose on your property where you, the homeowner, would have still owed them 4-HUNDRED K.

My point is - if you need to play defense, have a HELOC and consider using it before it gets frozen - IF it gets frozen.

It might not get frozen. See, a big reason that HELOC draws were frozen during the Great Recession 12 years ago is that housing was at the CENTER of the 2007-2009 Great Recession.

From the time that those HELOCs were originated, properties had lost value. As they lost value, that means loan-to-value ratios went up, often in excess of 100%.

So banks froze HELOCs so that they didn’t get exposed to that risk. If you’ve got zero equity in the home or skin in the game, you’re more likely to walk away - as a homeowner.

But see, if we have a pandemic-induced recession, it’s NOT housing-centered like the Great Recession was - with their irresponsible lending practices and overbuilding that occurred then.

Today, we’ve got RESPONSIBLE lending practices and an UNDERsupply of homes. We’re UNDERbuilt.

So, the Great Recession was different - and special.

Now, I don’t know whether we’re set up for a pandemic-induced recession or not. But I’d say that there’s a good chance that we’ll have one. I’d say, a more than 80% chance that we’re in one now.

We don’t actually know that we’re in one until in the future, we look back and see two consecutive quarters of year-over-year GDP contraction. That’s the definition.

But we’re definitely due for a slowdown. We’re in one now.

It’s worth remembering that recessions are actually a normal part of the economy. We have one every 7 years or so.

Our previous five recessions began in 1980, another one in 1981, then 1990, 2001, and finally the aforementioned Great Recession beginning in 2007.

In three of those five recessions - three of the last five, do you know what happened to home prices.

Home prices went up. They INcreased in 3 of the last 5 recessions.

Home prices increased in value anywhere from 1.9 percent to 4.8 percent. I’ll link that in the Show Notes for you.

So, a recession definitely doesn’t mean a drop in property value. Residential real estate is a recession-resilient asset class.

The thing that you need to keep your eye on is, is your tenant keeping their job during this crisis so that they can pay the rent.

By the way, do you know the difference between an epidemic and a pandemic?

As Oxford defines it:

An epidemic is a widespread occurrence of an infectious disease in a community at a particular time.

A pandemic is a disease prevalent over an entire nation or the world.

They mean about the same thing, but the pandemic is on a larger scale.

Now, MicroSoft co-founder Bill Gates has received attention recently in predicting that a pandemic was potentially humankind’s greatest understated threat.

In fact, let’s listen to this short clip - this is Bill Gates, more than three years ago in Davos, Switzerland:

Bill Gates clip: “An epidemic - either naturally-caused or intentionally-caused - is the most likely thing to cause, say, 10 million excess deaths. It’s pretty surprising how little preparedness there is for it.”

Yeah, Bill Gates said a lot more than that about it. But he’s appearing to be rather correct here.

Well, what has administration in the United States done for a response? Our political leaders?

Well, initially, Trump and company seemed to throw more money & fewer regulations at the problem.

That’s changing somewhat, as we’ve got more social controls and border closings now.

With the list of these administrative & … policy news stories longer than a Walgreen's receipt, the least you should know is that President Trump and Congress are aiding homeowners and renters alike.

Free testing, and an expansion of unemployment insurance.

A stimulus package of one trillion - with a “T” - one trillion dollars or more that looks to involve direct payments to American households … is really going to help provide relief to people.

There is lots of precedent for government bailouts in times of crisis.

The U.S. government provided $15 billion to airlines after 9/11, $700 billion to banks to army-crawl through the 2008 financial crisis, and $17 billion to automakers just after that.

Whether you see bailouts as the right way to do things or not, there is that precedent.

Fortunately - some of that help should include your tenant. We might see multiple injections of $1,000 each or more - directly into consumers’ hands.

That’s the plan that’s formulating - just write virtually everyone a check. And $1,000 means more to your tenant than it does to you.

This can really help Trump and Congress “fill the gaps” between cushions like paid leave and unemployment insurance.

Though that’s gonna cause more long-term taxpayer DEBT - yes, I think a lot of people need the relief in the meantime.

Think about it this way:

To save their economies over the long run, countries around the world are actively putting themselves into recessions.

Productive nations are actively plunging themselves into recession left and right.

Can you imagine that? But even though I’m a finance guy and a real estate investor, I think that it’s the right thing to do.

As odd as it sounds, the best way to heal the likely recession, is not to try to fix the recession. It’s to get into a recession by killing activity in order to control the virus.

The best way to heal the economy is to get people to stay home, stop the spread, and end this sooner.

Look, if you’re riding a bicycle and get a flat tire because there are nails on the road, well then, you don’t get to your destination … by patching the hole in the tire over & over again.

You get to where you’re going by cleaning up the nails on the road - which means that you & your bicycle go nowhere for a while - and then when the nails are picked up, you quickly roll along to wherever you’re going just like the economy should quickly roll along nicely - like it was - before the pandemic hit.

The fastest way to fix the economy is to stop the virus.

As we’ve now learned, even though you might feel like you’re in a digital age with TikTok videos, and an app that digitizes your dinner receipts, and everything else ...

Humans still generate trillions in economic activity by coming into close, physical contact with one another—sitting at restaurants, assembling auto parts, traveling on planes, getting haircuts.

But public health officials stress that to slow the spread of the coronavirus, we must all maintain a safe distance from each other, even if we’re healthy.

But that still doesn’t square with our economy’s structure.

Be mindful that recessions and surprises happen constantly. But this one feels a little more surprising for a few reasons - a virus is sort of intangible - you can’t see it - and there’s the fact that we just had a great loooooong run of 11 years.

That was the longest economic expansion in American history.

I think that this pandemic is the biggest news story since 9/11 - where you’re just kind of like, “I can’t believe this is happening.” But this WILL pass. It always does.

Look at what we’ve had in the last - not even 20 years: 9/11, Hurricane Katrina. The great recession. Superstorm Sandy. And now, you might call this the great shutdown.

With the economic slowdown, I’d expect sudden, deep, and brief.

I hope and expect that it will be sudden - it already has been sudden, that it will be deep - with massive layoffs, - and that it will be brief.

There are two prior Get Rich Education episodes that are getting a lot of attention right now.

One of them is named “A Recession Is Coming”. I released that in November of 2018.

One year later, I released an episode named “Planning For A Recession”. That was released in November of 2019, just four months ago.

“A Recession Is Coming” is Episode 215, and

“Planning For A Recession” is Episode 265 if that makes it easier for you to find them.

I’m coming back with more here - with “Your Pandemic Investing Strategy & Mindset”. This is “Get Rich Education”.

____________________________

Hey, you’re back inside Get Rich Education. And welcome, you’re squarely in the #WFH Era.

The “Work From Home” Era.

Yes, this alternate world where working from home is NOT frowned up - and going into the office IS frowned upon. I’m your host, Keith Weinhold.

I’d like to emphasize that no one really knows about the next turn that society and the economy will take during this pandemic. That’s because we are in uncharted territory.

Because I don’t think very many people were alive to remember the Spanish Flu of 1918.

As far as the most recent territory that HAS been charted ...

Last Friday, stocks, as measured by the S & P 500, fell more than 4%. So as of today, Monday, March 23rd, 2020, stocks have now fallen more than 32% from their recent high.

How many people with 401(k)s have lost 32% of their account’s value? Some of them, even more, oh … and that’s just in the last month or two.

And last week, stocks posted their worst week since the height of the financial crisis.

The bull market died of coronavirus.

That’s what happened.

Now, why am I talking about stocks more than usual both this week & last - since I’ve talked about the pandemic quite a bit on both of these shows?

It’s because stocks are often a LEADING indicator of what investors expect is coming.

(And note that I’m being kind by calling stock buyers true “investors”. A lot of them are just speculators.)

Now, a stock bear market is when stocks fall 20% or more from a recent high.

Do you have any idea how good of a predictor a bear market is of a recession? Well, I can tell you.

73% of stock bear markets have been accompanied by a recession.

As a forward-looking mechanism, the stock market usually sends warnings about the economy before shrinking growth shows up in the data.

So yes, in the 11 stock bear markets we’ve had since WWII, 8 of the 11 have resulted in a recession. That’s that 73%.

While it remains to be seen, real estate may be insulated to some extent - and that is because of tight residential inventory, high buyer demand, low mortgage rates, and lower prices for lumber and oil.

Recessions are not officially declared until the economy is already deep into them, or until after they’ve passed. We could look back later and say the recession started this month.

That’s because so much of our economy has to do with consumer spending - you buying a frappucino, you filling up your car with gas, you buying a boat.

Consumer spending accounts for about 70% of GDP.

Now, here on the show, we’ve spent the last few years focused on rental SFHs and properties up to four-plexes in size.

Though it’s still a developing story, there’s been some evidence that the ventilation system in larger apartment buildings - can transmit the virus. I … sure hope that’s not true.

I talked to two prominent national MLOs last week.

One of them is Caeli Ridge, where they are just doing a TON of mortgage origination business for both income property purchases and refinances.

The other mortgage loan officer is prioritizing new property purchases ahead of refinances there in THEIR office.

Low rates will outlast coronavirus.

Markets are anticipatory - so once the virus is past it’s peak, prices of real estate should be rather buoyant.

Be mindful too, that because we focus on investing in the United States Midwest & South - what i call the stable markets - instead of the volatile, coastal markets.

Just generally here, coastal properties and stocks here near the start of the decade - are very much alike.

They’re both overpriced, they’re both low yielding, and they're both susceptible to fall in value.

In these times, RE could be like the cleanest dirty shirt in the investment world - where you get the best risk-adjusted return.

Better than bond yields, and better than 2% dividends from the S & P 500.

With factories closed, supply chain kinks can LIMIT housing supply - and housing was already in short supply.

I think that some people either won’t have the confidence or capacity to buy a home.

Well, good. Then what they’ll do, is rent. You want them renting from you. More people in the renter pool … is to your advantage.

But they’ve got to have an income.

It’s important to remember that a pandemic is different from a financial crisis—bargain-basement interest rates can help keep businesses afloat, but the “social distancing” measures recommended by health officials mean canceling events and avoiding crowded places, which will curb spending.

Interest rates can’t fix that, though low interest rates are great for borrowers.

Think about how this has affected society - maybe in some other ways you haven’t thought about.

I know friends that spent months training for marathons that were cancelled.

MLB, the NHL, NBA seasons suspended.

Think about college & HS seniors that might have played their last game - without even knowing it. The pandemic ended their career - did you ever think about that?

Of course, this is minor. Some people have lost their lives, others have lung damage.

How’s your grandma doing - hopefully you get some time to video chat with her.

Maybe, just maybe, there is a huge silver lining to all of this with people staying home.

Maybe more time as a family is what we need. Maybe we’ve gotten so caught up in following the madness of busy-ness, and that this is a reset - and you can have some health benefits - and exercise more.

Maybe, after the short term economic losses have faded, some might place a much higher value on what is most important in their lives. Maybe.

We should salute and express our gratitude to the millions of frontline workers who are making tremendous efforts to help us all.

That includes our world class medical staff and others that you’re not thinking about too many others too - the calm grocery store & pharmacy workers and the tireless drivers bringing important supplies to hospitals & warehouses & stores & our own doorsteps.

Think about the spouses of some of those people too. My wife is a medical worker and I’m a little fearful that she’ll bring the virus home.

Realize that fear of the Coronavirus may keep people away from restaurants and small businesses who usually operate on small margins.

So here’s something you can do!!

From your favorite local business or restaurant, you can buy a gift card.

Buy it directly from that favorite place so they get the use of your money for the next few weeks or months.

Then ....when things have settled down, treat your sweetie to an evening out or buy something for someone and use your gift card‼ That’s something simple and actionable you can do to help the economy and your community.

Thank you delivery workers.

Thank you doctors, nurses & medical staff.

Thank you grocery workers.

Thank you truck drivers.

If you like to see the headshots of the guests we have here on the show and see the show notes, it’s easy.

For this episode, #285, simply go to GetRichEducation.com/285

Now, we might only have the complete lyrics for the episode transcribed for maybe ten percent of episodes.

But for both today’s show and last week’s show, you can see the entire transcription there.

That way, you can read along as you listen, or share that transcription with someone else who, perhaps, wants this content but isn’t able to hear. So you can check out:

GetRichEducation.com/284 for last week’s show notes with complete transcription or

GetRichEducation.com/285 - for this week’s.

I’ll be back with you next week. If you want to help the economy, then, you might be best off, just staying home!

It’s part of doing the right thing before you do things right.

I’m Keith Weinhold. Don’t Quit Your Daydream!

284: Coronavirus And Your Money Mar 16, 2020

The novel coronavirus threatens life, business, and the economy.

11 years of U.S. economic expansion could end soon.

(**The entire episode transcript is below. You can read along as you listen.)

Closed businesses mean that supply chains are disrupted. This could make it difficult for flippers and value-add apartment projects.

Travel, hospitality, and leisure business troubles mean that short-term rentals like AirBnB will have high vacancies.

Short-term rentals cater to business travelers and vacationers - both vulnerable in this downturn.

Long-term rentals are better positioned. As long as people are alive, they need a home.

Mortgage interest rates have hit their lowest rate EVER since they’ve been tracked in 1971.

The Fed made a 0.5% emergency rate cut. Expect more cuts. This punishes savers and rewards borrowers.

Stocks recently fell more than 20% from their recent high; that's the definition of a bear market.

Coronavirus’ effects are fast-moving and no one really knows the future. This is uncharted territory.

With this in mind, I’d expect real estate to fare better than other asset classes. Also expect:

Stronger: dollar, bonds, gold.

Weaker: many stocks & businesses, short-term rentals, oil, silver.

The unemployment rate will likely rise; I discuss what this means for your tenants.

Low mortgage interest rates can be locked in for 30 years, outlasting the coronavirus pandemic.

Check out our two new property providers in Orlando and Des Moines: getricheducation.com/orlando and getricheducation.com/iowa

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Peak Prosperity YouTube Channel

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RidgeLendingGroup.com

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Complete episode transcript:

Welcome to Get Rich Education. I’m your host, Keith Weinhold. The coronavirus, COVID-nineteen, has infected humans and financial markets too.

This creates both problems and opportunities for you, the investor. Today, on Get Rich Education.

Welcome to GRE. From Uruguay to the Ukraine to the UAE to the USA and across 188 nations worldwide, this is Get Rich Education. I’m your host, Keith Weinhold.

Yeah, you’re back in that abundant place, where your QUALITY OF LIFE exceeds your cost of living.

The novel coronavirus (COVID-nineteen) that began in Wuhan, China in November of last year when it transferred from animal to human is poised to affect the economy of every world nation and every U.S. state.

It's not SARS or Zika.

This transmits easily and it is perhaps 20x more deadly than the common flu.

Some experts believe it's the worst outbreak in America since the Spanish flu of 1918.

That was the worst pandemic of the 20th century.

And you know what, it didn’t have to be this way ... with coronavirus.

As my chief informant on the matter, Dr. Chris Martenson says, it didn’t have to be this way.

Often placing the economy ahead of human life, health organizations and governments have often done a DEPLORABLE job of handling this, often understating the threat.

The World Health Organization was even reluctant to acknowledge that the coronavirus is a global pandemic … which it surely has been for a long time. Well, they only acknowledged that five days ago.

Well now that agencies weren’t preparing people sooner - coronavirus is poised to threaten even more people - which in turn, will make the economy even worse than if the threat had just been accurately represented in the first place.

I’m going to focus on coronavirus’ likely effects on real estate and the other financial markets shortly.

But let’s - you and I - outline this together first.

The virus causes only mild or moderate symptoms for most people, like a fever and cough …

… but it can progress to serious illness including pneumonia, especially in older adults and people with existing health problems.

The World Health Organization says mild cases last about two weeks, while most patients with serious illness recover in about three to six weeks. Based on what I said earlier, consider the source there.

My heart goes out to the victims of this - past, present, and future.

The most credible source that I follow thinks that the virus will reach its peak in the U.S. 1 to 3 months from now.

I've followed this story closely since January and if you receive our Get Rich Education newsletter, you’ve known for a while that my favorite source of TRUSTWORTHY coronavirus information was and still is: the Peak Prosperity YouTube Channel, which Chris Martenson hosts.

In fact, I’ve mentioned that resource in our GRE newsletter for you twice - the first time was back on February 6th.

So if you get the Get Rich Education Newsletter, you’ve had plenty of time to get in front of this.

You know, it’s interesting. I had Chris Martenson on the show here earlier this year and we talked about “The Fed” printing money. That was right before coronavirus literally went viral.

Before I tell you about the affects on your real estate - both good and bad - let’s establish a baseline here.

Coronavirus is threatening because it has a substantially higher R-naught value than the flu.

If the R-naught value is greater than 1, that means that one infected person will spread the virus to MORE THAN one person then the disease can spread.

The way a virus dies out is for it’s R-naught value to be less than 1. Then, one infected person, on average spreads it to fewer than one person.

Well, the common flu has an R-naught value of about 1.3.

Coronavirus (COVID-nineteen) is believed to have an R-naught value of more than 3 and maybe even more than 6. So it spreads easily.

It spreads asymptomatically - and that’s bad.

There’s no vaccine available - and most believe it’ll take a while to develop one.

And, you can find resources elsewhere on how to prevent the spread like social distancing, avoiding gatherings, and lots of handwashing.

But because this is an investing platform and I don't have a degree in pathology or epidemiology, and much of what I just told you there, I learned myself in the past month or two …

Let me now get into my lane: how do I think coronavirus will affect your money and your real estate?

Well, it probably already has.

Businesses are closing. Colleges have suspended classes. Many events are being cancelled or postponed.

SXSW in Austin, Texas was one of the first major EVENTS to be cancelled in the U.S. March Madness basketball won’t have any crowd there.

We’ve got an entire country - Italy - that’s essentially shut down.

When businesses close and more people work from home, this disrupts supply chains.

That COULD include less supply of sheet rock or faucet handles or whatever - and affect value-add properties because so much building material comes from China.

It could be a tougher time to be a flipper then if you’re about to start a rehab or if you’re in the middle of a rehab.

If you're upgrading an apartment building, that could slow things down. You need materials.

This may or may not create disruptions for turnkey property providers. We’ll see.

You’re in a better position if you’re a prospective turnkey buyer waiting on a rehab - maybe that’ll create a delay until your property is ready. Maybe it won’t.

China accounts for nearly 30% of world manufacturing.

But importantly, they also make component goods for finished products.

An American car can't be finished if it doesn't have the battery and exhaust system from China.

Virtually every major car company has a component made in China.

Now, I see conflicting reports of whether some previously closed Chinese businesses have really come back online or not. We need to learn more there.

Travel, hospitality, and leisure businesses are already hurting.

Now, where hospitality meets real estate, we’ve got hotel rooms, Bed & Breakfasts and short-term rental platforms like AirBnB and VRBO.

Like I’ve said before, and not too long ago on the show at all - is that these short-term rentals are not very recession-resistant.

That’s because short-term rentals cater to two main groups of people - business travelers and vacationers. That’s who occupies those properties.

Well, what are business travelers and vacationers doing right now? They are postponing travel or cancelling travel left-and-right due to coronavirus concerns.

How great would you feel about owning AirBnBs right now?

Short-term rentals like AirBnBs are not as recession-resistant as long-term rentals.

Just a couple, three months ago, it probably sounded different to you when I mentioned that short-term rentals aren’t very recession-resistant.

Because perhaps you were still feeling good about our 11-year-long economic expansion.

But those same words probably sound and feel different to you now that some think that a coronavirus-induced recession could even be imminent - though that remains to be seen.

Also, expect big hits to: chemicals, pharmaceuticals, and electronics.

Apple Corporation is so dependent on Chinese manufacturing for their iPhone. That’s the bad news.

Now, let’s talk about the good news.

Mortgage interest rates have hit all-time lows - yes, lower than their lows that they hit in 2012, shortly after coming off of the Great Recession.

All-time lows - as long as Freddie Mac has been tracking them - which is since 1971. They’ve never been lower than they are now.

Today, you can get a rate in the low 3s for primary residences, I’ve even heard of a few people closing 30-year fixed amortizing loans for less than 3%. Just astoundingly good.

And of course, investor loans are often about ¾% higher than those.

The Fed has been pumping tens of billions, even hundreds of billions into the system lately … for bank liquidity.

The Fed's emergency interest rate cut of 0.5% two weeks ago is first time we've seen such a move since 2008.

That 2008 cut was in the wake of The Great Recession - that was the Lehman Brothers emergency one-half-of-one-percent cut.

Just a quick economics primer if you’re a new listener - lower interest rates for loans stoke the economy because they make you more willing to borrow & spend.

Interest rate cuts help the investor class like you, and not poor people. That’s just the truth behind who cuts actually help. It’s you!

It helps the Get Rich Education listener - you again - even more because we’re such strong proponents of responsible and sensible borrowing here.

Now, note that lower rates don’t help contain the diseas. If your grandparent gets sick, Jerome Powell’s decisions aren’t going to help that.

Right, how low would rates have to be to get you to travel to China or Italy tomorrow?

By the way, after the rate cut, President Trump was not satisfied with the amount of easing and cutting.

“More easing and cutting!” is what he tweeted following the central bank’s announcement.

But realize, of course, that long-term mortgage rates don’t move on that Fed Funds rate. The Fed controls the short-term rate - though there’s generally still a correlation there.

Long-term mortgage rates - like the ones that you really care about for real estate - they move with bond yields.

Now, bonds are like the boring can of beans or soup in the finance world - they’re safe and they’re stable.

Vigorous bond-buying makes bond prices go up and makes bond yields go down.

So this strong bond-buying … this safe have ... has dropped the 10-Year Treasury Note yield below 1% for the first time ever … and it’s fallen substantially below 1% in just a fantastic fall off the table.

OK, so they’re below 1% - and that’s a rate that was unthinkable just a few months ago.

Do you know what the average spread is between this bond yield and the 30-year mortgage rate?

On average, mortgage interest rates hover 1.8% above this rate, so you can see how low we could be going.

I think that the historic spread will widen, but despite the fact that we now have record - I mean all-time record low mortgage rates, there’s a good chance that they’ll go a little lower yet.

This is great for your new real estate buys. Refinance activity is surging right now.

But back to short-term rates that the Fed influences - more cuts there seem imminent too.

The next one could happen at the Fed's regularly scheduled meeting, which happens tomorrow and the next day.

So you’ll hear an announcement from The Fed this Wednesday about their rate cut decision.

The Fed loaded up with dry powder in 2018 when they raised rates, so that they can lower them at a time like this.

Every time they cut the rate like this, it punishes savers and rewards borrowers.

No one knows if rates will go negative - and only a few places in the world have those right now: places like Japan, Denmark, and Switzerland. We’ve never had them in America.

U.S. stock market investors are getting killed with all this uncertainty. Indices are whipsawing with volatility.

Fear pushes stocks around, but not RE. The U.S. stock market dropped 3% in just minutes when a report came out that in CA, a large number of people were exposed to coronavirus, but weren’t.

Last week was the first time that major stock indices dipped into bear market territory. That’s defined as a 20% loss from a recent high.

There was one recent trading day - just one day - where the S&P dropped 7%, triggering a circuit breaker, which paused trading for everyone for 15 minutes.

Yeah, now we’re talking about all these automatic fail-safes. When the stock market loses so much, so soon, there’s a pause in trading.

By the way, the way it works is that if the S&P had declined 13% in a day, trading would’ve paused another 15 minutes.

20% in a day, and everyone would have gone home for the day. That’s how it works.

Yeah, they put those circuit breakers in place after 1987’s Black Monday, when the market fell between 22 and 23%.

Stock drops are always sickening,l and if you’re within 5 years of retirement, stock drops are really scary.

I’ve told you before that I haven’t owned any stock, mutual fund, or ETF since 2014 and that’s still true today.

Being in something stable like real estate has rarely felt as good as it has lately.

And you know something, “volatility” is a funny word.

It seems like “volatility” used to mean something that changes rapidly, and anymore, it’s morphed into something that only means a change for the worse.

Warren Buffett says, "The stock market is a device for transferring money from the impatient to the patient."

I believe that. I’d even say that - not just the stock market - but just that, “MARKETS OVERALL are devices for transferring money from the impatient to the patient.”

Real estate investors like us are more patient. There’s no flash-selling in real estate. It might take you 30, 60 days or more to sell a property … or to buy a property.

I’d expect to see a stronger U.S. dollar because the world views it as a safe haven asset.

I expect this to be a nice tailwind for real estate too, because the world views U.S. real estate as a safe haven asset in times of uncertainty.

Gold should be strong with coronavirus concerns. That’s easy to say, since gold is the classic safe haven asset.

But remember that gold might not APPEAR stronger to Americans if the dollar strengthens.

That’s how it works. Because if gold goes up 10% and the dollar also gets 10% stronger, well then it takes just as many dollars to buy the gold.

The dollar-denominated gold price would look the same then.

I’ve read that a number of experts predict silver prices to rise on coronavirus concerns, but then I don’t see any sound rationale for them thinking this.

I disagree. I would NOT expect silver to rise.

That’s because silver has more industrial use than gold and more industrial slowdown is expected.

Let's talk more about your income properties in this coronavirus environment.

Though I'm speculating now, what if your tenant is required to self-quarantine at home and they lose their income?

This is not far-fetched.

Washington state officials were really some of the first in the U.S. to recommend that workers stay at home when they suggested that Seattle-area residents work from home.

More & more people can work from home today than anytime in modern history.

But when we’re talking about your tenants, it's unlikely that all of your tenants will lose substantial income.

Now, there are some positions where people can’t work from home so well, like mechanics, janitors, chefs and wait staff, sure. Let’s consider that ...

The current unemployment rate is 3.5%.

I’m really speculating here, but if 1 in 10 of your tenants is both laid off & without income, that’s a 10% increase in unemployment. That would be huge.

That would be like the unemployment rate going from 3.5% all the way up to 13.5% - which seems unfathomable!

And yes, realize that if 1 in 10 people were laid off it wouldn’t exactly make the 3.5% unemployment rate shoot up to 13.5%. It doesn’t exactly work that way with how it’s calculated.

But, I think you get my point.

If 1 in 10 of your tenants were both laid off and without employment, that would be massive. So keep that in perspective. Even 1 in 10 would be a lot.

Last week, Trump floated the idea of a payroll tax cut, which I don’t think would do much of anything to help - and also, extending paid leave which seems more helpful.

Companies, especially those in the service sector, are under pressure to provide paid sick leave to workers who may not be in a financial position to take time off.

Wal-Mart and McDonald’s put in safeguards for their employees.

Congress might step in. A bill has been introduced that would require companies of all sizes to provide paid sick leave.

Could your overall rental income go down? Maybe, though you have to speculate quite a bit to even think that 1 in 10 would go without an income. So that’s a maybe.

But does your mortgage interest rate go down? Definitely. It already has.

What about you?

If you lose your job, you need multiple income streams ... from places like your rentals.

And if 9 out of 10 … or 10 out of 10 of your tenants still have jobs, you probably still have that income stream because you set up your life for multiple income streams if you’ve been listening to this show & acting.

What about you - what about your job? Well ...

The lower your financial freedom, the higher the risk.

The more income streams you’ve built, the better off you are.

What about your job? The lower your financial freedom, the higher the risk.

Another benefit of a paid sick leave movement gaining momentum, is that “When people gain access to paid sick leave, the spread of the flu decreases.”

Because they’re more likely to stay home then. So that makes paid sick leave seem like more of reality.

It’s important in this situation that when you have people who have symptoms and don’t feel well, that they do not go to work and spread diseases to slow the infection rate and buy time for public health officials to develop a vaccine.

Let’s look at oil prices - because that’s a substantial input to inflation and oil is a real proxy for what’s going on in the economy.

Oil prices have crumbled faster than a Nature Valley Granola bar.

And that’s even before a coronavirus-induced slowdown.

What’s happened, is that with President Trump in the White House and the Republican Party controlling the Senate, environmental activists have shifted their focus from pressuring the government to pressuring the private sector instead.

Since JPMorgan is such a big financier of the fossil fuel industry, activists have really turned up the heat on them and other big banks to stop financing oil projects.

That’s significant - on top of a slowdown in the economy - if fewer goods need to be produced and shipped, it uses less energy and then there’s less demand for oil.

Low oil prices are generally good for consumers but bad for producer countries.

In the U.S., low oil prices are not good for real estate in areas like west Texas, parts of Louisiana, and Alaska.

But, of course, there’s the flip side of all this. At some point, low stock and oil prices mean that bargain hunters come in to float the market again at some point.

In fact, billionaire investor Sam Zell recently made remarks that oil looks like a “buy low” opportunity.

So let’s look at the bottom line - real estate is still quite well-positioned as long as you’re in residential, long-term rentals that you bought for cash flow.

Elsewhere: Bonds win, gold wins, the US dollar wins, many business sectors - like the ones I mentioned - lose, stocks lose, oil loses, and silver loses.

Of course, let me qualify all that by telling you that that’s my outlook and that we don’t have any recent precedent for anything else like the coronavirus. No one REALLY knows. That’s my take.

--------

If you happen to be a new listener to the show, you may not know much about me. I’ve authored many written articles for both Forbes and the Rich Dad Advisors.

Business Insider recently wrote two stories about me and Get Rich Education - and how I’ve helped everyday people create financial freedom through real estate investing.

That’s what I do here!

I’m a current member of the Forbes Real Estate Council.

But maybe the more important things I can tell you are that I’ve been the host of this show every week - and I mean EVERY week continuously since 2014 - you can count on me to keep showing up here.

I own three real estate trademarks. In 2017, I authored an international best-selling book on how real estate makes ordinary people wealthy.

And perhaps the most important thing I can tell you is that I invest right alongside you, from the exact same providers that we talk about here.

Though I travel pretty well, I’ve lived my entire life in the United States, dividing this life of mine between two states - Pennsylvania and Alaska.

I have spent the last 2-and-a-half weeks visiting four countries - the United Arab Emirates, Oman, India, and Sri Lanka. Though I’m a real estate guy, I have a degree in geography so I like to travel.

One of the coolest things I did is sandboarding on a sand dune in the Arabian Desert there in the United Arab Emirates.

I couldn't find another interested person, so I did that activity all by myself. Going high in the world's tallest building, the Burj Khalifa in Dubai, was a “must” while we were there.

Muscat, Oman has some surprisingly beautiful sights, and buildings, and mosques that we toured. Really clean-looking there in the nation of Oman.

Immersing myself in Indian culture is something that was really novel to me - the food, the way that - the women especially in some of these outlying provinces like Goa and Kerala, India - the way the women dress in such colorful outfits ... just if they’re walking to the market to buy some guava. Such an exotic feeling there.

The coolest thing that I did is visiting the world's largest slum. It’s called Dharavi and it’s in Mumbai, India. It's just sooo different from my world.

There are actually bustling little businesses inside the slums there - from plastic recycling to pottery. And the Indian people were so welcoming - even in the slums - which was just amazing to me.

As I like to say, seeing poverty enriched me. :o)

I’ve got more on coronavirus and your money straight ahead.

A fair bit of what I’ve discussed here about coronavirus and your money and your real estate, is material that I sent in our wealth-building Get Rich Education newsletter about 12 days ago.

The newsletter is a nice, written supplement to the podcast. Of course, you can unsubscribe at any time - but very few do.

My wealth-building newsletter is something that you can subscribe to … for free … at GetRichEducation.com You’ll be glad you did.

You’re listening to Get Rich Education.

_____________________________________

Welcome back to Get Rich Education. I’m your host, Keith Weinhold.

It’s unknown whether coronavirus will tilt the economy into a recession or not. It’s too soon to know. I’ll keep you updated on that here, of course.

For you, I think it helps to listen to a perspective that’s invested through a recession before.

I’ve been investing directly in real estate since 2002 - which was before the Great Recession.

I made a major income property purchase in 2007 - which was just within that recession (in fact, I mentioned that four-plex purchase last week on the show).

And I kept buying in 2010, as the recession wound down - and in 2012.

Well, what’s the common thread there? It’s that I continued to prosper because I bought for cash flow first.

It’s that I bought in multiple geographic markets for diversification - a recession-resilient strategy.

Residential rentals that were leased to long-term tenants.

People need a place to live. And as long as they're alive, a virus is not going to change that.

But see, a virus might mean people stop using vacation rentals and stop taking business trips and stop going to the mall and stop going to the office to work.

We’re talking about HOMES. Well, we could soon have more people working from … home.

Not office, not retail, not short-term rentals. They all look vulnerable now.

And by the way, that doesn’t mean I’m a permabear on those asset types. There’s always opportunity. But recession-resistence just isn’t one of their qualities.

I’m not saying short-term rentals never make an ounce of sense or anything like that.

Some companies are basically using the coronavirus as an experiment for that moment when “working remotely could broadly replace working in-person.”

Some people think that time is coming.

This can ACCELERATE THE - you’re seeing the acronym “WFM” around a lot more now -

the “work from home” movement. As people get more used to using workflow software and using platforms like Slack or Trello from home because they HAVE to, you know, when coronavirus passes - and it will - some might ask, now why return to an office all?

With each passing day, the camp of people believing that this is all fear-mongering loses troops.

We’ll see if the peak for coronavirus will be that 1-3 months from now like some experts predict. That’s the latest I’ve heard from credible sources. But again, we really don’t know.

That’s why I like to focus on things that we do know. So let’s focus on what we do know now:

The coronavirus threat will pass sometime. We just don’t know when. But it will pass.

A second thing we know is that people will continue to need a home - a place to live.

And thirdly, mortgage interest rates have hit their lowest level in American history.

So with those being the things that we DO know - this can be QUITE an opportunity to not only lock up investment property buys at historically low rates, but potentially, do that cash-out refinance of your existing home if you think that that’s in your best interest.

Procrastinators often aren’t rewarded. But, hey, maybe you are this time with rates being this low - or maybe you really weren’t because you had dead equity accumulated in one place for too long.

With borrowing rates underneath the basement, a lot of homeowners are racing to lock in cheaper loans.

I think we could see low to mid 3% rates on investment properties, and below 3% on primary residences.

Mortgage refinancing applications have more than doubled in volume from the same time last year - that’s according to the Mortgage Bankers Association.

And industry records are being shattered. Bloomberg reported that :

The country’s No. 1 mortgage lender, Quicken Loans, recently had its busiest day for mortgage applications in its 35-year history.

United Wholesale Mortgage approved a single-day record of $2.5 billion in loans.

These stories are all over the place.

The thing is, to process this flood of applications you’re going to need a lot of people. So the mortgage industry is on a hiring spree to take advantage of the gold rush.

Our preferred mortgage provider is doing a lot of volume now as well - RidgeLendingGroup.com - that’s R-I-D-G-E.

Just calculate your ROI just from principal reduction alone at these low rates. It’s pretty remarkable.

I think that the thing that you need to remember is … that long-term thinking.

"Investing should not be about a MOMENT; it should be about a PROCESS OVER TIME.”

Some of the classic problems with GETTING STARTED in real estate are ones that I’ve helped solve for you here.

I think that Problem 1 for people is that they feel like it costs a small fortune to GET started.

Problem 2 is FINDING the property. Often times, it’s because properties in your area don’t make sense with your 20% down payment and 80% loan.

I’ve really helped solve both of those problems.

By selecting investor-advantaged markets, with down payment & closing costs you can get started with as low as … about $18K - and they’re in areas where the numbers make sense … all at the website … GREturnkey.com

In fact, at the top of the page there, there’s that 8-step flowchart where I walk you through the process.

You start by getting pre-approved for a mortgage - I even suggest where - and then reading an investor due diligence report …

… all the way through to viewing properties, making an offer, getting your third-party inspection, appraisal, signing your Management Agreement, Closing on the Property … and then the really good part - years of owning and collecting the rent.

It’s rarely been easier - though the process still takes time & you need to supply your mortgage loan underwriter with plenty of documentation.

That’s all outlined at the same place where I buy my property: GREturnkey.com

What about some current highlights over there?

Well, it’s a great time to invest in Florida for a lot of reasons - you’ll find providers in Tampa, Orlando, and Jacksonville.

Our Orlando provider was recently added - they’re now - and they have NEW CONSTRUCTION - yes, newly-built, never-before occupied - single-family homes and duplexes … and they’re in locations from the Space Coast to The Villages, through Orlando, and nearly out to Tampa.

We’ve got another new provider on the page if you’re looking for more cash flow and less appreciation than what you’d typically get on new construction, and that is in … Iowa.

Yeah, I’m proud to introduce the Des Moines, Iowa market to you today.

It’s a model of midwestern stability and Des Moines has an MSA population of 600 to 700,000 people.

Des Moines has seen an average 3.6% appreciation over the last twenty years. I think of it as a cash flow market.

A lot of times, you might be buying for, say a 4 or 6 or 8 or 10% cash-on-cash return today.

If you have a little more patience and you want to potentially double your CCR, then, rather than the turnkey model - where you buy a property that’s already renovated - you might prefer the BRRRR model.

That stands for Buy – Renovate – Rent – Refinance – and Recycle Model - recycling your money to re-use right away.

That BRRRR model is suited to Baltimore, Maryland - within commuter distance to Washington, D.C. at just a fraction of the price.

All those markets - including the new turnkey markets with inventory TODAY in Orlando and Des Moines, plus the Baltimore BRRRR market, plus that 8-step flowchart that helps serve as a roadmap for you are all in one convenient place - all on one page - at GREturnkey.com

Market uncertainty is a short-term phenomena.

But when you lock up these lowest mortgage interest rates in American history - they can last you 30 years.

When the dust settles from any current news, you know what, you’ve still going to have your mortgage rate.

Stay safe. Enjoy these historically low mortgage interest rates … I sure am. Take action at GREturnkey.com

I’m Keith Weinhold and I’ll be back next week to help you build your wealth. Don’t quit your daydream!

283: Don't Save For Retirement with Daniel Ameduri Mar 09, 2020

You’ll struggle unnecessarily in life if you “maximize” conventional retirement plans.

How can this be?

Historically, rather than deferring your income into the future with a 401(k), 403(b), 457 Plan, TSP, IRA …

… you could invest in a real, cash-flowing asset that improves your life BOTH now and later.

I make a case that a “dollar per dollar” employer match in your 401(k) could be worth it. But only up to that level.

Today’s guest, Daniel Ameduri, author of “Don’t Save For Retirement”, discusses this with me.

Future federal income tax rates will likely be higher. That’s one risk of deferring your tax.

The biggest risk of conventional retirement saving is that you sell your todays for tomorrows. Would deferring your compensation ever “pay off” for you?

Children & money tips are also discussed.

The top role of most financial advisors? To keep the naive person from losing all of their money.

In retirement, many retirees pay their financial advisors 25% to 50% of what the retiree withdraws! I explain.

Summary: Don’t invest your income for savings; invest your income for more durable income.

__________________

Resources mentioned:

Future Money Trends:

www.FutureMoneyTrends.com/save

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Find Properties:

GREturnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

282: Predicting Your Economic Future with Brian Beaulieu Mar 02, 2020

The next recession, and your next 3-10 economic years are predicted by our guest today.

He is Brian Beaulieu, CEO of America’s oldest privately-held continuously operated economic research and consulting firm, ITR Economics.

Prediction: Interest rates should stay low through 2023.

By 2025, they could rise 3% to 3.5%.

Inflation should increase in the second half of the 2020s decade. Why? De-globalization.

We discuss how long this longest-ever economic expansion will last.

Declinism is people’s predisposition to view the past favorably and fear the future.

Brian tells us why the economy is likely to accelerate before it falls into decline.

Millennials and Gen Zers are large generations. As they age, their affluence increases.

Brian tells us that the widening gap between stock valuation and corporate profitability is concerning.

I tell you the difference between fiscal policy and monetary policy, and why the 30-Year Fixed Rate Mortgage might be the most undervalued “asset” today.

Of course, your economic future is based more on your individual decisions than the broader economy.

If you want an economic forecast for your business or personal investing, visit: ITReconomics.com

__________________

Resources mentioned:

ITR Economics:

https://itreconomics.com/itr-economics-podcasts

Book:

Prosperity In The Age Of Decline

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Find Properties:

GREturnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

281: Real Estate’s Secret Market Feb 24, 2020

One of America’s most underappreciated markets is right in the heart of cash flow country.

Rent-to-price ratios are often 1%.

Americans are moving from high-cost, high-tax places to low-cost, low-tax places.

Look, the biggest mistake most real estate investors make is emphasizing “the deal” rather than “the market”.

You are making an investment into an area’s underlying economy before the property.

Follow the data, not the money.

I discuss why health care employment is an important gauge of economic vibrancy.

Learn why sellers prefer investor-buyers like you, not owner-occupant buyers.

To buy cash-flowing properties in this underappreciated, “secret” market, start here at: www.GetRichEducation.com/Dayton

__________________

Resources mentioned:

Dayton Cash Flow Properties:

GetRichEducation.com/Dayton

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Find Properties:

GREturnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

280: Your Questions: Housing Bubble, Inspections, Student Loans, Report Cards Feb 17, 2020

Before you buy a property, I discuss something crucial that you’re probably missing.

Five of your listener questions are answered.

(The entire episode’s lyrics are in the Show Notes below!)

1 - How should I reward my child for their good school report card?

2 - How reliable is a real estate income stream?

3 - Are we in a housing bubble?

4 - Should you pay off $200K in student loans or invest?

5 - Should I get an inspection for a new construction property?

“Packaged commodities investing” is a way to think of real estate.

You have a buying opportunity for income property in Florida, Alabama, Indiana, Maryland, Tennessee, Arkansas and more all at www.GREturnkey.com.

__________________

Resources mentioned:

Inflation Lesson:

Sears & Roebuck DIY Homes

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Find Properties:

GREturnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Welcome to Get Rich Education. I’m your host, Keith Weinhold - answering your listener questions today. How do you reward your child for a good school Report Card? What about the long-term DURABILITY of a real estate income stream?

Are we in a Housing Bubble? What should I do - pay off student loan debt - or invest? Should I get a Home Inspection? And what’s the one thing you should do before you buy ANY property that you’re probably not doing?

All today - and more … on Get Rich Education.

___________________________

Welcome to GRE. I’m your host, Keith Weinhold. From Colombo, Sri Lanka to Columbia, South Carolina to Columbus, Ohio and across 188 nations worldwide.

This is Get Rich Education.

We’re having my favorite guest on the show today. That guest is you! Because I’m here with your listener questions today!

The first one concerns a kid’s school report card and then the rest are about real estate investing.

Rebecca from Los Angeles, California asks, Keith:

What reward should I give to my 11-year-old son, Mason, for having a good report card at school - all As and Bs? I love your show, keep up the great work.

Well, thanks, Rebecca. I love this question. Even though we’re largely a real estate investing show, I think there can be so many lessons about life for your 11-year-old son, Mason here.

The reward you can give them for their good report card is cash. Tell Mason that he’s getting $100 - or maybe it’s $40. But in any case, let’s just stick with the $100 example.

Divide it in half.

Tell him that he’s getting $50 in cash.

And tell Mason that, as a bonus for later, another $50 is going to be invested for him.

Over time, Mason will probably see that the invested $50 grew and the $50 that he spent on video games or whatever didn’t.

But see, he still gets rewarded with “short-term” fun. That way, it’s not ALL delayed gratification.

As you know, the abundance mentality isn’t about either / ors, it’s about “ands”.

This way, he can have his cake and eat it too. What good is cake if you can’t eat it?

Now, I didn’t say that he had to SPEND the $50 cash part of this. $50 gets invested - and you’ll have the fun of keeping Mason updated on his investment over time.

He can do whatever he wants with the $50 cash part. And over time, if he sees the invested portion gained value, he might choose to actually invest some or all of the $50 cash reward too.

But for now, let’s be realistic - he wants to spend his $50 cash on Minecraft or Fortnite or the latest release of Grand Theft Auto. A video game like that.

That’s fine. You need to let him be rewarded now - because that might incentivize more near-term good school performance - which is what you value seeing in Mason.

Thanks for the question, Rebecca.

Now, before I move onto the next question. There’s … I think … a real extrapolation here for you, the adult listener, with the way I recommended that Mason’s report card could be rewarded.

Really, there’s a real estate investing lesson there. Mason gets rewarded both now & later.

A employer-sponsored retirement plan punishes you now by reducing your salary and make you delay gratification.

Real estate investing reduces your salary now - in way - when you make your down payment. But it begins returning that to you in the form of cash flow now - and gives you the asset appreciation for later.

As you know, I’m not in love with the term “delayed gratification”. Now, I do think there’s a little something to be said for it.

When I made my first-ever property that four-plex building where I lived in one unit and rented out the other three, I could have bought a nicer SFH. So I delayed some gratification there.

I see some investors buy-in to “delayed gratification” so much that I wonder how long their postponing happiness and if they’ll EVER find it.

Sometimes, people get shocking reminders of this, but they soon forget it. I know this hits close to home for an Angelino like you, but you think about 41-year-old Kobe Bryant and his daughter Gianna being taken away from the world a few weeks ago.

There are really all kinds of analogies for life here. Sometimes “later” becomes “never”.

Would you say that IF 11-year-old Mason spent half his report card reward - the cash half - if he spent it all on video games, would you say that he “blew that money” - that he “wasted that money”. I don’t know.

What about you - the adult listener. Sometimes I hear people say that you should save all your moeny and not “blow it on a vacation” - as if you squandered money if you went on a vacation.

I don’t know that that’s necessary true.

Look, what is money for? What if you’ve wanted to travel to tour the beautiful Croatian coast or see glaciers in Greenland.

How can a person say that you’re necessarily “blowing your money” if you go out and to that.

You’re getting out and seeing the very world that you live in. You’re living the life you’ve dreamed of. What would you want to do any less?

Most people just don’t have a vehicle - they don’t know about a durable vehicle like real estate that pays them so many ways - both today & tomorrow.

See, a lot of investment promoters WANT you to delay gratification.

They oversell that stance. They’re selfish. They want you to invest your money with them so they get the sale first and that they get the commission first and that they get the referral fee first.

They’ve convinced you that paying yourself first … means investing with them first … so that you can accumulate dollars in an account with your name on it so that you can only then consume it in years or decades.

Use your dollars in years or decades? That’s not paying yourself first. How did that get to be paying yourself first? It’s because that promoter of salesperson is only thinking of themselves first.

There’s something to be said for delayed gratification, yes.

But delayed gratification should not be a permanent condition.

When are you really going to start living the life you’ve always wanted? The year 2052? Or do you have a plan to compound your cash flows so that you can do that in three years.

You know that that’s the big reason - the #1 reason for me, in fact - that I don’t care for conventional retirement plans.

They only invest for later instead of both now & later like cash-flowing real assets do.

Now, I don’t think you’re going to find it self-redeeming if you go broke trying to LOOK rich with ostentatious displays and classic CAR status symbols like the Lambo - unless that’s sustainable for you. Then … that’s great.

So be gratified both now & later. Give Mason cash - half now, half turned into an investment that you make for him.

And to 11-year-old Mason, if you listen to this now, I know you might want all $100 bucks right now. Most 11-year-olds would.

If you listen to this in 2030 when you’re age 21, you still might not understand.

If you listen to this in 2040 when you’re age 31, it’ll probably all make sense.

Thanks for the question about your son Mason, Rebecca.

------------------

The next question comes from Gerald in - Oxnard, CA - that’s just up The 405 and 101 - west from L.A. where our last listener inquiry was from.

I went through Oxnard on my last drive from L.A. to Santa Barbara.

Gerald writes. “Keith, thanks for your show. Nobody anywhere makes real estate investing more clear. It’s my favorite 40 minutes of the week.”

Now, see, with a comment like this, it really increases your chances that I’m going to read your question on-air here, Gerald from Calabasas. :o)

He asks, you discuss the importance of multiple income streams.

How PROVEN do you think that real estate income streams are long-term. How do I know it will still perform as an asset class for me in 30 years?

Thanks for the question, Gerald. I know I’ve discussed elsewhere that people are going to keep needing a place to live, like they have for centuries or millennia now - and that inflation is the long-term trend and your long-term friend for a leveraged real estate investor.

It’s also what makes your cash flow rise faster than inflation since rents move up with inflation but your principal & interest cost doesn’t - it stays fixed.

So, I’m going to take this in a different direction, Gerald. You’re asking about the durability of real estate an asset class and I think it’s a good question.

I recently had another listener write in to me about a concept that … I’ve thought about it before but I never heard it articulated in such an elegant way. And, I’m sorry that I don’t remember this listener’s name.

But she referred to real estate investing as “Packaged commodities investing”.

I love the … ingenious thought of packaged commodities investing.

When you buy a rental home, yes, you’re buying the cost of the utility and the construction labor.

But think about those materials in the home, those commodities - you now own brick, lumber, glass, copper wire, styrofoam insulation, granite, ceramic, paint, oil in the roof shingles, masonry, concrete, rebar, you own an HVAC system - every one of these individual commodity components are hedges against inflation.

Gerald, a while ago, Reddit had a trending article over these Do-It-Yourself Houses that Sears used to sell over a hundred years ago.

Look, this is fascinating -

I’ve got this one-page ad in front of me - it looks like a newspaper ad. It’s for Sears Roebuck and company from the year 1913.

This ad - that’s more than 100 years old - is interesting to any investor or economist - or marketer even.

This ad is for - like a kit you can buy where you help construct the home. Let me read it to you.

It says, “By allowing a fair price for labor, cement, brick and plaster, which we, Sears, do not furnish, this house can be built for about $1,530 - including all material and labor!

Now, this looks like a small, single family home plan that Sears was offering you here, back in 1913. I can’t quickly find the square footage on it - say it was 1,500 sf.

So, you’re buying this house over a hundred years ago, for say a dollar per square foot then.

They show you the flooring layout plan. This is a livable-looking place, complete with a nice, wide porch. It’s not a tiny home.

Ha - this is so quaint!

The Sears ad goes onto say, for $872 (which is more than half of your all-in cost of $1,500 that I just mentioned) - we will furnish ALL of the material to build this 6-Room bungalow …

… consisting of mill work, siding, flooring, ceiling, finishing lumber, building paper, pipe, gutter, sash weights, hardware, painting material, lumber, lath, and shingles.

NO EXTRAS - is in all caps. We guarantee enough material at this $872 price to build this house according to our plans.

So that was $872 for the material - and then, remember, your all-in price with labor and everything else is the $1,530.

This home, that’s giving us some historical commodity and real estate PRICING perspective here - doesn’t look like a piece of junk.

Reading on - the large porch is sheltered by the projection of the upper story and supported with massive built-up square columns.

A unique triple-window in the attic and fancy leaded art glass windows add much to this pleasing design. Ha! That’s all I’ll read from the ad.

So … I think this is representative of this concept of “packaged commodities investing” that a listener introduced me to.

It tells us a lot about monetary inflation, and at the same time - it speaks to the durability of residential real estate as an investment.

This IS less sexy than the “five ways you’re paid” stuff here. We’re just looking at an element of durability here.

When you have direct ownership of rental property, you simultaneously own all of these vital commodities. You own a basket of products.

You’ll see this Sears ad linked in the Show Notes. It’s fascinating to see.

And a lot of home construction here in the 2020s decade is still done largely the same way that it was decades ago.

3-D printed homes are not being adopted into the mainstream. Now, if they do, that could lower labor costs.

You’d still need to add a lot of things to make a 3-D printed residence livable - components and penetrations and mechanicals and the - all those commodities we mentioned, plus, you’ve got the cost of the land.

Decently-located land, is a commodity in itself - and IT’S of a limited supply.

By the way, this is a learning show, and the first definition of the word “commodity” when I Google it, is: “A raw material or primary agricultural product that can be bought and sold, such as copper or coffee.” That definition is from Oxford.

Ha - they even have copper as the first example - and you expect to own copper with each home that you buy.

I think yet another angle to your question, Gerald, about the durability of where your income stream comes from - is that we focus on RESIDENTIAL properties here.

As the office and retail real estate sectors KEEP feeling pain - residential has become even more important at the same time - and you already know all the reasons - more people can work from home, order products from home, and do more from home than they ever have before.

AirBnB properties might work in the short run, but we haven’t yet seen what happens to them in a recession yet - and as we know, the short-term rental market cater to business travelers and vacationers - and durability is what you need your income stream to have.

That’s why, for durability reasons, I favor long-term residential investing above all else … and love to consider the elegance of this “packaged commodities investing”.

Thanks for the great question, Gerald from Oxnard, CA.

----------

The next question comes from Andrew in Ridgefield, Connecticut.

Keith,

I have been listening to your podcast for a while. Your mindset resonates with mine.

I am a small animal Veterinarian, I own - and run - my own small animal hospital.

On the investment side...….I have a balanced Wall street portfolio (Stock, Bond, Mutual Funds). On the Real estate side I have a $280 cash flowing SFR, and am involved in some multifamily Syndications.

I wrestle with Buying more SFR properties vs. more syndications.

I feel that since money is so cheap in today's economic climate there is not much room for appreciation when buying RE. Should I sit on the sidelines and wait? (wait for Blood in the Streets?)

I like the Tampa area...but go back and forth with my thought process.

I look forward to hearing from you.

Signed, Andrew (his last name), DVM - DVM is Doctor Of Veterinary Medicine, BTW

Yeah, it is interesting that I’ve noticed a good deal of doctors & dentists listen to Get Rich Education. But I doubt that it’s #1.

Anecdotally, I’ve noticed that for some reason, we seem to have a really high proportion of listeners that are in LAW enforcement - like police officers & such.

Thanks for the question, Andrew, veterinarian from Connecticut.

On the first part of your question, buying more SFR vs. real estate syndications - that has a lot to do with both your risk tolerance and your desire for passivity.

Direct investing, like turnkey investing, does require a little remote administration - even when you’re not the property manager, but you’ve typically got higher returns and you’ve got control - versus a syndication.

In many cases, direct investing and that great control actually means you’re more liquid with your funds.

You could sell in a few months if you had to … and with syndications, if you’re in Year 2 of an apartment syndication where it’s 7 years until that deal matures … then good luck getting your money out. You can’t access it.

So, those are some more of the trade-offs between direct investing & syndications.

Ah, I know you wrote that money is still cheap - meaning that interest rates are low and that you think that might be an indicator that appreciation has run its course.

Well, I’m still buying direct property, where I own the deed.

See, interest rates have basically been low for over a decade and we’ve had appreciation the entire time.

Let’s look more recently. In 2018, interest rates really began a march higher and there were some people predicting that it would make housing prices go down. It didn’t. In 2018, national appreciation rates were about 7%.

In 2019, mortgage interest rates went lower and appreciation went lower, down to about a 5% annual gain.

Now, yes, there’s a lag effect between mortgage interest rates and pricing too.

But mortgage interest rates are one of - at least 10 different macro factors that effect the price of housing, so one doesn’t lead to the others.

There might be more substantial factors skewing the numbers than interest rates affect housing prices.

Housing prices can be more affected by things like chronically low supply like we’ve got today, wage growth, job growth, in-migration, birth rates, death rates - and did lending requirements get more stringer or more lax - did credit score requirements get more stringent or more lax and on and on.

But you do ask a good question, Andrew. Ah - if I didn’t think it were good, I wouldn’t be answering it here.

Now, I know that you didn’t bring up the word bubble.

But a few weeks ago, I described why I don’t think we’re in a real estate bubble. Prices are sustainable for a lot of reasons.

But on the flip side, I don’t see any scenario in which real estate, nationally, hits any high-flying annual appreciation rates of 10 or 12% anytime soon - like we saw back in 2005 either.

Low supply can only push prices so high. Affordability is the component that governs and tempers the upward price escalation.

Affordability is what’s moderating the rate of appreciation rate right now.

Of course, whenever we talk about the future, no one REALLY knows what’s going to happen. These are just my thoughts - and the basis and the reasoning for why I have them.

You mention that you like Tampa - I do too. I really like so much of Florida - of course, you have to get your submarket right.

And I need to say that’s generally Florida north of Miami - because the numbers don’t work so well in south Florida.

Around Miami, you just don’t get a higher rent income proportionally to the much higher purchase prices there.

Think about this!

When you look at net migration by state for this past year, Texas was 2nd in the U.S., and they had a net in-migration of 190,000 people.

Florida, even though they have a smaller population than Texas, is #1 with 322,000 people.

Yeah, net 322,000 moving into a smaller state - Florida. And 190,000 into a larger population state - Texas.

Florida has rent-to-value ratios that are favorable.

And as an investor, your property tax rate is substantially lower in Florida than it is in Texas too.

There are a lot of reasons to like Tampa and Florida. Of course, that’s why we had our real estate field trip there last October in Tampa … as well.

Thanks for the question, Andrew!

If you want to hear your voice on the show, ask your question at GetRichEducation.com/Contact

I realized that on earlier listener question episodes, I had only left you with our mail address so that’s why I have mostly e-mail questions today and only one voicemail question.

I’d really prefer to hear your voice on the show. So by visiting GetRichEducation.com/Contact, that way, you’ll have the option of either leaving a voicemail or an e-mail, whatever you prefer there.

Two more listener questions today. What should you do first, pay off your student loan debt or invest …

… and I need to tell you why you should always get a property inspection before you buy a property - and do one other crucial thing - before you buy property - that you may not have ever thought about before.

That’s next. You’re listening to Get Rich Education.

----------

Hey, you’re back inside Get Rich Education. I’m your host, Keith Weinhold, answering your listener questions today.

The next question comes from Dillon in Nebraska - I’m not sure which Nebraska place he’s from. Let’s play the audio: https://www.speakpipe.com/msg/p/120531/30/p15zsoamb252hyob35bvfc8d6uwrqv3ml1yh3h1suwgf6

Yeah, thanks, Dillon. And I do consider student loan debt as bad debt because YOU have to pay it back yourself …

… that is, you can’t directly outsource those payments to someone else, like tenants in a rental property where they pay all your mortgage loan interest, all your mortgage loan principal, and hopefully, another couple hundred dollars on top of that called cash flow.

Not to mention, Congress passed an act in 2005 which made student loans quite difficult to discharge in bankruptcy.

With your question, being basically, “Should I pay off $200K in student loan debt as quickly as possible before starting real estate investing?”

Well, the answer ... as it often is, is “It depends.” But I’ll tell ya what it depends on.

The short answer is - if your real estate cash-on-cash return could beat the interest rate on your student loan debt - only then would you invest in real estate and make the minimum student loan debt payment.

Now, that was really good insight on the inflation-hedging or even inflation-profiting that long-term debt can provide you. I can tell that you’re a careful listener to the show, Dillon.

Of course, that's just one tailwind. Just one consideration.

And the reason why inflation-profiting is lower in priority than your cash-on-cash return is that you need liquidity. You need cash to service your student loan debt.

I don’t know what your student loan debt INTEREST RATE is. But let’s just say you’re paying a 6% interest rate on that debt.

Now, I understand that it’s really easy to look at all 5 ways that real estate pays you and think - aw, I can get 20, 30, 40, maybe even a 50% ROI when I buy right.

So I’m just gonna pay the minimum on the student loan debt and plow all the extra into real estate.

I would say, not so fast. Even though that might work out for you, we need to be more conservative …

… because real estate appreciation isn’t liquid, tenant-made loan amortization isn’t liquid, and neither are real estate’s tax benefits or the aforementioned inflation-profiting.

So, to use the simplest example, if your rental gives you $100 of monthly cash flow, which is $1,200 annually - and you’ve got $20K of skin-in-the-game on your rental as down payment and closing costs.

Well, that $1,200 annual cash flow divided by your $20K down is 6%. That’s your Cash-On-Cash Return portion and if you can get THAT at 6% or above, then reduce your student loan paydown dollar-for-dollar for every dollar that you put into real estate.

That’s really the upshot here.

Yes, there are some smaller things to consider. Last time I checked, student loan interest in the United States is a tax deduction up to $2,500 annually.

So, your 6% interest rate might effectively be 5, 5-and-a-half or whatever it is.

Understand the risk. You don’t want to be left cash poor.

Your TOTAL Rate Of Return on real estate will almost certainly beat your student loan interest rate. But that's not enough.

Let's be conservative.

To summarize, because you service your loan debt with cash, not equity, the key question you must ask yourself is: "Am I confident that my cash-on-cash return from real estate will exceed the interest rate on the student loan debt?"

If your answer to this key question is "yes" - invest in real estate and stretch out the student loan and only pay the minimum on the student loan.

Otherwise, you're walking away from an arbitrage opportunity.

If it's "no", retire the student loan debt balance sooner. Otherwise, then you're hemorrhaging cash.

What did I personally do? After college, I retired my student loan debt fairly promptly.

But this was before I knew about REI. I still thought budgets were good and that the best way to financial betterment was cutting expenses and all the wrong stuff.

That was an awesome question, Dillon in Nebraska. Because I know that so many people have that question - how do I best allocate a dollar toward debt retirement versus expanding my upside.

----------

The next question is from Monique in Quebec City, Quebec. Monique says,

Keith, I love your show. I’ve listened to every new episode since 2018, and now I’m also going back and listening to them from the beginning. Thanks, Monique. I’m grateful for your listenership.

Monique goes on to say, “I’ve bought four cash-flowing properties from the providers at GREturnkey.com. (Good job there, Monique) They were all EXISTING construction properties.

Though I expect the cash flow to be less on my fifth one, because it’s going to be a brand new construction property.”

Is the HOME INSPECTION a required expense for me when the property is completely new?

Thanks for all your help. Signed, Monique.

Monique, the answer is “yes”, you should. Always have a pre-purchase inspection done, even for new construction property.

Sometimes people think of a NEW CONSTRUCTION property as “perfect”. Well, I don’t think of any property as “perfect”.

But an example of a mistake made in a new construction property is that, maybe the air conditioner is too small and doesn’t have the capacity to cool all, 1,800 sf of the home or whatever it is.

Maybe some new flooring wasn’t installed correctly and it’s showing signs of de-lamination.

An inspection provided by a local, independent, third-party inspector is a cheap insurance policy for you, the buyer and you need to factor it in as one of your closing and due diligence costs.

Now, an inspection on a SFR, is probably going to cost you somewhere in the neighborhood of $400 - of course that’ll vary based on the area.

You have the inspection performed shortly AFTER you & the provider agree on a purchase and sale contract.

The reason that you want to get the inspection scheduled shortly after you’re under contract is because sometimes it can take a while - weeks - for your provider’s contractor to fix the deficiencies that your inspector finds.

Now, how do you find an inspector for your property, anyway? There are a few ways of going about it. You can ask your provider to recommend one.

If you’re leery of that or think that your provider might be in “cahoots” somehow with the inspector, you can Google your own, or thirdly, get an opinion from friends or if you don’t have friends that have invested there before, then use an online real estate forum.

Seek an inspector that’s ASHI-certified. A-S-H-I stands for American Society Of Home Inspectors. Those certificants are educated, tested, verified, and certified.

The inspections that they do are really quite thorough. They go everywhere in the home you’re planning to purchase, even looking in the closets and pantries, making sure all the doors & windows open & close.

If there’s a crawl space, they’ll climb down into the crawl space looking for deficiencies, taking notes, and taking photos that they compile in a report and send to you.

Before you buy the property, the inspector might even go up on the roof - or at least zoom in and take some photos of the roof. And of course, they go all through the home and check everything in between.

They do the entire inspection same-day. It takes a couple of hours.

Some common findings that your property inspector might have are:

The outdoor rainwater downspout discharges water at the foundation. Add extensions. That’s a super cheap, easy fix for your seller to do for you.

The kitchen window doesn’t close all the way because it has a broken crank.

The exhaust fan in the bathroom doesn’t have any power and it’s not pulling any air.

The outdoor water spigot is missing its valve.

The backdoor is bent at the bottom.

A porch this high off the ground needs to have a railing added.

So, Monique, as you can see, some of these are deficiencies that could occur in a new construction home.

Now, let me touch on a couple of these. The backdoor is bent - that could be pretty minor. If you don’t think it’s aesthetically detracting and the door still closes - then maybe you do ask the provider to fix it - and maybe you don’t.

If I were you, I’d usually just ask.

But if there’s a minor dent in the door instead, and it functions well, then asking for something like replacing the entire door might make you appear unreasonable to deal with.

There’s some judgment there.

But if the backdoor won’t close, you’ve at least got to see that it closes and latches properly.

The last example that I mentioned - if the inspector cites a finding that a porch this high off the ground needs to have a railing for safety, you’ve got to be sure that’s done.

In fact, a reputable provider will be sure that’s done for you.

This is part of you being a good operator. Remember how I’ve discussed that having an LLC is only your fourth line of protection, at best.

Make sure any health or safety findings are addressed from the inspection. Do that good in the world.

If an accident ever did occur at the property - you can always point to the inspection that you had done - and it was an option that you paid for.

The inspection is an option.

So, these are all the findings that the inspector reports to you - and he’ll send you a report of a few dozen pages in a .pdf format.

Some things might be noted in the report, but the inspector won’t list them as deficiencies that NEED to be remedied - like small cracks in the sidewalk.

Often, in the report, the inspector makes a clear delineation as to when a condition is poor enough … such that it falls to a deficient level - and he puts them all in one punchlist at the end of the report.

That way, you’re not having to split hairs and do too much interpretation.

You look the report over, and then you ask the provider to fix them for you before you’ll close on the property.

The provider might take, say a week or so to have their contractor fix those punchlisted items.

When they’ve finished them, then you’re on your way to having your appraisal and moving closer to the closing table.

But, I’ve got to tell you something kind of disappointing here. I’ve been directly investing in real estate actively and continuously since 2002 - and I’ve got to tell you …

… many times, even when the contractor says that they’ve completed fixing everything - even when they send you pictures … something really wasn’t quite fixed right.

So what I suggest, is that - existing construction or new construction - when you hire your inspector, tell him right then & there, that you are also going to want a follow-up re-inspection that occurs after the initial inspection.

The purpose of a re-inspection is confirming that all of the deficienies noted in the original inspection were indeed done.

And by the way, there will ALWAYS be original inspection findings.

An inspector will always find at least one deficiency and I’ve dealt with properties from Pennsylvania to Florida to Alaska to Texas and in-between - and outside the U.S. too.

Inspectors always find stuff that’s wrong. Always. It’s like a universal law.

But, getting back to re-inspections. Upon scheduling your original home inspection, if you point out AT THAT TIME that you’ll also be getting a re-inspection - tell both the inspector & the seller this, I tend to think it helps keep parties on their toes and that they try harder to get the original inspection findings handled - the first time.

And look, re-inspections are super cheap. If a SFR ORIGINAL INSPECTION costs $400, a re-inspection is going to be less than $100.

I’ve even paid $50, $60 in some markets for the re-inspection. It’s hard to believe that you can even get a trained, qualified professional to make a field visit somewhere that inexpensively.

Now - and I have this happen too - what if after your RE-inspection - which would really be a second inspection, that the provider or their contractor STILL didn’t get things repaired properly?

Then the responsibility shifts to your seller - to schedule and pay for a second RE-inspection - which would be a THIRD inspection then - to prove that it’s right.

That’s correct, in every state and nation I’ve ever invested in, the seller-side pays for your second re-inspection … if it comes to that.

That’s fair. Because after the original inspection findings, your seller said they’d make the repairs.

If the re-inspection that you paid for to confirm that it was done, instead shows that it wasn’t done. Your seller had their chance and messed it up. That’s why it’s customary that they pay for the SECOND re-inspection.

So, Monique, to summarize for you here.

Always pay for a property inspection, even on new construction.

Expect there to be findings every time.

And my own personal experience shows that at the time that you book an inspection, it helps to indicate that you’ll be getting a RE-inspection too.

Now, getting a re-inspection makes so much more sense than getting a re-appraisal - if you get a low appraisal, which doesn’t happen often, maybe I’ll discuss that another day.

Re-appraisals are a waste of time … more than 95% of the time, they just come back with the same valuation you got the first time.

An appraisal protects the bank. An Inspection protects you - so be sure to have one done. Excellent question, Monique from Quebec City, Canada.

Next week on the show, I’m going to discuss Real Estate’s Secret Market - a geography where the numbers really work for investors that might have been off your radar.

After that, we’re going to talk with a prominent economist that’s never been on the show before that’s going to help you see your economic future over the next 1-3 years.

We’ve hosted a lot of economists here on the show that give you those long-term investing insights like Richard Duncan, Harry Dent, Jim Rickards, Jim Rogers - and also, though they might not be economists, Robert Kiyosaki and Chris Martenson are here with us to give us those types of insights.

Then there’s “Yours Truly” - I’m your armchair economist without an economics degree.

But this new guest is the leader of the oldest continuously operating economics prediction company in the entire United States, so I’m excited to chat with him and bring you that show soon.

As you know, nationally, housing inventory is scarce, especially with these types of single-family homes that make the best rentals.

You can’t make any money from the property that you don’t own. So whether you prefer to call it “packaged commodities investing” or the “get paid up to 5 Ways” vehicle, next time you’re looking to connect with a provider at GREturnkey.com …

As we spoke of Florida earlier, you’ll see that Jacksonville has brand new construction property, where you’re probably more of a fan of appreciation than cash flow on those.

Rents are $1,350 on a $180K purchase price. That’s a 0.75 rent-to-value ratio.

Tampa has existing construction property where you have a 0.8 or .85 ratio and might get, say $150 of monthly cash flow.

Alabama has numbers that work - like rent-to-value ratios near a full 1% and really low property taxes in either Birmingham or Huntsville.

If you’re looking for low cost property - as low as $80K in decent neighborhoods that really cash flow well, Memphis and Little Rock could be the places for you.

The Indiana State side of Chicagoland is advantageous too.

All those places - Memphis, Little Rock, Chicagoland - you can get a full 1% RV ratio or even more than that sometimes.

If you’ve got more patience and want to benefit and capture some forced equity along with your cash flow, the BRRRR model in Baltimore could work best for you.

Check out all of those markets and more - at GREturnkey.com

Thanks! I’m grateful for all of your excellent listener questions today! I’m your host, Keith Weinhold. Don’t Quit Your Daydream!

-------------

279: Trump Could End Fannie & Freddie Backing with Caeli Ridge Feb 10, 2020

Donald Trump’s re-election could end Fannie Mae and Freddie Mac conservatorship of mortgage loans.

This could mean that fixed rate mortgage loans disappear!

It could also lead to higher mortgage interest rates and more changes.

Ridge Lending Group President Caeli Ridge and I discuss why.

We compare Fixed vs. Adjustable Rate Mortgages (ARMs).

Your personal DTI - debt-to-income ratio - is thoroughly discussed in qualifying for rental property loans.

I made my last two mortgage loans personally at www.RidgeLendingGroup.com

__________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Find Properties:

GREturnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

278: How The Fed Is Corrupting America with Dr. Chris Martenson Feb 03, 2020

You’re affected by interest rates and inflation as both a consumer and real estate investor.

A 50% return is not necessarily risky: I review the 5 Ways Real Estate Pays You and pass it through a new filter.

Dr. Chris Martenson joins us to discuss how The Fed manipulates monetary policy and interest rates by running up staggering debt levels.

To solve our problems, can we just keep printing money and paving over the world with dollars?

Interest rates are artificially low.

Why you’re in a Fed-induced bubble.

Chris tells us why Fed Chair Jerome Powell is a liar.

When the credit cycle bursts, everyday people will be harmed.

Chris thinks the next crisis will be twice as bad 2008.

Solutions: have multiple income streams, cash, and real assets.

Join Chris and PeakProsperity.com for their annual seminar May 1st to 3rd, 2020 in Sebastopol, CA.

For the best event pricing, use Discount Code: GRE2020

__________________

Resources mentioned:

Find Properties:

GREturnkey.com

Meet Dr. Martenson & his tribe:

2020 Peak Prosperity Seminar

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

@getricheducation

277: How To Build Wealth Faster with the Pareto Principle, QRPs Jan 27, 2020

You only need to be 1% better ... to go from good to great.

This is due to accumulative advantage, which is the engine that drives "The Pareto Principle" (80 / 20 rule).

Lessons from nature extrapolated to business and real estate investing provide cues on how you can grow your wealth faster.

Damion Lupo tells us about important new changes that make the eQRP - Enhanced Qualified Retirement Plan - even more beneficial to you.

To learn more, text “QRP” in ALL CAPS to “72000”.

With the eQRP, you pay no UBIT tax on leveraged real estate. Self-Directed IRAs sting you this way.

eQRPs can provide tax credits of $15,000 for starting a plan, and a tax deduction on your income by paying your kids.

Open your eQRP before you file your taxes, and you can make the benefits retroactive.

To learn more, text “QRP” in ALL CAPS to “72000”.

__________________

Resources mentioned:

Text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Book:

The Slight Edge by Jeff Olson

Pareto Principle:

Business Insider article

Mortgage Loans:

RidgeLendingGroup.com

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

276: Weinhold, Wheelwright, Benna on 401(k)s, RE Pro Designation Jan 20, 2020

Even a dollar-per-dollar match from your employer might not make 401(k) participation worthwhile.

"Timing" could be the most underrated word in investing.

Retirement plans only pay you when you’re old.

401(k)s rob you of the opportunity to fully live life while you’re young enough to enjoy it.

401(k)s used to be named “Salary Reduction Plans”. They had to get rid of the name to foster participation!

Instead, opt-in for your “Salary Increase Plan” with cash-flowing real assets.

Tom Wheelwright joins us, and we hear the voice of 401(k) inventor Ted Benna from GRE Episode 197.

In fact, 401(k)s incur tax rates double than if you had simply invested outside of the plan.

If you’re young & building wealth, specialize.

If you’re old & maintaining wealth, diversify.

Tom & I go deep on how you can qualify for the coveted Real Estate Professional tax designation while you still have a day job.

You don’t need to be a real estate agent to be an RE Pro, but it helps. Marriage can help.

__________________

Resources mentioned:

Tom Wheelwright:

Wealthability.com

Ted Benna & I’s full chat:

GetRichEducation.com/197

Mortgage Loans:

RidgeLendingGroup.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

New Construction Turnkey Property:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

275: Go Out On A Limb Jan 13, 2020

Most people sell their time for dollars.

Were you really meant to do what you’re doing right now?

Mark Twain said, “Why not go out on a limb? That’s where the fruit is.”

Culture conditions most people to live an average, stale life.

Don’t trade away your authenticity for approval.

In over 6,000 years of human history, being a conformer is not a success recipe.

40 rental doors x $150 cash flow = $6,000 per month. This buys you time.

Don’t fear failure; fear not trying.

Powerful assignment: write your own obituary.

No one achieves anything extraordinary by playing it safe.

People that say, “I want to live frugally.” actually want to say, “I want to live well.”

But they don’t know how.

Get residual real estate income at: www.GREturnkey.com

I update you on asset class prices over the past year.

Americans paid $4.5T in rent this past decade.

The median homebuyer age is up to 47.

Corelogic expects a 5.4% housing price jump in 2020.

Housing shortages should continue at the low end of the market.

Nearly every news outlet reports a stable housing environment.

Why? Demand exceeds supply, appreciation rates are sustainable, stringent loan requirements, inflation-adjusted home prices are often still below 2005 levels.

**The entire episode's lyrics are at the bottom.**

__________________

Resources mentioned:

Turnkey income properties:

GREturnkey.com

Americans Paid $4.5T Rent Last Decade:

Zillow article

Median Age Of Homebuyers Up To 47:

HousingWire article

Fannie Boosts 2020 Housing Forecast:

CNBC article

Lenders, Builders More Conservative:

CNBC article

Home Prices To Rise In 2020:

Yahoo Finance article

Homes Under $250K Near Extinction:

HousingWire article

Mortgage Loans:

RidgeLendingGroup.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Welcome to Get Rich Education, I’m your host, Keith Weinhold. Mark Twain said,“Why not go out on a limb? That’s where the fruit is!”

I tell you how YOU can go out on that limb to get that fruit - that prosperity in your life.

And, and update on markets and housing here in the new decade. Today, on Get Rich Education.

Welcome to Get Rich Education, I’m your host, Keith Weinhold.

This is Episode 275 ... and you know something?

It has always fascinated me that people will trade time for dollars. You have traded your time for dollars … and I have sold my time for money in the past, as well.

Yeah, amazes me that people will work, often doing something that they don’t EVEN LIKE - and spend that time away from their family or for things that they don’t enjoy doing … just for money.

It’s actually even worse than that. The long-term plan - the OUTCOME for this sacrifice - isn’t even satisfying. It’s for you to retire old, and THEN only begin to really live … maybe.

Well, ironically, the answer to your potential freedom is something that you actually slept inside last night - a piece of real estate.

But you need to invest in real estate in a strategic way. You don’t need to be a landlord and you don’t need to know how to fix things - but few know the way.

Here on this show, I simply tell you the things that I would have wanted to know before I started down this road to freedom back in 2002, which is when I bought that seminal four-plex building.

You are where you are today because of you.

Your life isn’t a fluke and it isn’t an accident either. You are where you are because of your choices.

Well, let me ask you - were you meant to be doing what you’re doing now?

Were you put on this earth to do … that?

You probably know definitively without me even having to get specific - you already know - yes or no - if you were MEANT to be doing what you do for money now.

See, the #1 limiting reason that people give for why they can’t do something that they really want to do in their life … is … money.

So, time vs. Money is something that we discuss a lot on the show. It’s something that’s infinitely interesting to me … and what you need to do is “Go Out On A Limb”.

I’m going to discuss that with you a lot more later today.

But first, since we’re a few weeks into this new decade, let’s talk about some more broad and contemporaneous news items - this investor environment that you live inside every day.

Whipping around the asset classes like we do from here time-to-time here - in the year that was, last year, what really happened?

S&P 500 was up nearly 29% - it’s best performance in years. Of course, it’s volatile. In fact, it was just DOWN 6% the previous year.

Year-over-year, many commodities were up. Gold was up 18%, Silver up 15%. Oil - Light Sweet Crude - was up 22%.

Recession fears peaked back in September - four months ago. Columnists and economists and everyday people don’t really talk about recession as much as they did late last year.

Last year, the 10-year Treasury Note yield fell seven-tenths of one percent down to 1.9%. Now, why do you care about what you’ll hear people just shorten and call “the 10-Year T-Note?”

Economists say it that way with their slang.

That is because it’s the rate most closely tied to long-term mortgage interest rates.

I just told you that the note yield fell SEVEN-TENTHS of one percent last year.

Well, see, the most popular mortgage in America, the fell EIGHT-TENTHS of one percent last year down to 3.7%. That’s the 30-year loan.

So, pretty closely correlated. And of course, that’s the mortgage interest rate for primary residences. For investment property, it’s often nearly one percent higher.

Last year, the Freddie Mac House Price Index was up 3.6%.

I like to look at the Freddie Mac Index because it includes pricing for all 50 states and Washington, D.C.

The Case-Shiller Housing Price Index only measures 10 to 20 large cities.

One news story that we experienced in the past year is one that almost no one talks about.

Now, you generally want there to be higher wages out there. That means your tenants can afford to pay you more rent.

Higher wages mean higher inflation which means higher asset prices and also, faster debasement of debt that you owe.

Now, whether you agree that there should be a minimum wage or not ...

The minimum wage keeps getting higher across the country.

More than 20 states are bumping up pay for minimum wage workers this year, here in 2020, while Seattle’s large employers will now pay a nationwide-high of at least $16.39/hr to employees.

Meanwhile, the FEDERAL minimum wage has remained parked at $7.25. But these higher state wages - are a positive for real estate investors.

Now, I’ve aggregated a number of news stories that matter to you - all that have published over the past few weeks. Just about everything is positive for a stable housing environment.

Zillow report an astonishing figure.

Over the last decade, do you have any idea how much Americans paid in rent - in total?

Americans paid $4.5 TRILLION - with a “T” - dollars in rent in the last decade - the decade that just ended a couple weeks ago - the 2010s.

Well, that’s a gigantic number. It’s so giant, that it’s more of a fun figure to contemplate and hard to put it into context.

What CAN you compare this to? Well, this is greater than the GDP of Germany - which is the world’s 4th-largest economy.

Yes, it’s been a rather lucrative decade for landlords - partly due to the fact that the homeownership rate fell through the decade and - consequently - there are more renters now.

So, yes, you only need a small slice of this $4.5T dollar pie to win a substantial degree of financial freedom yourself.

Housing Wire has reported on what the median age of a homebuyer is in America today. Do you have any idea what that age is?

Well, I’ll tell you, to give you some context here, that in 1981, the year that Ronald Reagan first became President, the median age of a homebuyer then was … 31.

Age 31 back in 1981.

The median age of a homebuyer today is … higher than that. Just dramatically higher. Almost unbelievably higher … it is age 47. 47!

So … how did this happen?

There are VARIOUS reasons for this delay, including a dramatic increase in student loan debt - like we’ve discussed before - and a general shifting of attitudes towards the traditional homebuyer cycle.

People are waiting longer to marry, have kids, and buy houses. Household formation is postponed now.

These are some things that you’ve already realized. But you may be surprised to learn that the RESULT of this is now a 47-year-old median age homebuyer.

That’s like … old enough to be a grandparent perhaps.

Just remarkable - and again, great news if you’re renting property to others. People are renting longer - or just renting forever.

Now understand something else - and look, you can’t discriminate against a tenant based on age or for any other reason.

But just think about what else this means - there’s a renter pool today with more, say, 35 and 40-year-olds in it than there used to be …

… and therefore, a smaller proportion of 25-year-olds.

You have this aging of tenants … and older tenants tend to live more quietly in your property and be more gentle on your housing unit.

Long-term demographic trends exactly like these are why we talk about what we talk about here - how everyday, busy people and working professionals can create residual income with these investment properties.

CoreLogic expects a 5.4% home price jump in 2020. Yes, this would be a greater appreciation rate than that 3.6% we saw last year.

Fannie Mae has significantly boosted ITS 2020 housing forecast.

Overall housing DEMAND, they say, is incredibly high, especially at the lower end of the market, which is exactly the end of the market where builders are least active.

Prices are rising fastest on the low end, sidelining some first-time buyers.

Fannie Mae’s Chief Economist Doug Duncan says: “Housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years, further bolstering our modest-but-solid growth forecasts through 2021.”

Now, CNBC recently reported that:

U.S. homebuilders and lenders are to blame for the country’s housing shortage, Marcus & Millichap CEO Hessam Nadji said.

Home construction companies have reduced speculation and lowered risk-taking in an effort to prevent “the lessons — if you will, the hard lessons — learned in the 2008-2009 Housing Crisis & Great Recession - from happening again,” is what he said.

“All of that is frustrating from a consumer perspective, but it’s actually very healthy from an investment and economic perspective for the U.S. as a whole,” he said.

Yahoo Finance - really all these news outlets are reporting various sources that home prices are expected to rise modestly and that housing shortages are expected to continue.

Rather than reporting on another similar story about this … I’ve been saying for years on this show that if you’re waiting for housing prices to drop substantially … well, anything is possible.

But I don’t see what could possibly make that happen.

And that’s primarily due to three or four reasons that housing stays firm:

The #1 reason - the chief one is that housing demand exceeds supply. That’s just basic economics. And the housing crash of … now 13 years ago ... was due to the opposite condition. Back then, there was overbuilding - back then supply exceeded demand.

The second of three reasons is that appreciation rates ARE sustainable: Less than 4% per annum lately. Leading up to the housing crash, they were TEN TIMES that in some markets - totally unsustainable.

The third reason that supports housing is that lending practices are responsible. To get a loan, you DO need to supply a somewhat-annoyingly high amount of documentation. You need to have income, reserves, and some decent credit. That didn’t happen in the Great Recession buildup either - ANYONE qualified - and then that ARTIFICIAL demand helped push up home prices unsustainably.

Really a fourth reason - or a bonus - is that once you adjust for inflation - which so many people and even reporting outlets forget to do - many housing markets still haven’t even reached their pre-recession peak from way back in 2005.

So, these 4 reasons to be bullish about housing are all MY takes.

Links to all of the articles that I cited are in the show notes.

Next week, Tom Wheelwright returns to the show with me. Yes, it’s the long-awaited show where it’ll be Weinhold and Wheelwright on 401(k)s and going deep on how you can obtain the desired “RE Professional Designation” and the GREAT tax advantages that that gives you.

Are 401(k)s worth contributing to - even if you get an employer match? We’ll take that one head-on next week. And I think you’re going to get some really surprising answers.

During the holidays a while back, we had all FRESH shows. San Diego-based Get Rich Education listener Andrew Stanton - and his layoff story reminded us of the importance of having multiple income streams.

Should you - as they say “Rent out your backyard” with an ADU - accessory or auxiliary dwelling unit. Well, in places like California where they’re popular ...

Why don’t you instead enjoy your backyard and invest in markets in the Midwest & South where the numbers make better sense anyway.

Two weeks ago, CFP Brent Sutherland & I discussed why conventional financial advisors don’t discuss RE with you.

Last week, we had the “hands-on” perspective with Kevin Cross, asking, “Should you self-manage your rental property and your tenants?”

For him, the answer is “yes” - with some help - and that’s fine.

For me, the answer is “no”.

I want control without having day-to-day responsibility.

Let’s do good in the world and provide people with clean, safe, affordable, functional housing. But I make sure my manager does that.

I want to directly invest in real estate, with property titled in my own name - that way I get paid up to 5 different ways.

But, I don’t want it - I’ll say in my grip - as in - I don’t want to hold real estate right in my hand - otherwise it’s on my plate & on the front burner.

But I do want it within my arm’s reach so that I have CONTROL, and yet a FAIR measure of passivity.

If you want more out of your life, you’ve got to go out on a limb. I’m going to talk about that with you today … next … I’m Keith Weinhold.

This is Get Rich Education.

________________________

Welcome back to Get Rich Education. I’m your host, Keith Weinhold.

When it comes to your day job ... or how you spend most of your waking day, were you meant to be doing what you’re doing now?

I think that a lot of people get culturally conditioned that you have one path that you just MUST take throughout life, and if you deviate from it too much, that’s bad … because now you’re a non-conformer.

Yes, one path.

This narrative through the Industrial Revolution that you should go to school, get this amount of formal education, this amount of college debt, a good job, work for one company, marriage, kids, buy a big house …

… get a new car every 5 years, just 2 or 3 weeks of vacation per year (my goodness - are you kidding me?), work for 40 years, then retire & play golf … or something like that.

That’s what’s supposed to quote-unquote “guarantee” the masses happiness, fulfillment, and meaning. But it often doesn’t.

So why settle for what the masses do?

People are willing to trade away their authenticity for approval. Rather than being authentic, they instead settle for society’s stamp of approval.

Don’t trade away your authenticity for approval.

Parents, community, friends - they all taught you - here’s the one way you have to live.

Why don’t you, instead, custom design your best life.

What does success look like to you?

Is success being a doctor, lawyer, dentist. If you drive “this” nice of a car, or if you live in this neighborhood, or this nice of a house, if your kids go to this school.

Instead, your definition of success may very well be - are you doing the things that you dreamed about? Are you impacting others in a meaningful way?

You can either live a life of safety or a life of creativity.

Go out on a limb - where that tree branch might yield a little, 30 feet above the ground, scaring you.

Go out on a limb … because that’s where the fruit is.

Understand that the consequence might be that fewer people will PERCEIVE you as a success.

How you make your money is more important than how much money you make.

We’re “Get Rich Education - and “Get Rich” means living a rich life - whatever that means to you.

When you’re young & people ask you “What do you want to be?” when you grow up, they’re not REALLY asking what you want to be at all.

They’re asking, “What do you want to do professionally, to earn money?”

It feels risky to say what you REALLY want to be.

It feels risky to use an online platform to try to crowdfund your kitchen device invention. You’re afraid you’ll be seen as a failure when you share that on Facebook and get ridiculed from your friends.

That’s going out on a limb.

Trying to get your workout app featured on Shark Tank - that’s not being a conformer. But that’s where the great stuff happens.

Or, it’s doing what we focus on here - getting residual income from rental property to buy the time to do what you want to do ... or be who you really want to be.

It’s more generationally-proven than those strict entrepreneurial endeavors.

It’s neither quick nor easy, but real estate is a stronger tree branch - and your fruit IS out there.

If you get 40 rental doors that even cash flow just $150 a month each = That’s $6,000 month in rental income for you. Or double that or 10X that if you need to.

Most people live inside circle of certainty with their job and life. And in that small circle, we’ll call it 100% safety & security.

Now, if you enlarge your circle so that it surrounds the first one, you might be living where you only have 80% certainty in your life’s outcome.

If you make an even larger circle, around the first two, and really go for it, now your sense of certainly might be down to 60%.

But the one thing that you CAN be certain of then, it’s that you won’t have any regrets.

The #1 regret of elderly people that are in a nursing home is that “Gosh, I never tried _____”.

They didn’t go out on that limb and they never tasted that sweet, succulent fruit.

I can help tell you whether you’re going out on a limb or not, right now.

Do you know what the most powerful assignment is - with regard to this - it’s to write your own obituary. Put pen to paper.

If you must write your own obituary, right now … you’re going to have great clarity on if your accomplishments are or your contributions … or your current trajectory … are putting you where you need to be.

I think writing your own obituary can strike some fear into you. It puts some fear into me. What would people say about what you did? What would you write down about yourself?

In over 6000 years of recorded human history, no one has ever achieved anything outstanding by playing it safe. No one. The message is clear. You need to either accept the necessity for calculated risk, or settle for way, way less than you deserve.

Look, I’ve got this friend from childhood from when I lived back in Pennsylvania. Nice guy, nice family.

He became a public school teacher - math teacher. And today, I see his posts on Facebook more often than I see him.

One of the things that he commonly posts about are that he complains about how public school teachers aren’t treated well because he has disappointingly low pay.

And I see a lot of his teacher friends commenting on his posts, lamenting about the fact that they have low incomes, and have to take second jobs in the summer or whatever.

Well, after seeing a lot of these posts, I commented with an actual SOLUTION to the problem one time. My comment was something like - and here’s what I wrote:

“Many teachers that I know make $500K to $1M per year and they have great control of their time.” That’s what I wrote.

You should have seen their reaction. My friend and the other teachers on that thread were asking me how this could be - some of them even direct messaging me.

And I said, these well-paid teachers are online teachers. Yeah, they wake up each morning and see how many video course subscriptions they sold overnight.

You should have seen their reaction to that - they were quickly uninterested.

That sounded scary. That didn’t meet conformity.

Now, I’ve got nothing against public school teachers. In fact, I appreciate what they do.

But you can see how much fear there is … with going out on a limb.

See, when you try to provide a SOLUTION to people’s problems, they’d usually rather stay small, stay secure, and keep settling - staying inside that 100% certainty smaller life circle.

Do you think that a public school teacher would agree that their 12-year-old student should be a lifelong learner? Yeah, they probably would.

But is that public school teacher being a lifelong learner themselves if they won’t provide a better life for themself by learning some new online teaching and internet marketing skills?

Everyone wants change. But no one wants TO change.

This is not about condemning people for being employees. It’s about removing that wall between you and what you want.

Because look, you might be a highly compensated employee that WANTS to teach public school math or English to 12-year-olds.

But you can’t afford to make the, say $55,000 a year that a teacher makes.

Building a second income with something proven like real estate softens that financial blow, and it lubricates that transition to doing what energizes you - teaching English to 12-year-olds.

This way, you’re a teacher, but you’re not dissatisfied that your salary is low - because teaching isn’t where you started - and now you’re probably more valuable to 12-year-old students because you are where you really want to be.

The riskiest thing you can possibly do is stay safe and take zero risks because then, you virtually guarantee that you’ll never get the life that you could have had.

Residual income gives you the ability to leverage time - and also provide some physical possessions. I don’t think there’s anything wrong with some materials stuff.

Even if physical stuff isn’t what life is about, it can help you facilitate your best life. Even a simple hiker would like a nice, comfortable backpack, tent, and a sleeping bag.

Some people say they want to “live frugally” but, they only say that because they’ve been conditioned and they don’t know HOW to live better.

When people say, “I want to live frugally”, often, what they really want to say is: “I’d like to live well”.

Like I’ve said elsewhere, the great conundrum of modern society is that …

… people spend all this time learning about how work works … and zero time learning about how money works.

Yet money is the main reason that they even go to work. Hmm. Can you believe that.

Even if you’re one of the fortunate few that doesn’t want a substantial life change, adding a monthly stream of real estate income on top of your current situation sure won’t hurt you.

Investing in real estate myself - ihelped ease my transition from a day job - to doing things like this show - creating value for people in the way that I want to do it.

I invest in - especially this WORKFORCE type of housing - myself.

Earlier today, I talked about some of the economic and demographic “whys” about these modest but decent rental single-family rental homes and small apartment buildings that we so often favor here.

As the American family size continues to shrink and birth rates fall, people want smaller SFHs.

Think about how people live. Smaller family sizes are a trend away from McMansions.

Millennials and Gen Zers are also environmentally conscious. That’s the future, where there’s been this spurning of extravagance.

That’s why these low-cost rental single-family homes are in such demand.

In fact, a recent report by economic research consultancy Capital Economics shared a stunning statistic: The number of vacant single-family homes … for sale … priced under $250,000 has halved since 2012.

Yes, there are only half as many available now as then.

In fact, according to the report, there are only 550,000 vacant homes on the market priced under $250,000. That’s half as many as there were just eight years ago. That’s astounding.

When there’s a downturn, people will move from the $2K-$3K rent homes into yours where they pay $1,000-$1,500.

In fact, I just bought two more of these single-family rental homes last month myself. One was $150K and the other about $130K.

And I bought them from GREturnkey.

And you know, if you’re on the edge with your next move, and you don’t know if you should invest in a property or more education … and you’re trying to decide between the two ...

As long as you’ve got a little education, I’d err toward you putting another “property” in your portfolio - or your first property.

Why is that?

That’s because when you buy a property, you get a substantial education about it from the inside.

Buying and owning is the REAL world education that any classroom simulation can’t replicate.

Owning property gives you education …

… but more education alone doesn’t give you more property.

So here, we both teach a man - or woman - to fish AND give you a fish. We do both.

GREturnkey.com is where I’ve done my own property buying for years - including where I purchased these most recent two.

Go there, read a couple reports in some markets that interest you, and get some property under contract.

Over there, right now, I can tell you that:

In Alabama - Birmingham and Huntsville has been furnishing income property pretty actively.

In Ohio, Dayton has been bringing inventory to the market that exceeds a 1% rent-to-value ratio, meaning that you get more rent income per invested dollar there than nearly anywhere else.

Further south, Memphis and Little Rock have similar profitability to Dayton - and there are some really low price points in Memphis if you’re just looking to get started.

Then, Jacksonville has brand NEW construction turnkey property and actually have investor houses available now. Lower cash flow there but brand new.

Then, in Tampa, Florida, you can get a little cash flow and the Tampa-St. Pete metro was the 2nd-highest appreciation market in the nation at 5%.

Yes, year-over-year, Tampa was 2nd … and you can get cash flow in the submarkets north of there.

Tampa has been furnishing, oh, maybe 4 or 5 turnkey properties onto the market each month.

And, see, as noted, inventory is tight nearly everywhere.

In Tampa, you’re looking at something like $1,200 of rent income for a $150,000 property.

At GREturnkey, Chicagoland has an interesting dynamic. Where you’re investing in Chicago’s suburbs of northwestern Indiana.

That way, you get the proximity and economic diversification of a world-class city like Chicago, yet being on the Indiana-side of the state line gives you property taxes that are less than half of that than if you were on the Illinois-side.

Everything I’m discussing here is designed for OUT-of-the-area investors … like me and probably like you too.

It’s turnkey … meaning that the property is fully renovated, under a property manager’s management, and often even occupied with a tenant on the day that you buy…

… so that you’re enjoying that mailbox money … or ACH bank draft money as it might be.

You can find all those providers and more at GREturnkey.com

A big thanks to, well Mark Twain for some inspiration today.

“Why not go out on a limb? That’s where the fruit is.”

I’m back next week with Tom Wheelwright.

Until next week, get started at GREturnkey.com

I’m your host, Keith Weinhold. Don’t Quit Your Daydream!

274: How To Self-Manage Your Property with Kevin Cross Jan 06, 2020

Get 15 - 30% more rent income for your existing property.

Learn how to attract a better “Class B” tenant to a lesser “Class C” property.

We’re getting “hands-on” today.

Kevin Cross tells us about this and how to buy a bargain property (hint: find poorly-managed property).

Small tweaks make a big difference in your property’s rent income: clean grounds, orderly common areas.

Add amenities inside units yourself like: Wi-fi, TVs, curtains, artwork.

Your success is highly tied to tenant quality.

Learn how to talk to a tenant engaged in illegal activity.

A house cleaner can put eyes on your property.

To learn about Virtual Property Pro owner assistance service, e-mail Kevin at: kevin@alaskarex.com This is an intermediate step if you’re not ready for pro mgmt.

Often eliminate: garage door openers, garbage disposals, 2-bay sinks.

Incorporate your hobby into your rentals; now your hobby is profitable.

Though I personally use professional management, self-management fits our guest’s lifestyle.

__________________

Resources mentioned:

Kevin Cross contact:

Email: kevin@alaskarex.com

Mortgage Loans:

RidgeLendingGroup.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

273: Real Estate vs. Stocks with Brent Sutherland Dec 30, 2019

Financial advisors don’t talk about real estate for three reasons:

They'd receive no compensation.
Lack of education.
Regulatory oversight.

Among educated investors:

Real estate has higher returns.
There are more hidden fees with stocks than real estate.

I discuss dividend-paying stocks.

Ntellivest’s Brent Sutherland tells us why stocks won’t make you wealthy.

This CFP-turned-real estate investor is a financial coach.

Most financial clients ask all the wrong questions. That’s why they get all the wrong answers.

Few realize that you can increase your income now.

Brent walks the talk. He owns 9 income properties, averaging $250 cash flow each and more.

We discuss common REI mistakes: financial protection, estate planning and LLCs.

__________________

Resources mentioned:

Brent Sutherland:

Ntellivest.com

Visual Capitalist:

Composition Of Wealth

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

272: Refinancing, NIRP, GRE Listener Andrew Stanton Dec 23, 2019

Put more cash flow in your pocket by refinancing now.

Refinance conditions are ripe: equity up, interest rates down.

If you own property and interest rates rise, then hold.

But if you own property and rates fall, you can refinance.

This way, you’re playing both sides.

Sometimes you can negotiate a lower interest without refinancing.

Negative interest rates mean borrowers & spenders win, savers lose.

GRE listener Andrew Stanton (Email: apstanto@gmail.com) joins me to tell us how this show has changed his life.

This San Diego-based GRE follower works as a computer engineer and he’s building his investment real estate portfolio.

Losing his job helped Andrew realize how important it is to have multiple income streams.

The concepts of ROTI, your return from home equity is always zero, and “Don’t Quit Your Daydream” resonate with him.

__________________

Resources mentioned:

Andrew Stanton’s Email:

apstanto@gmail.com

GRE YouTube Channel:

GetRichEducation.com/YouTube

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

271: Permanently Reduce Your Taxes with Tom Wheelwright Dec 16, 2019

Your biggest expense in life is taxes - income tax, sales tax, property tax, capital gains tax, inheritance tax.

Taxation is not adjusted for inflation. I explain.

Wealthability’s Tom Wheelwright joins us about how to optimize Trump’s 2017 Tax Cuts And Jobs Act to your advantage.

A tax deduction is the amount by which your taxable income is reduced.

Income tax is on net income.

Sales tax is on gross income.

The $10,000 SALT deduction limit mainly hurts coastal residents.

Bonus depreciation substantially aids real estate investors - new and used property, and residential and commercial.

Learn how the 20% pass-through deduction benefits you.

Why you never own real estate in a “C” Corporation.

Learn about Section 179 tax advantages.

Opportunity Zones benefit those that invest in the renovation of distressed assets.

I bring you today’s show from Anchorage, AK.

__________________

Resources mentioned:

Tom’s website:

Wealthability.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting “QRP” to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

270: How To Own Agricultural Real Estate Dec 09, 2019

You don’t have to get your hands dirty or own a tractor to have your own agricultural real estate.

Humans need food to eat. Even futurists know that people will continue to need calories.

The world population of 7¾ billion will rise to 11 billion by 2100.

Coffee is the second most-traded commodity in the world.

You can buy half-acre coffee or cacao (chocolate) for under $20K - $25K, turnkey-managed. It produces cash flow from the annual coffee cherry and cacao pod harvest.

You own the land in Panama and Belize. You can drink coffee or eat chocolate from your own far. I invest in this myself.

Operation with three pillars of sustainability: social, economic, and environmental.

Cash returns are 10-14% annually, averaged over twenty years. This doesn’t include land appreciation.

Learn more about investing, where they’re having an “End Of The Decade Special” at:

www.GetRichEducation.com/Coffee

www.GetRichEducation.com/Chocolate

This special saves you thousands per parcel:

1 coffee parcel = $18,000 each

3 parcels = $16,650 each

6 parcels = $16,000 each

For the Belize cacao (chocolate) parcels:

1 parcel = $24,500 each

3 parcels = $22,650 each

6 parcels = $22,000 each

Cash or IRA funds are eligible. You won't see these prices again.

For these rates, confirm your order by Dec. 16, 2019, with time to fund.

There’s never been a better time to start in agricultural real estate.

__________________

Resources mentioned:

Learn about coffee investing:

GetRichEducation.com/Coffee

Learn about cacao investing:

GetRichEducation.com/Chocolate

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

269: How Wealthy People Think Dec 02, 2019

Money matters. It buys you freedom, options, and even the best medical care.

You have the same 168 hours per week as Jeff Bezos or Bill Gates.

Getting an MBA or Ph. D. is a slow way to wealth.

How many of your 8 great grandparents can you name? See. Making an impact is rare.

You can either live below your means or expand your means.

By the time you’re age 30, you should know how to produce income without trading your time for it.

Employees are motivated by fear.

Wealthy people are motivated by ideas and value creation.

You can only be truly free … with wealth.

Middle class people want enough money to retire; rich people want enough money to impact the world.

You can either be a conformer or build wealth. Your choice.

__________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

268: How To Double Your Real Estate Return (BRRRR) Nov 25, 2019

Rent amounts are more stable than real estate prices.

The rent amount you can charge is based on incomes in an area.

In real estate: rents behave rigidly; prices are more elastic.

Employment sectors dictate what type of worker buys and what type rents.

Mortgage loan qualification is difficult; I’m qualifying myself. This is inconvenient, but it means borrowers are solvent.

This creates a barrier to entry and stabilizes prices. Tips:

Be organized.
Buy multiple properties from the same provider at the same time, if possible.
Use the same mortgage company.

The BRRRR real estate investing strategy is: Buy - Renovate - Rent - Refinance - Repeat.

You can double or triple your cash-on-cash return with BRRRR.

Learn about Baltimore BRRRR and Philadelphia turnkey property at: GetRichEducation.com/Baltimore

Turnkey vs. BRRRR compared.

__________________

Resources mentioned:

Baltimore BRRRR & Phila. turnkey:

GetRichEducation.com/Baltimore

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

267: A Billion Gajillion Fafillion Dollars with Richard Duncan Nov 18, 2019

Today, money is being printed on a massive scale. Interest rates have plunged.

This is a Fed “U-turn” from last year when money was being destroyed and rates were rising.

What’s going on?

Richard Duncan of MacroWatch tells us.

We discuss how far the U.S. can “kick the can” down the road with their $23 trillion in debt.

Richard tells us about the future direction of interest rates and inflation.

Learn how deep the U.S. can go into debt.

Get 50% off Richard’s MacroWatch video newsletter. Use the Discount Code “GRE” at: www.RichardDuncanEconomics.com

I bring you today's show from Vancouver, British Columbia, Canada.

1) Get my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

MacroWatch:

RichardDuncanEconomics.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

266: Fourplex Financial Freedom with FIG’s Steve Olson Nov 11, 2019

A four-unit building is how I began in real estate.

Fourplexes can provide you with great financing terms and economies of scale.

Steve Olson of the Fourplex Investment Group (FIG) joins us. Website: www.fig.us

FIG builds new construction townhouse-style fourplexes for investors.

They operate in four high-growth U.S. states: Utah, Idaho, Texas - and Steve reveals their new market in this episode.

FIG properties often have excellent resident amenities.

“Investor-savvy” HOAs help protect your investment.

Their model best suits the investor that’s also a busy professional.

FIG also offers duplexes and larger multi-family properties.

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

FIG Website:

fig.us

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

265: Planning For A Recession & More Listener Questions Nov 04, 2019

Get a market update. Next, I answer your listener questions:

1: How do I start if I know nothing about real estate?

2: What’s better: existing or new construction property?

3: How do I identify an “up-and-coming” neighborhood?

4: How do I raise the rent without losing the tenant?

5: What if there’s a recession?

I bring you today’s show from Anchorage, AK.

Next week, we discuss four-plexes. The following week, declining interest rates and more Fed money-printing.

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Credit Score help:

MyFico.com

Neighborhood Research:

NeighborhoodScout.com

City-Data.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Welcome to Get Rich Education, I’m your host Keith Weinhold.

It’s YOUR listener questions today; What’s The Best Guidance For Beginners, Comparing New Construction vs. Existing Construction Property, How To Identify An Up-And-Coming Neighborhood, How To Raise The Rent Without Losing Your Tenant, and How To Position Yourself In The Event Of A Recession.

All today, on Get Rich Education.

______________________

Welcome to Get Rich Education! I’m your host, Keith Weinhold with Episode 265 and I’m answering your listener questions today.

First, let’s get you up-to-speed with our asset Class Whiparound.

The Fed lowered rates last Wednesday by a quarter-point again.

It IS their third quarter-point rate cut this year, bringing the upper bound of the Federal Funds rate down to 1.75%

Just before air time here:

Year-to-date, real estate is up 3.5% per the Freddie Mac Housing Price Index. The Case-Shiller National Home Price Index is at right about that same 3.5% appreciation rate.

Next, the Freddie Mac numbers show us 30-year and 15-year mortgage interest rates are just a touch more than 1% lower than they were one year ago.

Yes, your COST of money is cheaper now than it was either one year ago OR two years ago.

The stock market has been thriving. The S&P 500 Index is up more than 21% YTD. It’s flirting with all-time highs, as its over 3,000 points now.

Oil prices have not done so well, Down 17% year-over-year

Oppositely, Gold has thrived as it’s up 17% just since the beginning of the year.

Last week, the Commerce Department told us that GDP expanded at an annual rate of 1.9% through the 3rd quarter, falling slightly from 2% a quarter earlier.

The rate of dollar inflation is currently 1.7% YOY as measured by the Consumer Price Index, which is tracked and published by the government’s Bureau Of Labor Statistics.

With the way that they calculate inflation, I think it’s a little hard to believe that the true, diminished purchasing power of the dollar is only 1.7% per annum.

I think that makes about as much sense as turning back the clocks back an hour like we all did the other night, personally.

That’s our Asset Class Whiparound like we do here just once in a while.

Let’s start with the first listener question … and I usually start off with a more beginner-type question - like this first one - and advance from there.

This question comes from Jackie in Esko, Minnesota.

Keith, I love your show. I’m 25 years old, just a year out of college with $22,000 in student loan debt, and I just began listening to you three weeks ago.

Now I’m going back to listen from the very beginning, Episode 1.

What is the best way for me to begin if I know absolutely nothing about RE?

Thanks for the question, Jackie.

Well, you’re on the right track with your learning by starting with Episode 1 of the Get Rich Education podcast.

Bigger Pockets has some very well-populated FORUM that’s good for your learning.

I’d also say, work on your credit score WHILE you’re learning about real estate investing. That’s important in a credit-based asset like real estate.

Learn about what it takes to improve your FICO score at myfico.com

Now, for a beginner, yes, it’s probably not the long-term answer that you want.

But it can be helpful to have a W-2 job … at least in the short-term … before you go onto to dominate your own real estate empire.

I mean … I had a day job for years. Not only does this income help you qualify for loans, but let’s look at some ideal day jobs that can help you advance your real estate CAREER at the same time.

Now Jackie, I don’t know what your college degree was in … but if you’re a true devotee to real estate, consider that, even if you have to accept less income ... there are day jobs that can actually align with your path toward being a real estate investor.

You could become a Property Manager for a management company. Now, that is a tough job but you will learn remarkable things about how real estate works from the inside.

Property Management is perhaps the LEAST-RESPECTED job in all of real estate, but it’s perhaps the most important … at the same time and the manager is probably the investor’s #1 team member.

Other day jobs that can help a real estate investor are:

Being an Asset Manager, Financial Analyst, Real Estate Agent (of course), or a Mortgage Loan Officer.

With any of those related jobs, you’re going to learn about things like sales, marketing, pricing, maintenance & repair, capital improvements, and bookkeeping.

There are other benefits to making your day job … real estate-related.

You’re going to get to know other people in the business - these could be your future collaborators.
You’ll get to attend industry tradeshows.
And of course, you’ll get substantial education and training.

So, that’s just one course to consider for a beginning real estate investor. If you’ve got to work a day job before you build your empire anyway, it might as well align with what you’re truly MORE interested in long-term … yes, perhaps … even if you need to take a short-term pay hit.

It’s just another angle for you to consider, Jackie.

If you want one all-encompassing podcast episode that tells a beginner like you as much as you need to know as possible … all in less than one hour - check out GRE Episode 249, published just a few months ago.

That episode is titled, “The Beginner’s Real Estate Investing Audio Guide” and it’s our most popular episode that I’ve done ALL year. Again, it’s Episode 249.

Thanks for the question, Jackie.

The next question comes from Tate in Providence, Rhode Island.

Tate says, “Keith, I notice that today, more providers offer new construction investment property, but it usually doesn’t cash flow like existing properties do.

Is it worth buying new construction for the lower maintenance costs involved?” Thanks, Tate.

Alright Tate, let’s compare the pros & cons of buying Brand New Construction Rental Property vs. Existing Construction.

And, this is a top-of-mind subject for me because I just wrote about this in Get Rich Education’s e-mail newsletter two weeks ago.

What’s better: existing or new construction rental property?

Like with most real estate answers: “It depends.”

But because a “2-word answer” like “It depents” is really dissatisfying, let’s expand on this.

There are at least 8 different criteria for each type.

Before we look at your trade-offs with each type, understand that new construction turnkey property was almost non-existent until recently.

That’s because during the housing crisis of 2007 – 2010, home prices fell far below replacement cost.

Therefore, builders couldn’t make new developments feasible until existing property prices rose in this decade that we’ve had since the Great Recession.

There was also an oversupply of housing back then. Absorption of existing housing took time before new construction made sense again.

And supply has definitely been absorbed.

In SO MANY markets today, the housing that makes the best rentals is undersupplied.

That’s why new construction makes sense again - and why you’ve gradually seen more new construction income property be offered by providers these past few years.

Let’s look at the advantages of both existing and new construction … and these are certainly broad generalizations ...

First, with EXISTING Construction property - we’re talking seasoned properties here:

Lower purchase price.

Better cash flow. This is especially true in the early years. The early dollars are your most important as an investor.

Established property. You’re pretty assured that the foundation won’t settle. You know that the topsoil grows grass.

With EXISTING property, you’re in an established neighborhood. You already know who the neighbors are.

More safety in your investment with existing property. You see, because residents have lived in established neighborhoods longer, they’re more likely to have substantial equity in their property.

Now, why would you care if your neighbors next to your income property hold higher equity positions?

If there’s a recession, this means that residents are less likely to walk away from their home. This hedges against foreclosures and a valuation downdrain - and this domino effect like we saw in the housing crisis 10 years ago.

With EXISTING PROPERTY, you also have lower property taxes. Though there are also plenty of cases where this isn’t true, because an existing property could also mean it’s closer to the city center.

Location. Because you’re often closer to parks and city centers … residents have shorter commute times. This aids in both attracting & retaining your tenant.

Availability. In turnkey investment property, there are more existing structures available than new construction property.

You can keep your timeline. Construction delays are less likely with existing property.

Now that we’ve looked at what tilts in the favor of existing property - and it is a lot … let’s look at the advantages of Brand New Construction property.

New Construction:

You tend to get Better appreciation.

Higher tenant quality. New features attract a larger tenant pool for you to choose from.

Longer duration tenancies. It’s hard for a tenant to find a better situation, unless they leave to become a homeowner.

You tend to have fewer maintenance costs with new construction property.

Modern amenities. Layouts with open floor plans and a higher bathroom count.

With new construction you often have lower property insurance costs.

Better vendor warranties.

Utilities. New homes are more energy efficient, lowering utility bills. However, the tenant often pays this for you, especially in single-family homes and duplexes.

So, there they are - the advantages of existing property vs. new construction rental property.

Of course, this is general guidance.

Based on regional and other factors, you can surely find some “exceptions” to these criteria.

But these trade-offs can help you decide what’s more important to you as a real estate investor.

Excellent question from you there, Tate.

The next question comes from Alex in Lyndhurst, New Jersey.

Alex asks, “What’s the best resource for determining if a property that I want is in an up-and-coming neighborhood?”

“The market is more important than the property - and a thriving metro doesn’t necessarily mean that every property is in the right neighborhood.

Where do you do your own research?”

Well, thanks for the question, Alex.

In short, NeighborhoodScout.com is my favorite paid resource …

… and City-Data is my favorite free resource. It’s spelled “City-hyphen-Data”.com

Now, what makes Neighborhood Scout potentially worth paying for is that they’ve got investor-grade analytics and tools.

Where the free resource, CityData is more for a “general public” user.

But both resources tell you about things like crime rate, per capita income, vacancy rates, and virtually everything else for cities, zip codes, and even subdivisions.

Of course, there are countless other resources in addition to those two.

Be mindful that you aren’t just looking for neighborhoods that are safe, you’re looking for neighborhoods that are IMPROVING and both of these resources have backward-looking data so that you can track trends.

Remember, in income property, you don’t really want to seek out “beautiful” because beautiful often doesn’t correlate with profitable for cash flow.

But, of course, boarded-up, burnt-out buildings aren’t what you want to see either.

So, as you’ll remember, it’s clean, safe, affordable, and functional. Are people out walking their pets at night? That might be a sign of neighborhood safety.

The things that you can see through Google Street view are things like: are the streets relatively clean, are people mowing their lawns.

If the neighborhood - at least looks - respectable … then tenants are likely respecting your property too.

Too many “For Rent” or “For Sale” signs on a block might be bad sign.

Of course, seeing a lot of signals of remodeling or new construction in a neighborhood - is one of the best signs that could possibly see for an improving neighbhorhood.

The problem there - is that you’ve got to get in before a neighborhood is TOO improved. Otherwise, you’re going to be paying more for the property and the numbers won’t work.

So, there you go, Alex - both some hard data resources for research - and softer signals for what might make for an up-and-coming neighborhood and a safe neighborhood.

If you’ve got a question for me, go ahead and write in at info@getricheducation.com

How do you raise the rent without losing your tenant, and then, what happens if there’s a real estate recession?

That’s after this. I’m Keith Weinhold. You’re listening to Get Rich Education.

_________________________ **COMMERCIALS** ___________________________

You’re listening to the show where you don’t follow money, you make money follow you.

This is Get Rich Education. I’m your host Keith Weinhold.

Ben from Osnabrook, Germany asks:

“When it comes to raising the rent on a tenant, isn’t it better to just keep the rent the same & just … not raise it?

Because the cost of losing that tenant with its greater vacancy time is usually more of a loss than if I’m not receiving that potentially higher rent amount each month.”

And then Ben goes into a number of calculations that show his point.

Yeah, thanks for this great question, Ben.

This is the classic landlord’s conundrum.

Do I raise the rent to “market rent” & risk losing the tenant - or do I forgo that greater rent amount and just remain complacent with occupancy at a BELOW-market rent amount?

Let’s use an example here. Say you are renting a unit for $1,000. The tenant signs a one year lease for $1,000 … and after a year, when renewal time comes, you give notice that rent will be increasing from $1,000 to $1,040.

A couple days later, your resident responds and tells you that they aren’t willing to pay more than $1,000, and if they must, they will go find another place to live. So you risk losing them.

Yes, some tenants really will leave over just a $40 a month rent increase.

Now you have a dilemma. You think that you CAN rent the unit to someone ELSE for $1,040.

But on the other hand, you realize that it’ll take a month to turnover and re-rent the unit. You’ll also need to see that the carpets are cleaned, the blinds are replaced, and perhaps do some wall texturing and painting.

So RE-renting this unit will cost you something … plus while this work is done & a new tenant would have to be sought … it might be one month of vacancy that you’d endure.

The question you’re now asking yourself is, will it cost me MORE to turn this unit over & EVENTUALLY get $1,040 than it would to keep this tenant’s rent at $1,000 … and just keep them in place - ?

Yes, it usually would.

Numbers-wise, short-term, it’s better to just keep that existing tenant in-place and give them their way and keep the rent at $1,000.

In this case, a LOST month of rent while you try to find a new tenant then … effectively costs you ... $1,040.

Plus repairs, you might lose $1,600 on the turnover.

On the other hand, NOT raising rents by this $40/month will only cost $480 for the year.

Which loss would your rather take — $1,600 by turning the unit over - or $480 by keeping the same tenant there?

You’d rather keep the tenant in there & only lose that $40 a month or $480 a year … rather than the $1,600 for the turnover & month of vacancy.

Well, there’s a solution to this classic conundrum - and it won’t work every time, but the best thing that you can probably do - the way that you can have your cake and eat it too - which means both increase the rent and keep your tenant … is to make an improvement to your resident’s unit a month or two BEFORE you raise the rent.

For example, if they don’t have a dishwasher, you can add a dishwasher or add a ceiling fan in the master bedroom if they don’t have one. Or make a minor remodel that makes that tenant’s life better - before the notice of rent increase.

That makes the tenant more likely to stay because you’ve just improved their quality of life - and you’ve also shown them that you care - and they’re more likely to pay the rent increase.

Not only have you then kept the tenant and now receive a greater rent amount, often times, you can get a tax deduction for the repair or improvement - and above that, even if they do decide to vacate, you just improved your unit that you own.

So … that’s the best solution to the dilemma, Ben from Germany. Again the short answer is to make an improvement to the unit, optimally a month or two before the rent increase.

Craig from San Diego, California writes, “Keith, you are the first person that ever opened me up to the world of cash flow.

I’ve bought two single-family properties from one of your providers about 8 months ago and I’ve had a good experience so far, other than one tenant that paid the rent about 20 days late month.”

OK, so far, so f-a-i-r-l-y good there, Craig from San Diego.

Craig goes on to ask, “There are a lot of warning signs about a recession and I’m considering putting a freeze on new purchases until I at least have some certainly in this uncertain environment. What are your thoughts about a recession?”

OK, that’s certainly a valid question, Craig.

You bring up “uncertainty”. I’d say that markets are always, just always, uncertain … and prognosticators and forecasters have been calling for a downturn for 3 years, 4 years, including a prominent economist or two right here on this very show.

And that’s alright. That’s alright if there’s someone that’s wrong. A prominent economist’s decision is just one point of many that you have to take into consideration …

… whether it’s an inverted yield curve or slowing GDP growth or inflated stock market price-to-earnings ratios that might point to a recession.

Well, especially as it relates to real estate - let’s just talk about how a recession might look as it relates to real estate and what the probabilities are of a recession taking place soon.

First of all, a recession is broadly defined as having two or more quarters in a row of contracting Gross Domestic Product - said another way, a declining GDP for at least six months. That’s what a recession is.

Let’s relate a recession to real estate - broadly.

10 years ago, we were mired in the worst recession in a few generations.

Real estate was:

#1 - Overbuilt & oversupplied.

#2 - Real estate was being bought with irresponsible lending practices where borrowers didn’t have the capacity to pay their mortgages if anything went wrong. Everyone was qualifying for a loan.

And #3 - Ten years ago in the Great Recession, we saw ridiculously unsustainable appreciation rates. 20%, 40%, 50%, 60% per year in some markets on this speculative appreciation since anyone could qualify for a loan.

Today, I don’t think we’re in position for a real estate recession & if we do have one, it would be substantially milder than what we saw 10 years ago.

Why is that? Because today, we’re in EXACTLY the opposite condition than we were 10 years ago.

Today, we have an UNDERsupply of housing, lending practices ARE responsible, and appreciation rates are sustainable.

I talked at the top of the show that real estate has appreciated nationally at about 3-and-a-half percent.

So, we’re in the opposite place that we were 10 years ago for three main reasons: supply, lending responsibility, and sustainable appreciation rates.

In fact, if you’re buying for cash flow in good markets - like you should be - the question I’d ask you - uh, Craig from San Diego - is - do you WANT there to be a mild recession?

Yeah, if housing values began trending down for a little while, people are discouraged from buying and then there’s more rental demand.

This is what I experienced when I owned property for cash flow, like I did 10 years ago - when rental demand increased - my cash flow increased greater than the rate of inflation.

So, you might WANT there to be a mild recession when you’re a cash flow buyer.

In fact, this - kind of - workforce housing that we talk about buying here - long-term rentals that are just below the median purchase price for an area (but not too far below) - is some of the most recession-resilient housing type that you can find.

Now, other housing types - take the SHORT-term rental market - like AirBnB properties, HomeAway, VRBOs - they aren’t nearly as recession-resistant as these long-term rentals are.

Now, that doesn’t mean that you can’t own a few STRs - but they probably should be the bread-and-butter mainstay of your portfolio like these long-term rentals are.

AirBnB properties cater to two primary types of people - businesspeople and vacationers.

Now, it seems that most AirBnB owners prefer businesspeople to vacationers … because businesspeople tend to be more quiet, they don’t have parties, and businesspeople are more likely to have REPEAT stays than vacationers.

But in a recession, both business travel and vacation travel gets cut. You saw that happen in the Great Recession - and business travel is one of the first places that businesses cut when they had to get lean.

So … this doesn’t always mean that short-term rentals are dreadful. But long-term rentals are what are recession-resistant.

Again, in long-term rentals, you might actually WANT a recession depending on how you’re positioned.

So, thanks for the question there, Craig.

Next week on the show, we’re going to focus on four-plexes - four-unit buildings and what makes them so special.

The week after that, speaking of a recession, the incomparable Economist Richard Duncan is going to join us and tell us about this QE4-type of activity that the Fed has initiated …

… where the Fed is printing all kinds of money and pumping it into the system … and what that means for the economy.

Richard can make complex concepts sound devastatingly simple sometimes.

In fact, when he was here with us, about a year-and-a-half-ago, just listen into part of that, my question and his answer:

Yeah, could anyone else possibly describe the relationship between inflation and interest rates that succinctly … that concisely?

In fact, when he’s back with us soon, I think that Richard will tell you that nearly the entire globe is ALREADY in a substantial economic slowdown.

Well, what’s one way that I’m acting - and this is something that I regularly do whether I think that a recession is on the way or not - is that I just bought two more properties this past week myself.

Yes, they’re these cash-flowing, long-term rentals like we talk about here … eating my own cooking.

When I was almost ready to buy, I qualified for two more single-family income property loans with Ridge Lending Group.

And then to find the 2 new properties, I did just what you do.

I went to GREturnkey.com, downloaded reports on a couple markets that I was interested in, connected with the provider, and decided to buy two properties in the same day.

Really, walking the walk here. So, if you’re looking for cash-flowing income property in investor-advantaged markets - usually in the Midwest and South, you’ve got to act.

That starts at GREturnkey.com

Until next week, when I’ll be back to help you build your wealth, I’m Keith Weinhold.

Don’t Quit Your Daydream!

264: Keith Weinhold & Grant Cardone “10X” Your Wealth Oct 28, 2019

Grant Cardone is our guest today. He’s the world’s #1 sales trainer, 10X Movement Leader, and prominent real estate investor with $1.4B AUM.

We discuss wealth mindset, and the importance of “getting known”.

We tell you why you must embrace good debt in order to build wealth.

You start by asking yourself better questions.

What is “10X”?

I liken how your tenant pays you their income from the first 10 days of every month.

Get Grant’s take on why a house is not an asset.

I ask Grant about his physical fitness.

Bottom line: You must give your money multiple jobs.

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Cardone Capital:

CardoneCapital.com

Cardone Capital Free Book:

CardoneCapital.com/Book

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

263: Will 30-Year Mortgages Disappear? With Caeli Ridge Oct 21, 2019

Fannie Mae and Freddie Mac privatization could mean that the 30-year fixed amortizing loan - America’s favorite - disappears.

Ridge Lending Group President Caeli Ridge & I discuss this and more.

I describe the difference between primary and secondary mortgage markets.

Mortgage interest rates have dropped more than 1% year-over-year.

Learn what it takes for you to qualify for an income property loan today: down payment, credit score, reserves, and debt-to-income ratio.

You can put 15%, 20%, or 25% down payment on an income SFH. We discuss the differences.

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

Wall Street Journal:

How Fannie & Freddie Work

MarketWatch:

FICO Scores Higher

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

262: Volatility & Fees Kill Returns, Alabama Among Top RE States In U.S. Oct 14, 2019

Alabama might be the top real estate investment state in the U.S.

Why?

Low cost properties, low tax, landlord-friendly, growth, warm weather, and advantageous rent-to-value ratios.

For cash flowing property, start at: GetRichEducation.com/Birmingham and GetRichEducation.com/Huntsville.

Birmingham is Alabama’s largest urban area, Huntsville is 2nd.

SFH prices: $85K - $125K.

Fees and volatility degrade your stock and mutual fund returns more than most think.

Want more wealth?

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Birmingham Turnkey Property:

GetRichEducation.com/Birmingham

Huntsville Turnkey Property:

GetRichEducation.com/Huntsville

Tony Robbins’ book:

Unshakable

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

261: Five Years Ago: Episode One Oct 07, 2019

The first episode of one of America’s most influential investing shows began October 10th, 2014.

Here it is - uncut with gaffes, breathing and bumping the microphone.

Host Keith Weinhold gives present-day commentary on this show that launched five years ago from his home’s dining room table.

Want more wealth?

1) My FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

260: The Debt Decamillionaire Sep 30, 2019

$10 million in debt could BENEFIT you. I describe how.

There are more “free-and-clear” homes today than in 2006. I tell you why.

A major platform published that 30-year mortgages are better than 15-year. It appears terribly oversimplified.

Home equity always has zero ROI.

The debt decamillionaire can have a $300K annual tailwind from inflation-profiting alone.

How to get informed, not affirmed.

Then, Daren Blomquist joins us to discuss U.S. housing trends.

The homeownership rate has declined, especially among those under age 35.

The rental vacancy rate has plummeted to 6.8%.

Market appreciation is cooling in a sustainable way, returning to long-term norms.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

30-Year vs. 15-Year Mortgages:

Business Insider

My Forbes article:

Why Home Equity Has Zero Return

Auction.com

GRE’s Tampa Field Trip:

RealEstateFieldTrip.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

The NFL on CBS:

www.cbs.com

259: Turnkey vs. Syndication, CBD Investing Sep 23, 2019

Turnkey real estate vs. syndication compared.

Cannabis production is like today’s gold rush in agricultural real estate and retail.

CBD is medical cannabis. THC is recreational, mind-altering cannabis. CBD is discussed today.

CBD sales growth is projected at 107% every year through 2023.

Get a predictable 15% Cash-On-Cash Return by making a loan on equipment that turns raw hemp into CBD oil. Learn more here.

You must be an accredited investor, 12-month loan term.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

CBD Lending Opportunity For You:

GetRichEducation.com/Lending

CBD To Grow 107% Annually

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

258: Single-Family Rental Property Today Sep 16, 2019

Single-family rentals have 16 advantages over apartments:

Tenant quality, appreciation, neighborhood, school district, retention, no common areas, utilities, divisibility, fire, disturbances, financing terms, vacancy rate, management, supply & demand, risk, exit strategy.

There's nothing wrong with apartment investing. They have their own advantages.

Noel Christopher, Senior VP of Portfolio Services at Renters Warehouse, joins Keith to discuss today’s single-family rental (SFR) market.

Renters Warehouse manages 22,000+ homes in 25 states. They could be a good backup property manager for you. See their marketplace too.

The midsize investor (owns 25 - 2,000 rental units) is becoming more involved in buying SFRs.

Many say “mom-and-pop” landlords are competing with first-time homebuyers for single-families. Noel disagrees.

Long-distance investing is more common today.

Demographics of SFR tenants - both Baby Boomers and Millennials.

Also discussed: beginner tips, build-to-rent communities.

Keith brings you today’s show from Anchorage, AK.

Next week: Canton, OH.

The following week: Philadelphia, PA.

The week after: St. Petersburg, FL.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

RentersWarehouse.com

GRE’s Tampa Field Trip:

RealEstateFieldTrip.com

Warren Buffett on CNBC

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

257: Spend Your Money … Lots Of It Sep 09, 2019

Five benefits of spending your money are discussed.

(What? Is this irresponsible?)

Keith Weinhold tackles the rarely-discussed benefits of money-spending:

You beat inflation.
You don’t “lose” money; you spent it how you desired.
Ensure a better quality of life.
You help the economy exactly where you want to.
Spending is more fun than saving.

Many are afraid to discuss the topic of spending.

Also discussed - what goes into home price appreciation, how inflation persists despite decades of technology, Millennials waiting for home prices to drop.

Back to spending:

Are “cheap” people annoying?
School is irrelevant to wealth.
Don’t cut expenses; increase income.
The only place you get money is from other people.
Buy top vacations, wellness & exercise, mattress, vision, shoes, dental, home renovation, unprocessed food, phone.
Spending is an investment in yourself.
Experiences vs. Stuff.
Money is fuel; it’s only potential.
The $25,000 taco.
Giving to charity.

Benjamin Franklin: “Wealth is not his that has it, but his that enjoys it.”

Then, a discussion with our Tampa provider about finding the right rental property neighborhood.

Join us on our upcoming Tampa Real Field Trip, Oct. 10th to 12th. Start at RealEstateFieldTrip.com.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

GRE’s Tampa Field Trip:

RealEstateFieldTrip.com

CNBC:

The $25,000 Taco

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

256: The Real Estate Numbers That Matter with Frank Gallinelli Sep 02, 2019

Real estate math is simple: add, subtract, multiply, divide.

There’s no complex math like trigonometry, algebra or exponents.

Frank Gallinelli, Ivy League Professor of Real Estate Development at Columbia University in New York City, joins me to talk real estate numbers.

Net Operating Income (NOI) estimates current market value of a property.

NOI is rent minus VIMTUM. It does not include Principal and Interest.

Your Debt Coverage Ratio (DCR) had better be greater than 1. You typically need a minimum of 1.2 to 1.25 to qualify for a property.

Loan-To-Value ratio discussed.

Seller “asking price” is almost irrelevant. A property’s current market value is = Annual NOI / Cap Rate.

Cap Rate = Annual NOI / Property Price or Value.

Internal Rate Of Return (IRR) is more of a total return. Part of it is discounting your future cash flows. This considers your opportunity cost.

I give an example of buying a new $20,000 heating system for an apartment building.

This resulted in lower heating bills.
This increased cash flow (and NOI) by $4,800 annually.
Divide this by a 7% Cap Rate = $68,500 value increase.

Therefore, a $20K investment both improved cash flow and increased building value by $68,500.

I dislike GRM - Gross Rent Multiplier.

Franks dislikes CCR - Cash-On-Cash Return.

Return On Equity vs. Return From Equity.

Don’t get too lost in numbers. No property exists in a vacuum. The vibrancy of the market is more important than the property.

Get a 30% discount on Frank Gallinelli’s “Introduction To Real Estate Analysis” video course at learn.realdata.com with Discount Code: SAVE30

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Frank Gallinelli’s “Introduction To Real Estate Analysis” video course:

learn.realdata.com Use Promo Code SAVE30 for 30% off.

GRE’s Tampa Field Trip:

RealEstateFieldTrip.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

255: State Of The Real Estate Market with Daren Blomquist Aug 26, 2019

Keith Weinhold says the word of this real estate era may be: “supply”. Why?

The U.S. just hit its lowest rental vacancy rate in 35 years: 6.8%.

Also, the U.S. just hit its lowest homeowner vacancy rate in 40 years: 1.3%.

Mortgage interest rates just fell to near three-year lows.

U.S. existing median SFHs now a record $279,600.

Year-over-year appreciation is 4.3%.

Regulation and environmentalism increase real estate prices.

Join our Tampa Real Estate Field Trip at RealEstateFieldTrip.com

Next, Daren Blomquist of Auction.com joins Keith to discuss current U.S. trends in:

Foreclosure activity.
Home price appreciation.
Migration trends.

Foreclosure activity is down due to high employment, more exotic loans now “rooted out of the system”.

91-92% of metros Daren studied are appreciating in value.

Net migration winners include: Florida, Texas, Tennessee, The Carolinas, Georgia, Washington, Arizona, Nevada, Colorado.

Net migration losers include: New York, California, Illinois, Louisiana.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Daren Blomquist:

Auction.com

Heat Map:

Home Appreciation

Heat Map:

Net Population Migration

GRE’s Tampa Field Trip:

RealEstateFieldTrip.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

254: Grow Rich In Your Sleep Aug 19, 2019

If I pay you $114 an hour to mow my lawn, could you get wealthy that way?

No. You’d have to work all 8,760 hours in a year just to make your first million.

Invest.

The definition of investing is: “To expend money with the expectation of achieving a profit.”

Then, are stocks, bonds, gold, your home, vacations, or income properties … investments? I discuss.

Damion Lupo, expert eQRP Administrator, joins us. Learn more by texting “QRP” in ALL CAPS to 72000.

You can have five simultaneous profit centers with income property:

Leveraged Appreciation.
Cash Flow.
Return On Amortization.
Tax Benefit.
Inflation-Profiting.

To get ahead, you must give your money multiple jobs. That’s five in this case.

If you’re new to this: risk and frustration still exist in real estate. Your best-laid plans will be derailed sometimes.

It’s not “get rich quick”. But most people never acquire wealth at all.

Why switch your retirement plan to an eQRP?

$55,000 annual contribution limit for single, $110,000 for married couples.
Invest in real estate, hard assets, nearly anything.
Creditor protection.
eQRP setup has less red tape setup than SDIRAs.
$50,000 line of credit.
Avoid UBIT tax.

Learn more about the eQRP from Total Control Financial by texting “QRP” in ALL CAPS to 72000.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

eQRP: Text “QRP” to 72000 or:

TotalControlFinancial.com

By texting QRP to 72000 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel.

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

253: Jim Rickards | Aftermath Aug 12, 2019

Jim Rickards is our guest today.

Debt is growing faster than the economy.

In an eventual financial crisis, we discuss how a real estate investor will fare.

A prolific author, Aftermath is Jim Rickards’ new book.

Debt, inflation, and interest rates are macroeconomic forces that affect you daily.

The U.S. has $23 trillion in debt. Why can’t we just keep kicking the “debt can” down the road?

Alexander Hamilton effectively created the debt 230 years ago.

When the debt-to-GDP ratio exceeds 90%, problems occur. It’s 103% in the U.S. today.

We discuss debt solutions, and why negative interest rates and Trump tax cuts won’t work.

Rickards says inflation has nothing to do with money supply; it’s about psychology.

Learn how a new international monetary system looks - outside the U.S. dollar.

In a new system, hard assets retain value. Stocks and bonds lose substantial value.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Book - Amazon:

Aftermath by Jim Rickards

National Debt Clock

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

QRP:

TotalControlFinancial.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

252: The Power Of Now Aug 05, 2019

Imagine that you’re paid $8.5 million - your entire life’s earnings - all on the last day of your life.

But you received nothing until then.

That income really wouldn’t serve you well anymore.

It’s an extreme example about “The Power Of Now”.

Delayed gratification should not be a long-term condition. You get one life.

I also discuss housing affordability: which is your income, housing prices, and mortgage interest rates.

Historically, affordable homes have a price-to-income ratio of 2.6 or less.

In just three minutes time, I tell you how the Federal Reserve works. Their ¼% interest rate cut announced last week is the first cut since 2008.

Join me in-person on our Tampa Real Estate Field Trip. Register at www.RealEstateFieldTrip.com

The Phillips Curve signifies that employment and inflation are highly correlated.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

GRE’s Tampa Real Estate Field Trip:

RealEstateFieldTrip.com

Article & Video by Keith Weinhold:

How “The Fed Works” In 3 Minutes

Book:

Eckhart Tolle “The Power Of Now”

Affordability article:

Housing Wire

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

QRP:

TotalControlFinancial.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

251: Floating Ocean Cities - Seasteading with Joe Quirk Jul 29, 2019

Floating ocean nations can provide solutions to rising sea levels, overpopulation, and poor governance.

It’s known as “seasteading”.

Joe Quirk of The Seasteading Institute describes their plans and structure.

The institute was co-founded by well-known venture capitalist Peter Theil.

This differs from living on a boat or oil platform, or cruise ship life.

200 miles offshore is the exclusive economic zone.

Hurricanes, tsunamis.

A new environment for enterprise and innovation.

Seeking freedom and liberty.

Aquaculture - seaweed, algae farming.

Regulation by the free market rather than government.

Could security evolve into an army?

Today’s seasteading population.

Cryptocurrency.

How far we are from a seastead nation?

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

The Seasteading Institute:

Seasteading.org

Blue 21 Floating Homes:

www.blue21.nl/

GRE’s Tampa Real Estate Field Trip:

RealEstateFieldTrip.com

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

QRP:

TotalControlFinancial.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

250: How To Raise Rents And Retain Your Tenants, Dayton Jul 22, 2019

Tenant retention begins before move-in:

Use a move-in checklist with the tenant.
Move-in gift and packet.
Communication.

Ongoing tenant retention during occupancy:

Inspections every six months.
Be attentive with service calls.

How to achieve a rent increase:

45 days’ notice.
Use phone.
Substantive reason: increase in property tax or maintenance costs.
Remind tenant of moving costs.
Offer an upgrade - carpet cleaning, ceiling fan, etc.
2 - 5% annual increase typical.

We discuss why not every tenant is worth retaining.

Dayton, OH has 1% rent-to-price ratios and an MSA population of 800,000. Also:

Proximous to Cincinnati and Columbus.
Health care.
Military.
Manufacturing.
3 Amazon fulfillment centers within 45 minutes.

Learn more about the Dayton turnkey provider here.

In-house property management.
Use luxury vinyl plank, white kitchen cabinets, newer HVAC & water heaters.
1-year and 3-year warranties.
97% occupancy rate.
Leases up to 18 months.
3/1 SFHs: Rents $750 - $1,300 | Purchase prices $75K - $120K. Detached garage. 800 - 2,000 sf. Usable basement is additional sf.
Property tax 1.8 - 2.1% annually as a percent of property value.
Rent promise: Provider starts paying rent to you if your property is vacant 30+ days.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Dayton Turnkey Property:

GetRichEducation.com/Dayton

Mortgage Loans:

RidgeLendingGroup.com

Turnkey Real Estate:

NoradaRealEstate.com

QRP:

TotalControlFinancial.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Our Tampa Real Estate Field Trip:

RealEstateFieldTrip.com

Best Financial Education:

GetRichEducation.com

Find Properties:

GREturnkey.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

249: Beginner's Real Estate Investing Guide Jul 15, 2019

Two big mistakes are: 1) Renting out your former primary residence. 2) Only being invested in one market.

This Beginner’s Real Estate Investing Audio Guide also helps you step-by-step with buying an income property:

Credit Scoring
Mortgage Pre-Approval
Writing An Offer
Inspection
Vetting A Property Manager
Appraisal
Insurance
Closing
LLCs

**The entire audio from this episode is transcribed into words and can be found at the end.**

People set up LLCs for asset protection, anonymity, or tax purposes. But there is a lot of administrative work. Is it even worth setting up?

Your FICO credit score has five ingredients. Down payment, debt-to-income ratio covered.

Mortgage pre-approval is better than pre-qualification.

Select income property in: job-growth economies, high rent in proportion to low purchase price.

Cash flow = Rent Income minus “VIMTUM”.

Why would someone sell you a cash-flowing property?

“Turnkey” defined. Should you make a lowball offer to a turnkey provider?

Also discussed: Negotiation Strategy, Earnest Money, Purchase Contracts, Management Fees, Management Agreements, Mobile Notary, Title Company, Rent-To-Value Ratio, Collecting Cash Flow.

__________________

Want more wealth?

1) Grab my FREE E-book and Newsletter at: GetRichEducation.com/Book

2) Your actionable turnkey real estate investing opportunity: GREturnkey.com

3) Read my best-selling paperback: getbook.at/7moneymyths

__________________

Resources mentioned:

Mortgage Loans:

RidgeLendingGroup.com

Find Properties:

GREturnkey.com

Memphis & Little Rock Property:

MidSouthHomeBuyers.com

Turnkey Real Estate:

NoradaRealEstate.com

QRP:

TotalControlFinancial.com

JWB New Construction Turnkey:

NewConstructionTurnkey.com

Our Tampa Real Estate Field Trip:

RealEstateFieldTrip.com

Best Financial Education:

GetRichEducation.com

@getricheducation

Keith’s personal Instagram:

@keithweinhold

Complete Audio Transcript:

Welcome to Get Rich Education. I’m your host Keith Weinhold and I’m here to help Beginning Real Estate Investors Today.

_____________________

Welcome to GRE. This is Get Rich Education Episode 249 - 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.

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.

I’m actually talking about a specific property here.

It’s the home that THEY 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 $500 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-value 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-value ratio (or RV ratio) is 0.6%, meaning that for every $100K in value it has, you’re only getting $600 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 .6% RV ratio. Say that you can get $1,800 rent out of that $300K property that you used to live in.

But instead, three $100K homes bought strategically as rentals can have a combined rent income of $3,000. Yes, you can still find that full 1% rent-to-value ratio.

So it’s either one $300K property at $1,800 of rent income.

Or three $100K properties at $3,000 of rent income.

So you’re losing $1,200 dollars of cash flow every month - you’re only getting $1,800 rather than $3,000 - 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 own it, is because you defaulted and “fell” into it. Don’t fall into things. Be intentional.

You are a better investor when you’re intentional rather than emotional.

It’s even better for you now. Beyond your $1,200 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 $1,200, AND you’re in multiple markets. One property isn’t divisible.

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, inspection and vetting your Property Manager which is known as due diligence, 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 single-family turnkey homes, especially homes outside your home market - as most of the best deals are not found where you live.

Like they say, the best investors live where they want to live, invest where the numbers make sense.

Get Rich Education is heard in 188 world nations.

Today’s content is primarily geared toward United States real estate investors - but those that live outside the United States will benefit here too.

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 three 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 three episode numbers will appear so that you can listen.

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 judgement 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?

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.

24% of that then is about $14,000 that you’ll need. You should have some extra on top of that as reserves.