Show notes
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 Follow us on Instagram: @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 c…
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