Podcast appearances and mentions of ridge lending group

Keith discusses his journey from an entitlement mentality to realizing the importance of wealth creation through real estate investing and shares the real estate shockwave that nobody is talking about. We are also joined by Caeli Ridge, President of Ridge Lending Group, as she explains the differences between owner-occupied and investor mortgage loans. Hear about the ease of entering real estate investing with no formal qualifications or high income required. Learn the concept of demographic shockwaves and how the aging population will influence housing demand in the future. How to ethically use other people's money to build wealth for yourself before you even own a property. Learn about the key differences between owner-occupied mortgage loans and investor mortgage loans, particularly the use of rental income in qualification. Resources: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Show Notes: GetRichEducation.com/520 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”  GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Complete episode transcript:   Automatically Transcribed With Otter.ai      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 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  42:18 The preceding program was brought to you by your home for wealth building, getricheducation.com.

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: GetRichEducation.com/515 You can follow Jen on Instagram @jen_sidorova or check out her writing at reason.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 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”  GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation 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.   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, 266, 866, learn more about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text, family 266, 866,   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   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  42:21   The preceding program was brought to you by your home for wealth building, GetRichEducation.com

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: 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”  GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation   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.

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 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”  GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 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.

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 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”  GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to 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.   Robert Syslo (00:01:08) - 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 (00:01:19) - 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 (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.

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 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 Follow us on Instagram: @getricheducation Keith's personal Instagram: @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.

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 no - 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: MidSouth Homebuyer's 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 Follow us on Instagram: @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.   Speaker Weinhold** ((00:26:11)) - - 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 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.

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”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:00) - 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.

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: Show Page: GetRichEducation.com/494 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to 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.

The Fed has signaled something significant for mortgage rates. With inflation still rearing its head and the job market hot as ever, the Fed already has enough evidence to hold back on lowering the federal funds rate, which influences the mortgage rate you get on a home. So when will the Fed finally lower rates so we can escape this highly unaffordable mortgage market? Or, can the Fed pause for the foreseeable future as we enter a new era of high interest rates? Caeli Ridge, President of Ridge Lending Group, is here to help us answer these questions. Caeli works on getting investors mortgages every single day, so she has a solid pulse on the mortgage market. She gives us a mortgage rate update, explaining what today's rates look like, when the first Fed rate cuts could come (sooner than you think!), and how a mortgage lender calculates your specific rate. She also gives some tips on navigating this high-rate environment and why merely looking at your mortgage rate as a deciding factor could cost you big time. As we wrap up, Dave will give his perspective on what the Fed is waiting for and the factors that MUST change before the Fed decides to proceed with a rate cut. He'll also share a few tips on how to get ahead of the competition with today's high rates and why these unique advantages won't last long.  In This Episode We Cover How long we'll have to wait for the Fed to finally cut rates  March 2024 rate update and the rate you can expect on your next mortgage  What matters MUCH more than your mortgage rate when closing on a property  LLPAs (loan-level price adjustments) and how to score a lower interest rate from your mortgage lender The crucial economic factors the Fed is watching to decide when to lower mortgage rates How to get ahead of the competition during a high-rate environment and buy when the masses are distracted  And So Much More! Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-915 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

The first episode of "Now You Know" with Caeli Ridge is here !Caeli is going to walk you through calculating your income for mortgage loans as a self-employed person and what this means when applying for a mortgage loan. For more education and access to live events join our Community here ! https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2024 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Owning raw land, timberland, and farmland is often the domain of the wealthy. This is partly because it is difficult to obtain loans for this property. Today, we discuss an income-producing timberland that also tends to increase in value. For under $7,000 you can own quarter-acre parcels of producing teak trees in Panama and Nicaragua. You can invest yourself. All at once, this provides diversification with a hard asset in a foreign nation and a different product type. Over a twenty-five year period, each $7K quarter-acre teak parcel is projected to return $94K. You get title to the property. Learn more at: www.GREmarketplace.com/Teak With ownership of two quarter-acre parcels, you can qualify for a second residency in Panama for under $22K with legal fees, etc. A SFR does not grow into a duplex. But teak trees grow in volume while its unit price typically appreciates. Teak price growth is historically 5.5% annually. I've met the company CEO and Chairman in-person. This provider has offered this opportunity for 24+ years. They've recently added a sawmill, increasing profits. What are the risks of teak tree investing? Disease, pests, fire, geopolitics and more. They are proven mitigation plans. In-person teak tours for prospective investors are offered. Trees grow through recessions, COVID, market cycles, and Fed rate decisions. Learn more about teak tree investing at: GREmarketplace.com/Teak Timestamps: Welcome to Get Rich Education (00:00:01) Keith Weinhold introduces the podcast and emphasizes the importance of real estate and financial information. The US economy and land ownership (00:01:44) Keith discusses the strength of the US economy and the importance of diverse and resilient real estate portfolios. America's top 100 landowners (00:02:29) Keith talks about the largest landowners in America and the reasons why land ownership is often associated with the wealthy. Investing like a billionaire (00:05:32) Keith introduces the topic of investing in producing land and the benefits of owning producing land. Introduction to ECI Development (00:06:21) Keith introduces Michael Cobb and discusses the company's projects in Latin America. Marriott resort project in Belize (00:07:08) Mike talks about the construction of a Marriott resort in Ambergris Key, Belize, and the challenges of financing such projects. Development and tourism in Belize (00:08:37) Michael Cobb discusses the development and popularity of Ambergris Key, Belize, and the involvement of major hotel brands. Teak tree parcels investment (00:11:30) Michael Cobb explains the investment opportunity in quarter-acre teak tree parcels and the generational wealth stewardship associated with it. Reasons for teak investing (00:14:05) Michael Cobb discusses the reasons why people are interested in teak investing, including hard asset diversification and international residency opportunities. Cash flow cycles and teak investment (00:16:42) Michael Cobb explains the 25-year cash flow cycle associated with teak investments and the generational income potential. Optimal growing conditions for teak (00:19:26) Michael Cobb discusses the optimal growing conditions for teak and the physical growth of the trees. [End of segment] Teak Plantation Locations and Growth (00:19:42) Discussion on the optimal locations for teak growth and the historical track record of teak price growth. Teak Price Growth and Business Plan (00:20:44) The historical 55% annual increase in the value of teak and the business plan's conservative approach to teak price growth. Physical Properties and Residency Opportunities (00:21:33) The value of teak and the opportunities for achieving residency in Panama by owning teak. Residency and Citizenship (00:24:33) Differentiating between residency and citizenship in Panama and the process and benefits of obtaining permanent residency. Sawmill and Value-Added Component (00:27:56) The integration of a sawmill into the investment proposition and the value-added potential of processing teak into lumber. Sawmill Investment Opportunity (00:30:07) Details of the investment opportunity in the sawmill, including the expected return and investment structure. Risks and Mitigation (00:32:41) Discussion on the risks associated with teak plantation investment abroad and the mitigation strategies in place. Property Management and Tours (00:35:25) Outsourcing property management and the availability of tours to visit the teak plantations in Panama. Long-Term Investment Perspective (00:37:43) The long-term growth potential of teak investments and the comparison to the investment strategies of wealthy families and institutions. Earth's Highest Real Estate (00:38:11) Discussion about Earth's highest point, the equatorial bulge, and the location of teak plantations in Panama and Nicaragua. Investing in Teak Parcels (00:38:11) Information about purchasing teak parcels, the absence of loans, and the potential for building wealth through teak investments. Consultation Disclaimer (00:39:34) Disclaimer about seeking professional advice and the potential for profit or loss in investment strategies. Resources mentioned: Show Page: GetRichEducation.com/490 Learn more about teak investing: GREmarketplace.com/Teak For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to gray. I'm your host, Keith Reinhold. An affordable way to simultaneously invest like a billionaire. Get diversified in multiple ways with real estate. Help the earth. And if you prefer, even achieve residency in a second nation today and get rich education. When you want the best real estate and finance info, the modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text gray to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Daydream letter and it wires your mind for wealth.   Keith Weinhold (00:01:16) - Make sure you read it. Text gray to 66866. Text gray 266866.   Corey Coates (00:01:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Keith Weinhold (00:01:44) - What category? From Sorrento, Italy to Sacramento, California, and across 188 nations worldwide. I'm Keith Reinhold, and you're listening to get Rich education the Voice of Real Estate since 2014. As we're two months into the year now and the US economy has continued to stay strong. Let me ask, how's your portfolio doing and how resilient is your real estate? How diverse is it? How would you grade yourself on those criteria?   Donald Trump (00:02:17) - I would give myself, I would look, I hate to do it, but I will do it. I would give myself an A-plus. Is that enough? Can I go higher than that?   Keith Weinhold (00:02:29) - Well, well, whether your, I guess, straight A's or not. Consider this land report.com. They recently published a report about America's top 100 Las donors. Now, Lynn could be vacant and nonresidential, yet have active ranching or agriculture or forestry taking place.   Keith Weinhold (00:02:52) - That way the land produces something while it might increase in value at the same time. But the reason that often land is the domain of the wealthy is that it's harder to get loans for land, and therefore one must often pay all cash. Well, by the time they were done. Today, you'll learn about producing land that's actually available at such a low price point that alone typically is not required for you to buy it. In 2024, America's largest land owner is Red Emerson, and that's what the report found. Read and his family owned 2.4 million acres in California, Oregon and Washington through their Timber products company and the number since they became America's largest landowners in 2021, when they acquired 175,000 acres in Oregon from another timber company. Well, with that acquisition, the Emerson surpassed Liberty Media chairman John Malone's 2.2 million acres. And then in third place is CNN founder Ted Turner. Yeah, he's America's third largest landowner, with 2 million acres in the southeast on the Great Plains and across the West. And it was a few years ago now.   Keith Weinhold (00:04:05) - It was 2020 when news broke that Microsoft co-founder Bill gates was America's largest farm land owner, with more than 260,000 acres. So the wealthy are attracted to real assets that can produce yield in something like land, which they aren't making more of. That's the backdrop for today. Surely we'll talk about income producing land, although most years it won't pay out and it's available to any investor, big or small. But before we do, let me share that. About ten days ago, I climbed up the highest point on Earth here while we're talking about non-residential real estate. Well, where was it? Where was I? Yes, I was on Earth's highest piece of real estate. Kind of a trivia question here, and I used to think that that must mean Mount Everest, but it's not. So there's a clue for you there. Where is Earth's highest point is you ponder that. I'll give you the answer later. Let's talk about investing like a billionaire with the opportunity to own producing land did it to you? We've discussed this topic before, but it's been quite some time and there have been some important updates, including a sawmill for the production timber.   Keith Weinhold (00:05:32) - After success in the computer industry, today's guest formed ECI development in 1996. I suppose going on nearly 30 years now. He served on advisory boards for the Na as a resort community developer. They have projects in Belize, Nicaragua, Costa Rica, El Salvador, Honduras and Panama, and neighborhoods include homes, condominiums, golf courses and over five miles of beachfront. So they got some really beautiful properties. He and I first met in person in 2016. He and his family lived in Central America from 2002 to 2016. It's always fantastic to have back on grea, and I guess I must button up here because it is the chairman and CEO, Michael Cobb. It's good to be with you. Thanks for having me.   Michael Cobb (00:06:21) - Back on the show. It's fun to have these conversations. I didn't realize we met in 2016. That's a little while ago.   Keith Weinhold (00:06:27) - Yeah, it has been eight years. Yes, we met in the region then down there and Mike's about the most relatable and down to earth guy that you can find and literally down to earth is.   Keith Weinhold (00:06:41) - Besides the resort development, you've made it easy and inexpensive for investors worldwide to buy producing teak tree parcels. But before we discuss that, you've got a project that's drawn a lot of interest on Ambergris Key, Belize, which many of our listeners already know, that's Belize's largest island and its top tourist destination. I have visited and owned property there, and it's coming online next year. It's pretty exciting. Tell us about it.   Michael Cobb (00:07:08) - It is exciting. It's been in the works for goodness, eight years. I think we signed our contract with Marriott maybe 7 or 8 years ago. We started construction just about a year ago last January. So almost exactly a year. Yeah, it's a marriott resort, 202 room oceanfront resort. It's fantastic. It will be done in August of 2025. Soft opening heart opening October 25th. So yeah, about 1618 months from now have this project finally finished. You know, the big challenging thing in this part of the world is financing. But it's really hard to get financing or affordable financing.   Michael Cobb (00:07:42) - Let me say it that way. Yeah. And so we took our time and we would not start a project until it was fully funded. I think a lot of challenges are people start these projects are kind of betting on the. Com. Right. Oh well we'll figure it out later. And we don't operate that way. We've been around for yeah 28 years. And so we're very very conservative. And until we had all the money to build the hotel, the resort, we did not start. And so we kicked it off last January. It was just down there last week. Steel is arriving. The superstructure is already going up. Yeah, man. It's just so nice to see it really coming to fruition. But you know, it's prudence and patience to take our time, make sure we have all the funding and then launch so that what we start finishes. And that's really been our mantra for almost three decades now.   Keith Weinhold (00:08:27) - Make it up, make it real, make it happen. In the largest town there on Ambergris Key, Belize, just a few decades ago, it was still this sleepy fishing village.   Keith Weinhold (00:08:37) - And with the setting that that island has and all the great snorkeling and everything else, it's really become popular and is boutique hotels grew into larger hotels. Yeah, it was probably, what, ten years ago perhaps, that you saw some of these big brands start to take more of an interest, like Hilton and Marriott, in branding the buildings what is.   Michael Cobb (00:09:00) - And, you know, I give a presentation called Why Belize, Why Right Now? And you nailed it there when you talked about the timelines. Right. And how a country or a region, it's not even a country in this case. Ambergris key. It's very specific. Right. How ambergris Key Belize has moved through this timeline, this path of progress. And at some point it goes from being a niche market or a no name market to a niche market, to a boutique market. And then all of a sudden, you're right, at some point the brand start to pay attention and then you move into popular acceptance and really mainstream tourism. And so, right.   Michael Cobb (00:09:31) - The cruise ships started going to Belize about 15 years ago, which put Belize as a country into the mind of a more mainstream traveler. And then you're right, about eight, ten years ago, the brand started to pay attention. And we do. We have a Hilton, we have a curio by Hilton, we have an autograph by Marriott, our company, ECI. We picked up the best Western franchise, and so we operate a Best Western on the island for that middle class market. And then Marriott, obviously, for the very high end traveler who wants an oceanfront 4 or 5 star kind of property. So yeah, but the brands are paying attention. And by the way, we're just seeing the beginning of that happening. This popularity curve Belize has entered what I would call the fast growth period. And over the next five, maybe eight years, we're going to see incredible growth in the tourism industry. Airlift is up. JetBlue just started flying down. So we're starting to WestJet. So we've got Canadian Air.   Michael Cobb (00:10:22) - We've got a discount carrier southwest. So when those things start to happen what you see is a market dynamism that's you know really it's exciting and it's going to change. Very, very rapidly. The pace of change is going to grow rapidly as well. So great time to look at Belize. If folks are interested in sort of that positioning in the path of progress in the marketplace.   Keith Weinhold (00:10:43) - Each time I visit Ambergris Key, Belize, the level of development increase is palpable. And, you know, this is an opportunity for a US or Canadian buyer or a buyer from outside that nation to come in. And it's just a very easy step with the English language and the common law in Belize, where you can invest yourself in this Marriott project that Mike discussed. Now, Mike, a while ago, to change topics, you recognize that the world has been really deforested and losing its valuable teak hardwood forests so continuously since 1999, you've offered a program so that individual investors at a really affordable price. We'll get to that price later.   Keith Weinhold (00:11:30) - They can own quarter acre parcels with the property deeded in their name, and reap the benefits and returns from the growth of the teakwood on top of the land. And now this is pretty novel, because for hundreds of years, only the hedge funds and super wealthy had access to an investment like this. So get us up to date with what you're doing on the teak hardwoods, because I know that so many of our listeners and viewers have already gotten involved.   Michael Cobb (00:11:56) - They haven't really. Thank you for being one of the people who put the word out there. Right? Because most people don't even know you can own teak or let's just back it up and you say, own timber, right? You start there. You're right. Only the super rich land barons, hedge funds. Those are the people that have always owned timber for centuries. Right. And so I think in most people's minds it's like, oh, I can't even get there. How would I even do that? Right. Well, then you take it overseas and you take it into something very, very specific, like teak timber.   Michael Cobb (00:12:25) - That's just not on anyone's radar. So. So you have done a great job. Thank you for getting the word out to just let folks know that this is something that they can do. So quarter acre teak parcels. We are now on our third plantation in Panama. We have one in Nicaragua as well. And so we're in our third plantation in Panama. Just because of the incredible number of folks, well over a thousand folks now who have decided they want to invest in own teak. You said something really interesting, Keith. You said you get to own the land, you get title to land and you get the harvest of the trees. That's absolutely correct. But it gets better because when the trees are harvested, they get replanted. And then the next generation of people your children, your grandchildren, whoever that might be, get the next harvest. But because you still own the land and the trees are replanted, a third harvest, you know, and a fourth harvest. So what you've really created with teak ownership is generational wealth stewardship.   Michael Cobb (00:13:24) - And that is something that's just so far beyond the comprehension of so many people that it can be so easy and so affordable to do.   Keith Weinhold (00:13:32) - I'm an investor myself in producing land like this in Latin America, so I know what some of my reasons are for being interested in this. And yes, it's more than the fact that I'm just a geography guy. It's the fact that I know I'm diversifying in multiple ways at the same time, a different product type in residential real estate. And I'm getting international diversification in a different nation, for starters. So are those some of the reasons that you see for why so many people are interested in teak investing like this? What are their reasons?   Michael Cobb (00:14:05) - Yeah, I think you've nailed a big part of it, which is the hard asset. A lot of folks, your listeners, readers in the news that are right, I mean, hard assets are important. I hope more people recognize that. Right. And more and more people are, thank goodness. So hard. Asset real estate being this particular hard asset.   Michael Cobb (00:14:22) - Right. And then the international diversification, one of the challenges we have is us, especially in Canadians to some degree, is that we kind of locked into the US system like we can own, say, Toyota stock, right? Japanese company, we can own Nestlé, a Swiss company, but generally we're doing it on the New York Stock Exchange. And so even if we own an international stock, it's still the US basket are still the Canadian basket that we hold it in. Right. And so when you physically own a titled property outside your home country, you have now truly diversified internationally. And there's a lot of prudence in that. And even just tiny little percentages of your portfolio, 5% of your portfolio, 10% of your portfolio outside your home country and hard assets is prudent because you want some other baskets for those nest eggs. Antiqued because it's such a low price point of entry with a huge yield, by the way, that it has become very, very popular for folks who want that international diversification in a hard asset.   Michael Cobb (00:15:23) - But to have the true international diversification because it's a physical asset outside your home country. And then I. Just say this and we can pick up on the theme or not. The other reason that people are looking at teak in Panama and Nicaragua, by the way, both countries, is because of the availability or the qualification for a visa for a second residency. And a lot of times people look at that as a plan B, if we kind of think maybe the US is going off the rails or Canada or wherever your home country is at, or it could go off the rails. Doesn't have to be now. It could be going off the rails in the future. You sort of that Boy Scout mentality of, you know what, I want a plan B, and if we have a second residency outside our home country, we now have an option. If we don't like the way things are going or where they get to, we can actually pick up and we can move and we have the right legal right, because we have a residency to live in another country.   Michael Cobb (00:16:17) - That's another reason that a lot of people have picked up the teak because it qualifies you for that residency. But I think the bigger reason is the international hard asset diversification. I think that's the leading reason people do it.   Keith Weinhold (00:16:31) - I want to ask you more about the residency shortly, but tell us more about the investment. We're thinking about maybe capital growth as the trees grow. And then what about the income?   Michael Cobb (00:16:42) - Sure. And so I think let me back it up. A lot of people think in cash flow cycles, right? If we have a job, we get paid every two weeks. You know, you have a lot of folks that have invested in properties. We get a monthly rent check, right? Or if we have stocks, maybe we get a quarterly or annual dividend. Right. So those are the what I would call the common time frames that we think about in cash flow. But what the Uber wealthy, what the hedge funds, what the family offices, what the endowment for places like Harvard, Yale, these big institution or big institutional thinkers have known for centuries is that there are actually other cash flow cycles that are largely ignored by the what I would say, the average investor.   Michael Cobb (00:17:21) - And those cash flow cycles are much longer. Teak, for example, is a 25 year cash flow cycle, right? You plant the trees and in 25 years you harvest them. You plant them again, not them. You plant new ones, right? In 25 years you harvest those and then so on and so on. So what you're creating is this 25 year cash flow machine. Now the kinds of returns are truly outsized. I mean you're talking about double digit ers. Now a lot of people say, well Mike, that's great. But what happens if I need the money in year 15? You can't have it because there is no money in year 15. Your trees are still growing, right? So it's this weird investment timeline. It's almost flatlined until the very end. And then it jumps way up and then it drops back down to a flatline again. And so it'd be silly to put tons of money into teak unless you had thousand times tons of money, right? But for some small piece of your investment portfolio where you have enough cash flow coming in from your maybe your job, your rent, your dividends, whatever, that a small piece that moves into this 25 year cash flow cycle with the thought process that this is how I steward wealth into the future, to children, grandchildren, great grandchildren, because the 25 year cycle is almost generational, right? In fact, in the US, it probably is generational because we're having children in the ages of, you know, 25 to 30.   Michael Cobb (00:18:44) - So it kind of starts to line up with generational income as opposed to, you know, sort of that whatever biweekly, monthly, yearly income. So it's just a different cash flow cycle.   Keith Weinhold (00:18:56) - That's right. And I brought up before that, when you think about the growth of one of your investments, you now get to think about it in two ways. If you own a duplex, it might have growth in its price. However, it doesn't grow into a fourplex and have growth in its price. However, with teak, you might have an increase in the value of the wood, perhaps on a board foot unit basis, and at the same time it is growing in height and volume.   Michael Cobb (00:19:26) - Absolutely no. That's a cute way to say it. I never really thought about a duplex growing into a fourplex, right? That's good. Exactly. And so what you do, you're right. You have the physical growth of the trees. And we have located our plantations in the optimal growing conditions, fatigue. And they are very known.   Michael Cobb (00:19:42) - Right? I mean, the British started plantation growing teak 350 almost 400 years ago in Southeast Asia. And so the Brits have just meticulously kept statistical records of every plantation that they were involved with the altitude, soil type, rainfall, temperature, on and on and on. And so it's really well known exactly where teak will grow well, and both where we have our plantations, it does Nicaragua and Panama, and we'll stick on Panama today, but the locations are dead center bull's eye locations for the best optimal growing of teak. So you have this growth of a physical thing, right. But you mentioned the board foot price. And by the way, the track record on teak being grown in plantations is 350 years. So what a track record, right? But since 1970. Two. The average price of teak over 5152 years has been 5.5% a year. That's the growth in the price of teak, right? And so you know who knows the future, right? I mean, the future is the future, right.   Michael Cobb (00:20:44) - But if a 50 year track record on a 5.5% increase in the value of the teak itself is pretty powerful, right? That's the long track record of nice growth. And when we factor in our teak into our business plan, we take that 5.5 and we make it zero. We just say, what if there is no increase in the price of teak over 25 years? How much will the tree grow? And if that tree is cut down and is sold as lumber? When we'll talk about our Solomon in a minute. If that tree is sold as lumber, what's the value of that lumber today? And what will the tree be worth in that value 25 years from now? And so if things do continue to increase at 5.5% a year, that's just all gravy. And that just starts to take that rate of return and just ratcheted up even further.   Keith Weinhold (00:21:33) - Teak has a number of physical properties that make it valuable, from its beauty to its fire resistance and more. Mike has now touched on a few interesting things.   Keith Weinhold (00:21:44) - We'll come back and talk about that soon, including how you can achieve residency in Panama by owning teak, what the risks are, and more about their sawmill that he just mentioned, adding value to the operation there. And then we're going to talk about what the prices are. We're talking with ECI Development Chairman and CEO Michael Cobb more when we come back. I'm your host, Keith Wynn. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns, or better than a bank savings account, up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.   Keith Weinhold (00:22:52) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six. Role under this specific expert with income property, you need Ridge Lending Group and MLS for 256 injury history from beginners to veterans. They provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com.   Speaker 5 (00:23:49) - This is the Real World Network's Cathy Fekete, and you are listening to the always valuable get Rich education with Keith Reinhold.   Keith Weinhold (00:24:06) - You're listening to the SOS created more financial freedom for busy people just like you than nearly any show in the world. This is guitarist education. I'm your host, Keith Whitehill. We're talking with ECI development chairman and CEO Mike Cobb about teak hardwood investing in Panama and Nicaragua.   Keith Weinhold (00:24:22) - Like, tell us more about how one can achieve residency, for example, in Panama if they own teak there maybe just how residency varies from citizenship?   Michael Cobb (00:24:33) - Sure. Well, why don't we start with the second part, how residency differs from citizenship. And there's a good place to start. You know, citizenship is you become a citizen of the country. You have a passport, you can vote. You have every legal right of that country. Right. The decision would have residency to use a US term is like a green card, right? It's the legal permission to live in that country for some period of time. Many of them are permanent. In fact, Panama's is permanent. So once you have a Panama permanent residency, you could literally pick up, you could move there tomorrow, and you could live for the rest of your life in Panama. And so it gives you the legal right to live there. But you don't have a passport. You can't vote. I guess that's the main difference, right? You don't have a passport, you can't vote.   Michael Cobb (00:25:18) - But for most people, in fact, the overwhelming majority of people, a residency delivers exactly what somebody wants, which is the ability to live somewhere. Right? And we don't care if we vote or not. I mean, right, we'd still be citizens of our home country, US, Canada, or wherever we can vote back home or citizen. We have our passport from those countries, but the right to live somewhere else is powerful. And so the teak in Panama qualifies you in two ways for two quarter acre parcels, and then the legal fees and stuff like that. It's just under 22,000. A little less gives you permanent residency in Panama. Right? That's such an affordable way to be able to I call it the back pocket. Right. The insurance policy or the plan B in the sense that, like, I think a lot of folks are worried about the direction things are headed. And, you know, you have the teak parcels, which are going to produce a tremendous return. And then this byproduct that you qualify for and you have to go, you have to get down there a couple times.   Michael Cobb (00:26:16) - I mean, there's a little bit of administrative stuff, some legal fees, that's all included in that 22,000. Right. So that's all included. You have to go there a couple times. So there's a little bit of friction I would say. But when you get finished with that friction, you are a permanent resident of Panama and you only have to go there one day every two years. So you fly down every other year, whatever. Go, go talk to your trees, maybe sing to your trees a little bit, whatever you want to do and fly. All right. And you have a permanent residency. So it's a very easy, fast way to get that plan B now in the future, if you ever said, well, I really love Panama, I'd like to live here. Panama is beautiful. The city itself, it's got skyscrapers, apartments on the 50th floor of use or killer. You can be out on the beach or somewhere. You can be up in the mountains. So there are a lot of different climates and geographies in Panama where you might say to yourself, yeah, I think I want to come down here and live someday.   Michael Cobb (00:27:09) - Well, you already have your residency. You already have the legal right to do that.   Keith Weinhold (00:27:14) - Yeah, I mean, 100%. Now, Panama isn't predominantly English speaking like Belize is, but Panama just has a lot of inherent familiarity and feel to a lot of Americans. Since the canal is there and there is that strong American presence, and they've even dollarization their economy there, for example, in Panama. So it might be that nice plan B for you. And tell us more about the residency and the investment into the sawmill and how that works. So it sounds like there's now a value added component is you essentially vertically integrated and now have this sawmill with the teeth. Tell us more about that.   Michael Cobb (00:27:56) - So we've always factored in the sawmill into the investment proposition. Because if we were to just take the logs for example, 25 years, you cut down the trees, you stick the logs in the container and send them off to China or India, which is where most of the logs go. The return on investments.   Michael Cobb (00:28:13) - It's not great, it's okay, but it's not great. The way you actually get a phenomenal return on investment is you take those logs and you turn them into lumber, which has about a 3 to 4 x differential, or what we call first stage end product or simple end product, which would be something like flooring, which is basically lumber that's been finished one more level rooted and bulldozed so that you can put them together right on a wood floor. So those two modifications from the log all the way to the first degree of finished product, the returns start to really jack it up into that double digit IRR right over 25 years, which again is phenomenal. So we talked about price. But just to give an idea, a $7,000 quarter acre parcel at harvest turned into lumber and first level finished. Product turns into about $94,000, right? So 7000 turns into $90,000, which is a tremendous return. But the way you get that return is to deliver to the marketplace lumber and first grade finished product. And so Soma has always been part of our business plan.   Michael Cobb (00:29:19) - Well, we are now two years away from our harvest on our first plantation, the one I planted back in 1999. Right? I mean, it's incredible thinking that, you know, 20, gosh, 24 years ago planted a teak plantation. So we're two years from harvest. We have one more set of kind of odds and end thinning of just trees that didn't quite grow. Right. We're going to use those thinning over the next couple of years to practice in our sawmill. Because you know what? We are going to make mistakes. I mean, you don't ever get it right the first time. So we're going to make mistakes. We're going to learn from them. And by the time we actually do the real harvest of that first plantation, 100 acres of teak, two years from now, we will be up to speed with our sawmill will size up, we'll capacity up to do that. But yeah, so folks can actually we have a $2 million opening in the sawmill. And it's a real simple formula.   Michael Cobb (00:30:07) - It's two times your money and then a proportionate 10% interest in the sawmill. So for example, just rough numbers off the top of my head. You put in $100,000, you get twice your money back in about a 3 to 4 year period. As a sawmill really becomes operational. We take the first harvest, like the thinning, aren't going to produce much. In fact, we hope to just basically kind of break even over the next two years while we practice. Then we cut down 100 acres of teak. We start putting that through the sawmill, right? So you get two extra money, you invest 100 to get back to 100, and then your return would be about 13 or $14,000 a year. On going after that, because you get a 10% carried interest in the sawmill into the future as well. So that's the investment opportunity that produces a shorter cash flow, much tighter on the cash flow. But then a nice trailer for many years. But the investment is 100,000. So it's a more significant investment than, say, somebody wanting a little bite sized piece of a quarter acre parcel or two quarter acre type parcels paired with the residency that gets you that.   Michael Cobb (00:31:13) - So a couple different levels of investment depending on what your goals are, but also what your timelines are.   Keith Weinhold (00:31:19) - We described the sawmill investment numbers there. And then just to clarify, on the quarter acre parcels, they cost $7,000 each with an expected value or return of $94,000 after 25 years.   Michael Cobb (00:31:37) - That's correct. 6880. I'm using round numbers, but 6880 is the quarter acre teak and right at harvest when it processes through the sawmill. A little over that, but $94,000 is returned to the investor along the way. I'll mention this. There are maintenance fees. It's about $150 a year. We just take a credit card. We just tap it once a year. That takes care of property taxes, thinning, cleaning, anything that they have to do with the plantation. So $150 a year, your maintenance fee. But yeah, 6880 turns into 94,025 years. If teak continues to go up at 5.5% a year, the return would be better than that.   Keith Weinhold (00:32:16) - You probably have investors that come in oftentimes from North America, maybe some from Europe, and they see this as a really low cost of entry, $6,880 for one quarter acre parcel.   Keith Weinhold (00:32:29) - So are there any risks that one should consider? Therefore, if they're a first time investor abroad, maybe something they're not thinking about if they buy a rental single family home in their own hometown?   Michael Cobb (00:32:41) - Yeah. Very different. I mean, in some ways it's very different. In other ways it's pretty similar. Right. You're going to get title to the property. The process of getting title will be a little different. You're going to have to send in copies of your passport, a notarized utility bill. Just some things that you wouldn't have to do if you were buying a property in the States. But at the end of the day, you will get what's called Escritorio Publica public title. So it's a registered land deed. And so that part of it's all pretty similar risk factors. Absolutely. The business plan has them in there. But the big ones are any kind of disease. It's monoculture. So I mean a disease could come through and kill all the trees. Right. The good thing there is, again, teak has a 350 year track record of being managed and grown in plantations.   Michael Cobb (00:33:24) - So it has a long track record where they've kind of figured out, well, if this happens, then do this or if this pest comes along. This is how we, you know, we mitigate that, but nothing can mitigate all risk. That fire is an interesting one. Fire is a risk in the first three years of teak. So we call it baby teak. But once the tea trees are 3 to 4 years old, they're really above any kind of fire. Because you clean the plantation and the guys are in there with the machetes chopping to keep the, you know, the brushed and grass down in the dry season, which, by the way, you mention the qualities of teak, the hardness of teak is actually the most. Prized quality. And so the hardest of the teak that we get will actually be taken and sold as marine lumber, which is an unbelievable differential in price. But only 5 to 10% of your teak would qualify as marine lumber. So it's a small percentage, but the value of that is very, very high because it's set to hardwood.   Michael Cobb (00:34:20) - But the rest of the tree is also likewise very hard. The dry season is what cures the teak. And so in the dry season teak drops its leaves. And so it's very resistant to fire. If you do good maintenance on the plantation, we do so fires only a risk really in the first three years. And we actually warranty the trees of a fire comes through. In the first three years. We replant the plantation for any parts that are burned. So there's sort of a warranty that comes with the first three years. I mean, the other risks are political risk. What if Panama goes off the rails? The good thing about Panama, it's got the canal. And that is a major, vital strategic US interest. I just don't see the US letting Panama kind of go off the rails. But it could. But those I think are the three what I would call main risk factors. And we mitigate those to the best way possible.   Keith Weinhold (00:35:13) - You heard Mike mention about the thinning and cleaning. Yes, there is ongoing management, but that is already handled and taken care of in any of the prices that you already mentioned.   Keith Weinhold (00:35:24) - Is that right, Mike?   Michael Cobb (00:35:25) - Yeah, correct. And we outsource to a company called Geo Forest. All Geo Forest, all. They've been our plantation manager from since 1999. And and they're phenomenal. What they do, their world class. They've been doing it for longer than 25 years, maybe 30 years at this point. But we outsource what we have to outsource because we're not management plantation managers. So we can find folks that are.   Keith Weinhold (00:35:47) - The same property manager for a quarter century, a property manager that actually doesn't get fired. Hey, that's a novel concept. Two times two is what some investors back here in the U.S. are thinking with their residential real estate investments. If you want to learn more about this investment, I encourage you to check it out. You can do that through Gray Marketplace at Gray marketplace.com/teak. Mike, do you still offer tours.   Michael Cobb (00:36:16) - Oh my goodness yes. And I hope that you will take us up on the opportunity to come down and see the dairy and province. But yes, we do.   Michael Cobb (00:36:24) - And I don't know the dates off the top of my head, but for folks who are interested, uh, two things. One, we actually run a tour that's fun because it's a group of people and it's just, you know, you come down and you do it. But if somebody says, hey, I can't make those dates, but I want to come see the trees. Yeah, it's very reasonable. I think it's a couple hundred bucks. They pick you up at your hotel, they'll run you out to the plantation, bring you back. But it's a whole day. I mean, it's four hours outside of Panama City and four hours back, so it's a long day. And if it's a couple, it's still 200. It's basically for the vehicle out and back. Right? The driver and the vehicle. So you can come anytime or you can come with a group. And if you come with a group there is no charge. I mean, we get the van or the bus and we pay for it all.   Michael Cobb (00:37:03) - And yeah, we make peanut butter and jelly sandwiches and we have fun.   Keith Weinhold (00:37:07) - All right. Well, I think people have probably covered for the tea more than the sandwiches, but that is a nice touch that you do for people because you do that whether someone is a great investor or not, whether they haven't invested at all yet, and they just want to go ahead and check it out. And you can learn more about those dates at GR marketplace.com/teague Mike, it's always such a fun chat to discuss something so exotic. It's been great having you back on the show.   Michael Cobb (00:37:34) - Nice to be back with you. I look forward to seeing you in Panama one of these days.   Keith Weinhold (00:37:43) - Trees grow through recessions, they grow through market cycles, they grow through Covid, and trees just keep growing through every single fed rate decision. The wealthiest families on the planet, the top 1%. They have locked up vast portions of their wealth for timeframes even longer than the 25 year peak harvest cycle. In fact, Harvard has fully 10% of its endowment, specifically in timber.   Keith Weinhold (00:38:11) - To follow up on what I asked earlier, as we're discussing non-residential real estate today, Earth's highest point above sea level is Mount Everest. The highest from base to peak is Monica. But Earth's highest piece of land, uh, the highest point is measured from the center of the Earth is Chimborazo Volcano, Ecuador. That's because Earth is not a perfect sphere. But there's an equatorial bulge. That's what I was climbing ten days ago. Earth's highest real estate, Chimborazo, was also there for the closest real estate to the sun and moon. But back down here at a lower elevation where the teak plantations are in Panama and Nicaragua, there are no loans for teak. But at prices under seven K, many GRI listeners have found that they don't need a loan and they have bought ten or more parcels. But you can buy as few as 1 or 2 a quarter acre teak parcels and then later cash it out for yourself or build that wealth legacy for your family. Kind of like the top 1%. If it sounds interesting to you, learn more.   Keith Weinhold (00:39:22) - Get started at GR marketplace.com/t. Until next week. I'm your host, Keith Wild. Don't quit your day dream.   Speaker 6 (00:39:34) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively. The.   Keith Weinhold (00:40:02) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Caeli Ridge recorded this episode on 2/20/2024 Remote Real Estate Investing : Pros, Cons & TipsCaeli details the Pros, Cons and Tips to Master Remote Real Estate Investing including diversifying portfolios, thorough research, build reliable local teams, embracing technology, finding reliable property managing partnerships and other topics! https://www.narpm.org/Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2024 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

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 Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:00) - 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.

Learn the pros and cons of bitcoin, the world's largest cryptocurrency. Bitcoin can be moved well across space and time. You can't move dollars over time due to inflation; you can't  move gold over space due to weight and security concerns. Real estate, bitcoin, and gold are all scarce and take real-world resources to produce. Bitcoin is a global digital currency that's decentralized. Nick Giambruno joins us to discuss why bitcoin has value today.  Since there can only be 21 million bitcoin, it cannot be debased like dollars are. By April, bitcoin will experience a halving. Rather than 900 new bitcoins brought into issuance daily, there will be 450.  The SEC's recent Spot EFT approval will give more investors bitcoin access. The higher the stock-to-flow ratio, the harder the asset.  What about governments shutting down bitcoin, regulating it, or taxing it to death? We discuss. Bitcoin price volatility is a problem in currency adoption. Lots of energy is used in bitcoin mining. But much of it is stranded energy. Bitcoin cannot produce income. Keith Weinhold stresses his preferred way to hold bitcoin. Timestamps: Bitcoin's value proposition (00:00:01) Keith Weinhold introduces the topic of Bitcoin's value and why it is relevant to a real estate show. Jamie Dimon's criticism of Bitcoin (00:05:27) JPMorgan Chase CEO Jamie Dimon expresses his disdain for Bitcoin and blockchain technology in a heated conversation. Bitcoin's resistance to debasement (00:07:19) Keith Weinhold discusses the resistance of Bitcoin to debasement and the skepticism of governments and financial institutions towards it. The origin and value of Bitcoin (00:08:18) Nick Giambruno, an international investor, explains the history and value proposition of Bitcoin, emphasizing its decentralization and resistance to debasement. Bitcoin's hardness and production rate (00:14:21) Nick Giambruno delves into the concept of Bitcoin's hardness and its production requirements, comparing it to other assets like gold and real estate. Bitcoin's upcoming halving event (00:16:28) Nick Giambruno discusses the significance of Bitcoin's upcoming halving event, which will impact its stock-to-flow ratio and reinforce its value proposition. Bitcoin's scarcity (00:19:42) Bitcoin's limited supply and its unique scarcity attribute, compared to other commodities like gold. Upcoming halving event and Bitcoin ETF approval (00:20:53) Discussion on the significance of the upcoming halving event and the approval of a new spot for Bitcoin ETF, indicating the growing acceptance of Bitcoin. Bitcoin as a currency and value proposition (00:22:42) The value of Bitcoin as a currency for transferring value and its resistance to debasement, emphasizing the importance of self-custody of Bitcoin. Global adoption of Bitcoin (00:24:30) Comparison of Bitcoin adoption in different nations, highlighting the potential benefits for early adopters and the impact of Bitcoin on the world's financial landscape. Bitcoin's market potential and investment consideration (00:27:27) The potential market share of Bitcoin in the global economy and the consideration of Bitcoin as an investment asset. Government's ability to regulate Bitcoin (00:34:11) Discussion on the government's potential regulation and taxation of Bitcoin, emphasizing the power of economic incentives and Bitcoin's resilience to government intervention. Bitcoin's uniqueness and credibility (00:36:12) Differentiating Bitcoin from other cryptocurrencies, highlighting its credibility and resistance to change, making it the real innovation in the crypto space. Bitcoin as a Store of Value (00:37:55) Discussion on Bitcoin's role as a store of value and its comparison to gold. Bitcoin as an Emerging Form of Money (00:38:25) Explanation of Bitcoin as an emerging form of money and its distinction from established money like gold. Bitcoin's Transaction Network and the Lightning Network (00:39:37) Explanation of Bitcoin's transaction network, scalability, and the use of the Lightning Network for smaller transactions. Earning Income from Bitcoin (00:41:40) Discussion on earning income from Bitcoin through related companies, dividends, and caution regarding Bitcoin lending services. Bitcoin Exchanges and Custody (00:44:20) The importance of custodying your own Bitcoin and the risks associated with centralized Bitcoin exchanges. Connecting with the Guest (00:45:13) Information on how to connect with the guest and access a helpful Bitcoin guide. Bitcoin's Energy Use and Price Volatility (00:46:01) Insights into Bitcoin's energy use, price volatility, and the use of stranded energy sources by miners. Real Estate vs. Bitcoin (00:47:04) Comparison of real estate as a wealth builder with the merits and risks of owning gold and Bitcoin. Disclaimer and Conclusion (00:47:54) Disclaimer about the content and a conclusion to the episode. Resources mentioned: Show Page: GetRichEducation.com/488 More on Nick Giambruno: FinancialUnderground.com For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to 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.   Keith Weinhold (00:28:29) - 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 W2 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.   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.

Caeli Ridge recorded this episode on 2/6/2024 When is the Right Time to Refi? Let's do the Math! In today's call Caeli discussed the things you should be looking at when you are deciding whether or not to refinance your property. She outlines the checklist that she would recommend you doing before making your decision, to cover all of your bases and make sure that the math is adding up to be the shortest amount of time to recapture your costs in the process. Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2024 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Caeli Ridge recorded this episode on 1/23/2024 Guest Speaker Sam Parker with My Credit Guy Sam Parker of My Credit Guy joins the podcast today to talk about credit, credit repair, the percentages of the different points that make up your credit score, and some really interesting tips and tricks of the trade for building your credit and maintaining a high credit score while investing in real estate. Sam & Caeli have some great Q&A where Sam details a few things you can do to improve your credit score, and how his company can help you in achieving better credit scores by following their personalized guides. Sam also shared with us his website where he partners with Experian, creditsitter.com You can find Sam at mycreditguy.com or www.team-parker.com Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2024 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Has America already descended into a depression worse than the 1930s Great Depression? Today's guest, Doug Casey, suggests that we have. He joins us from Buenos Aires, Argentina, where inflation has been 100%+. Is real estate cheap, adequately priced, or overpriced? America's national debt is so bad that we must now spend $1T annually just on the interest alone.  Keith Weinhold and guest Doug Casey explore the silent economic depression in America, discussing signs and impacts on daily life.  They compare real estate affordability across locations, viewing housing as a consumer good. Doug offers insights on Argentina's housing market, inflation, and the new president's influence.  They critique government intervention, fiat currency, and advocate for gold-backed currency, emphasizing moral values.  Strategies to counter currency debasement, like investing in durable goods and property improvements, are shared, alongside the benefits of spending on experiences and potential tax advantages of real assets. Timestamps: The silent economic depression (00:00:00) Discussion on the concept of a silent economic depression and how it may be affecting America. Real estate and property management issues (00:02:32) An unusual property management incident and the impact of inflation on real estate in Argentina. The guest's background and consistency (00:03:53) The guest's background, consistency in views, and a discussion on diverse viewpoints. Comparison of housing costs (00:04:59) Comparison of housing costs and other expenses between the Great Depression era and the present day. Real estate in the United States and Argentina (00:06:08) Comparison of real estate prices and living expenses in the United States and Argentina. Housing as a consumer good (00:09:29) Discussion on housing as a consumer good and the impact of government policies on housing and wealth creation. Comparison of housing costs and amenities (00:10:56) Comparison of housing costs, amenities, and political changes in Argentina. Impact of inflation on standard of living (00:14:37) The impact of inflation on capital, standard of living, and the unsustainability of the current economic situation. Government deficits and inflation (00:18:05) Discussion on government deficits, inflation, erosion of the middle class, and the role of the government in creating inflation. A Currency and Gold (00:20:22) Doug Casey discusses the benefits of using gold as currency and the potential impact of government involvement. Investing and Loans (00:22:42) Keith discusses investing in real estate and loans, providing insights and tips for beginners and veterans. Government Numbers and Inflation (00:24:54) Doug challenges the accuracy of government unemployment and inflation figures and predicts higher inflation levels due to excessive money creation. US Involvement and Financial Meltdown (00:27:57) Doug discusses the impact of US military involvement, potential financial meltdown, and the unstable foundation of global debt. Strategies to Counter Currency Debasement (00:32:05) Doug presents the concept of saving in durable goods as a strategy to counter currency debasement and avoid capital gains tax. Beating Inflation (00:34:41) Keith proposes spending money as a way to beat inflation and improve quality of life, while Doug emphasizes the importance of saving for the future. Doug Casey's Novels and Publications (00:36:44) Doug promotes his novels and encourages listeners to subscribe to internationalman.com and watch his YouTube channel for more insights. Improving Quality of Life and Beating Inflation (00:38:03) Keith suggests making improvements to one's home as a way to beat inflation and improve quality of life, without incurring higher tax assessments. These are the timestamps covered in the podcast episode transcription segment, along with their respective topics. Resources mentioned: Show Page: GetRichEducation.com/485 Doug Casey's YouTube Channel: https://www.youtube.com/@DougCaseysTake Doug Casey's blog: InternationalMan.com Doug Casey on Donahue in 1980: https://youtu.be/uAk6_74m_kI?si=qeQw0404xcTIAsOU For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:00) - 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. 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How the tax benefit of doing this can offset capital gains in your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.   Speaker 4 (00:24:04) - This is Rich dad, sales advisor Blair Singer. Listen to get Rich education with Keith Winehouse. And above all, don't quit your day dream.   Keith Weinhold (00:24:22) - Welcome back to get Rich. And we're talking with Doug Casey, the international man, about the Greater Depression. That's really a silent depression as he sees it. And Doug, I want to know where you see us headed, because a lot of people see today unemployment under 4% in the United States, we have GDP growth that's decent. The rate of inflation is still higher than the fed target but has come down substantially. The Fed's even talking rate cuts this year. So where do you see this all headed with the silent depression.   Doug Casey (00:24:54) - First of all, it's a big mistake to trust the government's numbers. If you look at the way the government computed unemployment and the way it computed inflation back in 1980, it's very, very different from the way these numbers are computed today. And if you computed them the way they did way back when in 1980, you'd find that our current unemployment is something more on the order of 10%, and current inflation is not I don't know what they say.   Doug Casey (00:25:27) - It is not 2%, 3%, 4%. It's also more like 10% or more. But with the amount of money that they've created, I mean trillions of dollars that have been cranked out of Washington in recent years. I expect we're going to see inflation go back to much, much higher levels. There's no limit to how bad it can get. And since the government has promised all these things to various pressure groups in the US, they have to be paid. The taxes aren't there to do it. The borrowing they can't borrow anymore, especially as interest rates go up. And incidentally, I point out that because of the debasement of the currency, that's a better phrase to use than inflation. The basement of the currency is an actual thing that's done by the government and its central bank, whereas inflation people think, well, maybe inflation falls on the butcher or the baker or the gasoline maker. No it's not. Those people fight the effects of inflation. Inflation is something that comes out of Washington because the government has all these pressure groups that get all kinds of benefits.   Doug Casey (00:26:43) - They're going to have to keep printing up money to pay for these things, and you're going to wind up in the same position as Argentina has wound up. In fact, it's going to be worse because unlike Argentina, which doesn't have any foreign involvements, they had a war with the Falklands 40 years ago. But there's basically no Argentine Army. There's no Argentine Navy to speak of. But the US has 800 military bases scattered all over the world. They're very expensive to maintain. The natives aren't particularly happy to have foreign soldiers in their lands. In addition to the war in the Ukraine, why were involved in a border war between two countries is a mystery to me. And now we have Israel and Gaza dusting it up. Literally, I feel sorry for both sides, but on the other hand, I don't epoxide both their houses. It's not our problem. This has been going on between these people for 2000 years, and the US getting involved in it is going to add on to our ongoing bankruptcy and maybe start World War three.   Doug Casey (00:27:57) - There's new wars popping up all over the world that are going to cost us huge amounts of money. And of course, the Defense Department spends giant amounts of money building high tech toys, which are basically useless in today's military world. It goes on and on. It's a big problem, and I suspect we're going to reach a crescendo by the 2024 election, assuming we have one. I don't know who's going to win that election if had anybody, quite frankly. So it's we're looking at chaos, political chaos, economic chaos, the potential for a financial meltdown because the whole world is built upon a foundation of debt, which is a very unstable foundation to build things on. And of course, you've got all kinds of sociological problems, starting with total and absolute corruption of the US educational system, which is spread like poison throughout society. We're seeing that now, incidentally, with the presidents of Harvard and Penn, MIT, but all of the higher educational institutions in the US suffer from the same problem. This is like a many headed hydra.   Doug Casey (00:29:10) - Where are we going to take any one instance of a problem in society? And when we examine it, you find that it's even worse than you might think. Like I was talking about education. Your kids are being indoctrinated a great cost. I think it's the University of Michigan has 161. I believe that's the number for the University of Michigan D administrators. That's the diversity, equity and inclusion administrators. All are earning over six figures. And what are they doing? Well they're justifying their positions by doing absolutely ridiculous things in education that shouldn't be about educating as opposed to. Enforcing somebody's goofy ideas of diversity and equity and inclusion. So anyway, we've got lots of problems beyond real estate and beyond the high level of rent that people have to pay today. But listen, it's so hard to build a new house. God forbid, build a new apartment building today by the time you jump through all the hoops. Local. County. State. Federal. The cost of construction is probably twice what it should be.   Doug Casey (00:30:21) - Because of inflation. Because of regulations. I hate to be so gloomy, Keith, I do, but.   Keith Weinhold (00:30:28) - Well, there's a lot there. We talk about diversity. We're in an era where people are very conscious of that. But a lot of people think of it with regard to race or gender or perhaps religion. But I like to champion diversity of thought as well. And then when it comes to we.   Doug Casey (00:30:44) - Don't have any of that anymore.   Keith Weinhold (00:30:45) - Yeah, yeah, that's for sure. But when it comes back to the root of productivity, I think that's really important because whether the government gives away money to programs in the United States or outside the United States to Ukraine or Israel, whether you believe in that or not. And a lot of the giveaways have been in the hundreds of billions of dollars to those nations were now running a national debt of over $34 trillion. And my point is, is that the United States doesn't produce as much as they used to. However, the United States produces a lot of dollars and a lot of debt.   Keith Weinhold (00:31:17) - And when the government has giveaways, either domestically or internationally, a productive person is the one that has to end up paying for that. So, Doug, we think about a lot of the problems out here, much of it coming back to the root of inflation. But you tell us more about what can be done. In fact, I know you have a practical, common sense way where you don't save in dollars. You and I have talked before about how real estate or gold can give you a hedge or even help you profit against inflation, but you've talked about the importance of real material things, like food that you can store, or light bulbs that you can put away, or tools that you can use because you're also not taxed on those sorts of things. So can you tell us more about that?   Doug Casey (00:32:05) - There was a book written years ago, and it's still available on Amazon by an old friend of mine named John Pugsley, and the book's name was The Alpha Strategy. The point that John made in that book was that rather than trying to save in dollars, you should save in things that have a long shelf life that you're going to need and use.   Doug Casey (00:32:30) - So, for instance, if light bulbs common thing, they burn out if you wait until there's a sale on light bulbs. Get them cheap. Buy them in quantity, buy them extra cheap, put them aside. You're not going to have to buy a light bulb forever. Whereas if you don't plan ahead and do it that way. If your light bulb burns out, you don't have one. You got to get in your car or in gasoline. Buy it at the convenience store where it's going to cost you. License much, and you can do this with many areas of your life planning ahead. In other words, this is a variation, if you would on the old Mormon idea. A lot of people are aware that Mormons or their religion tells them that they should put aside three months or a year worth of food, and it's storing food which is properly canned and so forth, so that no matter what happens, they'll always be able to eat. Well, the alpha strategy is something that you take that attitude towards food and you apply it to all the consumable things that you have in life.   Doug Casey (00:33:37) - And as they go up in price, lightbulbs go up from $1 to $5. With inflation, if you made an investment that kept pace $1 to $5, you'd have to pay capital gains tax on it. But you don't on the consumable that you put aside. So, I mean, this is just one of a number of strategies that you can use to counter the effects of currency debasement.   Keith Weinhold (00:34:03) - I love that as a strategy on what you can do. You are not taxed on the gain in price or value of an entire pallet of food or tools, like a tractor or ladder or table saw. So it's a really elegant way to beat inflation. Doug, I have an idea, and it might not be one that you heard before. It might even make the listener laugh a little bit. Here. I have an elegant way to beat inflation and improve your quality of life at the same time. And it's something really simple. And that solution is to spend your money. It's an elegant way to beat inflation and improve your quality of life.   Keith Weinhold (00:34:41) - At the same time. If a mediterranean cruise for you and your wife is going to cost $18,000 this year, and you think it's going to cost $22,000 next year, spend beat inflation and get an experience that you'll never forget that as long as you've got something set aside already spend, it's a way to beat it and live a better life.   Doug Casey (00:35:01) - I can't argue with that case. But on the other hand, it's wise to put aside capital for the future, because once you consume that grows, the capital is not there anymore, and you may need it in the future. But this is one of the problems created by currency debasement. People start thinking in terms of live for today, because tomorrow we might die with their money, and that's not a good way to get wealthy. Although it's true, you do beat some of the effects of currency debasement that way.   Keith Weinhold (00:35:34) - Yeah, if there were no inflation, there would be less incentive to do something like that. In spend would also be less incentive to invest.   Keith Weinhold (00:35:41) - But Doug, you've given us a lot of good ideas today for this creeping of the silent depression fueled by inflation and some actionable things about what we can do about it. Give us any last thoughts and then how our audience can learn more about you.   Doug Casey (00:35:56) - I've written a series of novels. Well, they're quite well written that explain a lot of these principles in the form of an exciting story. They're called speculator, where our hero, uh, gets involved in gold mining in Africa and a bush war and so forth, and it becomes a drug lord. Or we show a drug lord can also be a good guy, and then he becomes an assassin because he's so pissed off. There are four more novels to come. So I suggest people go on Amazon, pick up those three novels that are out there. That's one thing they should do. Second thing, I'd encourage you to go and subscribe to International man.com, and you'll get a great free daily blog from me and other people. It's really a good publication.   Doug Casey (00:36:44) - And the third thing on YouTube is we have Doug Cassie's take where once or twice a week I, uh, talk about different subjects.   Keith Weinhold (00:36:54) - Though our subject is depression, our conversation has not been thoroughly depressing. So thanks so much for coming back out of the show.   Doug Casey (00:37:02) - I see you again, Keith.   Keith Weinhold (00:37:10) - Well, you might wonder what kind of prepper weirdo is going to save a bunch of durable goods like tires or crescent wrenches, or even store an extra car, or a few extra cords of firewood that may or may not be feasible for you, some of it having to do with your storage capacity, whether you live urban or rural. But what you can do if you're really concerned about persistent inflation is to beat it by making improvements to your own home, and you can do that sooner rather than later. And see, that way you might actually get to enjoy the item and integrated into your lifestyle. For you, that might mean getting yourself new windows, or a new water heater, or renovating a bathroom, or remodeling the kitchen.   Keith Weinhold (00:38:03) - And if you can avoid activities, though, that create a higher tax assessment, then you will not get taxed on those real assets, all while improving your quality of life at the same time. So there's an idea, some real guidance, spurred from today's chat with Doug Casey. Big thanks to him. Next week, I'll tell you more about the weird problem with my rent payment that was stolen from my property manager and what I'm going to do about it. My manager says he's not taking the loss. I'm not taking the loss either. Interesting stuff. Until then, I'm your host, Keith Weintraub. Don't quit your day dream.   Speaker 5 (00:38:44) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively. The.   Speaker 6 (00:39:12) - The preceding program was brought to you by your home for wealth building.   Speaker 6 (00:39:16) - Get rich education.com.

If you've been thinking about buying a house in 2024, you already may be too late. With mortgage rates dropping, listings increasing, and spring buying season only a short couple of months away, NOW is the time to act before bidding wars start up again. With so much pent-up buyer demand, agents and lenders are already seeing a spike in activity, and we haven't even gotten to spring. So, if you want to know how to buy a house in 2024, even with fierce competition, we're here to help. Avery Carl, short-term rental expert and agent, and Caeli Ridge, President at Ridge Lending Group, join us to talk about what they're seeing in the market NOW, what their housing market predictions are as buying season heats back up, and whether or not now is even the time to buy. Both Avery and Caeli work heavily with investors, so they know what does and doesn't work when buying a rental property, NOT just a primary residence. We'll touch on the hottest markets that could see the most competition, why rookie investors need to snap out of analysis paralysis to win in 2024, and why this buying season could become red-hot in just a few months. Plus, David and Rob will answer a listener's question about how to win in a competitive market without having the highest bid. In This Episode We Cover: “Buying season” and why spring 2024 could bring back the hot housing market  Most active real estate markets that are seeing inventory fly off the MLS Why mortgage rates are NOT as important as you think they are The “great stalemate” and what could cause homeowners to finally list their houses Whether to buy or wait and the risk of holding out for lower mortgage rates How to beat other buyers when bidding for investment properties And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Expand Your Investing Knowledge With the BiggerPockets Books Be a Guest on the BiggerPockets Podcast Ask David Your Question David's BiggerPockets Profile David's Instagram Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Ask David Your Seeing Greene Question 5 Steps to Get ANY Home Offer Accepted (WITHOUT Being the Highest Bidder) Why Investors Are Giving Up Their “Golden 4% Interest Rates” w/Caeli Ridge Federal Housing Finance Agency Connect with Avery and Caeli: Avery's BiggerPockets Profile Avery's Facebook Avery's Instagram Avery's LinkedIn Avery's Website Caeli's BiggerPockets Profile Caeli's Instagram Caeli's LinkedIn Caeli's Website Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-869 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

Yes, simply "five". The number "5" has remarkable symbolism on both real estate investing the GRE way, and elsewhere in your life pathway. See how real estate actually performed when compared to other asset classes in the past year: stocks, gold, bitcoin, and bonds. Everyone knows that some commercial real estate is sagging, like office. Industrial is steady. Retail is actually booming. Recession predictions were so bad. In the past year, we had low unemployment, rising GDP, solid corporate profits, and inflation fell.  I explain what an inverted yield curve means and why it matters to you. Not only does “Real Estate Pay 5 Ways”, but the number “five” often has significance in both symbolism and numerology. Using a $40K down payment on a $200K property, I add up how “Real Estate Pays 5 Ways” and sum a lofty 46% total rate of return with today's real-life numbers.  We have available inventory of income property. If you're ready to buy, contact our Investment Coaches. It's free at www.GREmarketplace.com/Coach GRE Marketplace properties are less expensive because: there's no agent to compensate, selective investor-advantaged markets, and not dealing with owner-occupant emotions. Timestamps: Asset Class Performance (00:01:25) Comparison of various asset class performances in the past year, including stocks, global stock markets, bitcoin, treasury notes, gold, and residential real estate. Inverted Yield Curve Explanation (00:07:47) Explanation of an inverted yield curve, its significance as a predictor of economic downturn, and a simplified example to illustrate the concept. Five Ways Real Estate Pays (00:12:18) Discussion of the five ways real estate provides returns to investors: appreciation, cash flow, return on amortization, tax benefits, and inflation profiting, with a focus on the symbolic significance of the number five. Real Estate Returns Calculation (00:18:49) Illustration of a simplified method to calculate the total return on investment from a real estate property, covering appreciation, cash flow, return on amortization, tax benefits, and inflation profiting. Investment Opportunities (00:16:23) Promotion of investment opportunities with Ridge Lending Group and Freedom Family Investments, emphasizing the potential returns and benefits of investing with them. Upcoming Episodes and Conclusion (00:17:44) Teaser for upcoming episodes featuring investment coaches and discussions on property tax, and a conclusion expressing the significance of real estate returns and investment. Replacing Toilet Flappers and Spackle (00:23:56) Discussion on conservative estimates, tax benefits, and property management costs in real estate investment. Visual Explanation of Five Ways (00:25:09) Explanation of the five ways real estate pays returns and the simplicity of real estate math. Introduction to Get Rich Education (00:26:17) Overview of Get Rich Education's history, team, and independent voice in the market. Real Estate Market Inventory (00:28:40) Discussion on the slowing real estate market, available inventory at GRE marketplace, and the importance of free coaching. Ethical Use of Other People's Money (00:29:51) Explanation of the formula for starting or growing a portfolio of buy-and-hold properties, emphasizing the use of a small down payment. Benefits of Off-Market Properties (00:31:13) Explanation of competitive off-market property prices and the advantages of buying direct, investor advantage markets, and property management solutions. Safeguards in Property Purchase (00:33:57) Importance of property inspection, lender appraisal, and independent third-party property inspection in property purchase. Free Coaching and Financial Readiness (00:35:03) Emphasis on the free coaching at GRE marketplace, the absence of upselling to paid courses, and the importance of financial readiness before investing. Disclaimer and Host Information (00:36:05) Disclaimer regarding the content of the show and information about the host operating on behalf of Get Rich Education LLC. Resources mentioned: Show Notes: GetRichEducation.com/483 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1 (00:00:00) - Welcome to GRE. I'm your host, Keith Weinhold. I compare real estate to how other asset classes have performed. Give you a simple example to help you understand an inverted yield curve. Describe the significance of the five in your life. Then help find a match with the right income property for you today and Get Rich Education. If you like the Get Rich Education podcast, you're going to love art. Don't quit your day dream newsletter. No, I here I write every word of the letter myself. It wires your mind for wealth. It helps you make money in your sleep and updates you on vital real estate investing trends. It's free! Sign up and get rich education.com/letter. It's real content that makes a real difference in your life, spiced with a dash of humor rather than living below your means, learn how to grow your means right now. You can also easily get the letter by texting gray to 66866. Text gray to 66866.   Speaker 2 (00:01:09) - You're listening to the show that has created more financial freedom than nearly any show in the world.   Speaker 2 (00:01:16) - This is get rich education.   Speaker 1 (00:01:25) - Welcome to GRE. From Johannesburg, South Africa, to Mechanicsburg, Pennsylvania, and across 188 nations worldwide. I'm Keith Weinhold and you're listening to Get Rich Education. This is where your educational major is real estate investing. And your minors are in real estate economics and wealth mindset. That's what we do here. It all culminates with your doctorate in financial freedom. Before we talk about real estate, we recently had a year that just ended. And to know their real estate is the right place for you long term at times, especially after a year ends, we need to compare that to other asset classes. So what actually happened last year? Elsewhere in the investing world? Stocks, the S&P 500 was up 25%, even though for most of it invest in stocks, you're only paid one way, not five ways, but still 25%. That's a pretty healthy return on tech companies accounted for most of the gains, yes, what they call the Magnificent Seven that is putting the team on its back.   Speaker 1 (00:02:33) - Yeah, these are the seven tech mega caps Microsoft, Apple, alphabet, Nvidia, Tesla, meta and Amazon. They surged more than 75% last year, while the other 493 companies in the S&P 500 have gained just 12%. Yes, the Magnificent Seven now accounts for nearly 30% of the index's entire value. That's per the Wall Street Journal. And speaking of the S&P 500, it just added a prominent new member a few weeks ago, and that is Uber zooming outside, the United States, global stock markets had their best year since 2019. Bitcoin was up 157%. Yes, you heard that right. 157 as the crypto winter thawed out last year, the yield on the ten year Treasury note was up just eight basis points. That's virtually unchanged. Very little movement. And see, that's also why mortgage rates ended the year at the same level they started at, which is near 6.5%. That is because mortgage rates track that ten year note. Gold was up 11%. And here in residential real estate it was up 4%.   Speaker 1 (00:03:51) - That's on the median price of existing homes. But it's only through November, not the full calendar year. Yes, real estate is such a laggard with reporting statistics. So almost everywhere y'all look prices are up up, up. Yes. It's not just for those essentials on your last grocery store run where they're up okay. The value of your assets fortunately is up too. And really, one of the few places that pain was felt was in the commercial real estate market. I think you know that. But let me tell you how that pain is positioned to get even worse shortly here. All right. U.S. office vacancy rates hovered around 20% last year. Now, that's a rate that was actually worse than during the 2008 financial crisis. More companies told workers, hey, get back to your desk, okay? Calling workers back to the office at Salesforce, Amazon, Blackrock. But still, card swipe data in America showed that only about half as many people are making the trip into the office compared to pre-pandemic numbers.   Speaker 1 (00:05:03) - And you've got some companies like meta, the parent of Facebook and Instagram, they're getting creative and actually subleasing their office space to other tenants. But not all commercial real estate is struggling. The retail vacancy rate fell to just 4.8% last year. Retail is not dead, and that retail vacancy rate, that is actually the lowest in 18 years since the real estate firm CBRE started tracking it. And big box stores and malls, shockingly, are. So back. There's also a big real estate demand for warehouses, data centers and industrial space, thanks to the recent surge of AI and that pandemic induced e-commerce boom. But we probably haven't seen the worst of it yet because, okay, within the next four years, about two thirds of commercial real estate loans will likely be refinanced, with interest rates much higher than they were the first time around. The last thing that we have to recap for you that we learned from last year is all of those god awful, dreadfully wrong predictions. A recession. So many predictions were so wrong.   Speaker 1 (00:06:27) - Instead, we had historically low unemployment and solid corporate profits. Inflation fell. Now there is one prominent financial media platform, one of the nation's biggest. I won't mention their name, though you've surely heard of them. This agency gave zero room for any other outcome because they predicted a 100% chance of a recession last year. 100%. All right. They really look wrong. Although let's be mindful, technically, due to a statistical lag, we often don't know if we are in a recession until after the fact. But if you think that we were late last year, understand though, not absolutely everyone was a Debbie Downer, say back in late 2022, let's give some credit where it's due. Moody's Analytics chief economist Mark Zandi, he was one of the few experts who kept the faith for a soft landing. He pointed out the recessions typically come out of the blue, and that there was a good chance the fed would get inflation under control without taking the economy. Now, one condition that a lot of people pointed to saying that a recession should be here by now, is that dreaded condition that you probably heard of? Maybe.   Speaker 1 (00:07:47) - Maybe not. But that is known as an inverted yield curve, which is deemed as a harbinger of bad things to come, usually recession. Okay, now that phenomenon inverted yield curve. That sounds intimidating. I think when you hear that. Okay. And what that means in inverted yield curve is that the interest rate on long term bonds is lower than the interest rate on short term bonds. And that that right there is what's often a bad sign for the economy. Now, if what I just said right there kind of makes you scratch your head and say to yourself, what was all that gobbledygook again? And why does it matter? Why don't I give you a simple example of an inverted yield curve? Then you can actually remember. What I'll do is make this personal to you. A bond is just a fancy name for a loan. Let's say that you need a loan for $10,000, and you've got this great friend, a lifelong and trusted friend, and he will let you borrow the money from him.   Speaker 1 (00:08:56) - Now, if you take out the loan and tell him that you'll pay him back as quickly as next week, which is our short term bond. In this example where your friend might not charge you any interest on the loan at all, then just say that he wanted you to pay him a small 1% interest rate. Okay, see, your rate is low because there's not that much risk for him since you'll pay him back next week. That's not too long for him to wait. But say that you want to take the same $10,000 loan from that friend, but you're going to pay him back for ten years. An entire decade? Well, for him to want to make you that loan, he's going to need to get compensated more with a higher interest rate for the heightened risk in that long payback period. Okay, what if you move or if you aren't even alive in ten years? All right. That entails more risk for him, the lender. So therefore your loan comes with a 10% interest rate that you've got to pay your friend.   Speaker 1 (00:09:57) - This is analogous to the long term bond. All right right there I've just explained the normal yield curve condition right there. That's normal. The longer someone lends money out for to you, the more that they must get compensated. And that should make sense to you that that is a normal world. One week was 1% interest, one decade was 10% interest that you'd have to pay. That's normal. However, in inverted yield, curve simply flips that normal world upside down. It inverts it. It's the opposite of the arrangement that I just described with your friend. So this is where the shorter duration that one makes a loan for the higher interest rate they're compensated with. See, that's a weird world. That's an inverted yield curve. Because if your friend thinks that the world is going to crash soon with a recession or a depression, or Earth gets hit with an asteroid soon, well, then he'd want high compensation, even on a short term, week long loan, because freakish things are happening. And that's an inverted yield curve.   Speaker 1 (00:11:10) - And that's why having one like we have recently signals something dire, like a recession coming to many. Now, at the top of the show, I talked about the returns of various asset. Over the past year. Of course, that is only in terms of capital appreciation. That's all that most investors think about simply, did it go up or did it go down? It's an important question, but around here we know that real estate is a special asset class because when it's bought, right, it can pay you five ways at the same time. When it comes to the numbers, that number five, that is symbolic of why we do what we do here at gray. So let me talk about really, the existential and symbolic virtues that resonate with you across your life and the meaning behind that special number five. And it's about more than our real estate pays. Five ways, which is any listener knows is appreciation, cash flow, return on amortization, tax benefits, and then fifthly, inflation profiting.   Speaker 1 (00:12:18) - And I'm holding up five fingers right now, as I say this, according to numerology, the number five symbolizes freedom, curiosity and change, a desire to have adventures and explore new possibilities. But it signifies more than just high energy and excitement. In numerology, the five negative traits can include talking too much and overconfidence. Okay, that's what numerology says. Five ways real estate pays is a freedom formula. So that's actually numerology appropriate, I suppose. Now we don't do astrology or tarot cards here. Nothing hokey, concrete evidence though I will venture to guess that at least in some other facet of your life, five resonates with you. You've got five senses. Each one of your limbs has five fingers or five toes. In Christianity, there are the five wounds of Jesus Christ. If you're Muslim, there are the five pillars of Islam. Muslims pray to Allah five times a day. In Judaism, the Torah contains five books. Aristotle said that the universe is made up of five classical elements water, air, earth, fire, and ether.   Speaker 1 (00:13:41) - A lot of more popular folklore celebrates the five like Indiana Jones sort, the Sankara stones. They were five magical rocks. In music. Modern musical notation uses a musical staff made of five horizontal lines. Sports. The Olympic Games have five interlocked rings. When you shake hands to close your next real estate deal, you're each using those five fingers. In law, five is what renders a verdict. Five is the number of justices on the Supreme Court of the United States necessary to render a majority decision. There's a show on Fox called the Five and near the top of our Don't Quit Your day dream letter. We've got the five. Five is defensible in your investment fortress, just like the Pentagon is a five sided building in D.C. known for defense. Real estate pays five ways. And hey, even that phrase is five words. And it's a concept that was first introduced to the world right here on the Gerry podcast in 2015. So we're done with the touchy feely stuff, but look around five. It has a lot of meaning in your life.   Speaker 1 (00:15:02) - And in fact, the next time someone asks you why you're invested in real estate, hold up five fingers and confidently tell them that real estate pays five ways. What better way to affirm this than to come back with a concrete example shortly on how this helps you navigate toward financial freedom in your life, in ever changing real estate markets, we're going to use today's real life numbers in summing up the five. I hope you enjoyed me whipping around the asset classes in explaining what an inverted yield curve really means to you. More next, I'm Keith Reinhold. You're listening to get Rich education. Role under the specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's. Start your pre-qualification and chat with President Charlie Ridge personally. They'll even customize a plan tailored to you for growing your portfolio. Start at Ridge Lending group.com Ridge lending group.com.   Speaker 1 (00:16:23) - You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, six eight, six, six.   Speaker 3 (00:17:26) - This is Rich dad advisor Ken McElroy. Listen to get Rich education with Keith White.   Speaker 3 (00:17:32) - Hold and don't quit your day dream.   Speaker 1 (00:17:44) - Welcome back to get Rich education. I'm your host, Keith Wayne. Hold. You've been with me here every single week since 2014. A lot of you have anyway. You're listening to episode 483, and I'm deeply appreciative for you, the listener, coming up here on the show and in house chat with one of our investment coaches, Doug Casey, on the Silent Depression. And like I told you last week, soon, a return of Tom. We write when we discuss whether the US can just completely do away with and delete the property tax. Wouldn't that be amazing? Around here? We like to say that when we provide good housing to people, we can help abolish the term slumlord. But your real estate investing venture isn't solely altruistic. There are generous profits, too. And, you know, it's incredible to me how more real estate investors don't even understand the answer to basic questions like how do I get paid in? How much do I get paid, and where the sources of where that money comes from.   Speaker 1 (00:18:49) - And really, these are all huge reasons for why you and I are even investing in real estate at all. So I love doing this. Let's add up the five ways and come up with a total ROI. And it's always a little awe inspiring to do this, even with conservative numbers, to see how high your return gets. And let's use the year 2024 sort of numbers. And it's kind of funny in a sense. I dislike real estate elements where down the outside tenants might get difficult to manage on the inside, and you're certainly going to have some problems, including some weird problems along the way in your investor journey. So although in a sense I dislike real estate, rather I like what real estate does, for me, it's largely about those giant returns. So let me demystify real estate returns with a quick breakdown. And I think you know that the five ways are not for fix and flip property. This is just with buy and hold investing on a property that's ready to go, ready to be moved into turnkey.   Speaker 1 (00:20:03) - Here's a simplified method the concrete numbers. Right. Let's say that you make a 20% down payment. In this case that is a 40 K initial investment on a 200 K income property in just a year. Here's what can happen. The first way appreciation. You've got that initial property value of 200 K and appreciation rate of just 5%. Where your new property's value is now 210 K, you just experienced an equity gain of ten K divided by your 40 K initial investment. That is a 25% return to you just from the first of five ways you're paid. That is due to the magic of leverage, because you got the gain on both your down payment and the money that you got to borrow from the bank. The second way is with cash flow. Let's say your rental income is $1,600 a month, but things are running a little thinner on this property, and your expenses are $1,500 a month with the mortgage and all the operating expenses, that gives you leftover cash flow of only 100 bucks a month. That's 1200 bucks a year that's still divided by that same 40 K initial investment you made.   Speaker 1 (00:21:13) - All right. That is another 3% return to you. The third way you're paid is that ROA return on amortization. Also known as principal pay down. All right. Will you have a 160 K loan on this property? We'll use an 8% interest rate. So all you got to do is search for a loan amortization table, bring it up, and you'll see that you have a monthly principal reduction of about $110 a month. That is $1,320 a year that your tenant paid down, not you. So right here, your $1,320 equity gain is still divided by your same 40 K skin in the game down payment. That is yet another 3% gain. Then the fourth of five ways are your tax benefits. All right. Your property value is 200 K. That's how much your property is worth on the day that you bought it. And your building value might be about 70% of that. And the other is in the value of the land. So therefore you're building value. Or that improved portion of the property is worth about 140 K will annual depreciation is about 3.6% of that.   Speaker 1 (00:22:30) - That gives you a $5,000 tax depreciation benefit. If you're at the 25% tax rate, that's 1250 bucks a year divided by your same 40 K initial investment, that is another 3% return to you just piling on. And then the fifth and final way is your inflation profiting you profit from inflation as your debt gets debased by inflation. This is the least understood of the five ways you've got that 160 K loan amount at a 3% inflation rate. That gives you an annual debt debasement of $4,800, again divided by your same 40 K initial investment. This is another 12% return to you. All right. There we go. Now let's add up all of those ROI from the five ways real estate pays. You had 25% from appreciation plus 3% from cash flow, plus 3% from your ROA, plus 3% from your tax benefit, plus 12% from your inflation profiting that equals a 46% total ROI that you have from this property. I mean that right there. That is exactly why you're a real estate investor. That is exactly why I'm a real estate investor.   Speaker 1 (00:23:56) - What do you think it was for to replace toilet flappers and spackle? Drywall? Hey, this stuff's important, but I don't personally do it myself. That's the kind of stuff I dislike because I'm not good at it. Now, at a number of steps when I went through that, you'll notice that I was conservative or rounded down. I used an 8% mortgage rate and 3% inflation. Although there are numerous tax benefits, the only one I considered is tax depreciation. Your seller can often help pay your closing costs if you make a full price offer. So to keep it simple, I did not roll closing costs into that. See, all these numbers are realistic. While paying a property manager is accounted for. And as a reminder, that was only in year one. Your subsequent years returns. They are going to gradually diminish as equity accumulates in your property. And of course, that's an example. You are real life numbers. You're really going to be better than that or worse than that. And yes, we could get more precise numbers if we like, discuss numbers from 20 spreadsheets and really made your head hurt.   Speaker 1 (00:25:09) - But we're not going to do that. And you do enough years of this, and you're going to have hordes of people lurking in the viewers of your Instagram story about your latest month long vacation in the Maldives islands. Okay, now, if you need to see what I just explained visually and your newer to our platform and you haven't seen that yet, I also explain the five ways in a free mini video course so that you can really get a good look at all those numbers and where they come from. And you can get that at get Rich education. Com slash course. The cool thing about real estate math like I just did there is it simplicity. All we did there was addition, subtraction, multiplication and division. It real estate. I've never had to do trigonometry, calculus or use exponents. Okay, it's not about complicated maths. All it is is knowing what numbers to use. And in fact, that's probably why I'd expected. My skills are pretty rusty in calculus and trigonometry right now. I don't need to use that stuff.   Speaker 1 (00:26:17) - You can do all this with a pen and a napkin at. Lunch. And that is a big part of the beauty of this. So here at gray, we brought the world in awareness to this for about nine years now, and shortly after show inception, we helped lead you to the actual property addresses that are conducive to this because you kept asking me, where can I actually find properties, where this works? And then more recently, we added free coaching to help get you started or to help you get your next income property. And by the way, if you've ever wondered, there are eight of us that are here on the team at gray, and we often recruit new team members. We do that through our newsletter subscribers like you, because you already understand abundantly minded concepts like financially free beats debt free. We are not owned by any parent company. So when you tell a friend about the show or you interact with our sponsors, you're really supporting an independent voice here. And that's not to disparage the big corporate in any way.   Speaker 1 (00:27:26) - That's just simply not who we are. It was recently reported that Warner Brothers and Paramount are in early merger discussions. Well, gray won't be facing scrutiny from antitrust regulators anytime soon. And our sponsors, like you hear on our ads here during the show, they are ones that I use myself. We don't produce AI generated material here either. This is organic, original content, and a number of people on our team here have been with us for a while. Our investment coach Andrea since 2020, nourish since 2021, and our podcast Sound Engineer and has helped produce this show that you're listening to right now, every single week since episode three, in 2014, almost since inception, nine plus years now, Gray Marketplace is where you'll find the income properties for almost two years now. To make it even easier for you, you can even find and select from our two investment coaches on that page in order to help you out. And since our coaching is truly free, please respect their time. They're not there just to chat.   Speaker 1 (00:28:40) - It is for action takers now. Seven weeks ago, we did an episode here on how the real estate market is slowing it down. And of course, when we're talking about slowing down, the slow real estate market is in terms of the number of sales or the sales volume, not as many homes are transacting as usual. For one thing, there's always a lag around the holidays, but there's also an overall lack of American housing inventory, as you probably know well, I am happy to tell you that we do have inventory at GRE marketplace and a good selection. Everything from an older, renovated Ohio single family income property for a sales price of, say, 110 K to Alabama and new build single families for 300 K to Florida. New build duplexes for 500 to 600 K to four plex's for upwards of $1 million. If you want to benefit from everything that we discuss here on the channel, the actionable way for you to do that is with our free coaching. Yes, I'm talking about you. Make yourself that long term.   Speaker 1 (00:29:51) - Five ways profiteer. By not focusing on getting your money to work for you. That is a fixed mindset paradigm shift to ethically getting other people's money to work for you. Like we discuss here. That is, you simply put a small down payment on an income producing property. I mean, that's most of the formula right there. That's it. We're talking about how you can start or grow your own portfolio of buy and hold property, not fixing flips. It's often entry level property which is what makes a good long term rental property that's either already renovated or it is brand new. Oftentimes it's single family homes. Up to four plex is sometimes some apartment buildings. They're now a great marketplace. You can either shop off market property yourself, or have the free help of one of our great investment coaches. And your coach learns your goals, guides you, and makes it easy for you. They help you shop. The great marketplace properties, tell you where the real deals are nationally, and sometimes they tell you how to get improbably low mortgage rates when new home builders make those available, and your coach if you don't have one already, they give you the insights, the news on the latest good deals.   Speaker 1 (00:31:13) - For about a year now, a lot of new home builders have got to keep building and they have to keep moving properties to stay in business. So that's why amidst. Higher mortgage rates. You can get an interest rate for income property in the fives now because the builder buys it down for you and or even get a year's worth of free property management. Yeah, builders are often able to buy down your mortgage rate for you, because what they do is that they buy big chunks of money from lenders in bulk, where instead, if a lender does it directly with you, they have more documentation that they have to do with each individual investor for their smaller loan sizes. That's how builders are buying down your rate. They buy money in bulk from lenders. Now you'll see that grey marketplace properties are often less expensive than you'll find elsewhere. For properties that are turnkey and ready to be tenant occupied. Like this. Now, how are these off market property prices so competitive? Really? Where's the advantage come from here? Well, first of all, there is no real estate agent that the seller has to compensate with a traditional 5 or 6% commission.   Speaker 1 (00:32:30) - Instead you get to buy direct. Secondly, investor advantage markets just intrinsically have lower prices than the national median. They tend to be in the Midwest, southeast and Inland Northeast, and they come with a property management solution. And thirdly, the providers in our network, they're not mom and pop flippers that provide investors like you with just 1 or 2 homes a year. Instead, these are builders and renovation companies in business to do this at scale. So they get to buy their materials in bulk, keeping the price down for you. And really a fourth reason that you tend to find good deals at Gray Market Place is that you aren't buying properties from owner occupants where their emotions get involved, and they sometimes expect irrationally high prices for some offbeat reason because the living room is where they open their Christmas stockings every year for a decade or something like that. Now, just like buying your own home to live in, these income properties come with a lot of the same safeguards when you buy. We suggest that once your coach helps you make an offer and you're under contract for a property, that you have an independent third party property inspection done, and then the seller typically fixes any inspection findings for you at their expense, the seller's expense, before you close the deal.   Speaker 1 (00:33:57) - And we're talking about anything from a window that doesn't close properly to a faucet that drips. You want to have those conditions cured and taken care of before you buy. Now, as a buyer, it's not legally required that you do an inspection, but I recommend it even if it slows down your purchase process a little. Inspection is like cheap insurance for you. Don't rush that part as a condition of your mortgage lender giving you the loan, there will be an independent lender appraisal of the property's value before you buy. That part is mandatory. And this appraisal? It's another safeguard to keep you from overpaying. If you don't have an investment coach yet, it is truly free. They're there to help you out. Read a few sentences about each coach and pick the coach that you think resonates with you. Or just pick the one that you think has the best smile over there on that page. Uh, they are really well qualified. They have their MBAs, but more importantly, the coaches are relatable because they're active real estate investors themselves, just like I am.   Speaker 1 (00:35:03) - Coaching is truly something that's free. We don't try to upsell you to some paid course or some fee based coaching program later. There's nothing like that. So just create one login one time and connect with them at Gray marketplace.com. And it's really helpful if you're financially ready. First check with your mortgage loan company and get pre-approved unless you're paying all cash. Really? Today, with inflation about as little as you'd want to spend on a rental property, they won't give you an inordinate amount of problems. Is your 20% down payment on a 100 to 150 K property? Well, you should find this most helpful. You can get started with investor advantaged off market deals and investment coaches at Gray marketplace.com I'm Keith Reinhold. I'll chat with you next week. Don't quit your day dream.   Speaker 4 (00:36:05) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss.   Speaker 4 (00:36:20) - The host is operating on behalf of get Rich education LLC exclusively.   Speaker 1 (00:36:33) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Caeli Ridge recorded this episode on 1/2/2024 Creative Financing Strategies for Non-Owner Occupied Portfolios Caeli Ridge discusses some really creative options that Ridge Lending Group can offer as it relates to purchases and refinances. Ever wondered about some alternative ways to get funding for your next home or investment property? Tune it to hear about all that Ridge Lending Group offers! Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2024 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Is real estate cheap, adequately valued, or overpriced? I explore.  Everything considered includes: inflation-adjusted price, affordability, quality, and other nations' prices.  Stadium trends are affecting urban real estate. More plan to move outside of downtowns. I divide society into four groups of people. Then I discuss who is harmed by inflation and who benefits most: 1: The poor—lose 2: Paid-off homeowners—hedge 3: Mortgaged homeowners—hedge and profit 4: Mortgaged income property owners—hedge, profit, and increase income  Learn how to talk to your tenant so that they never think “How the Rent Stole Christmas”. It'll help ensure timely rent payments. Many tenants don't understand that you have a mortgage to pay. Finally, I reveal the exact percentage number that indicates GRE's 2024 National Home Price Appreciation Forecast. Timestamps: Real Estate Valuation and Gold Ratio (00:02:53) Explains the concept of using the home price to gold ratio as a measure of real estate value and compares it to the long-term average. Global House Prices (00:05:28) Discusses how US home prices are comparatively cheaper than those in other developed nations, such as Australia and Canada. Impact of Quality on Real Estate Value (00:06:40) Highlights the increase in home size, amenities, and safety features over time, suggesting that today's homes offer more value at a potentially lower inflation-adjusted price compared to the past. The trend of sports complexes with casinos (00:12:15) The speaker discusses the trend of building sports complexes with casinos, mentioning examples such as Mark Cuban's plan for a new Mavs arena and the proposed entertainment complex and casino next to Citi Field. The necessity of a second job due to inflation (00:13:36) The speaker explains why inflation makes a second job necessary, emphasizing the importance of investing money at a rate higher than inflation to maintain prosperity and quality of life. The four groups and their relationship with inflation (00:14:46) The speaker categorizes four groups of people based on their ownership of property and how they are affected by inflation, highlighting the benefits and disadvantages each group experiences. The Landlord-Tenant Relationship (00:24:22) Discussion on maintaining open lines of communication with tenants and addressing misconceptions about landlords being greedy. Explaining Property Expenses (00:25:37) Informing tenants about the various expenses that landlords have to cover, such as mortgage, insurance, taxes, and maintenance. Forecasting Home Price Appreciation (00:29:04) Discussing past predictions and forecasts for future home price appreciation, including insights from various agencies and factors influencing prices such as housing supply and interest rates. Home price appreciation forecast (00:35:22) Keith Weinhold discusses his forecast for home price appreciation for the next year, which he predicts to be 4%. Investment decisions based on forecast (00:36:51) Keith Weinhold mentions that people are increasingly making investment decisions based on forecasts, but reminds listeners that forecasts are not guarantees. Resources mentioned: Show Notes: GetRichEducation.com/481 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1 (00:00:01) - Welcome to 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.

Caeli Ridge recorded this episode on 12/26/2023 Risk Management: Understanding Through a Lenders Perspective Caeli Ridge will go through the understanding of risk management as it pertains to the lender, so that investors can have a better understanding of what is going on behind the scenes when it comes to investing in real estate. She will round out the episode by discussing the state of the market and what can be expected in the new year, 2024! Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2023 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

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 Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Today's episode is rated PG for personal growth. Most people just float through life with hopes and wishes that are never realized, because they never turned those ambitions into concrete goals. How do you get clarity of mission, vision, and values before you set the right goals for yourself? It's a transformative episode today with a terrific guest on get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text grey to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.   Keith Weinhold (00:01:18) - It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it. Text grey to 66866. Text grey 266866.   Corey Coates (00:01:36) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Keith Weinhold (00:01:52) - Welcome to GRE! From Toms River, New Jersey, to Hood River, Oregon, and across 188 nations worldwide. I'm Keith Weinhold and you are tuned in to get rich education. Now, why do you live the almost same routine that you live day in and day out? How are you spending your highest order in finite resource of your time? Maybe you're intentional, and maybe you don't really enjoy shoveling your snow or mowing your lawn all that much, but you do it just because it's the way that you've always done things, but at the cost of what higher order activities could you instead fill with that time? And that's exactly what a lot of people have never explored. I know that today's guest and I both admire the Robert Heinlein quote.   Keith Weinhold (00:02:40) - In the absence of clearly defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it. One other axiom that I find so frustratingly inconvenient, because it's simultaneously true, is that your growth happens outside of your comfort zone. So then you've got to get comfortable being uncomfortable. And once you do enough of that, you'll become so enamored of growth that you'll soon find yourself being uncomfortable when you get comfortable. The best version of you. It means constantly disrupting yourself. Well that's disruptive. Now, within real estate, I've had various goals, and you might too. If you work at a dissatisfying day job, you might have a passive cash flow goal through real estate so that you can replace your job income. That's a pretty common one. Now, when I made my first ever property, that first fourplex, I didn't have much of a financial goal then. I just knew that I was effectively living for free, supplemented by the other three rent incomes. And when I first bought that building, I didn't even know what cashflow meant.   Keith Weinhold (00:03:57) - But once I did snowballing my cash flows became a goal until I could use that to replace my day job. Once that was achieved, the goal became how many doors can I control? Because that's a measure of service and influence. And today, one strong real estate goal is reaching more people like you with this very show right here today, we're talking to an expert at setting goals and helping you live the life that you were meant to live. He has had a deep influence on me and my growth. In fact, if it weren't for him, Jerry might not even exist and you would not have even heard of me. That's how much. Let's talk about setting and achieving goals to get the outcome that you want for your life. Today's guest is a professional real estate investor with experience in nine states and six nations, and I have toured some of that property with him in person internationally. He is also taught real estate practices and appraisal at the college level, but you might know him as the host of the nationally syndicated radio show The Real Estate Guys, now in its 27th year of broadcast.   Keith Weinhold (00:05:10) - You know that I've recommended that show to you, the listener, today. It's great to give a warm welcome back to Robert Helms.   Robert Helms (00:05:19) - Hey, Keith. So good to see you.   Keith Weinhold (00:05:21) - Robert. It's good to see you too. But we're not here today to talk so much about real estate, because a lot of people use real estate to fuel their other goals in life outside the real estate world, you brought a keen awareness to the fact that most people just kind of go floating through life without any real direction. And I think we're all aware, Robert, that there is a gap between who we are and the most that we can be. So can you talk to us about how finding our trajectory can perhaps be an exercise in connecting these dots that we call goals?   Robert Helms (00:05:58) - Yeah, I love this topic, as you know, because if we're left to our own devices, human nature is we're just going to bounce from thing to thing, like a boat without a rudder. And we get excited about something and it's a shiny object and we go off and pursue that.   Robert Helms (00:06:11) - And maybe real estate is that thing for you. And then, you know, you've got all the rest of your life to contend with. And whether you're a full time real estate investor or a part time real estate investor, I've found that one of the great keys to be able to discipline yourself, to do the things necessary to get the results you want in your life, is to set goals. And goal setting is pretty simple, but at the same time, it's almost alarmingly simple because if it seems too easy, people don't do it right. And the crux of goal setting is to figure out what you want, and then put that down in a way that you can be driven towards the things you have to do to make those things happen.   Keith Weinhold (00:06:52) - Maybe before we talk more about ourselves and what each of us really wants, maybe we can talk about what we don't want. And so many of us, me included, are influenced in life by the people that we surround ourselves with. You and I are both familiar with the quote from the late business philosopher Jim Rohn.   Keith Weinhold (00:07:11) - You are the average of the five people that you spend the most time with. A lot of people probably wouldn't like to admit it, but the statistics are kind of alarming with how much time one spends around their co-workers versus how much time spends around their family and friends, and with influences from co-workers. And that temptation to maybe just go with the flow. You know, it's pretty interesting because your coworkers are not chosen by you. They're chosen by your employer. Now, maybe that's good because it opens you up to a new set of ideas and a new context for your life, and that might adjust the goals you set. But then on the other side, if you don't have that and you don't have those coworkers, maybe those coworkers can help keep you out of one think silo and just thinking all the same way. So you talk to us about the influences of other people in one's lives. As you think about the life that you want to create for yourself.   Robert Helms (00:08:01) - This is such an important topic. I'm glad you bring it up at the beginning here because it is subtle, right? We don't get shoved off course.   Robert Helms (00:08:10) - We get nudged off course little by little by little. One of those five people you spend the most time with says, hey, let's go out drinking Friday night. And you were thinking, well, I was going to work on a podcast or a chapter on my book, or I was going to, okay, I'll just go out drinking and before you know it, like, that's not a bad decision. You get to spend time hanging out and there's some time in your life you want to be able to hang out with friends. But I think it's important that you become very strategic about your time. Time is a zero sum game, and it's also the most interesting resource because once this minute is gone, it's never coming back. What we do with this minute, we get a chance to do once, whether that's an hour, a day, a week. But at the same time, what happens after this minute? Well, another one and another month and another week. And so time can get away from you.   Robert Helms (00:08:58) - And if you're strategic about it, this is the key to success. Just spending time with people that have you going places, having you looking at your future, excited about what's happening now, you know, you mentioned your coworkers and you don't get to pick them. And that's true. But that's true about your family too. So you don't want to just write off your family. But let's face it, we probably all have negative people in our lives, whether it's friends, lifelong friends, people from college, but sometimes people in our family. So it's not that you don't spend any time with those people. It's your strategic about how and where you spend time with those folks. And the influences in our life probably have more impact on how well we do in life than any other factor.   Keith Weinhold (00:09:44) - We talk about being strategic and intentional with goal setting. There isn't a have you here today is because you're an expert in helping people set goals and help define a mission for their life, so I'm sure a lot of people, Robert, have come to you with a pretty well known framework for setting goals, called the Smart Goal Framework.   Keith Weinhold (00:10:03) - That's an acronym that stands for the fact that goals should be specific, measurable, attainable, relevant, and time based. So now I do think about the Smart goal framework before I set a goal, but I'm sure not to muddy up goals with a mission and all personalizes for a moment to give a good example for the audience. Robert, you can let me know what you think about this. And this is something outside of real estate investing. But when it comes to physical training, I have this mission of longevity and lean musculature. But to me, that's only a mission because it's kind of fuzzy and hazy. And then I have goals within that. For example, I had a couple goals within that. This year. I failed at them both. By the way. One was to be under £180 by June 1st, and the other was to run uphill up this trail in under 40 minutes by the end of the season. To me, those two things were goals, the body weight in the running, both of which I failed at within this broader mission of longevity and lean musculature.   Keith Weinhold (00:11:02) - So what are your thoughts about the Smart Goal Framework? Does that help people set goals and get them where they want to be?   Robert Helms (00:11:08) - Yeah, 100%, because just wanting something like, I want to be healthier or I want to be richer, those are great sentiments, but those aren't goals. What makes it a goal is the things you mentioned in the Smart framework works great. There's kind of the 101, which is if you've never set goals before, there's three things to focus on. The first is that a goal has to be specific and measurable. If you can't measure it, you don't know whether or not you hit it. So when you talk about something like your health and being lean, well, there's a couple of metrics in there. Percentage of body fat is a number and it's measurable how much weight you want to gain or lose is a number. And it's measurable. So that will help you instead of just I want to be lean. It's how lean do I want to be. And of course you might seek some counsel in that regard, either from a trainer or a doctor or someone to say, what's a good, healthy weight for me and so on.   Robert Helms (00:12:00) - So that's the specific part, which is also measurable. I kind of put that in as one thing, and the second is having a time deadline, a time limit or a deadline. So the best way to think of those two things is how much buy win, and your example of being able to do a specific amount of time metric by a certain date. That's exactly right, specific and measurable and with a time limit. And then the third thing is that to be effective, goals have to be written down. If you don't write down your goals, they're worth the paper they're written on. And it's not just so you won't forget. It's that something magical happens when we take pen to paper and writing it down. Using your computer, keyboard or voice to text is not the same as getting a good old fashioned pen or pencil and writing out your goals. Now that's the 101 write to take it. Beyond that, there are some few things in the smart model. It's either attainable or achievable for the A, and what that means is it has to be somewhat realistic.   Robert Helms (00:13:03) - You don't want to put limits on yourself, but if you say, well, you know, Robert, I made $50,000 this year and next year I'm going to make 5 million. Okay, well that's possible. People do that. There are people that go from 50,000 to 5 million. It's just not very likely. So unless you have some information that would show why that would happen, a much better way to think about it is how much can I stretch and still make the goal? If you made $50,000 a year for the last three years, Zig Ziglar says you can stretch to about 50% $75,000. That's a stretch, but it's realistic. So that's the attainable part, and it is a great framework. Now the other part, which is awesome when you're talking about how do I affect what I'm going to do. This is the crux of golf setting. There are two types of goals. If we were to narrow it down, there are outcome goals. That's how it's going to be at the end.   Robert Helms (00:13:56) - And then an even more important there are activity goals. So let's say you're in real estate sales and you want to sell 20 houses in 2024. That's a great goal. That's an outcome goal. At the end of 2024, I want to have listed and sold 20 houses. Okay, so January 2nd, when you get back, you know from your celebrating January 1st, what do you do? It's nebulous to say, well, gosh, to get to 20 houses by the end of the year. So what you do is you break down those 20 houses, that outcome goal into the specific steps necessary, and it would be different depending on every goal, right? It would be different for health than it was for relationships, than it was for your income. But to use this example, you might say, well, in order to sell 20 houses. Maybe I have to list 30 houses. Okay. To list 30 houses, I have to talk to 60 people. Okay, well, to talk to 60 people, I got to get 200 people on my list and so on and so forth.   Robert Helms (00:14:56) - Until you break it down to the actual activity, you can do January 2nd. So it might look like this. On January 2nd, I have to talk to four new people. I have to send out emails or letters or postcards to ten new people. And if I do that, if I do those two things, following the numbers all the way to the end of the year, that should result in my 20 houses. Now, how do you know what those numbers are? That's from your practice. You've done this before. If you're brand new in the business, you would get counsel from folks that are already doing that. Back to the five people you spend the most time with, right? Surround yourself with folks that have already done what you want to do, and then break down the outcome goal into the activities necessary to achieve the goal.   Keith Weinhold (00:15:40) - Oh, this is great step by step guidance. After I knew I failed at those two goals I shared with you, Artemis tried to reassure myself and tell myself that, well, you know, a lot of people don't even set concrete goals, so I ought to be okay about it because I've definitely ended up more fit.   Keith Weinhold (00:15:54) - But then at the same time, I don't always want to be comparing myself to normalcy or that's just a recipe for mediocrity. But maybe just here, as the introductory beginner goal setter that I am, I would have been more successful had I written them down, and had I made more intermediate steps in order to reach those two goals that I told you about? So I learned a little something there. I'm your host, Keith Weinhold, with Robert Helms of the Real Estate Guys. More on goals when we come back. You're listening to get Rich education. Render this a specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four plex's. Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.   Keith Weinhold (00:17:22) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains and your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.   Robert Kiyosaki (00:18:09) - This is our rich dad. Poor dad. Author Robert Kiyosaki. Listen to get Rich education with Keith whine old Dot Prichard, Adrienne.   Keith Weinhold (00:18:27) - Welcome back to get Rich education. We're talking with Robert Helms of the Real Estate Guys about goals or not talking so much about real estate today because many people use real estate in order to fuel their other goals in life.   Keith Weinhold (00:18:40) - So many people just go floating through life without many goals. I could do a better job with my goal framework myself, as I think you just learned there, Robert. I think some people, they might be dismissive of goals because some people have the mindset where they're thinking, well, I'm just ordained to live a life like this, or I'm just destined to live a life like this. I don't know that our audience necessarily thinks that way, but I'd like to get your input on this. We recently had an Instagram poll over on our Instagram page, and the poll was simple are you destined or are you made? And 75% of respondents chose that they are made rather than that they are destined. So what are your thoughts with regard to that as we set goals for this trajectory in our life?   Robert Helms (00:19:28) - That is a world class question. We always say, if you want great answers, you have to ask great questions. And that's a great question and something people don't think about. There are folks that believe that they are completely self-made and that it's up to them.   Robert Helms (00:19:40) - If it's to be, it's up to me and I completely respect that. And then there are folks that believe that no something is written on my heart. Something tugs towards me. I have a destiny. I have a life work that I need to pursue, and I respect that as well. So we for years have done an annual goal setting retreat that we call Create Your Future. But people wrestle with this, and I kind of witnessed the same thing. About three quarters of the people resonate with Create Your Future. But the very first evening of the event, I also submit to the attendees that if you feel called, if you feel like I have a destiny, but I'm not clear about it, then I just suggest that they reframe the entire event by the original title we use, which was Discover Your Destiny. So whether you believe that there is a destiny, a calling for you, or you've got to figure it out, this process of thinking about your goals, breaking them down to action steps, making sure they're in alignment with your vision, having that mission that you talked about, right.   Robert Helms (00:20:45) - All those things will serve you kind of either way.   Keith Weinhold (00:20:49) - Yeah, that's a rather deep existential question that I think some people need to figure out, I would imagine, before they develop their goals. So now that we've talked about mission and goals somewhat, Robert, can you tell us about some of your more successful people and some real success cases you've seen with people that have actually achieved goals and gotten this life satisfaction about becoming the most that they can be?   Robert Helms (00:21:14) - I love that the reason I keep doing this part of my life is because of the results people get. It's absolutely astounding. We've watched people go from modest means to incredible success, and not just monetarily, although that certainly happened. One of my favorites is a young gentleman who was dragged along to this, the goal setting event we do every year by his dad. His dad had been through a four years, brought his son and his son was kind of lackadaisical, had a job that paid okay, but he was living in a home. He was £50 overweight, just kind of plodding through life.   Robert Helms (00:21:51) - After three years. This guy was a brand new guy and he has completely changed his life. He's fit as can be. He found the woman of his dreams, which was something he thought might never happen. He's no longer working at a job that he just deals with. He loves his career like everything has changed and he gives credit to that, to finding this clarity. So here's the essence of goal setting. Your two best friends are clarity and focus. You have to get clear on exactly specifically what you want and the steps to get there. Most people are not clear. They're vague, they're nebulous. They kind of know what they want to do, but they aren't sure. And so you need a process to help you uncover and get that clarity. And then once you have that clarity, focus, right? Tracy says. And this is a deep one. All of life is the study of attention. What you think about comes about, said Earl Nightingale. And so the point is, what if we focus on something? Think about in your life, you've had some experience that's been successful.   Robert Helms (00:22:59) - It's probably because you put a lot of focus into that, a lot of attention. Sure. I remember all those years ago when we were talking about, hey, you said, I'm thinking about starting a podcast, and I'm like, awesome, right? And I was encouraging of it. I was thrilled you'd thought you'd already recorded a couple episodes. Yeah. And so many guys or gals come up and say they want to start a podcast, and most never do. But because you had the passion for it and you were committed to it and you did all the hard work, right? Those first several episodes where you got six or 7 or 10 listeners, you can't get to the first million until you get to the first ten. And this is what life is. It's focusing on the things that you want in your life. Instead of spending our focused time on distractions, things that the advertisers in our life want us to do, things that those friends that maybe like us but don't necessarily have our best interests at heart.   Robert Helms (00:23:54) - They want us to come to you. So there's a lot to figuring out who you want to be when you grow up. But if you'll take the time to figure that out and then work towards it, it's extraordinary what can happen now as far as success stories, I'll tell one more story because this is a reality check. It's not all happy high notes four years ago. At the end of the Create Your Future Goals retreat, I had a gentleman come up to me, pretty well-known guy, and so I won't mention who it is. But he said, Robert, you don't know this about me, but you saved my marriage this weekend. He said, I came with my wife. She was really reluctant to come. We were on the verge of divorce and we spent our time to separate parts of the room. But as you recommended, we came together Saturday night for dinner and we just connected like we haven't in years. And I saw this guy a couple weeks ago thrilled with his marriage, with everything that's like, awesome.   Robert Helms (00:24:49) - Now, I have to tell you, the other part of the story, which is that same evening, I talked to another gentleman who came up to me and he said, I'd like to talk to you about something. My wife and I came to this event and we both played full out, and we took all the notes and we really got clear on on what we want to have and be and do in our lives. And we've made the decision that we're going to get a divorce. I'm like, wow. So here's my point. If that was in their trajectory, if the best thing for them really was to separate, like, how soon would you want to know that versus the other couple that for all those reasons, they have strife and challenges in their marriage, but when they really looked at who they were and who they were becoming, they figured out they were much stronger together. So all that to say that when you get into the tough stuff, right, that squishy part of your heart and your soul, that stuff will come up for you.   Robert Helms (00:25:42) - You know, at the event, we put Kleenex out everywhere and people are like, what is a cold going around? Like, no, you. May need this. You may not. But I will tell you most people, if to get it done right, you have to be emotional because emotion is what will create motion, and that motion in your life will change your life.   Keith Weinhold (00:26:01) - Well, you talked about how clarity is an early step and wow, that's astounding for a couple to get the clarity that they want, amend things or a couple to get the clarity that they should end things. So we talked about goals kind of the back end and everyone knows what goals are. But kind of on that front end in the clarity, in winnowing down toward your goals. Can you speak to us more about that clarity piece? Because really, I think that's what a lot of people lack, because it probably takes some real vision.   Robert Helms (00:26:30) - Boy sure does. And it's the part I think, that people don't teach.   Robert Helms (00:26:33) - So the simple part of goal setting, you know, the Smart goals that works, but it it assumes you already know what you want. And so at our workshop the first day, we don't spend a minute on goal setting. And people are like, isn't this a goal setting workshop? Yeah, there's a whole bunch of stuff you have to do before you can set goals, right? And so I'll give the listeners some nuggets. The first is to get clear on who you are. Now, that sounds too vague and too big of a question, but specifically your principles and values that govern your life. And I've discovered that most people have about a half a dozen. There's about a half a dozen things that you value that really, really matter to you. And I don't even want to prime the pump. I don't even want to put words out. So people jump into that. Oh yeah, that sounds good. Instead, you have to spend some time alone or with some awesome music, or how whatever's best for you to get in that state, and then really delve deep on to the things that matter in your life.   Robert Helms (00:27:36) - What principles guide your life? What's super important to you? If you could only have 2 or 3 things in your life, what would they be? And then you start to get clear on really what matters. Because most of us are busy. We're busy doing all kinds of different things. And busy is not necessarily the path to success. Sometimes you have to take things off your plate in order to do more. As we like to say, you have to say no to the good in order to say yes to the great right. And most busy people really need to do some changes in that regard. First, the things that maybe you've been doing but you really aren't suited to or you don't enjoy doing, you offload those things. You learn how to delegate some of that. And then if you can spend time thinking through what matters to you as a person independent of real estate or your career, or even your family life, just the values and principles that guide you now you start to open up to that clarity, and then we take you through a whole bunch of exercises to imagine what life would be.   Robert Helms (00:28:38) - And, you know, pay attention to things that you are good at. Most people don't give themselves enough credit for their skill sets, and there's two schools of thought in personal development getting better as a person. One is I'm going to do an assessment and this is really important, do an assessment of where you're at. And as Jim Collins said in his book, Good to Great, confront the Brutal facts. If you're messing up somewhere, admit it. This is just between you and yourself, right? So admit where things aren't going. So are where maybe you're not as skilled as you like to be, or you don't have the experience that you want. And then you take an assessment of the places that you're pretty good at. You know, we don't like to pat ourselves on the back publicly, but in the privacy of your own mind, figure out, hey, there are some things that I'm skilled at. Either I have learned and developed the skill. I'm naturally drawn towards a behavior that's positive, whatever that might be for you, and then school of thought number one is I'm going to look at all the things I'm not very good at and try to get better at them.   Robert Helms (00:29:37) - And if I do that, that'll make me a better person. And that's true. The second school of thought is I'm going to do the same exact assessment, except I'm going to look at the things that I'm really good at and I'm going to design my life. So that's what I spend my time doing and the things I'm not good at. I find out how to have somebody else do those things. You can probably tell from my energy that's the school of thought I subscribe to, but both will work. But if you will focus on your unique talents and gifts and those things you are destined to be, then that's how you become the next best version of you.   Keith Weinhold (00:30:12) - Oh, these are key pieces in finding the clarity that you need to go ahead and set goals. We all become victims of weapons of mass destruction. Robert. Oftentimes I joke about how I can't believe how much stuff I get done when my iPhone is over on the charger because I can't be on the iPhone at all. So every year you host the Goals Retreat, an in-person event so a person doesn't have weapons of mass destruction, and they can really be focused.   Keith Weinhold (00:30:40) - And it's important that this is done in person. It's a hands on workshop in a focused environment. You've got a lot of great testimonials about it, and even people that repeat and show up year after year, people that become teary eyed for what you brought out of them, people that say that their lives have been changed forever. So tell us about how one can attend your goals retreat.   Robert Helms (00:30:59) - What's coming up the second weekend of the new year. It's a great time to be thinking about your future as we're at the beginning of the year when 2024 is a blank canvas and it happens in Dallas, Texas, we picked a hotel that is really conducive to having little nooks and crannies and places that you could go because there is instruction, but there's also times where you're going to go journal and answer questions and think and be alone. And it's a beautiful place. So you get some inspiration in that regard. It takes two and a half days. So we started about 5:00 in the afternoon on Friday and go till 10 or 1030 that night.   Robert Helms (00:31:33) - A lot of people are traveling in a day, so that's about as much as we can get people to pay attention before they start to nod off. But then the next day, Saturday, it's all day from, you know, 730 breakfast till 1030 at night. And then Sunday kind of 8:00 in the morning for breakfast until 6:00 at night. And then we have our afterglow reception. And, you know, I used to do this, Keith, in three hours and in three hours I could teach a lot about how to set goals and how to ask those questions. But then I'd have to send you home to do it. And a few people would, and most people wouldn't. So now in the two and a half days, you will get a ton done. Your missions, your values, your purpose. You'll answer more than 250 questions, and you'll do it in writing and you'll get some great, great stuff. Some of it you'll go, yeah, of course. And other times you'll be absolutely surprised at what happened when you put pen to paper.   Robert Helms (00:32:27) - And then on Sunday, it's really a workshop to turn those goals into action plan. So you leave not confused, not vague, but crystal clear. You obviously can't get every single thing done on every goal. In two and a half days. There's some homework, but you're going to have enough done that you'll have that momentum. So if people are interested in that, that sounds interesting to you. All you have to do is go to Goals retreat.com goals retreat.com and you can learn all about the Create Your Future 2024 goals. Retreat.   Keith Weinhold (00:32:58) - Invest in future. You. You're worth it Robert. It's been valuable. Thanks so much for coming out to the show.   Robert Helms (00:33:05) - Great to see you, Keith. Thanks for having me. I wish everybody out there a wonderful 2024.   Keith Weinhold (00:33:16) - Oh yeah, great stuff from Robert Helms. As usual to review Smart goals are specific, measurable, attainable, relevant, and time based. Even if it's your personal goal and you know that you won't forget that goal, it has been shown to increase your success.   Keith Weinhold (00:33:33) - If you write down your goals old school style with a pen and paper, let's review a few other things that you learned there. When you set a goal, set intermediate benchmarks within it. That's something that I need to work on personally. But before you even set goals, you'd have to know that they are the right goals. And that means that you need to get clarity of vision first. That comes with understanding your principles and values, and then you can spend your life being in the lane that you enjoy because you've helped figure out what that was in our discussion about. Are you destined versus are you made? Earlier in my life, I believed I was destined and now I believe I am made. Back when my high school classmates voted me as the most quiet and shy student, and then later I'd go on to host basically a talk show here. Well, that was my pivot point. To know that you make yourself, if you're still wrestling with the you are destined versus you are made conundrum, perhaps you can adopt the belief that you were destined to make yourself the best you that you can be, and there you've got both in one, the real estate guys host a number of world class, in-person events.   Keith Weinhold (00:34:50) - I would know because I've attended a number of them myself, from a real estate syndication event to a summit cruise to real estate field trips. But among them, all their goals retreat is their highest rated event, and it's only held annually. If it sounds interesting to you again. Goals retreat.com major thanks to Robert Helms today. Next week here on gray. It's real estate investing content that you've probably never heard before when we do How the Rent Stole Christmas. And I'm also going to deliver Gre's big home price appreciation forecast for next year and more on top of that. That's all next week. Until then, I'm your host, Keith Reinhold. Happy holidays. Don't quit your daydream.   Speaker 5 (00:35:40) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.   Speaker 6 (00:36:08) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Caeli Ridge recorded this episode on 12/12/2023 Guest Speaker Brent Widman from Southwestern Consulting joins today as our guest speaker. Caeli and Brent have a great Q&A on what it means to stay consistent in life and discuss the power of writing your goals down in order to achieve them. They discuss many personal insights on what it means to be successful, and what drives us all! You can contact Brent Widman at bwidman@southwesternconsulting,com or call or text him at 507-382-7641. He offers a 30 minute business action plan so please check him out to help you reach your goals!  Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2023 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Caeli Ridge recorded this episode on 11/28/2023 Have you ever been hit with a property tax bill that far exceeded your expectations? You've come to the right place ! Caeli breaks down property tax definitions for us as well as showing us how you can know exactly what you'll be paying in property taxes based on the county in which your property resides. We dive into a Q & A after this explanation as well as some news, updates and expectations for rates and other real estate investment pieces. Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these live  by following this link to join the call:https://community.ridgelendinggroup.com/events/live-with-caeliAs always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2023 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Join our free Florida income properties webinar, tonight, Monday, November 27th for 5.75% mortgage rates at: GREwebinars.com 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 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 GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete Episode Transcript:   Keith Weinhold (00:00:01) - Welcome to 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.

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 GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   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.

Caeli Ridge from Ridge Lending Group shares that a lot of rental property investors get started by harvesting the equity they have in their primary residence.As they are growing their rental portfolio, a lot of them tap into the equity they have created in their rental propertiesOn this bonus episode, Caeli shares the pros and cons of the different ways investors are harvesting equity.https://rentalincomepodcast.com/Bonus-Equity-Caeli-Ridge

I don't keep much money in a savings account, money 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 “GRE” 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 Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Timestamps:   The importance of increasing income (00:01:28) The speaker emphasizes the importance of increasing income rather than cutting expenses and discusses the concept of a financial runway.   The need for liquidity in real estate investing (00:04:05) The speaker explains the need for liquidity in real estate investing and recommends having 3 to 5% of the total value of a real estate portfolio in liquid funds.   Investing in residential real estate for strong returns (00:06:44) The speaker discusses the benefits of lending to the long-term stability of residential real estate and related businesses, highlighting the potential for strong returns.   The acquisition and growth of Freedom Family Investments (00:11:35) This topic covers the growth of Freedom Family Investments, including the number of units acquired, funds raised, and the value of their portfolio.   The concept of vertical integration in real estate (00:12:38) This topic explains the concept of vertical integration in the business world, specifically in the context of real estate companies. It discusses how vertically integrated companies have more control over their supply chain.   The Master Note Program by Freedom Family Investments (00:15:45) This topic introduces the Master Note Program, a lending program offered by Freedom Family Investments. It explains the program's features, including high yield returns, liquidity, and the option to compound interest.   Private Money Lending and Investing in Materials (00:20:57) Danny explains the process of private money lending and how investors can invest in materials for discounted prices.   Expansion of Opportunities for Passive and Active Investors (00:23:34) Danny discusses the various opportunities available for passive and active investors, including turnkey real estate, private money lending, and funds.   Minimum Investments and Accredited vs Non-Accredited Investors (00:26:22) Danny explains the minimum investment amounts and the options for accredited and non-accredited investors, as well as the different investment opportunities available for each category.   The trust question (00:30:14) Importance of trust in investment, transparency, and how to choose trustworthy partners.   The worst deal (00:32:21) A story about a bad investment deal, the importance of honoring commitments, and how volume can mitigate risks.   Get Real (00:35:28) Introduction to the "Get Real" book series, the importance of authenticity and transparency in real estate investing, and the power of sharing failures.   Time Deposit Accounts and Demand Deposit Accounts (00:38:36) Explanation of the differences between time deposit accounts (like CDs) and demand deposit accounts (like checking and savings accounts).   Vertical Integration in Business Strategy (00:38:36) Definition and explanation of vertical integration as a business strategy where a company takes ownership of multiple stages of its supply chain.   Financial Runway (00:38:36) Definition of financial runway as the amount of time one can maintain their lifestyle without the need for a paycheck.   Complete Episode Transcript:   Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Why settle for growing your money at a 5% interest rate in a savings account, money market account, or treasury bonds? You could earn double that or more. In fact, we're talking about exactly where I invest my more liquid dollars myself, often with a real estate centric backing. Today on get Rich education.   Speaker 2 (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Speaker 1 (00:00:51) - We're going from Hartford, England, to Hartford, Connecticut, and across 188 nations worldwide. I'm Keith Weinhold, you're listening to episode 475 of the Get Rich Education Podcast, the Voice of real estate investing since 2014. Don't live below your means. Grow your means. It's in your genes. Most people tie up so much life energy in their job, and they're scared to death of losing their job because it provides everything to them, not just their salary, but their health care, their retirement, and even who they are.   Speaker 1 (00:01:28) - And then even their very identity is in their job now. So that might be okay, especially if you truly get a deep existential meaning from your job and you get that sense. In fact, in that case, thank you. You're probably serving society, and I might be a beneficiary of that. But now we isolate the fine part of your job. It is a real mystery to me how so many study, how work works, so few study how money works. And yet money is the main reason that people go to work. In the personal finance world, it's more important to increase your income, then cut your expenses. Spend more time building a cash flow statement. See that's constructive to your standard of living, not a budget which is destructive to your quality of life. Think of residual income in terms of what I'd like to call your financial runway. Your financial runway. Yeah, it is that amount of time you can maintain your lifestyle without the need for a paycheck. So the length of your financial runway is measured in time, and it is critical for you to lengthen this runway if you hope to retire early and it can dramatically reduce your stress.   Speaker 1 (00:02:49) - Level two well, that can create outcomes so that you can say, go on a super long vacation and make your ostentatious display of time wealth as it is now. At some point in your life you probably listen to and had. The real estate pays five ways epiphany. And it is really compelling to then keep the majority of your capital invested there, for sure. But you likely don't want to keep absolutely 100% of your dollars there because you need some liquidity to fund the operations of your daily life. In fact, you can make the case that you need more liquidity than a non real estate investor does. Now, a six month emergency fund is the rule of thumb for laypeople, but on top of that is real estate investor. It's also a good idea to have 3 to 5% of the total value of your real estate portfolio in liquid funds. Now, a lot of people hold liquidity in a bank, and you do that as either a demand depositor or a time deposit. In fact, in banking vernacular, do you know the difference between demand deposits and time deposits? Well, demand deposit accounts, they include things like checking accounts, savings accounts and money market accounts.   Speaker 1 (00:04:05) - And they're called demand deposits because they allow you to withdraw your money from the account whenever you want to. That is different from time deposit accounts, like a CD, which requires you to deposit your money for a specific length of time. So that's the difference between a demand deposit and a time deposit. So time deposits like a CDS certificate of deposit. Therefore they pay you a high your rate of interest in exchange for your reduced liquidity. Now with that understanding, let's take a time out here to remind ourselves of something. When money flees the stock market, which it often does, it usually ends up in bonds as demand for bonds goes up, their interest rates go down. Then, as bond interest rates go down, investors go back to stocks in pursuit of yield and everything reverses. So that is an ebb and flow of funds, which creates a degree of equilibrium. But it also moderates your return. And you're also never going to get in and out at just the right time trying to time those markets.   Speaker 1 (00:05:22) - So when it comes to your dollars that you don't have being actively leveraging real estate, you know you can't hit every note in the symphony yourself with just one investment vehicle. It takes an orchestra full of your prosperity, all your dollars, all playing their notes boldly to help you hear the complexity of the. Position. Well, when you park money at an everyday bank or a treasury bond. Either way, you're now making a loan and oftentimes the exact way that that loan is backed your collateral that's actually unknown to you. Well, instead of that, what we're talking about today is that you can lend to the long term stability of residential real estate and related businesses and still get a strong return. And yes, I'm focused on the resilience of residential, just like we have here at from day one. Now, when it comes to something more precarious, really touchy section like office real estate. We work. They're expected to seek chapter 11 bankruptcy protection after that embattled office space company missed interest payments that it owed to its bondholders.   Speaker 1 (00:06:44) - So instead, you can keep your more liquid and semi liquid dollars working for you as a loan to someone else in residential, and enjoy some of the condensation on that pipe with returns that are about double what you can get on a 5% savings account today. Now, today it is the right time to talk about returns of 10% plus, because just a year or two ago, we were in this inversion where inflation was higher than interest rates. That's atypical. In fact, in June of last year, CPI inflation peaked just over 9%. And you got to ask yourself, how attractive is a 10% return on your liquid dollars? If inflation is 9%, well, that's not attractive to you at all because you real rate of return would only be 1% in that case. But now with inflation down, you can get a higher real return again. Today, interest rates are higher than stated CPI inflation and even the true rate of inflation. If you know where to look for that and you have a sense for what that is today, I'll help you know where to look, because it's exactly where I invest my liquidity today.   Speaker 1 (00:08:02) - See, in order to do this, it's really investing like a billionaire. And you don't need to have some wealthy sounding name like Brandon Meriweather, Rudiger, Bertram Lawrence, Perry Bottom or Carruthers Davenport. You don't need any names like that. You just need the knowledge. No, I guess I won't call you Carruthers if you preferred, but I think you'd sound like a guy that blows rings of smoke into people's faces. And I don't think that's a good look for you. We'll talk to the custodian of my funds here shortly. I make private loans to her company. She and I both serve on the Forbes Real Estate Council. She is a strong visionary, and she's not afraid to discuss problems either. That's something I really like. In fact, I'll be sure that comes up. This could really help you today. That's next. I'm Keith Weinhold in your listening to get Rich education. Diary listeners can't stop talking about their service from Ridge Lending Group and MLS. 42056. They've provided our tribe with more loans than anyone.   Speaker 1 (00:09:10) - They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Caeli Ridge personally, or even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866.   Speaker 1 (00:10:27) - Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.   Speaker 3 (00:10:39) - This is Hal Elrod, author of The Miracle Morning and listen to get Rich education with Keith Weinhold and Don't Quit Your Daydreams.   Speaker 1 (00:10:56) - Okay. I'd like to welcome back onto the show today, the co-founder and CEO of the whole operation Freedom of Family Investments. There's seven real estate centric companies based in Centerville, Ohio. By the way, the other co-founder is her husband, Philip, whom you've heard on the show before. Hey, we are graced with the presence of Dani Lynn Robison.   Speaker 4 (00:11:15) - Hello, Keith. I'm so happy to be here.   Speaker 1 (00:11:18) - So good to see you again. I've got to congratulate you on your success. You've got 62 team members. They're now in your vertically integrated companies. And by the way, that's a term vertically integrated that might throw some listeners off. I'm going to come back and explain just what that term means. They've done over 1500 deals now.   Speaker 1 (00:11:35) - They've acquired 600 plus units since 2020, and they've raised more than $20 million through podcasts and word of mouth. And they now have a portfolio valued at $32 million. Plus, they've been in real estate since 2008. And they'll tell you that they have a perfect track record of always returning investor capital, including to me, I'm one of their investors and paying 100% of the returns as promised, even if they themselves lost money on a deal. We'll talk about what losing money on a deal looks like in a moment. And in fact, you, the listener, you've probably heard me talk about how I personally participate for a high yield return with them myself, with Danny Lin's company backing me near the middle of Gary. Episodes like this right here. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.   Speaker 1 (00:12:38) - Well with having. Listen to that. Danny, I want to ask you about your master note program shortly. But first, since this is get rich education, emphasizing the education part here, I think the term vertically integrated, that might throw some people off. It sounds like a mouthful. And. And what is that, Danny Lynn seven syllables. But it is a term that you, the listener, you see that and hear that across the entire business world, vertically integrated. That's a term for a business strategy where a company takes ownership of two or more stages of its supply chain. So, for example, a vertically integrated automaker, they might produce automobile components and vehicles and also sell directly to customers. All right. That's ownership of multiple stages of a supply chain. So to me it comes down to vertically integrated. It means that you now have more control. So Danny tell me about how that vertical integration applies to your seven real estate companies.   Speaker 4 (00:13:41) - You nailed it. As far as the definition and really why we created all of the companies when we first initially created our turnkey real estate company, we hadn't had the intention of bringing everything in-house.   Speaker 4 (00:13:54) - But as we outsource different pieces of the renovation or the property management, we found that the lack of control that we had was hurting us and hurting our investors. And so one by one, we would bring in a company. So first was renovations. Because of all the contractor nightmares that many fix and flippers have experienced themselves. We had them too, and in spades because we were doing volume. So we brought that in-house first so that we can control the subcontractors and the project management and the scopes of work and how we paid our contractors. The next thing we brought in house was property management. And then we had a brokerage so that we could just list our properties on the MLS internally and keep that in house as well, since we had to have a broker anyway. And then acquisitions got brought in-house because the wholesalers were buying all of our deals from went dry with deals and we're like, hey, we need deals. And so we brought the marketing in-house and started doing acquisitions. And then I've told this story of drugs, thugs and bugs many times about our 56 unit apartment complex.   Speaker 4 (00:14:54) - That led to company number six, which is our funding syndication company. That was a really great company because it allowed our private money lenders to be able to start putting their money to use 24 over seven instead of going in and out of deals. And then company number seven is going to be a hard money lending company, because as we've raised all of this capital, we found that there's times we have excess capital and we don't want to say no to incoming investors. So we started using that to network with our mastermind groups and saying, hey, let us know if you've got a deal going on. We'll underwrite it. And if we feel like it's a good deal, we'll go ahead and lend on that deal for you. And it allowed us to keep putting that money to work for our investors. So it's been really fantastic. Help us as an internal company, helped our investors be able to earn more returns and helped other our entire network just do more things with us.   Speaker 1 (00:15:41) - That's a vertical integration. And like that it hadn't heard that before.   Speaker 1 (00:15:45) - Drugs, thugs and bugs can lead to an epiphany that creates a new company bringing more in-house. So you have to listen to the least you need to remember is vertical integration. That means control. And one of your company's vertically integrated into that, Danny, is something that can benefit the listener here, and that is your lending arm. Now, your most popular program for giving everyday investors high yield returns is your master note program. That's actually a common program in the private lending industry, but some might not know about it. So go ahead and talk to us about what your master node program is.   Speaker 4 (00:16:25) - So this was brought to us by an investor who was working with us and said, hey, I love your private money lending program. You know, I've researched you. He actually found us on Forbes and came to our office and visited and said, I would really love to lend, but I don't necessarily want to keep going in and out of deals. And so we worked with an attorney and said, hey, what can we do in order to keep an investor's money at work? And so he talked with us and we explored different ideas, and we kind of went back and forth between us and the investor and the attorney and ultimately created this program called the Master Note Program, which offers investors 10 to 12% returns.   Speaker 4 (00:17:03) - It offers them liquidity so they can get cash out at any year that they want. So they'll invest in every single year they have the opportunity to say, hey, I'm going to go ahead and give you 180 days notice to get my cash back. So the liquidity piece has been really, really powerful, especially for private money lenders, because they reason that private money lenders like that program is because they know that, that they're going to get their capital back in 12 months or less. And at that point in time, they're going to say, hey, do I want to invest again? Yes, okay, I do. Or hey, I could use this money for something else that I was waiting for. And in the meantime, it was earning interest while I was waiting to use it for this other avenue. So the master note program was really just meant to have flexibility and to be able to customize the program based on the investor's goals. So what we've done is created a five year auto renewing note.   Speaker 4 (00:17:55) - So that way these investors can say, hey Danny, I've got $100,000. I'd like to invest that with you. And at that $100,000 level, that is 12% interest. And so they put the money in, and they know that every single year it's either going to auto renew or they're going to say, hey, I'm ready for the money to come back to me. And it also allows us to give them compound interest. I would say over half of our investors are not investing with us for distributions or cash flow. They actually are investing with us because they trust us and they trust our track record, and they want their money to grow. And so they actually choose to compound instead of taking the distributions, which allows for faster growth.   Speaker 1 (00:18:39) - Your master note program 10 to 12% returns. I know it's just that 25 K minimum. So it's really available to investors. So okay. Unlike an all say five year certificate of deposit from a bank that might only pay you 5%. Plus you're illiquid for five years.   Speaker 1 (00:19:00) - With a conventional instrument like that, you can cash out your master note any year, or you can just keep rolling it over. You have the option.   Speaker 4 (00:19:09) - Exactly right. And so what's interesting is we all like liquidity. I know Philip and I like liquidity. It's nice that you got this peace of mind that you can access your capital if you choose to do so, but in reality, most of us leave the money exactly where it's at. We like to see the growth. We like to see, you know, the returns that we're getting. And we get excited and we're like, where else am I going to put this money? So I love having the ability to get it back. But I would say 95% of the people in our master program and even our funds, after they get to the period in which they committed to, whether that be a year or three years, just depends on the vehicle that they're using. They stay there like, I love this, this is fantastic. You can keep my money and just keep it growing.   Speaker 1 (00:19:51) - Real estate is largely thought of as an equity based investment. You're the listener, putting 20 to 25% down and borrowing the rest. That's great. We talk about the virtues of doing that all the time, but you are not very liquid when you do that. Here. We're getting on the opposite side rather than being on the equity side. You're on the debt side, you're making a loan and you have higher liquidity this way.   Speaker 4 (00:20:18) - Exactly right. And so with our master Note program, the way that we worked it out with the attorney is it's used for both deals and our business growth. So that's really important that I think that we talk about because the private money lending. Let me give an example. Private money lending. You are going to maybe loan a $70,000 and that's going to cover an acquisition and rehab of a property. But maybe you had $100,000 available. Now your $70,000 is backed by a lien on that property. And then once we're done with the rehab and once we resell the property, then we're going to give you all of your capital back, plus the interest that you were owed for the time that we borrowed your money.   Speaker 4 (00:20:57) - Now, this is where our private money lender said, Danny. Danny, will you keep my money? And if you're a private money lender, I have to say no, I can't. I have to give you back your money because you have to sign a release of mortgage. There's a lean on that property. You have to sign the release that you got your capital back, and then we can give you another deal. And that might take two weeks or two months. What the most master program provided for investors was allowing them to invest with us still being used on deals, but for our protection, if we didn't have a deal to put money into, then we can use it for the growth of the company. So right now we're actually partnering with another investor who is out of Columbus, and we are creating a home supply company of materials. We have this opportunity to buy materials at huge, huge, massive discounts. And so we're working on acquiring the office space that we're in, which has 20,000ft² of warehouse right next to us, and we're going to buy in bulk all of these materials.   Speaker 4 (00:21:54) - And not only is that reducing the cost of our business and our rehabs, but now we can help other investors in the local area save money. And we have created a revenue stream. As a result, the growth of all the companies has been a result of working with investors exactly like this. So now the investor gets to say, hey, Danny, I'm going to give you $100,000 and I'm going to invest it in this master note program. Now they got to use $30,000 or more of their capital, as opposed to the $70,000 example I use for private money lending, so they can put all the capital they want to use. And then me, if I have a $70,000 deal, that I'm still going to use it on that same deal, and it's owned by our company, and then that other $30,000, then I can use it for things like we're buying materials in bulk, and it's allowing us to save money on those rehabs. It's allowing us to create another revenue stream. So it allows us to have a little bit of flexibility, and it allows the investors to have a higher return, still have that liquidity piece and still have it backed by real estate and or our business.   Speaker 1 (00:22:59) - Well, what an explanation. And you know what's interesting, Danny Lee, and listening back to that is the realization that most bank depositors don't have any idea how that bank is investing their money. They don't know how their deposit is backed at all. But with an explanation like that, that's substantive, we really do hear. So it's really an interesting contrast. We discussed the details of your master note program, including where you can get up to a 12% return. Tell us about the other opportunities that you have besides your master Note program.   Speaker 4 (00:23:34) - Because of our vertical integration, we have many different things that we can offer. If you're a passive investor, we have turnkey real estate. We do have private money lending, the master node program. We have funds that also provide great returns. And one of them we're getting ready to launch in the next couple of weeks, is offering even more liquidity, allowing people to get in and out in 90 days. So for those who don't want to wait a full year, maybe they just want it.   Speaker 4 (00:23:59) - Hey, I just want to put my money to use and I want to have this access to it every 90 days. We're now allowing people to have that option, and that is really a reflection of our conversations with investors in seeing what they want based on today's market, today's economy, what they feel comfortable investing in. So that's some of the passive investor opportunities for our active investors. We don't typically serve them. But I thought, hey, you know what? We are buying all of these deals and we're getting all of these leads, some of the deals we don't want, maybe because we have enough and we don't want to buy another one because our rehab team is stretched and we don't want to have a house sitting for a couple of months for our rehab team to be able to get to it sometimes. There's other reasons. So now we are starting to wholesale properties to investors who are active, that are wanting to flip the properties themselves for a higher profit. And because we are vertically integrated, we said, hey, if you want to buy one of these wholesale properties that we're not buying ourselves, we have a renovations department, we have a property management department, we have a brokerage.   Speaker 4 (00:24:58) - So if you're an out-of-state investor, you've got an entire team you can leverage through us to be able to buy a property as is, get it renovated, and then either sell it on the market or hold it and have our property management company look after it. So we're just continually trying to expand what we can do in service of other investors.   Speaker 1 (00:25:18) - I love that we can let the term vertically integrated just roll off our tongue. Now that everyone knows that, it means having control of multiple portions of the supply chain of their business, a real estate business. In this case, again, we're talking with Danny Lynn. She is the co-founder and the CEO of Freedom Family Investments. You deal with investors on both the more active side and the passive side smartly. I know, Danny Lin, that you don't call turnkey real estate investing passive, even though it's mostly passive. It's not completely passive. You have both passive and active sides. You know what investors want. You know the pallet of items to offer them with what interests them.   Speaker 1 (00:26:00) - So with that in mind, tell us just a bit more on the landscape overall in just how you serve people. I know a lot of them. For example, they might wonder, do I need to be accredited or do I need to be non accredited? And tell us more about the minimum investments amounts kind of that bar to clear in order to participate with you, just like I am myself.   Speaker 4 (00:26:22) - For the minimum investments, it's $25,000. That's typical for turnkey properties. That's typical for our master node program, and then $50,000 for some of our funds, also our private money lending program. And then for the accredited versus non-accredited, we have both options. So there are rules as to when we can offer certain investment opportunities if you're non accredited. So things like private money lending, turnkey investing, master node program those are all opportunities for non accredited investors. And then for our accredited investors we have funds that are it's 506 C. It's a little bit technical but it's the way the SEC says hey you can talk about this.   Speaker 4 (00:27:01) - You can advertise it but you can only allow accredited investors inside. So as we work with our attorney we are like, okay, we don't want to serve just accredited investors. So how do we make sure that we're serving both at the same time? And so we've made sure to just really have a variety of offerings. And I talked to people a lot about what you said about active versus passive. I think that's a really, really important conversation because many people who are getting into the real estate game, they don't know whether they want to be active or passive, and so many of them end up being active first, only to realize they just created another job for themselves. And then they go, okay, I don't want to do this anymore. I actually want to live a quality life. I want to spend time traveling. I want to spend time with my spouse or my kids and just enjoy life. And I didn't mean to create another job, even though it is building wealth. And then they move to the passive side so that they can get mailbox money or have their money working for them while they sleep, or while you are traveling like you just got back from traveling.   Speaker 4 (00:28:05) - Keith and I loved watching your Facebook post, right? I love having that educational piece of really talking to somebody about what their goals are, what the quality of life is that they want, so they don't make a mistake of going active, only to feel like they lost some time because the active journey is difficult, like it's not been easy to build seven real estate companies, and we've got two more in the wings that we're getting ready to launch that we talked about even the the home supply company. It's not an easy road. You make a lot of mistakes, you lose a lot of money. And so when somebody has capital to invest in, their goal is to grow their wealth, build wealth, have a legacy, be able to retire and not worry about money. Going the active route may seem like I'm going to make more money because I'm going to get the big chunk of equity, but it ends up being something where they learn the hard lessons themselves and then usually waste a lot of time and energy and frustration, only to realize that they probably could have made equal, if not more on the passive side and not had all the stress.   Speaker 4 (00:29:06) - So I love really having that conversation with everybody. I love active and passive investors alike. It's just making sure that they truly know what journey they want to be on.   Speaker 1 (00:29:16) - In my mind, the term ROI return on investment is more active and a term that I've talked about wrote I return on time invested with that being considered that falls more on the passive side with you guys experience and understanding, you're surely quite cognizant of that. Why don't you talk to us about some of the other questions that you get from new investors, things that really they want to know about before going ahead and making a loan and participating in a lending opportunity with you.   Speaker 4 (00:29:49) - So the top three questions that we get is where do I start? Which path is right for me and who do I trust? And I actually talked to one of our investors who has grown his seed capital of $100,000 into $2.5 million with us over the course of four years that he's been investing. Every time he has capital, he's like, what opportunities do you have and where can I put my money? And again, we talk about compound.   Speaker 4 (00:30:14) - He has been compounding since day one with us and is really allowed his capital to grow extensively. I was interviewing him to tell his story about his journey with us and his experience. He actually said, you know, those questions are funny, Dannielynn. I would tell you that you should ask them in the opposite order. You should say, who do I trust? And then once you know who to trust, then ask, where do I start and which path is right for me? And I do agree that the trust question is the most critical piece of the puzzle, right? So many times I get on the phone and I talk to investors who have lost money working with somebody else, and so they've maybe heard me on your podcast or seen me somewhere else and heard me say over and over, private money lenders, our investors are our number one priority. I am never going to put myself in a position where they're not receiving their full capital back, receiving every single penny owed for the interest of the time that I was using their capital.   Speaker 4 (00:31:11) - And I'll allow myself to lose money to make sure that they get paid. And that's so important to me that I tell people very often they said, you want to work with people that will be transparent enough to say, this is my worst deal, this is what happened. And what you're going to get by asking that question is a revealing of their character. Yeah, who they are. How did they treat that situation? How was the investor treated in that situation and what happened? Did they tuck tail and run? Do they walk away, which many investors do? They get frustrated and they're like, oh my gosh, I lost all this money. What am I going to do? And they just they stop answering their phone. They stop answering emails. And then the investors are stuck with the house. I think the questions like that are really important. Looking at track records and just asking the hard stuff, understanding the true nature of a person. And then lastly, the which path is right for me is a question of really understanding that active and passive piece, and then understanding your goals when it comes to money, is it cash flow, is it growth? Is it tax benefits? Is it liquidity? What are the things diversification.   Speaker 4 (00:32:11) - There's so many goals you can have in investing. And if you don't know the questions to ask, then you might not be hitting the goals that you truly desire in life.   Speaker 1 (00:32:21) - We learned about a really good investor outcome there. How about a bad outcome or a worst deal? And then how did you cover that to make sure the investor is made whole?   Speaker 4 (00:32:33) - Our worst deal is a duplex in Dayton. And what happened was one of the reasons we brought our renovations company in-house, because we had a project manager, we had a runner, and one of the processes that we have is when the contractors are rehabbing a property, then the runner will go to the properties and just double check that what their invoice is saying, that they actually did the work and then we will pay them. So the project manager is trusting the runner. The runner is saying he went to the houses and we're paying this contractor. And it turns out one of the contractors had not done anything. The pictures that they were submitting to us was from another property they were rehabbing, so it looked like he was doing the work.   Speaker 4 (00:33:12) - The runner? Yep. The runner was relying on those pictures as his proof instead of actually going to the property and physically seeing the work being done. And we were paying them as a result of this hierarchy of process that we had. So we ended up having a property where none of it got rehabbed, and we paid the full amount of rehab to that contractor. So we had to pay for the rehab twice. So in this situation, we lost over $50,000. Our investor didn't even know what happened. And I say that not because we weren't being transparent, it's because we were going to do exactly what we said we were going to do. They were going to get all of their capital back, and they were going to get every single penny of interest owed. We ended up asking them at the end of 12 months, do you mind extending on this loan? We're still working on it. It's okay if you don't want to. We will still get you paid back, plus all interest, and we'll replace your loan with another private money lender.   Speaker 4 (00:34:06) - They said no, it's no problem. Absolutely. You can extend. So by the time it was all done we actually had the house fully rehabbed. We had lost a lot of capital. The reason that we can cover situations like that and make sure that we're honoring our word to our investors is because we do volume. When you do volume, I tell people, this is what I say. If you've been in real estate long enough, you understand you're going to lose money. You're understand that you're going to pull back walls and find things that you did not anticipate. So doing volume was our way of mitigating that risk. If we're doing ten deals a month and two of them go bad, well, we've got eight others that are covering the two that went bad. And so it's a numbers game for us knowing that we're going to find some duds, we're going to make some mistakes. And that's okay because we're playing the volume game.   Speaker 1 (00:34:53) - Ah, that harrowing story about the contractor and the rudder that comes back to the old Ronald Reagan trust, but verify they're right.   Speaker 1 (00:35:01) - So. Right. Well, thanks for sharing a more difficult story with us like that. Well, Danny, as we're winding down here, you do a lot of things there at Freedom Family Investments because you have this big holistic picture. Since you are vertically integrated company, and that's given you the experience and the wisdom. Do a lot of things. I know you have a book published and you're speaking at events around the theme get real. I own your book. Get Real. Can you quickly tell us more about it?   Speaker 4 (00:35:28) - So our very first book was Get Real, understand Real Estate Investing before it's too late. And it was just our first book. And it's going to be a series of Get Real Books was our first book to really introduce people that were new to real estate. What is it? Why do we love it? Why do we have such a passion for building real estate businesses and love that we can not only grow wealth for ourselves, but we can help other investors do the same? And then the get real part of it.   Speaker 4 (00:35:52) - The reason that we love this is actually one of my marketing team members, actually, you know him, Matthew. He's the one that came up with a Get Real brand. And it's really become something that people say, hey, Flip and Dani, you guys are so down to earth, like, I feel like I can talk to you about anything and you're so transparent. You tell us the ups and the downs and the crazy roller coaster rides, and there's so many people that are on social media or on podcast that will just tell you the rosy rainbows and sunshine stories, you know, as if nothing goes wrong. And I think reality is, is people want to work with people that are just more authentic, that are willing to share, hey, I'm human, I'm not perfect. We're going to make mistakes, but watch how we correct those mistakes, watch how we act during those situations. I think if you can do that, you actually gain more trust. And that's something that surprises a lot of the masterminds that I'm in.   Speaker 4 (00:36:43) - When I say they say, how do you have so many investors? How do you raise so much capital? I'm just like, I'm just authentic and transparent about everything that we do. And that garners a lot of trust in the people, because not a lot of people are willing to talk about their failures. That $50,000 loss on a duplex. And I don't know why, but it builds trust instead of loses it. And their jaw drops to the ground going, oh my goodness, I can talk about my failures. And I'm like, yes, start. People want to know that you're real. So I think that that get real concept is important. So we're going to keep on building creating some more books. We have investors that are giving us ideas of, hey, write a book about this. So we're going to keep on releasing them. And we're also speaking in events nationwide and just really just getting down to earth for people and letting them know, hey, stop telling yourself your can't. Anybody can build wealth.   Speaker 4 (00:37:32) - If you run a great podcast, you have so many loyal listeners and we love talking to them, and you have helped educate people for years and years and years, and we just need more people out there doing that.   Speaker 1 (00:37:45) - Well, thanks. The name of the platform and book is Get Real, Danny. Dannielynn, in closing, why don't you let our audience know about the best way to reach out to you and learn more about your private lending programs, including your Master Note program? Because for you, the listener, if this sounds interesting, here you go. Mean this is where I tie up a lot of my liquid funds for a high return. Let our audience know how they can learn more.   Speaker 4 (00:38:11) - All you have to do is text family to 6686, six.   Speaker 1 (00:38:17) - Dani Lynn, it's been valuable. As always. Thanks so much for coming back onto the show.   Speaker 4 (00:38:21) - Thank you so much, Keith. It's an honor.   Speaker 1 (00:38:29) - Yeah, good stuff from Dani Lynn Robison of Freedom Family Investments. Today, let's review what we've learned.   Speaker 1 (00:38:36) - Demand deposit accounts, which include things like checking accounts, savings accounts and money market accounts. They allow you to withdraw money from the account whenever you want, whereas time deposit accounts like CDs require you to deposit your money for a specific length of time. Vertical integration that's a term for a business strategy, where a company takes ownership of multiple stages of its supply chain and the term financial runway. That is, the amount of time you can maintain your lifestyle without the need for a paycheck. As you know, I often like to leave you with something actionable. Their Master Note program offers 10 to 12% returns, some liquidity, and just a 25 K minimum. And another way to think about it is that, in fact, then that is a 10 to 12% cash on cash return. And if you're interested in being more nimble than that, there are other lending programs where you can get a strong return with just 90 day liquidity. And to get started on any of them, or simply learn more. Text family to 66866.   Speaker 1 (00:39:45) - Until next week where we've got a great show for you. I'm your host, Keith Weinhold. Don't quit your daydream.   Speaker 5 (00:39:55) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.   Speaker 1 (00:40:23) - The preceding program was brought to you by your home for wealth building. Get Rich Education.com.

Guest Speaker Alex Hines Caeli Ridge pre-recorded this episode on 11/3/2023 Caeli and Guest Speaker ( & Ridge Lending Group Borrower) Alex Hines discuss how he has been so successful in real estate investing in just the few years he has been doing it.They go into detail about his properties and how he has been able to fix and flip while still turning a great passive income on his properties.  Check out the video with the screen share and the documentation in the Community and our YouTube Channel.https://www.youtube.com/c/RidgeLendingGroupYou can join these calls live by clicking on this registration link.  As always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.comCopyright ©2023 Geneva Financial, LLC, DBA Ridge Lending GroupNMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Before our PA Governor-appointed public official guest joins us, I discuss how autonomous cars expect to change real estate. Richard Vague, Pennsylvania's Secretary of Banking and Securities from 2020-2023 joins us. We're in the state capital of Harrisburg, PA. We discuss America's beginnings in real estate and banking from around 1800. He tells us about the health of banks in the wake of recent failures due to higher interest rates. I ask Richard about full reserve banks vs. fractional lending banks. Great Britain prohibited colonists from owning land west of the Appalachians.  The basis of early land wealth were crops grown on the land—wheat, corn, tobacco, indigo, and rice. Mortgages around 1800 were often 50% LTV and 6% interest rates. Here in the 2020s, Richard believes that private sector debt is a larger problem than public debt. Wherever debt growth is most rapid are where the economic cracks exist. Inflation benefits the Top 10% of the economic strata. Private debt becomes unsustainable around 225% of GDP. In the US, it's currently 160%. You become insolvent when you cannot make interest-only payments. That's true for you as an individual, or a nation. If these topics interest you, check out Richard's new book, “The Paradox of Debt” at ParadoxOfDebt.com. Timestamps: America's beginnings with banking, real estate, and debt [00:00:01] Discussion on the historical influence of Pennsylvania banking on the formation of US banking, including figures like Robert Morris and Alexander Hamilton. The impact of autonomous vehicles on real estate [00:02:54] Exploration of the potential effects of autonomous vehicles on real estate, including reduced need for parking and changes in commuting patterns. The role of the Secretary of Banking and Securities in Pennsylvania [00:09:20] Insight into the responsibilities of the Secretary of Banking and Securities in Pennsylvania, including oversight of banks and consumer protections. The fractional reserve lending system [00:10:44] Explanation of how banks operate through fractional reserve lending and the possibility of full reserve banks. The origins of the US banking system and the role of Thomas Willing [00:12:06] Discussion on the founding of the US banking system and the involvement of Thomas Willing, the first banker in the United States. The land crisis of 1796-1797 and its impact on Robert Morris [00:14:14] Exploration of the financial crisis caused by land speculation and how it led to Robert Morris, a prominent figure in credit ratings, ending up in debtor's prison. The formation of the nation and its intersection with banking [00:21:50] Discussion on the short-term loans and interest rates during the formation of the United States and the role of debt in the westward expansion. Private sector debt and its growth [00:25:30] Exploration of the significant increase in private sector debt since World War II and the focus on the potential issues associated with it. Debt growth as an indicator of economic crises [00:28:23] Insight into how rapid debt growth, particularly in the private sector, can serve as a predictor of economic crises and the shortcomings of economic models that exclude debt as a factor. The paradox of debt [00:31:47] Debt creates wealth, using leverage and appreciation to generate wealth. The end game of private debt [00:33:29] When the requirement to service debt slows the economy down to near zero. Inflation profiting with real estate [00:37:42] Real estate is not just an inflation hedging vehicle, but an inflation profiting vehicle due to fixed interest rate debt and rising rents. Resources mentioned: Show Notes: GetRichEducation.com/472 Richard Vague's new book: ParadoxOfDebt.com For access to properties or free help with a GRE's Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY' to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. I'm sitting down in Pennsylvania with the governor's appointed state secretary of banking and securities. What were America's beginnings with banking, real estate and debt? Learn how this affects you as an investor today. And what does America's day of debt reckoning look like today on Get Rich Education?   Speaker 2 (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.   Speaker 1 (00:00:44) - Welcome from Harrisburg, Pennsylvania, to Harrisonburg, Virginia, and across 188 nations worldwide. I'm Keith Weinhold and you're listening to Get Rich. Education has been the Keystone state of Pennsylvania this week. In just a few minutes, you'll hear my sit down with secretary of banking and Securities for this great state of Pennsylvania from 2020 to 2023. The rather distinguished guest also sits on the Ivy League University of Pennsylvania's Board of Trustees. And before we're done, I'll be sure he understands at least one core principle here and get his opinion on that. Yeah, I visited seven US states so far here in the past month and I'll continue to visit so much of the United States.   Speaker 1 (00:01:28) - In fact, I might have done more driving this past month than at any time in my life. Now. Some people are really car people. We have this kind of car culture in the United States for some evidence that younger people aren't as interested in that is older people. I mean, some people, they get really excited about new car features or new dashboard interfaces or hybrids or EVs and charging stations. You know, none of that is really that interesting to me. However, you know, the one new car feature that I actually really care about and I'm waiting to go more mainstream. Any idea the one game changing car feature that I really can't wait to get here because it's really going to improve your quality of life. And mine and I talked about this way back in Get Rich Education Episode 13 in the year 2015 is something that is still expected to have substantial ramifications for real estate, and that feature is autonomous vehicles, also known as driverless cars. I mean, as much of the world that's automated these days and digitize, it feels like something is out of whack to have all of this technology that you have in your car today.   Speaker 1 (00:02:54) - Yet even if you're on cruise control out on Interstate 80, like I have been a lot lately, you've mostly got to keep your eyes glued to the car bumper in front of you. Yes. And the car that reliably drives itself. That's the new feature that I really want. I mean, imagine for you to be able to get some sleep or scroll your phone or I know that it sounds funny, even exercise while your car drives itself. And of course this still pretends to have a real impact on real estate. Cars will really need to be owned. It's just the subscription service that you order. A car comes to pick you up and then it drops you off where you need to go. So these cars just continue to stay in motion out there. You don't need a garage so much. And this means that cities won't need nearly as much parking. So parking lots are less important, parking garages are less important. And since you can be more productive while you're a passenger in the car drives itself, well, therefore, those neighborhoods that are say no one hour outside of the center or metro area, well, those areas won't have as much of a price discount because autonomous cars lower your time expense in commuting.   Speaker 1 (00:04:16) - But autonomous car adoption has been slower to develop than a lot of people, including me, expected. I mean, there have been a lot of experiments, But see, what happens is an experimental autonomous car crash that just makes more news than a human created car crash. And that has really slowed adoption. So yeah, I'm not so into cars. The only feature that's on the horizon that really gets me interested is winning back some of my time with autonomous cars. Hey, we have a ton of great podcast episodes lined up here at some of the most brilliant minds in the real estate and money world. Continue to join me coming up soon. Here on the show is the return of a really dynamic guest. He goes by the nickname the mad scientist of multifamily in the industry. Some call the amount of multifamily, mobile home parks self in other commercial real estate investors that have these floating interest rates, the amount of those people, it's almost insane. Higher rates are going to bring those deals down and investors will keep losing money in those deals.   Speaker 1 (00:05:27) - That's what the mad scientist of multifamily and I are going to focus on them. Yes, these people that learn how to perhaps do syndications through TikTok videos, they are losing their deals. Isn't that really is too bad because that reputation seriously that. The good operator, so we're going to sort that out for you. Then on a later episode here, one of the sharpest economic minds in the entire world joins us to discuss why the recession didn't happen as soon as he and a lot of others thought and what that means for the future of stocks and real estate and commodity prices. All of that is in the near future here on the show. But today I'm visiting my home state of Pennsylvania, where I've lived most of my life. It is the fifth most populous state, despite not being that large by area and despite the fact there are still a ton of rural areas in Pennsylvania, and of the five biggest states, Pennsylvania may very well have the deepest history. So we'll dig into some real history today.   Speaker 1 (00:06:31) - Pennsylvania banking was influential on the formation of United States banking, including that of Robert Morris. He's a pretty well known name, but he was succeeded by a better no name. Right after Robert Morse, we had Alexander Hamilton in that banking role. But yeah, Pennsylvania Robert Morris, he is known as the very financier of the American Revolutionary War. As we're about to discuss the nation's beginnings, America's formative years in land and real estate hundreds of years ago. Look, if a hundred years ago, a colonist or an early American, if he or she said this, I'm going to buy a piece of property and develop it. Okay. What do you think that meant when they said that today? If you said, I'm going to buy a piece of property and develop it, well, most people would think that you're going to build a housing development. But back then it probably meant that you were going to clear your land of trees and planted for agriculture and you're going to grow wheat or corn or tobacco.   Speaker 1 (00:07:37) - That was the discussion you were having then. What crop are you developing on your real estate? It sure wasn't. Are you going to develop apartments or condos or single family homes? That's how it might sound today. In fact, the 1790 census that shows that roughly 90% of the American population was employed in agriculture. 90%. So your real estate income was largely derived on your crop yield, which you might use to pay your debt on your land. Let's start this interview that I expect to be wide ranging as we'll take it from yesteryear up to the present day. This week's guest has served as secretary of banking and securities for the great state of Pennsylvania from 2020 to 2023. It is a cabinet level agency here in the state capital of Harrisburg. He was appointed to that position by Pennsylvania Governor Tom Wolf today. He is managing partner of Gabriel Investments as well based in Philadelphia. And today he's the author of an interesting new book. It's titled The Paradox of Debt A New Path to Prosperity Without Crisis. Welcome to Richard Vague.   Speaker 3 (00:08:53) - Thank you so much for having me.   Speaker 1 (00:08:55) - It's good to have you. For those of you listening in, the audio only vague is spelled vague. You and Richard, as Pennsylvania's secretary of banking and Securities, I know that you have various deputy secretaries that assist you. Tell me. I'm going to venture to guess that that role includes acts like the oversight of banks and various consumer protections. Are they important parts of that role?   Speaker 3 (00:09:20) - Without question. The fundamental job is looking to the safety and soundness of the banks chartered here in Pennsylvania to make sure they don't fail. And we all saw the importance of that recently. Silicon Valley bank failed in California. And I think if we'd had the caliber of examiners out in California that the folks here in Pennsylvania or that might not have happened.   Speaker 1 (00:09:44) - That's a nice compliment to those that have that oversight here in state, Richard. It sure has been interesting with interest rates actually not being historically high, but at the rate that they change and the rate that they spiked, making some things break everything else to tell us about that role with the oversight that you had of banks and consumer protections in Pennsylvania and really what everyday depositors are concerned with.   Speaker 3 (00:10:10) - Everyday depositors are concerned with getting the highest yield they can. Sure. And certainly they've been rewarded more lately than they have been over the last, let's say, ten years prior to that. But they also should be concerned about the safety and soundness of the bank they deposit with. And I think a lot of folks forgot that lesson. You know, a few years passed from a crisis and folks aren't worried about whether their bank's going to be around so much anymore. I'm really pleased to report the banks here in Pennsylvania are in really good shape.   Speaker 1 (00:10:44) - Richard, I don't even think that everyday depositors understand the fractional reserve lending institution system, which is really how most banks operate, and that is when a depositor gives the bank money or the money goes ahead and lends that out, that difference, that spread being their arbitrage, which is how they stay in business. I've got a rather interesting question, perhaps are full oil reserve banks feasible as the norm? And what I'm talking about there is banks that can't lend depositors money out and instead that bank needs to profit by charging fees to depositors.   Speaker 1 (00:11:23) - Now, I know everyone likes to get something for free, but would that be a more responsible system? Are full reserve banks feasible at all?   Speaker 3 (00:11:31) - If you did that. You know, that's something I've studied quite a bit, and that was a very active question, by the way. Yeah. In the founding of our banking system here in Pennsylvania in 1781, it's a question that's been around forever. Any economy needs to have money created in order to grow, and the banking system is what does that now. But if you banned that in the banking system, it would just have to happen somewhere else.   Speaker 1 (00:11:58) - Were there any prominent names that were involved with the setup of banking in Pennsylvania?   Speaker 3 (00:12:06) - The name that you hear the most is the guy named Robert Morris, who was the head of it was in effect, the secretary of the Treasury during the Revolutionary War. But his senior partner was the original banker in the United States, and his name was Thomas Willing in history has more or less forgotten him. And that's, by the way, the subject of my next book.   Speaker 3 (00:12:30) - I'm in the Middle of writing a biography of the origins of the US banking system and our first banker, Thomas Wells.   Speaker 1 (00:12:38) - There is a Robert Morris University in Pennsylvania, of course, and we're talking about history here, Richard. And I know that you have an excellent sense of history about the nation's beginnings in land and in real estate. Can you speak to that?   Speaker 3 (00:12:55) - The United States was all about land from the very beginning. You had massive land grants like to William Penn to found the state in the first place. But almost immediately after the founding of the country, you know, one of the reasons we had the American Revolution is because Great Britain prohibited colonists for owning land west of the Appalachian Mountains. And that was very frustrating to people like George Washington and others who had surveyed really lush pieces of land in the Ohio Valley. Immediately after the success of the revolution, the wealthy investors in America began buying millions and millions of acres towards the west, in the Ohio Valley, in Kentucky, in New York, in western Pennsylvania and the like, and got into trouble and brought the first financial crisis in US history, the land crisis of 1796 and 1797, because they were buying all that land on credit, either from the landholder, the private landholder or the the state or commonwealth that the land was in.   Speaker 3 (00:14:14) - They bought this under the presumption that the value of real estate would always go up and of course it just didn't go up fast enough. And Robert Morris to speak of someone actually ended up in debtor's prison because he overextended himself, which is somewhat ironic since he's something of a icon for credit ratings and credit prudence. And yet he was very much of a wild speculator and ended up in prison destitute.   Speaker 1 (00:14:45) - This is really interesting. Okay. And nefarious character early on in America's private real estate development, when the Appalachian mountain range in the late 1700s was deemed as the frontier to a lot of people.   Speaker 3 (00:14:59) - Absolutely. Everybody was looking west of there for the big games and the big opportunities.   Speaker 1 (00:15:06) - I mean, this is part of Manifest Destiny and the American Dream. So can you tell us more about a lot of that land in the early days west of the Appalachian Mountains? How much did the government claim is theirs and sell to private landowners on credit? And then how much were private landowners taking and were they allowed to make land claims and then sell it to someone else? Or tell us more about those early beginnings of that real estate setup?   Speaker 3 (00:15:34) - Well, that's exactly right.   Speaker 3 (00:15:35) - Most of that land was owned by the colonies, which in 1776 became states. The states own that land. The states all incurred massive debts in prosecuting the revolution itself. So by the time you get to 1783, 1787 states are deeply in debt and bondholders of state debt are not getting paid interest. And one way to alleviate that crisis was to sell land and selling it an acre here, an acre. There wasn't going to do you any good. So the states were selling land of 100,000 acre parcel a year, a million acre parcel there. Now, the guys that bought that, at first they were thinking, we'll do it, we'll develop towns, will lay out the towns, will survey them, will sell them, will attract settlers into this realm, will sell it plot buy plot to these settlers. But it was pretty clear that was a pretty slow way to make your money back. So they started looking to the wealthy in Europe and started sending brochures and agents to Europe to in essence, be able to flip their land in Early on, they were very successful at that.   Speaker 3 (00:16:54) - Guys like William Bingham, who was the richest man in America, and Robert Morris, who was one of the richest, would make, you know, 100,000 here and 100,000 there, which is tantamount to making tens of millions. Now that ended. They started doing bigger speculations. There weren't the settlers to buy it. The Europeans got a little bit smarter. You had a major national financial crisis, including, by the way, it wasn't just those Western lands. One of the biggest parts of the financial calamity was in the new town of Washington, DC, where they were moving the government, and people came in, including Robert Morris, thinking it's the seat of government where this is going to be a boomtown. And a lot of folks got into deep trouble speculating on plots in Washington DC.   Speaker 1 (00:17:42) - And if you're the listener, think that this sounds rather unorganized and free wheeling. Of course, we just need to think back a little bit earlier as to what happened when we as colonists went ahead and wrested the land away from the natives as well, of course.   Speaker 1 (00:17:57) - But yeah, Richard, you talked about some of the draw and the appeal to some of the land around Washington, D.C. there along the Potomac River. But just generally overall, in a lot of cases, this new American government, who were the land sellers trying to attract or were they trying to attract them to do, for example, was it to only and to set up a farm for agriculture or was it for trapping or what attracted people to this new land grab, if you will?   Speaker 3 (00:18:24) - The basis of wealth early on in the United States was the crops that we grew. And that obviously, first and foremost was wheat and the biggest supplier of wheat, not just in the United States, but to Europe was Pennsylvania. That's why Philadelphia became the largest city in the United States. Then just south of US and Maryland and Virginia. You had tobacco, which was our number one crop, but it was our number one export. South of that, you had indigo and rice. The further north you got, there really wasn't a lot of arable land.   Speaker 3 (00:19:03) - And that's why, you know, places like Massachusetts had to turn the manufacturing so heavily. It was really that. And fishing for cod were the only thing they could do. So, yeah, absolutely. We were a breadbasket for not just the country, but the world almost from the beginning.   Speaker 1 (00:19:21) - You talk early on about the extension of credit and how that enabled settlers to go ahead and own some of this new land? Is this sort of the early formation of long term mortgages? When did that.   Speaker 4 (00:19:35) - Occur?   Speaker 3 (00:19:36) - Well, absolutely. You know, really from well before independence. One of the problems you had is that there wasn't enough currency to really facilitate economic growth. So they began issuing paper currency in various forms. And a lot of these were very successful. This was done at the state level. And what they would do is they would create land banks. And so you would go in and take your land as a farmer. You would take it to the land bank and you could get currency up to half the value of your land and you'd pay interest on it.   Speaker 3 (00:20:14) - So it was really was a de facto mortgage, a.   Speaker 1 (00:20:18) - 50% mortgage, a.   Speaker 3 (00:20:19) - 50% mortgage, and you could spend that currency. They were well managed early on. Most of these didn't work, failed. And the first real commercial bank was Thomas Williams Bank in 1781 and Philadelphia.   Speaker 1 (00:20:35) - What were interest rates like at this time in these formative years of our nation.   Speaker 3 (00:20:40) - For bigger transactions, the range was really just 5 to 6%. It might get down to four, might get up to seven. Interest rates in the U.K. were closer to five and us, they were closer to six. There were breakdowns by a slice of an interest rate, so there wasn't an interest of 5.1% or 5.2%. And for high risk transactions, you could easily get into the same interest rate realm that some of our usurious lenders do today. Yeah, you see situations where folks in dire straits would borrow for an interest rate of 5% a month. A lot of loans in those days were very, very short term. There were the land loans that were long term.   Speaker 3 (00:21:28) - Most commercial banks made loans for 30 to 90 days, and they really were meant to bridge the period from when you, as a merchandiser bought your wholesale supplies to when you sold them as goods to the folks in your town. You could roll those loans over. But they were very short term back in those days.   Speaker 1 (00:21:50) - That is interesting. Those are really short term loans. And this is pretty parallel with what I've read around that time, that interest rates seem to be about 5%, something like that. We're talking about the formation of this nation, its beginnings in land, in real estate, and how that intersects with banking and the mortgage market and really part of the manifest destiny in the westward expansion of the United States. Yes, we are talking about a popular four letter word debt, and that word debt has only become more popular in America with consumerism here in past decades. So when Richard and I come back, we're going to talk more about debt today in the United States. In his new book, The Paradox of Debt, you can get that at Paradox of Debt.   Speaker 1 (00:22:35) - More we come back with Richard. I'm your host Keith Wayne hold you're listening to Get Rich Education. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Charlie Ridge personally, though even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited. For some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income.   Speaker 1 (00:23:48) - And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866. This is author Jim Rickards.   Speaker 4 (00:24:22) - Listen to Get Rich Education with Keith Reinhold and Don't Quit Your Day Dream.   Speaker 1 (00:24:37) - Welcome back to Get Rich Education. We're talking with the guest that served as the secretary of banking and securities for the great state of Pennsylvania since 2020. Today, he's the author of an interesting new book. It's titled The Paradox of Debt A New Path to Prosperity Without Crisis. His name is Richard Vig. He's joining us from here in Pennsylvania, where we are together today. And Richard, I know that you have a lot of commentary about modern debt and what we can do about today's debt and how debt really seems to have expanded a lot since Nixon pegged us from the last vestige of the gold standard back in 1971.   Speaker 1 (00:25:14) - I guess really the preeminent question, Richard, is should debt be a concern? We read all these stories about unrelatable numbers, about how the United States has $33 trillion of stated public debt. What's problematic?   Speaker 3 (00:25:30) - There's a lot more private sector debt than public debt. And I think private sector debt is the area where we need to focus and where our concern needs to be. Private debt has increased since World War two from 35% of GDP to 160% of GDP. Wow. So it's almost quintupled. There's about $41 trillion worth of private sector debt. That's a bigger number than the government debt number, and that's globally as well. There's about a $150 trillion worth of private sector debt and only about $90 trillion worth of government debt.   Speaker 1 (00:26:09) - And what is private sector debt? Are we talking about automobile loans, credit card loans, student loans?   Speaker 3 (00:26:14) - It's roughly divided between business and household debt. So if we've got 40 trillion in debt, it's about 20 business and 20 households. And within both of those categories, the single biggest type of debt is real estate by far.   Speaker 3 (00:26:31) - So within household debt, it's about 20 trillion. Almost 14 trillion of that is mortgage debt. On the business side, it's about 20 trillion. About 6 trillion of that is commercial real estate debt. So there's never been a time where real estate debt, household and commercial has not been really kind of the driving force of the economy.   Speaker 1 (00:26:57) - You got public sector debt and you got private sector debt. And, you know, it's kind of funny, Richard, if someone asked me what the difference between those two is, there's a few different directions you could go. What I like to tell some people is, well, the government can just print dollars, okay? Everyday consumers in businesses, they don't have that handle. So the government can print dollars and they can call that whatever name they want to quantitative easing. Maybe they want to call it currency creation. But over here, if the individual tries to do something like that, it's called counterfeiting. So, yes, it can be more problematic. Individuals cannot print their own dollars at home.   Speaker 3 (00:27:32) - That's exactly right. And that's why private debt is the area that we should focus more on. If you think about the great financial crisis of 2008, mortgage debt in 2002 was $5 trillion. By 2007, it was $10 trillion. It had doubled in less than five years. And we all now know that was millions of mortgages that it should never have been made. That was mortgages where the individuals had no income, no job, no assets. Those were homes that stood empty for years. And in many cases, they had to get torn down.   Speaker 4 (00:28:10) - Yeah.   Speaker 3 (00:28:11) - If you want to look out for trouble, the place to look is in the private sector debt. And the way to detect it is wherever it's growing very, very rapidly, that's where you're going to have a problem.   Speaker 1 (00:28:23) - So that's therefore a way to help predict economic crises. It's debt growth or I guess you could really call it credit growth as well, right? I mean, both credit and debt are basically the same terms for the different side of a transaction wherever the growth in that is most rapid is really where the economic cracks are.   Speaker 3 (00:28:43) - That's exactly right. And the fact that the Federal Reserve did not spot that in 2005 and six is one of the great stories of our time. They build economic models that don't even include debt as a factor whatsoever. Everybody finds that very surprising. It's called the DSG model, and it models the future of the economy without taking into consideration anything about debt.   Speaker 1 (00:29:12) - Why is that excluded? Mean, I'm a bit taken aback by what you just told me. Think you can tell.   Speaker 3 (00:29:18) - It's the fact. And economists got so theoretical going back a couple of decades that they started separating out financial economy from what they call the real economy. And they just stopped studying the financial economy as kind of a secondary matter to the real economy. The real economy would be, you know, the wheat and the automobile that gets manufactured and so forth and so on. My argument is those two things are inseparable. You shouldn't and cannot consider one without the other. And that's a huge blind spot in our Orthodox economics profession.   Speaker 1 (00:30:01) - Tell us more about how what we've discussed ties in to the thesis of your book.   Speaker 1 (00:30:06) - Richard The Paradox of Debt. What's the paradox?   Speaker 3 (00:30:10) - Paradox is that debt creates wealth, but it also creates calamity. So, for example, in the pandemic, 20 through 22, government debt alone increased by $8 trillion. Household wealth increased by $30 trillion. So the money the government spends does not disappear. It actually goes into the checking accounts of households. So at the end of that three year period, households had 8 trillion more in deposits in their checking accounts. And the flood of new money had pushed up real estate and stock values. So cash in bank accounts increased by 8 trillion, and the value of real estate and stocks increased by 20 something trillion. So households were $30 trillion better off at the end of 22 than they had been at the end of 19. However, most of that, like 80% of that benefit, went to the top 10% of the population. And that's for the very simple reason that most assets, most stocks and real estate are held by the top 10%, like 65% of all the stock in real estate in the country is held by the top 10%.   Speaker 3 (00:31:32) - The bottom 60%, six 0%, only hold about 14% of the stocks in real estate. So for real estate and stock values go up, it's the most well-to-do that get the benefit.   Speaker 1 (00:31:47) - That's right. And it's really the listeners on this show that we want to help take from poor or middle class and help them understand something you said in just a couple of minutes ago, that debt creates wealth, which is a paradox to many. The title of your book is The Paradox of Debt. So here what we often do is get 75 to 80% loans on an income producing property where the rent income meets or exceeds all of the expenses. And this is creating wealth. How is that wealth generated debt? A 75 to 80% loan debt is leverage and leverage appreciation actually makes compound interest look pretty slow. So a very concrete example in a sense of the paradox of debt that we're using right here at Get Rich education. Richard.   Speaker 3 (00:32:31) - You have described something that is not just true about real estate transactions, but it's true about the economy as a whole.   Speaker 3 (00:32:40) - That's the essential analysis. Yeah. And to put some macro numbers on it, in 1980, total debt in the economy, government plus household was 125% of GDP. Today it's 260% of GDP. Yeah. Yeah. And that exact same time span, household wealth, net of debt went from 352% of GDP to 600% of GDP. Debt created. Well.   Speaker 1 (00:33:12) - Yes, those are some astonishing figures. I guess as we're winding down here, Richard, one might wonder, well, where is the ceiling? When is the day of reckoning? When do we reach a calamity? How do we know that there's too much private debt and how does that actually look?   Speaker 3 (00:33:29) - We have a chapter on that very subject in the book there. It's pretty easy to see that there's an end game on the private sector side. And right now we're at about 160% of GDP. We think that that's probably somewhere in the 225% of GDP range here in the United States when there's so much debt that the requirement to service that debt slows the economy down to near zero.   Speaker 3 (00:34:00) - On the government debt, for the very reason you suggested that limitation doesn't really exist, the government could refinance its debt in perpetuity. As we said a moment ago, that ends up in the bank accounts of households anyway. So the thing I look to and I'm concerned about is private debt. Even though if you go flip on the cable news channels, you would think the world's about to end because of our government debt.   Speaker 1 (00:34:26) - Now tell me, am I oversimplifying things here, at least with private debtors, everyday Americans, when an interest only payment on your debt exceeds your ability to service it each month? Is that the path to bankruptcy right there?   Speaker 3 (00:34:42) - You got it. And whatever you say about an individual, you can say about the economy as a whole, because GDP is really just the sum of the individuals and businesses in the US. So if all the individuals and businesses are approaching this, the circumstance you just described, economy is not going to grow well there.   Speaker 1 (00:35:03) - Any last things that you would like to tell us about you very well received book because again, it's called The Paradox of Debt in the subtitle is A New Path to Prosperity Without Crisis.   Speaker 3 (00:35:14) - We cover the same material for the other six largest countries in the world. So if you read the book, you're not just going to learn about the US, you're going to learn about China, Japan, Germany, France, England and India. And I think it gives you the kind of fulsome grounding you need to better understand the news stories that we get such a barrage of every day.   Speaker 1 (00:35:38) - That's right. We need a frame of reference and putting our own more domestic debt into perspective here. Well, Richard, if someone wants to get a hold of the book, remind them of how they can best do that.   Speaker 3 (00:35:49) - Thank you so much. Go to Paradox of Debt or go to Amazon or Barnes and Noble and just search for that and it'll be right there.   Speaker 1 (00:35:58) - Oh, Richard, you've helped expand our debt mindset somewhat here on the show today. It's been great having you here.   Speaker 3 (00:36:05) - It's been such a privilege. Thank you for having me.   Speaker 1 (00:36:14) - A lot of interesting history with Richard Vig today, this great state of Pennsylvania's secretary of banking and securities.   Speaker 1 (00:36:20) - One concept that really hasn't changed throughout history that we discussed there is that inflation mostly benefits those at the top. Again, check out Richard's book at Paradox of debt.com. But yes, real estate, it is still known as an inflation hedge. You still hear that term thrown around a lot but I really try to use a different term not hedge I don't like hedge. Okay. In the investing world, the word hedge means something that you do to offset risks. I don't like that word used with real estate. So therefore, the word hedge that really correlates with a defensive strategy. I mean, hedge, that's probably a better term for gold. Gold is a hedge against inflation. That makes sense to me. But where I draw the distinction is that investment property bought with a loan is not merely a hedge against inflation. That's why when I coined the real estate pays five ways back in 2015, the fifth benefit, it's not called inflation hedging. It is called inflation profiting. Now, if you're only looking at the overall capital price of your real estate, even your own home, well then it's dollar denominated price alone.   Speaker 1 (00:37:42) - Well, that could be a hedge against inflation. But that's only the beginning, because when you get the fixed interest rate debt with it, now you're profiting because inflation debases your debt while the tenant makes all of the payments. And then as your rents rise with inflation, the reason that your monthly profit, your cash flow rises faster than inflation is, of course, due to the fact that your principal and interest payment stays fixed and feels really low over time. That's the inflation Triple Crown that I just described right there. And that's why when you buy investment property, REIT real estate is not just an inflation hedging vehicle, it is an inflation profiting vehicle. And today real estate isn't just scarce. It is still about 60% below the needed supply. And then amidst that, within that, single family homes are even more scarce. And then entry level homes that make the best rentals are even more scarce than that. But here on the show, we connect you with those builders and providers that are making the most in-demand properties available.   Speaker 1 (00:38:59) - Oftentimes these single family homes that are entry level. So therefore, in this environment, if you can get a hold of those, you are going to own a scarce asset that everyone wants. That's what we help you do here. But mortgage rates have been a hindrance for adding investments. But with our referral network here, we have largely solved that problem for you. We have providers that offer 5.75% mortgage rates because they buy down your rate for you less. We're going to show you've heard how a Marketplace income property provider is offering an astounding 4.75% mortgage rate. And although it has some shortcomings, there are also 2.99% seller financed investment properties that you can tie up. Yes. Today. So profit from a scarce asset that everyone wants and benefits from higher inflation. And today it really tilts toward you, often giving more consideration to new build properties because builders, they're the ones that are aggressively buying down your rate for you today. And new builds also have lower insurance rates last year. To make it easier for you, we started our free investment coaching service so contact your investment coach to help get you started.   Speaker 1 (00:40:19) - Some of our more popular markets lately are in Ohio, Indiana, Missouri, Tennessee, Alabama, Florida, Georgia in summer. So whether you like to connect with the provider on your own, if that's what you like to do or if you don't, you can then just utilize our service free of charge investment coaching. You can do all of that at GREmarketplace.com thanks to Richard Vague today until next week I'm your host Keith Weinhold. Don't quit your daydream!   Speaker 5 (00:40:57) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.   Speaker 1 (00:41:25) - The preceding program was brought to you by your home for wealth building. Get rich education.    

Learn how to permanently reduce your tax burden. The greatest tax breaks for real estate investors are revealed. But first, home prices are permanently elevated because they're larger and with more amenities than they had in the 1970s.  Today's homes have vaulted ceilings, multiple fireplaces, granite countertops and more square footage. I describe. John Hyre, the Tax Reduction Lawyer, joins us for the first time. The top federal income tax rate is 37%. Learn where it's headed next. On your short-term rentals (like Airbnbs), sometimes you can reduce your taxes by legally stating that it's a “hotel”. Your rent income is taxed at less than your day job (W-2) income. Rent income is not burdened with social security and self-employment tax. Learn exactly how tax depreciation lowers taxable income for real estate investors. You'll legally never pay any capital gains tax with a 1031 Exchange. We review how. Will the 1031 Exchange go away? John tells us how to get $100K tax-free out of your property—without doing an exchange. Timestamps: The direction of the marginal income tax rate [00:08:19] Discussion about the current marginal income tax rate and the potential for changes in the future. Tax changes under the Trump administration [00:09:22] Explanation of the Trump tax changes and the potential impact of those changes on real estate investors. Taxation of rental income [00:10:08] Explanation of how rental income is taxed differently from regular job income, specifically regarding self-employment and social security taxes. Opportunity and traps of Airbnb rentals [00:10:25] Discussion on the potential to convert Airbnb income into losses and the tax implications of Airbnb rentals. Making an Airbnb an active trade or business [00:11:41] Exploring the distinction between treating an Airbnb as rental income or hotel income for self-employment purposes. Accelerating depreciation with cost segregation study [00:14:17] Explanation of cost segregation study and how it can help real estate investors lower their taxable income by depreciating certain assets more aggressively. Tax Depreciation and its Benefits [00:21:34] Explanation of how tax depreciation works in real estate investing and its value in reducing taxable income. The Basics of 1031 Exchange [00:26:13] Overview of the 1031 exchange, a tax-deferred exchange that allows real estate investors to swap properties without paying capital gains tax. The Long-Term Benefits of 1031 Exchange [00:28:37] Discussion on the strategy of using 1031 exchanges until death to maximize tax deferral and potentially convert it into tax-free gains for heirs. The 1031 Exchange Trick [00:30:36] Speaker 3 explains a trick to maximize the benefits of a 1031 exchange by utilizing passive activity losses. The Pass-Through Deduction [00:33:21] Speaker 3 discusses the concept of the pass-through deduction and its application to rentals, providing insights on how to maximize the deduction. Future Tax Policies [00:36:15] The potential tax policies of Democratic and Republican presidential candidates are discussed, with an emphasis on their stance towards real estate and taxes. The 1031 tax deferred exchange [00:40:03] Explanation of the 1031 tax deferred exchange and its potential benefits for real estate investors. Disclaimer and advice [00:40:36] Disclaimer about the show not providing specific personal or professional advice, and the need to consult appropriate professionals for individualized advice. Sponsorship message [00:41:04] Acknowledgment of the show's sponsor, getricheducation.com, as a platform for wealth building. Resources mentioned: Show Notes: www.GetRichEducation.com/469 Learn more about John Hyre: www.TaxReductionLawyer.com If you'd like help with one of  GRE's Investment Coaches (free), start here: GREmarketplace.com/Coach Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY' to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Real estate investors get tax breaks like you'll find absolutely nowhere else in the entire tax code that can help you legally work the tax system like you're a billionaire and actually work your way toward becoming a billionaire. Today on Get Rich Education.   Speaker 2 (00:00:22) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.   Speaker 1 (00:00:38) - Welcome from Belgrade, Serbia, to Bellingham, Washington, and across 188 nations worldwide with 5.2 million listener downloads. I'm your host Keith Weinhold and this is Get Rich education. Yeah, you're back at that abundant place and you gotta be because the scarcity mentality is abundant in the abundance mentality is scarce so be frugal with your time, not your money. You can afford to be because you live by the mantra that financially free beats debt free. Throughout our nine years of weekly shows here, Waiting in the Wings is just the third ever expert tax guest we've had on the show. The other two are Tom Wheelwright and Kristen Tate.   Speaker 1 (00:01:18) - You meet the third one in a few minutes. Here I am sitting the first half of this month in Denver, Omaha and then Chicago checking out real estate markets and more. Before we talk taxes. All prices have risen this year, just like they do most years, and they expect to stay elevated. I've talked before about all those reasons why demographic and supply demand and all of that, but why else are houses permanently more expensive today than they were decades ago, even when adjusted for inflation in some cases? Well, it's not all the dollars given to people during Covid or anything like that. It's just the fact that houses are bigger and more complicated than they were in the 1970s and 1980s. I mean, they used to build houses that were just 1000 or 1500 square feet. I mean, often it would be like a three bed, one bath house with a one car garage that used to be sort of the suburban staple. Well, today it'll often be four bed, three bath, three car garage with things that didn't exist in yesteryear.   Speaker 1 (00:02:26) - I mean, today you have things like multiple fireplaces and vaulted ceilings and more overall size and more amenities that would have just been considered a luxury home like 50 years ago. So the home quality is better and you also have more strict building codes that leads to things like more insulation or egress windows or different roofs or wiring or Hvac and plumbing in that courts are going to countertops, even in rentals. That was an unthinkable luxury 50 plus years ago. And also today, it's just more expensive to develop land. It takes years to get approvals for drainage and utilities and roads and environmental requirements. And after all that, all those factors that make us real estate more expensive. The US still has some of the most affordable property prices in the entire world. Now those changes that I talked about aren't bad. It just makes real estate more expensive. And a lot of times those changes are actually good. It means we have a higher and better standard of living now and now seemingly everyone from Warren Buffett, with his big investment in home builders to shark tanks, Barbara Corcoran's bullishness, I mean, all these people have made either bullish bets or bullish remarks on real estate, all these prominent figures.   Speaker 1 (00:03:52) - And we are to, in future episodes of the show here, someone who admits that he's a gloomier guest. He and I are going to produce a fascinating episode on the collapse of American cities, what's happening in some of our inner cities, How bad is it and how bad will it get? Yeah, we're talking about the collapse of American cities in that episode. And also in a few weeks, I will be in the Keystone state of Pennsylvania for a different, fascinating episode. That's what I'm going to sit down with. The Honorable Secretary of Banking and Securities for the great state of Pennsylvania. He's in that role from 2020 to 2023. That's a cabinet level agency there in the state capital of Harrisburg. And my guest for that show there, yes, he was appointed to that position by Pennsylvania's governor. And he also sits on the board of trustees for an Ivy League university. That is Penn there in Philadelphia. And I'll be sure that the secretary of banking and securities for Pennsylvania that he understands some core principles here and get his opinion on those.   Speaker 1 (00:04:58) - So, again, that's the secretary of banking and securities for the great state of Pennsylvania appointed by the governor. Coming up here on Gray. Now, when we look down the road into the more distant future here on the show in, well, I guess, 31 weeks on Monday, May 6th, 2024, do you have any idea what that day is? That day is episode 500 of the Get Rich Education podcast, and I'm going to take you on an abundance mindset journey then that I hope you'll never forget for episode 500. That's on May 6th of next year. So many other great episodes are in the works here for the show. The housing market has momentum. I have a lot of great material that I want to share directly with you, and we really have some of the top guests in the industry. And I guess they're attracted here because they know that they'll reach a large, passionate, actionable audience and that's what you are. So if you're new here to the podcast, I invite you come along with me.   Speaker 1 (00:06:01) - I think you'll find it valuable. If you immerse yourself, you'll find it life changing and everything that we do and offer here is free. This show reliably recurs in your life every single week without any exceptions, just like it has since 2014. And we have never replayed an old show. I am here for you. I'm inviting you. Be sure to subscribe or follow in your favorite pod catcher. And the reason that I tell you about the Get Rich Education mobile app is that if you have someone in your life whose life would like to be changed by real estate investing or could be changed by real estate investing but doesn't know about podcasts that way. For iOS and Android, you can just have them grab the Get Rich Education mobile app. We are in Q4 and it is time to think about your taxes before the year ends. Today's expert tax guest is brilliant and understands nuances about the tax code that I sure don't. This centers on the US tax code. But you know what? If you're outside the United States, many nations provide similar incentives to the United States.   Speaker 1 (00:07:08) - Now, I don't know about you, but in my opinion, tax talk, you know, if one isn't careful, it can quickly feel like an abstraction which can make it hard to understand. We are get rich education. I'm here to help you understand things. So what I'd like to do to help aid in your comprehension is jump in and use concrete examples during our interview here. And then after the interview, I'm also going to review what you learned. Hey, today's guest is making his debut. He's a tax reduction professional. He caters real estate investors and small businesses. In fact, he is pretty well known as the tax reduction lawyer. Hey, welcome on to John Hiatt. Thanks for having me.   Speaker 3 (00:07:57) - Glad to be here from Argentina.   Speaker 1 (00:08:00) - Yeah, you're joining me from a most interesting place today, a place with high inflation and tasty steaks and a lot of other things going on in Argentina today. But back here in the United States, where so much of our listenership is, I want to get into the real estate part and how real estate investors can lower their tax burden shortly.   Speaker 1 (00:08:19) - But first of all, just in general, John, every one of us that has an income pays an income tax. Now, Obama had the highest marginal income tax rate of 39.6% under the Trump administration. That was soon lowered from 39.6 down to 37 when the Biden administration came into power. A lot of people felt like that 37% rate was going to be raised back up to 39.6, but it was not, and it's still at 37%. So with that context, can you talk to us more about the direction of the marginal income tax rate?   Speaker 3 (00:08:55) - Gridlock, glorious, wonderful gridlock, when those people in DC are unable to, quote unquote do anything mean? I'm happy in one sense. I get a lot of opportunities to make content when the law changes. But in terms of the good of the country, when very little is changing in DC, yeah, usually I'm a happy camper and right now with the gridlock and they're not agreeing on things, I would say the most that's likely to happen, I don't think marginal tax rates will change.   Speaker 3 (00:09:22) - There is some negotiation on some of the Trump tax changes, which were almost all very positive, are fading out. For example, bonus depreciation is dropping by 20% per year. Right? So the Republicans are trying to keep it at 100%. The Democrats want more spending. That's the polite term. Let's leave it at spending. And so there is some discussion going. We'll see if they can agree or not. But I don't see any massive changes coming given the gridlock.   Speaker 1 (00:09:51) - Now as real estate investors and we think about the income tax, one often wonders, even when someone's been a real estate investor for a little while, John, I don't quite think they understand how the rent income is taxed differently than their daily job income. Can you tell us about that?   Speaker 3 (00:10:08) - Yeah, really important in two contexts. I'm going to give you the straight rentals on straight rentals. The rental income had schedule E instead of schedule C or some other schedule. So like W-2 income, the extent it's tax, there's no self-employment or Social Security.   Speaker 3 (00:10:25) - So that is a positive. Also, with things like depreciation, you have a lot greater opportunity to zero out the income or even convert it into losses. Now, if you manage to convert it into losses, we have a separate struggle which is making those losses useful. In other words, they're not being passive losses which we can have a discussion on. Another up and coming area is short term rentals. I'll just call it Airbnbs generically, even though there are a lot of other systems, it's really important to understand there's opportunity here, but there also traps. Airbnbs can be taxed as rental income or hotel income. And which one do you want? Well, the lawyer answer, of course, is always it depends. Usually we want it taxed as rental income for self-employment purposes. In other words, your Airbnb normally belongs on schedule E, not schedule C, which is good because you avoid self-employment tax. Most CPAs don't understand that. Second, from a passive loss standpoint, in other words, converting these passive bad losses into good losses that might offset your W-2.   Speaker 3 (00:11:36) - You want the Airbnb treated from that standpoint as a hotel.   Speaker 1 (00:11:41) - And when John's using the word hotel, he's using his fingers to make little, quote, signs around the word hotel.   Speaker 3 (00:11:48) - Yes, because hotels are considered not rentals. It's an active trade or business. And the definition is different. So we have the code might take the same word and define it 15 different ways depending on which part of the code you're playing with here. That helps us real brief one your audience, A lot of them have a day job. A lot of them would have a hard time becoming real estate professionals, which would allow them to take passive losses on rentals. Right. Well, for those who happen to be in Airbnbs or even just temporarily want to get into Airbnbs to get a loss, here's a classic strategy for people who have a W-2 job or otherwise have too much work time outside of real estate. They cannot ever be a real estate professional. It's just not going to happen. And again, the impact of that means passive rental losses stay passive.   Speaker 3 (00:12:40) - They. On the return. They don't help you in the present. A way to wake up those losses and make them active is the first year you have a rental for passive loss purposes. Make it an Airbnb and be personally involved with it. So let's talk about that. How do you make it an Airbnb for passive loss purposes? There are a number of ways because I can talk for hours and you don't want that. The most common way to make something into an Airbnb for passive loss purposes is on average rented for seven days or less. If you rent it for seven days or less, it still goes on schedule. E No social security tax. But instead of rental passive loss rules, you deal with the normal ones. What does that mean If you spend 100 hours or more and by the way, you means you and your spouse, if you're filing married, filing jointly, your hours both count so you can split the burden. If your hands on renting the Airbnb, let's say you buy it late in the year so you don't have to run it all year and you spend 100 or more hours on it between the two of you and no other human spends more time than you, then it is considered active.   Speaker 3 (00:13:51) - People will want to rewind and listen to that because it's a great strategy for in the first year you own something going to be a rental, maybe buy it towards the end of the year, run it as an Airbnb for the end of the year. Not a big time commitment. 100 plus hours. Take the cost segregation study, write that all off and use it. It's actually will lower your W-2 income. It's useful. And then in year two, if you want to go back to it being a normal rent.   Speaker 1 (00:14:17) - So we're talking about accelerating your depreciation and therefore decreasing the amount of your taxable income with this strategy.   Speaker 3 (00:14:27) - Yep. So the cost segregation study where the basics of cost segregation, when you hear the term, first of all, you only use it if you can use the loss. But if the loss is going to be passive, don't add cost, it's going to cost you money and get you not. But if you can use the law, what is cost? Segregation? We depreciate more aggressively.   Speaker 3 (00:14:46) - A very brief description. Everything outdoors that God did not put there. Fences, sidewalks, decks, landscaping. It was put there by builders like the oak tree that the squirrel put there. We give God credit for that one. But if the builder actually planted a row of trees, they get the credit. All these things that God did not put outdoors can be depreciated very rapidly and get you a much larger write off. And then all personal property which we define as anything a tenant can steal without using power tools. So furniture, some of the carpeting, maybe some of the cupboards, window treatments, etcetera. That's a cost seg study that will draw your income. Usually it produces a loss. And then we have to ask, can you use the loss?   Speaker 1 (00:15:33) - We hit on a very specific and valuable strategy there for reducing you, the real estate investors, taxable income. But just pulling back to something more basic, you said something important in the beginning there when asked about how rental income is taxed differently than the bank.   Speaker 1 (00:15:50) - You did let us know that rental income is not subject to self-employment tax and Social Security tax. And I know it's difficult to do 1 to 1 because certainly it depends. But oh, if one is in the 24% tax bracket, so therefore they're $1 from their job, that really only resulted in them getting $0.76 if they get $1 from rental income, just roughly or perhaps give us a range as to how much after tax income they get from that dollar of rent income.   Speaker 3 (00:16:19) - Classic Lawyer Answer It depends. Here's a rough rule of thumb. So self-employment and Social Security tax are pretty much the same thing.   Speaker 1 (00:16:26) - And how much percentage are they alone?   Speaker 3 (00:16:28) - So here's how the bracket work. That's the reverse of the normal bracket. It gets lower. The more you make. Roughly speaking, I'm just rounding here. If you have 150 gram of Social Security or self-employment taxable income, for example, your W-2, this is per person, not per couple. If you have 150 up to 150, your Social Security tax bracket is roughly 15%.   Speaker 3 (00:16:52) - Then it drops after that 150 grand to right around 3 to 5%, depending on factors you don't want to know. So it depends on your total income. For example, if you have a $200,000 W-2 and you run out and have a side business that generates self-employment tax, your self-employment tax is probably only 3 to 5%. So it depends on how much you're making that is self-employment taxable.   Speaker 1 (00:17:18) - Right. So we're talking about how you will have a chance to keep more of your $1 of rent income than you would from your $1 of day job income. And that's interesting with the Social Security tax, I actually didn't realize that, therefore, Social Security tax is a regressive tax policy. With increasing income, you pay a lower tax rate where generally overall in the United States, we would have with the income tax what's called a progressive tax policy, where you pay a higher tax rate with increasing income.   Speaker 3 (00:17:47) - Correct. And here's the theory to make it pass politically. Back when they did this in the 30s, they had to sell it as it's insurance and we're going to cap out your insurance, but we're also going to cap out your benefits.   Speaker 3 (00:17:59) - And so if you look in that regard, it's not really regressive because your benefits are also capped out. Now, what's one of the proposals? Let's make it flat so that people who make more subsidizing, those who make less, making it functionally progressive because you don't get any more benefits past a certain level.   Speaker 1 (00:18:17) - You're listening to get raises occasionally. We're talking with the tax reduction lawyer, John. Here we come back, we're going to talk about some more of those real estate tax advantages and get into the nuances of some things that people don't understand that well, like tax depreciation and the 1031 exchange. More with John. I'm your host, Keith Reinhold. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four Plex's. So start your pre-qualification and you can chat with President Charlie Ridge personally, though, even deliver your custom plan for growing your real estate portfolio.   Speaker 1 (00:19:04) - Start at Ridge Lending Group. You know, I'll just tell you for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25. K. You don't even need to be accredited. For some of them, it's all backed by real estate and I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866.   Speaker 4 (00:20:15) - This is author Kristen Tait. Listen to Get Rich Education with Keith Reinhold and don't Quit Your Day dream.   Speaker 1 (00:20:32) - Welcome back to Get Rich. Okay. So we're talking with John here. The tax reduction lawyer is how he's known. You can learn more about him at tax reduction, lawyer John's real estate investors. We get some of the very best tax breaks anywhere. In fact, they're so generous that I consider it to be a profit source. And I don't know that you can really say that about taxes in all contexts. I talk about how real estate actually pays you five way simultaneously appreciation cash flow, loan pay down made by the tenant. Fourthly, is that generous basket of tax benefits that we'll discuss. And then fifthly, is the inflation profiting benefit that you get on the long term fixed interest rate debt? But coming back to the fourth one, the tax advantages, really the two big ones that I predominantly think of, the quickly come to mind for a lot of us are tax depreciation, which is a deduction that reduces the investor's taxable income and the 1031 exchange, meaning that we can defer all of our capital gains tax all of our lives, which is incredible.   Speaker 1 (00:21:34) - But do you want to touch on the tax depreciation portion first, John, and tell us why that's so integral and valuable to real estate investors? Sure. When you buy stock.   Speaker 3 (00:21:43) - For example, on the market, it does not produce any paper deductions. Basically, you get the stock, whatever you paid for, it is your tax cost, your basis, and when you sell it, you just look, what did I sell it for, minus the tax cost. That's my gain. There are no benefits in the intervening time. You just sit and hold it. Nothing really happens. Real estate is different and that you get a paper deduction. Why Congress said so. You get something called depreciation and it's formulaic. You take the cost that you have in the property, what you have invested, and you multiply it by some number. Now that's where the cost segregation gets interesting because we debate which number. But for the moment, let's just pick a number. The most typical one is 3.6%. Multiply the building by 0.036 of what you have invested in it.   Speaker 3 (00:22:33) - And annually that's a deduction you get because and so that goes a long way when you add it to other expenses to reducing your income to zero. So the so if you have the income tax rate is much lower.   Speaker 1 (00:22:45) - So if you have a $1 million building, we're not talking about the value of the land with the building, just a $1 million building. Therefore you'd have about $36,000 each year that you do not get taxed on. That $36,000 is deducted from your rent income.   Speaker 3 (00:23:03) - Exactly. Try that with stock or mean you can. So that was a hypothetical non suggestion. Yeah, but that's one of the big benefits of depreciation. Now what's the downside? Because there's always strings attached. It drops your tax calls. So if I bought for a million, I took 36,000. Now my tax cost is 964,000. And so when I sell, if I sell will get into that, I have a larger gain. So there's a trade off. Now, in fairness, one of the other benefits of rental real estate is if you do sell for cash and you choose to pay taxes, we're going to talk about an alternative.   Speaker 3 (00:23:39) - If you choose to pay taxes, the tax rate on selling real estate are almost always 98% of the time lower than your normal tax bracket. So even if you sell after getting this depreciation benefit, the bracket is almost always considerably lower than your normal income, which is nice.   Speaker 1 (00:23:59) - I don't want this point to be lost on people. With that example I give of the $1 million building that you buy and the fact that say you get $100,000 of rent income from that, you'd only be taxed on $64,000 worth because you're able to deduct 3.6% of the value of the million dollar building against your rent income. And that $36,000 deduction typically with a lot of other investments, in order to get that deduction, you would have to make a $36,000 expense, like, for example, buying a new heating system for the building. But no, you don't have to buy a new $36,000 heating system for the building where you might qualify for that deduction. It's just the magic of appreciation. You can just take this $36,000 deduction out of thin air because the tax code says that you can.   Speaker 3 (00:24:47) - Yep, it's pretty much automatic. In fact, the code says you have to take it.   Speaker 1 (00:24:51) - That's right. I have learned that the tax code actually says you must take this benefit. And who wouldn't want to do that? Would there be any situation in which someone would not want to do that job?   Speaker 3 (00:25:02) - Yes. If they're going to sell later on or if they're going to sell in the comparatively near future, let's say they're going to buy and hold rent for three years and they're going to sell after three years taking the depreciation if it did not help them, let's say, created a passive loss, raises their bracket a little bit when they sell in three years. Now it's still lower than your normal bracket. It's just not as. Much lower as you would like. So yeah, there are a few spots where people resisting depreciation. It's pretty rare, but it happens.   Speaker 1 (00:25:32) - So you must take that depreciation, which is going to be a benefit to most investors in most cases down the road when it comes time to sell this million dollar building, oh, say ten years later, you wanted to sell this million dollar building for $2 million.   Speaker 1 (00:25:47) - Oh, I'm certainly oversimplifying here, but say that gave you $1 million gain because you bought it for 1 million and you're selling it for $2 million down the road. We have something known as the 1031 exchange. It's called the light kind exchange. It's also known as a tax deferred exchange. Tell us more about the 1031 exchange when it comes to selling this example, building ten years down the road for $1 million more than what you bought it for.   Speaker 3 (00:26:13) - You want to avoid paying tax. Here's the basics and then we'll get into a little bit of the process. The basics are you're swapping one house for another, but you don't have to direct swap. It's not barter. You don't have to go find someone who wants your house and you happen to want their house. That's just not practical. Rather, you sell your house, the money goes into the hands. This is really important of what's called a qualified intermediary. There are tons of them and that's pretty much a commodity at this point. So they're not that expensive.   Speaker 3 (00:26:39) - The money has to go in their hands. If you touch the money with your hands, it becomes dirty money and it's taxable, which sells. It goes straight from closing to the qualified intermediary. And you have certain deadlines, 45 days to find properties that you want and 180 days total from the sale date close, which kind of can help you time, especially if you have a cooperative buyer helps you. You need a time. For example, maybe I want to find the property I want sooner and then get out and sell the one I've got and you can do it in reverse order. You can go buy a property and then sell something afterwards and say to the government, Listen, I want the funds from this later sale to apply to this prior purchase. A reverse reverse fixture. Yeah, reverse exchange. And there are some creative games we can play with reverse exchanges. They're looser rule wise than the normal ones. I enjoy those 1031 exchange.   Speaker 1 (00:27:36) - Such a benefit where you can defer your capital gains tax.   Speaker 1 (00:27:40) - Hey, in this example you had $1 million then that would be subject to the capital gains tax, which is going to be a rate of 15% or more. And if you don't do a 1031 exchange, you have to pay back to the government all at once that tax depreciation that we discussed earlier. So there are actually consequences. It's going to feel like there are consequences to not doing a 1031 exchange. So you kind of get your money trapped in this real estate game. It might be the best place to have it, but that's something that I think investors need to understand for the long term.   Speaker 3 (00:28:12) - And it's the classic strategy. 1031 Until you die. Now, what typically occurs with investors and then life cycle, they want a little more time, so they start 1030, letting in some more passive type investments, whether it's with a management company or a property that by its nature tends to be a little bit more passive, but the object is to die and not sell. I'm not suggesting everyone go out and die right away.   Speaker 3 (00:28:37) - That's great tax planning. But in terms of reality, it's not so great. But if you. 1031 let's give an example. You bought for a million, many years later it's worth 10 million. Your basis in the property is 100,000. You've depreciated it. So if you sell, there's a huge gain, you die. Whoever inherits is going to love you. At least we hope they will, because when they inherit the property that's worth 10 million, their tax cost, their basis at law is 10 million. They can sell the next day with no gain. That's the infamous step up in basis. And the object is to convert the deferral into tax free. If you defer long enough, it becomes tax free. That's the goal.   Speaker 1 (00:29:18) - And John touched on it. There is no limit to the number of times that you can do the 1031 tax deferred exchange. As a real estate investor, you can trade up from a $1 million property to a $2 million property. Ten more years go by to a $4 million property.   Speaker 1 (00:29:33) - Ten more years go by to an $8 million property. Now I'm certainly oversimplifying this, but at each step you don't owe any capital gains tax. So because you can defer it endlessly, you really never have to pay it and effectively becomes tax free with that step up and basis to your heirs like John just described. John, I'd like to know your thoughts. You know, it seems a few different presidents lately. I know Biden, at least he threatened to do away with the 1031 exchange. I just wonder if the 1031 exchange is ever going to get precarious. I think some people, though, don't understand that the 1031 tax deferred exchange has been around for more than a hundred years.   Speaker 3 (00:30:12) - They've been talking about getting rid of the 1031 since the 1930, and Democratic administrations have threatened to do it since the 1930. They've never had the supermajority they need to actually get away with it. And even then they've come close to it. And even then, some of the lobbyists on the Democratic side said, listen, this is not a good idea, freezes up capital.   Speaker 3 (00:30:36) - We want people to be able to buy and sell and not be frozen into a property because of tax reasons. So, look, could it happen? Sure. We live in a crazy world, but the probability of the 1031 going away I think is pretty darn low. Let me give one real quick trick that's going to help. Some people won't help very many, but the ones that helps it help big time for you. 1031 A property. Ask your accountant. Do I have any passive losses tied up in the property? They're going to know there's going to be a form on your larger tax return. There are different versions of your return. The big thick one is not. The one that goes to the government. Ask them how much passive activity loss you have in the building. Whatever that is in a 1031. Take out the cash. It's tax free and in fact, it's tax arbitrage. To give you an example. We are selling a property. You had a million and you're selling for 2 million.   Speaker 3 (00:31:29) - Let's say you had 100,000 of passive losses tied up in it. Go ahead and take out 100,000 cash from the exchange. Go ahead, ask double check with the 1031 intermediary because they know the rules. But go ahead and take out the 100,000. What happens? You get the 100,000 tax free because your passive losses that were hibernating on the return are now activated and wipe out. Normally when you pull cash out of a 1031, there's gains. Normally we don't do that. But here the losses are activated. They not only offset the 100 you pulled out, they drop your tax bracket because you're getting a capital gains tax bracket offset by a normal loss that was now brought out of hibernation. So just a little trick for those of you always before 1031, always ask your CPA, what's my passive activity loss? And think about taking out exactly that amount of cash, tax rate, tax arbitrage.   Speaker 1 (00:32:28) - I just learned something as well. I've got a number of 1031 exchanges in my life and that's one tip that I sure didn't know about.   Speaker 1 (00:32:35) - So thanks for that. And if you, the listener, if you want to learn the nuances of the 1031 exchange, which John and I aren't going to do here, because that really goes a mile deep with the three properties rule and the 200% rule and all of that. You can listen to episode 143 where that entire episode is dedicated to the 1031 tax deferred exchange and just how you can best pull it off for maximum tax efficiency so that you can then go ahead and re leverage those dollars into a larger property later. Well, John, that was very helpful on both tax depreciation and the 1031 exchange. Do you have any last things to share with us? Any last strategies so that a real estate investor can pay less in tax or anything that's particularly helpful?   Speaker 3 (00:33:21) - Yes. There's this concept of the Trump tax law called the pass through deduction or qualified business income tax code, Section 199 Capital A First of all, it applies to all rentals. Unless they're triple net least. A lot of accountants still don't get that.   Speaker 3 (00:33:38) - You have to have a trade or business that's tax term trade or business rentals that are not triple net leased are a trade or business, which is a good thing under the code. So there's this deduction. It's large. If you're showing that income even after depreciation and everything you buy is typically 20% of the net income. So if I'm showing 100 grand of net income, I get a $20,000 deduction because Congress said so. Protect that. In particular, if you make roughly I'm rounding here 164 grand total taxable income on your 1040 single and roughly 370 filing joint, there are special things you need to do to maximize the QBI and you need to do it before the end of the year. Nothing pains me more than to see high income people who benefit the most from this deduction because of their high bracket and they're in these high brackets. And if they would have done a little bit of talking to their CPA, hey, I think I'm going to make married filing jointly 370 or more for the year. It's going to cut my QBI based on the mechanical rules.   Speaker 3 (00:34:41) - What can I do to preserve my qualified business? Income tax deduction might pass their tax deduction. To do that, you need a really good set of books and returns. You have to have good books in the knowledge of your income so your accountant can look and say, Hey, here's how much we think you're going to make. B Here's what we can do to preserve this deduction. That is the number one easy pick up by C in tax returns. I review for planning purposes that people missed in prior years and we tell them going forward, please, please towards the end of the year, start thinking about if you're going to show gain. Doesn't matter if you're showing a loss, but if you're going to show gain in any business, not just rentals, please look at the deduction. Please make sure you're getting the full 20%.   Speaker 1 (00:35:25) - John is an expert at looking at your recent tax returns and pointing it to one area and saying, hey, there's a quick ROI for you if we change this. And right over there is another quick ROI for you if we change this.   Speaker 1 (00:35:37) - Well, John, that's been great with what we can do with the existing tax code to help optimize our situation. But wrapping up here, a lot of people are interested in what's coming down the road in the future. It can be a little bit speculative, but it also can be a proxy for how people and politicians are thinking. And that's. Is there anything that the presidential candidates are offering tax wise? It's very interesting whether that be an RFK Jr or a Ron DeSantis or a Vivek Ramaswamy or Nikki Haley or anyone else with this potential future direction of where an influential candidate wants to take taxes.   Speaker 3 (00:36:15) - I think the parties are pretty consistent regardless of candidate. Now they each have their subgenre of flavor, right? Do you like your chocolate? Dark or milk chocolate or with or without salt, but it's still milk chocolate. So likewise, the Democratic presidential candidates are going to be looking to increase taxes, get rid of what they view as loopholes, and they are aware of real estate having a lot of special benefits and they don't care for it.   Speaker 3 (00:36:41) - The Republicans, by contrast, are going to be more for lowering taxes. They are not hostile to real estate. They're generally pro-business, especially pro small business. And I think that's consistent across the board. I don't think there's a lot of deviation there with either party. The specific proposals will vary. For example, the Kennedy candidate strikes me as less hardcore left wing and a little more common sensical than maybe some of the more progressive sorts and might not be as harsh in that regard.   Speaker 1 (00:37:13) - Well, that's helpful in knowing what future policy might be and that might affect the way that you want to vote. This has been really helpful, particularly to real estate investors and small business owners. You are the tax reduction lawyer, so if our audience wants to connect with you and learn more about what you can do for them, what's the best way for them to do that?   Speaker 3 (00:37:33) - Not coincidentally, tax reduction lawyer.com and I put out a ton of content. I take a few clients but it's really getting more and more content based.   Speaker 3 (00:37:43) - So if you like what you heard, you might hear more.   Speaker 1 (00:37:47) - Sometimes in the video, hear you and the audio only might not be able to see that. For example, when John was using the word loopholes, he was using his fingers as air quotes. He understands that these are intentional incentives that help direct behavior because the government knows that society is generally better off when the private sector and the mom and pop investor are the ones providing good housing for society. A lot of public housing projects really haven't fared so well. So that's what John is here to help you do provide clean, safe, affordable, functional housing for others and get all the tax benefits that come along with that. Hey, John. Hi. It's been great having you here on the show.   Speaker 3 (00:38:26) - It has been an absolute pleasure. Thanks for having me.   Speaker 1 (00:38:35) - Oh, yeah. Nice clear breakdowns from the tax reduction lawyer John Heyer. I was talking with John Moore outside of our show. He read the entire some 1000 page long inflation reduction act that was passed last year.   Speaker 1 (00:38:51) - He did that to try to help understand its tax implications for his clients and was kind of impressed that he had the endurance, I suppose, to read all of it. And I asked him how many members of Congress he thinks read it and we both answer the question at the same time. Zero To achieve one looks like the top 1%. You must act like the top 1% does. And that might include tapping the expertise of a pro like John to review what you've learned today with our expert guest John. No changes to federal income tax rates are expected. There are ways to lighten the tax burden on your short term rentals, which you might not be aware of. Your dollar of day job income that's taxed at a higher rate than your dollar of rent income. Because on your day job income, you must pay Social Security and self-employment tax. You don't pay those tax types on your rent income. Real estate tax depreciation is kind of like magic. It means that you can write off a portion of your rent income each year, meaning that you can make it non-taxable even if you don't have a real expense associated with doing that.   Speaker 1 (00:40:03) - You learn more about the 1031 tax deferred exchange and the fact that it will persist as a benefit for real estate investors is highly likely. Again, if you like what you learn each week on the Gerry podcast, I invite you to subscribe or follow within your favorite podcasting device. For those non podcast listener friends you might have, they can try the Get Rich Education mobile app. Everything that we do is free until next week. We'll all be back to help you build your wealth. I'm your host, Keith Wild. Don't quit your day dream.   Speaker 5 (00:40:36) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.   Speaker 1 (00:41:04) - The preceding program was brought to you by your home for wealth building Get rich education.com.

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 Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. National home prices continue to increase for at least four big reasons. There's also a hindrance that's getting so bad that it could keep more price growth in check. We look at why single-family rent growth is increasing. Then we focus on one particular metro area that could be America's best cash flow real estate market and why today on Get Rich education.   Speaker 2 (00:00:30) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get rich education.   Speaker 1 (00:00:53) - Walking from Whitney Island to Mt. Whitney, California, and across 188 nations worldwide. I'm your host, Keith Weinhold. And this is Get Rich. Education, National home prices continue to increase and no one knows what mortgage rates are going to do. There's one factor that could slow the home price growth party down. It could be impeded a little by these rising insurance costs. Now, in years past, do you know how many American homeowners decided that they were just going to skip insurance and not buy it so that they don't have to pay the premium? Any idea what percent? Well, the longer term norm is that 5 to 8% of homeowners skipped insurance.   Speaker 1 (00:01:38) - They just said we'll handle any risk and not buy it. Hm. Maybe that's sort of like not using a case for your phone, perhaps, which I don't actually. I never use a case for my phone, but I do have insurance on all of my properties. Well, The Wall Street Journal was just reporting that the number of homeowners that have decided to forego insurance has increased. Okay. The longer term historic number is 5 to 8%. That decided to skip insurance. And now amidst insurance premiums that in a lot of places have risen faster than inflation, that proportion of those that skip homeowners insurance is now from 5 to 8%, up to 12%. Yeah, 12% of homeowners electing to skip insurance. And they're going to be those people that are free and clear of a mortgage. And if you have a mortgage, you must have property insurance. The Wall Street Journal also found that it's mostly lower income people that forgo it, lower income people that skip the insurance. Now, of course, homeowner borrowers, you have to eat that premium increase if you're a homeowner, borrower, they have to eat that.   Speaker 1 (00:02:53) - You're going to remember that just seven episodes ago on Episode 461, I went into a lot of detail on the areas of the nation that do have skyrocketing insurance premiums. And if you're a landlord in any of those markets, you can pass along the hot potato because you can raise your rents in order to offset that. But primary residence homeowners, they cannot do that. They cannot pass along the hot potato. Homeowners have to eat the hot potato. And sometimes that hot potato can burn the roof of your mouth. That's why the proportion of those that skip insurance has about doubled. And also some areas have become uninsurable. If you want a new policy, think of some of the forest fire prone areas out west and you know, the eastern half of the nation, they can get forest fires, too, of course, But east of the Mississippi, it stays more humid and you get more rain. That's why it's just not as much of a problem in the eastern half of the US. Well, you've taken my guidance to heart and you sure are passing along the insurance hot potato, raising the rent on your tenants.   Speaker 1 (00:04:04) - Here's some evidence because John Burns, real estate and consulting shows us that in the latest stats, single family rents are up 6.5% year over year. Yeah, single family rentals are also seeing higher occupancy and lower vacancy, and that's 6.5% annual growth rate in single family. So that's worth watching if you forecast inflation because of course that does make up part of the CPI like Rick and I recently discussed. Now single family rentals. They are roughly one quarter of America's rental housing stock. And this differs, by the way, from the rent growth on larger apartment buildings. Apartment building rent growth is slow due to so much new construction of larger apartment buildings where they're just still not building enough single family rentals in so many markets. So with this low, really just awful affordability for wannabe homeowners, what's happening in this area is that single families, they're attracting quality tenants. As this affordability worsens, the quality of the single family tenant is therefore increasing. The Fred charts tell us that the median sales price of the new build home is now $437,000 for 37.   Speaker 1 (00:05:31) - Note that that's for a new build, not existing. And home prices are up, up, up for four big reasons. It's really for major reasons that home prices are up. There is high home demand from the large millennial generation, this astoundingly scarce supply. Thirdly, there is a still pretty strong economy and. And then fourthly, believe it or not, if you're new to real estate, fourthly is, yes, historically normal mortgage interest rate levels. All these things are supporting these higher and higher prices and this scarce housing supply. That is a genuine American problem that we have here. Now, President Biden, he's tried to address it with a five year plan that he announced last year. And in just two days, Republican presidential candidates are going to take the stage in California for the second GOP primary debate. And the presidential candidates, they should be asked, what would you do about the housing shortage? That question was not asked in the first presidential debate. If I could ask them one question, yeah, it would be about housing and our next president matters whether Biden wins reelection or whether it's someone else.   Speaker 1 (00:06:44) - But my gosh, America spends too much time wrapped up in all this debate posturing and all this media hype over the positioning of the candidates. I mean, this is already been going on for months and months. Trump, Haley Pence, Ramaswamy DeSantis. Yes, the primaries are sooner, but the presidential election is still more than a full year into the future, even from this point. And this has already been going on for this long. I mean, virtually no other nation in the world drags it out for this long. It's almost a two year cycle of vetting these presidential candidates with two years. That's half of a presidential term right there. My goodness. Next week, as I'll be leaning on my team for a makeshift studio, I'll be joining you from Chicago, Illinois. And I will be checking out the sites and also the real estate opportunities there and those still in Chicago land. It's typically on the Indiana side of the Illinois Indiana line, where you'll tend to find the better real estate deals and the lower taxes is back to this week's show.   Speaker 1 (00:07:54) - We're not talking about Chicago today. Straight ahead, is this America's best cash flow real estate market? It's an area that has population and job growth, but it's slow growth. You'll be surprised with how low the property prices are. I mean, they're often below replacement cost, which is remarkable. But what that means is with today's high materials and labor and regulatory costs, it would pay more to build a new home on that site than what you can buy that completed existing for home today that was built decades ago. And I've walked these very neighborhoods. A lot of them are nice. They're not in war zone areas. The city has a great base of distribution jobs. It says sector where it's hard to outsource distribution jobs over to a less developed nations because those jobs need to be fixed right there where you need to move the goods. So in this city, they are building fulfillment centers. That's warehousing in this highly investor advantaged place is also a state capital. So they have another base of government jobs that are not going away.   Speaker 1 (00:08:58) - I'm talking to an experienced principal in this market that offers freshly renovated property to out of market investors like you. That's next. I'm Keith Windell you're listening to Get Rich Education. Jerry listeners can't stop talking about their service from Ridge Lending Group and MLS 42056. They have provided our tribe with more loans than anyone there truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your pre-qualification and you can chat with President Charlie Ridge personally, though even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom family Investments because their funds pay me a stream of regular cash flow in. Returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited. For some of them. It's all backed by real estate.   Speaker 1 (00:10:10) - And I kind of love how the tax benefit of doing this can offset capital gains in your W-2, jobs, income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 668660. And this isn't a solicitation If you want to invest where I do, just go ahead and text family to 66866. This is Perrin Life's Patrick Donahoe. Listen to Get Rich Education with Keith Wayne Mold. And don't quit your day dream. Hey, well, I'd like to welcome in one of our marketplace providers in such in Investor advantage geography, that is in Little Rock, Arkansas. Brian, we're going to be listening to one of the voices of Marketplace today. Hey, thanks so much for being here. Hey, thank you, Keith. Appreciate being here for the second time. This is great. Great catching up with you.   Speaker 1 (00:11:27) - Well, that's right. Now, it's been a few years since you and I got together in person in Little Rock, Arkansas, and we toured the market. If we walked the number of properties. But I think the thing that stands out most to me with that trip to Little Rock, where I spent the day with you, is that my baggage arrived late. Now, we had good accommodations at the Capitol Hotel, kind of the stately nice hotel right in the center of downtown. But my luggage to Little Rock arrived about 20 hours late. I've had really good luck with luggage all my life, but didn't this time. And my most enduring memory maybe, is that I had to go running in street shoes. And I still remember near the end of my run, I was running over the bridge that spans the Arkansas River between North Little Rock and Little Rock. Looking down while I was running at these slightly dressy black shoes on my feet, thinking, My gosh, it's a miracle that my feet don't hurt me.   Speaker 1 (00:12:24) - Yeah, that's exactly what I remember, Keith. I remember piecing it together. So you didn't come right out and just tell me you'd mention your bag had been lost. And then you mentioned that you went for a run that morning and thought, What did you run? So, yeah, you described basically running in your loafers from the day before. So I was like, This guy's a real machine from the north, the Great North down here. So I was impressed. Yes. And you're probably also wondering, did you really have to go running it? Right? That's the other thing. Well, right. Hey, you and I were just discussing this great media clip that we watched there from the local news there in Little Rock. This tells us quite a bit about the economic drivers in Little Rock as well as the low median home price there in the Little Rock area. Let's listen to this together. This is about two minutes in length and then we'll come back to comment.   Speaker 3 (00:13:15) - We turn now to the national recognition that three communities in central Arkansas are receiving.   Speaker 3 (00:13:20) - Little Rock North, Little Rock and Conway ranked in the top ten places for young professionals to live by for.   Speaker 1 (00:13:27) - Some great news channel. Seven's Brenda Lipinski is on your side tonight. She joins us now live in our studio. Brenda, tell us a little bit about these rankings.   Speaker 3 (00:13:34) - Yes, Chris. So Forbes advisor analyzed 99 of 100 largest cities and found that Little Rock North, Little Rock and Conway had great opportunities for young people. Little Rock North, Little Rock and Conway named Top ten Best Places for Young Professionals to Live by Forbes Advisor. And some agree. I think that there's no no doubt here in Arkansas, central Arkansas that we foster some of the greatest minds in talent. The criteria for the ranking included employment and pay, housing affordability, lifestyle and cost of living. North Little Rock Chamber of Commerce saying investment in young people is crucial for the area.   Speaker 1 (00:14:11) - They're the next leaders. So we need to make sure that we can continue to recruit them and develop them because they're going to be the next people on our board of directors are going to be the next city council members.   Speaker 3 (00:14:19) - Mayor Frank Scott Junior, who's a millennial, says good public education and jobs are a must.   Speaker 1 (00:14:25) - We've seen historic job growth for close to 10,000 new jobs.   Speaker 3 (00:14:28) - Young professionals saying there's a ton of reasons why they like the area, the community affordability.   Speaker 1 (00:14:34) - Every single time I connect with someone and I'm I'm able to find a new opportunity, whether it be inside of work and with my career or outside of work with just having fun.   Speaker 3 (00:14:44) - And for the future. So I'm hoping the state will create policy that will continue to attract more young people and think about the ways that we can continue to attract diverse professionals and how policy can impact people's image of the state and of the area specifically. Now, Forbes advisor also says that the areas are evolving into an entrepreneurial and innovation hub, which may also attract young professionals on your side. I'm Brenda Lipinski.   Speaker 1 (00:15:09) - Okay, Brenda, thanks so much. Forbes also likes the cost of living in central Arkansas, where the median home price is about $200,000. Right. So that's what the media is reporting.   Speaker 1 (00:15:20) - But you're right there, you're the boots on the ground. So tell us more about population growth and job creation and just overall the market vibe in the drivers there in central Arkansas. We have continued to see growth here. You know, I think it was mentioned that over 10,000 jobs created in just the last five years. One of the things that stands out here, too, is really driving that growth is that we're kind of known as a distribution hub or an upcoming distribution hub. A lot of that has to do with our geography and where we're located very centrally in the United States. And we're at the crossroads of two major interstates, I-40 and I-30. And so we've seen in just the last five years a very large Amazon facility put in actually three different fulfillment centers put in. So that's said to have brought in around 2000 jobs just right there. Then we've seen other big retailers come in like Lowe's and Ace Hardware and Dollar General, and they've all built distribution fulfillment centers here as well. And then even still we seeing growth with manufacturing moving into our river port here.   Speaker 1 (00:16:26) - It was just announced this year that a big Trex facility, they manufacture decking materials and from environmentally friendly sources and they're putting a major operation here. And they were drawn here for the location in proximity to the interstate. So those things really are driving us right now. A lot of our growth is accelerated by this sort of fulfillment warehousing distribution space. We have other drivers, too, and just the last few years, very diverse in the economy here. But we have a large tech company here called Apta. G. They were created right here in Little Rock and have really accelerated their growth. I believe they're said to get up to around 800 jobs. And those are all young professionals that could be working in Silicon Valley if they wanted to. Very diverse. We have aerospace here with Disso Falcon Jet, and then we have lots of government jobs here. We are the state capital. So we have all of our state government here. We're also a major medical center. So all of our medical professionals train here.   Speaker 1 (00:17:24) - Our medical school for the state is here in Little Rock. So all of our large hospitals there's on that note, things that we have coming now, they're announced they're building a new dental school here in Little Rock. So there's not a dental school in Arkansas currently. Also building a veterinarian school here in Little Rock. These are both going to be attached to another college that's here in Arkansas. So starting on a good foundation for those two schools. But that's another exciting move for Little Rock. So all these things are driving the workforce and bringing in younger workers, generating out workers from the medical school, for example, putting them out into the marketplace here. So we have a lot of young professionals, and I think that's why Forbes ranked us in the top ten of places for young professionals to live being the state capital there. Yes, you have that base of government jobs, some of the private sector jobs you mentioned you mentioned the expansion of medical. You know, these are two areas, government and medical that rarely contract very much, especially with the medical often growing and then with the government jobs, with the state capital being there in Little Rock, those just aren't the type of jobs that are going to be outsourced.   Speaker 1 (00:18:32) - And they're also not going to move the capital from little Rock to Pine Bluff, Arkansas, anytime soon either. So you do have that base there. And Brian, you and I were looking at different media articles recently and studying more statistics. No one area has it all. Little Rock has a lot of advantageous drivers, especially a high ratio of rent income to purchase price for investors. And we'll get into that later. But really with one of the statistics that we were consuming together, basically, if you think of it as gradients in an area's population growth and job growth, maybe let's think of five of them. There's high growth, there's slower growth, there's no change, there's slow decline or there's fast decline. And of those five, it seemed to be pointing to that second one, slow growth for the area. Yes, I mean, we're a very linear market here. Our growth is consistent. We haven't had a major increase or a major dip. We're just very consistent in linear in our growth.   Speaker 1 (00:19:32) - But it is continuous. We've seen that happen with even with housing, we've seen a lot of permits increase in the last few years, more multifamily permits even than single family permits. And it kind of tells you that the demand that's there for housing that rises along with the growth we are in that category, I would say, yeah, that's right. When we think about slow population growth, obviously those people need to be housed somewhere. And in the past decade you touched on it. To your point, both Little Rock and North Little Rock have had more multifamily built than they've had single family homes built. And nationally we are just so undersupplied depending on what numbers you look at. Were millions of housing units undersupplied nationally? How does that translate to the local picture there in central Arkansas, including Little Rock as far as being oversupplied, adequately supplied or undersupplied with housing? Well, I think we're undersupplied with single family housing first, and there's a real demand there. And there has been an increase in multifamily and most of that multifamily increase is at the top of the market.   Speaker 1 (00:20:40) - So there's been a real shift in multifamily. And what maybe used to be an A-class multifamily building is now A, B or a C because new A-class has been built to replace it. So we've seen some shift there. But where the majority of the housing stock is coming from is the multifamily sector and that puts more demand on the single family rentals. I mean, that is still a very desirable place. I think most anyone who lives in an apartment or has lived in apartment aspire to eventually have their own home or be within their own four walls in a yard that, you know, they belong to them or they control or rent or whatever else and have their own piece. So their demand stays there for single family rental, but there's not as much being built. So we've really seen an increase in our single family rental rates. I know there's been increases across the country in rental rates, but usually it's linear here. But you know, we've with not a great big jump, but we've really experienced a significant jump over the last few years.   Speaker 1 (00:21:42) - And I think a lot of it is driven with the demand for the single family and there's just only so much of it Now. We think about investors. Of course, most of the investors that you provide product for come from out of state. They live in areas that aren't nearly as investor advantaged as Littlerock is, but that's about more than the numbers. Oftentimes it's about that local landlord tenant law. I've got to say, it's been a while since I've consumed any material about this, but I remember in the past reading for years that oftentimes Arkansas comes in as one of the most landlord friendly states. That's correct. And it's been that way for a long time here. Our process is very simple and it's very much in favor of the landlord. But here an average eviction, if you get to that point of having to evict, typically it takes 30 days or less to actually get the tenant that's fast and less than $1,000 and that's hiring an attorney. So you're hiring an attorney? We have several that specialize here in the Little Rock area, for example.   Speaker 1 (00:22:45) - They can turn this thing around in about 30 days. And the process is it goes to an unlawful detainer if you filed for eviction and the tenant hasn't followed the eviction process and hasn't followed the proper notices and the proper days to get out, then the legally you can follow a unlawful detainer. And once that process gets moving and it moves pretty fast, a writ of possession is issued. And so at that point, the tenant is actually served by a police officer and they don't it's not a harsh dragging out with handcuffs, but they show up and generally escort them out of the place. It's pretty quick process overall and it's backed up by law enforcement. So but in no means is it a bullying or a brutal process or anything like that. And most residents here in Little Rock in Arkansas in general, that's the way it's been forever. They understand it. And usually when you serve an eviction notice, it means business. And most tenants know it means business and they just abide by it. So really, we don't have to enforce all that many evictions all the way through other than that, we serve, so we serve evictions and they generally just get out.   Speaker 1 (00:23:51) - That's sort of the process in Arkansas is known as to being one of the most landlord friendly states, and it's been that way for quite a long time. Of course, we're highly interested in that long history of the law reinforcing landlord interests more so than tenant interests, since we are interested in being long term investors. And when we talk about a metro area there in and around Little Rock, including their MSA, which includes North Little Rock and Conway, and we sometimes want to think about, all right, now, what parts of town would fit ones by box? Because even in an investor advantaged place, you probably don't want class A+, single family homes because of those higher price points. Rents don't keep up proportionally. And then we also typically want to avoid class areas. Those properties are shabby. They can't attract a rent paying tenant and properties don't typically appreciate very well on those low end class properties. So tell us about those areas in the criteria that fit your buy box that you know that investors want to put in their portfolio? Yeah, that's correct.   Speaker 1 (00:24:59) - I mean, we really stick a lot into the space. We're looking for kind of that working class tenant. They've got a good job. They are, you know, blue collar. They're hardworking people. Generally it's a family. Those are the areas where we're focused on and we're not exclusively in Little Rock. As you mentioned, the metro area is about a 55 mile radius. There's about a million people within that radius, the metro area. And that encompasses other areas around us other than Little Rock. So the city of Little Rock. There's the city of North Little Rock, which is actually not just the north side of Little Rock. It's a separate city from Little Rock and the other side of the Sherwood, Cabot, Jacksonville, Conway, Benton, Bryant. All of these are communities, cities around us enjoying Little Rock. We find rentals in those areas, too. We target specific areas within those different cities where really that B-class property in that B-class tenant is looking to live. And so we're not just in Little Rock.   Speaker 1 (00:25:56) - We do venture out into some of these other areas and we're talking about the Little Rock, Arkansas, and the investor market there and its growth story. However, a slow growth story, perhaps it's not growing as fast as some Floridian counties are, where you have a lot of foreign in-migration, you're going to have less foreign in-migration, for example, in Little Rock as compared to a lot of other places. We think about where the tenant income stream is going to come from. We've talked about that. All of those market drivers there, we start to think about, all right, what are the properties like in the prices in the rents? So can you tell us about the property types and then get into some of the important numbers for investors, Brian, And tell us about the quality of the renovation you do to get that property ready and make it effectively turnkey for investors. Tell us about the properties, the prices in the rents. We try to target mostly single family and we do come across and dabble in some multifamily as well, and it's mostly smaller multifamily.   Speaker 1 (00:26:58) - So you know, anywhere from a duplex up to maybe a 20 or 30 unit complex and fits within our box. But mostly we're focused on single family rentals. Our criteria is a three bedroom. Obviously it's going to have a bath, but three bedroom, two bath is what we like. We do come across a lot of three bedroom, one and a half baths. A lot of these homes were built in the 1960s, 1970s. Those homes are going to have some of the more modern things, sheetrock versus plaster wire versus knob and tube. So, you know, those are reasons why we want to focus on those 1960s, 1970s homes. Again, most of them are three bedroom, one into two baths. Most of them are around 1200 square feet. And we do a fairly extensive remodel. We have a lot of boxes to check. But I would say our average home ends up with a new roof, new Hvac, new hot water heater, almost all new flooring. We always put in granite countertops.   Speaker 1 (00:27:53) - It's a staple in Little Rock. We find that that just is a little bit of a wow factor compared to some other competitors out there and what they're offering as a result. So we pay attention to the finishes. We want all the hardware to match, we want all the light kits to match. We want everything to feel uniform. And our whole philosophy is we're trying to attract best quality tenants we can, but we want this to be it. Hope this is the best rental property they've ever had as well. We want them to really fall in love with the property and our number one goal is to retain tenants for as long as possible because one of our biggest killers is turnover cost. So, you know, if you lose a tenant, you've got to get that thing rent ready and put it back out on the market. And you've got to go through the whole process of finding a new tenant. So what we find is by providing a better product, it equals longevity of the tenant and then staying with us for a long time.   Speaker 1 (00:28:46) - And we typically start with an 18 month lease with escalators there with rent increases built in. But we find that we keep tenants for three and four years. Really good success with that. And think a lot of it is due to the areas we pick and then the product that we put out in the market. That's an excellent tenancy duration between 3 and 4 years with what you just laid out and describe there with these fresh rehabs and even granite countertops in your single family homes, it kind of feels like your own. So therefore you want to be a tenant longer. And I think that tenant duration, as long as mortgage interest rates stay high, really is set up to lengthen because it's that much more difficult for a renter to go out and be a first time homebuyer. So therefore, if you put them in a rental that they're really happy in and get that right right from the beginning that you guys do, it's unlikely that they're going to move into another rental because it's hard to do better than that.   Speaker 1 (00:29:40) - And it's also difficult for them to buy their own home due to this affordability constraint with the higher mortgage rates and higher prices. And when it comes to property prices, we listen to that media piece earlier where it was stated that the average or median home price, whatever it was, is about 200 K. So tell us about what rent we would see with what price for one of your typical properties there that you prepare for investors? Long var properties once they'd gone through the full turnkey renovation process and have been rented, they fall somewhere in a price range of 115 to say $140,000. Maybe our average sweet spot there. And those rents range anywhere from 1200 to $1500 a month, just sort of depending again on the location where it is and that sort of thing. So that medium may be up there in the 200 range. But again, we're sort of focusing on the B-class areas. And so that's where our price points tend to fall, that sort of like 120 to 140 price range. And if you're new to the show and you're a listener in Brooklyn, New York or Burbank, California, we're not talking about the 20% down payment amount here.   Speaker 1 (00:30:51) - We're talking about the complete purchase price amount with what we've discussed there. Tell us about your availability just in general over time. The inventory here, not unlike a lot of places around the country, is very tight right now. I mean, a lot of people are staying in homes and real estate just isn't moving like it was. So we're still finding opportunities, but not like we were. And that goes all the way down to home owner occupants. They're having a hard time finding places to buy because the sellers aren't selling. And that I think, trickles down to tenants as well. They're just fewer places to rent. That's what we're seeing. There is less supply than demand. And when something is coming on the market, I mean, it's getting gobbled up pretty quick, be it a rental or a property to buy. So the demand is still very strong and inventory is low. No, I'm curious, with prices that low, 150 K or less now that mortgage interest rates are higher, I think you know that I'm a leverage fan and we have ratios like that.   Speaker 1 (00:31:52) - You might be able to pay a higher interest rate yet still have cash flow but with higher interest rates. Brian Have you seen it where anyone is interested in making an all cash payment, a greater proportion of those people than there used to be? Yeah, absolutely. I mean, we're seeing people bring more money to the table for the down payment. We've seen quite a few cash buyers that we didn't normally see before. So yeah, people are just, you know, using their resources to write some of these things out or there's understanding to that this interest rate level is probably short term. And so they're like, you know, hey, let me go ahead and get this great property and hold on to it. Now, put a little bit more money into it. I'll refinance it later. So we are seeing a lot of people think more with that type of strategy in mind. I guess one approach is paying all cash now and then mortgage rates come down to a level where an investor is comfortable.   Speaker 1 (00:32:40) - They could maybe do an 80% cash out refinance. In my experience. What I've found, though, is that usually when someone pays for a property, all cash, no matter what mortgage rates do, they don't go back and get a mortgage on it. They just leave it paid all cash. That's what I always tend to see happen. Absolutely. And that's not a wrong way to go at all. I'll tell you what. And with appreciation built in and then, you know, all the other benefit tax write off benefits and those types of things. I mean, it ends up being a great place to put your cash if you had your cash, if you look at the full picture of the return. So to your point, people who go there temporarily end up staying there, right? Yeah, it goes from temporary to permanent and keep that paid off condition, even though it probably doesn't make a lot of financial sense. But it can depend on what situation. Well, in conclusion here, is there just anything else that an investor should know in general about the Little Rock market or Little Rock property or the particular renovations that you make to the property there? One thing just to point out kind of from an earlier part of our conversation about why, you know, the city is great for young professionals and had that Forbes ranking.   Speaker 1 (00:33:48) - And, you know, our cost of living here in Little Rock is 17% below the national average. So your money just goes further here. I believe. And I think that translates out right. And you know, at our unemployment is around 2%. So it's a very low unemployment rate. So the cost of living is lower your dollars go farther. Your tenants here tend to be more stable. There's job opportunities for them. So I think all of that builds into why Little Rock is a great investment market and why we see tenants stay in units for longer than their lease periods. As far as availability and quality of renovations, I mean, we certainly have availability. We have deals popping up all the time. I mean, we're known for our renovations and being at the top end of our renovations and a lot of our tenants come to us almost word of mouth. They've been in one of our rentals before with a friend or neighbor, and a lot of times they are knocking on our doors as we're renovating, asking when is this going to be available for rent? So a lot of it is reputation of product out there, even among the tenant population, not just the buyers out there.   Speaker 1 (00:34:53) - So I think those are some of the things we have going for us here. We continue on our our journey here. We've been investing in Little Rock since 1997, so we've got a great track record here and a lot of great experience. Yeah, Your volume of repeat investors that want to keep buying there is really a testimony to what you're doing. Well, thank you so much for sharing this. It's really an opportunity a lot of people don't know about or a lot of people don't think about. It's hard to find a more investor advantaged place than Little Rock, Arkansas, and surrounding central Arkansas. There for you, the listener from Marketplace, you'll see our little rock provider there or contact your investment coach If you don't have an investment coach yet, you can visit Marketplace com slash coach and pick your coach It's been great chatting about Little Rock. Oh yeah, a great chat about Little Rock. You know, one of the things that I visited while in Little Rock, it was the Clinton Presidential Library.   Speaker 1 (00:35:56) - It's worth checking out. But, you know, the one thing that I did not see, despite all the memorabilia and historic tributes to Bill Clinton there, there was not one mention, nothing about Monica Lewinsky. I could not find one in the whole place. I guess it's his library and he'll be remembered how he wants to be. But yeah, these numbers really work for investors 1200 to $1500 rent renovations like what we discussed in purchase prices of 115 to 140 K, So you can start with one of those properties or get a pack of these smaller sized single family rentals and then they can manage them all for you long term. They seek tenants for life there, quote unquote. So we're talking about working class, stable families now here in central Arkansas that should not be confused with higher priced areas out in northwest Arkansas. Okay. The provider and I were talking off air about a story that's emblematic of that area, Northwest Arkansas, a schoolteacher priced out of Bentonville. She couldn't find housing there. So she lives in a Fayetteville rental and commutes into Bentonville.   Speaker 1 (00:37:12) - Okay. Those are both northwest Arkansas cities. Of course, Bentonville is famously known as the Walmart headquarters. So we're not talking about northwest Arkansas here, which is an area that just doesn't work as well for long term rentals as Little Rock, central Arkansas. Forbes Even highlighting that Little Rock ranks as one of the top ten places for young professionals to live in, pointing out those super low house prices, Little Rock should be considered to see if it fits into your portfolio as a stable place with some of America's very best cash flows, which you can do is from Marketplace. You'll see our little rock provider there. If you want to connect with the provider yourself, you can also go directly to Marketplace slash Little Rock or if you prefer, contact your investment coach. It is free and Jerry marketplace slash coach until next week when I'll be back to help you build real estate wealth. I'm your host, Keith Winfield. Don't quit your day dream.   Speaker 4 (00:38:16) - Nothing on this show should be considered specific, personal or professional advice.   Speaker 4 (00:38:20) - Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.   Speaker 1 (00:38:44) - The preceding program was brought to you by your home for wealth building. Get rich education.  

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 Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY' to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   (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.

In many world nations, if you're born poor, you stay poor. I discuss how in America, you can be upwardly mobile. Back in 2010, real estate prices had fallen, but rents had not. This created years of cash flow. Today, as prices have outpaced rents, cash flow keeps shrinking. Our Investment Coaches have access to income properties with 4.75% and 5.75% mortgage interest rates. It's a way to "bring back cash flow". Get started at GREmarketplace.com/Coach Terrific housing intelligence analyst Rick Sharga joins us for the first of two consecutive episodes. Rick & I discuss the condition of the American consumer, inflation and interest rates, concerns about a potential economic downturn, the housing market, the impact of consumer confidence on spending, and the actions taken by the Federal Reserve to control inflation.  There's flagging consumer confidence and a yield curve inversion. Are these finally harbingers of an economic recession? Rick's informal survey of economists find that there's a 50-50 chance of a recession this cycle. Earlier this year, 80% of economists felt that a recession was imminent. If there is a recession this cycle, Rick thinks there's a probability that it will be mild. Average hourly wages are $28-29 / hour. Wage growth is 4-5%. Wages are finally running higher than home price appreciation. Timestamps: The Future of Real Estate Investing [00:01:33] Discusses how owning real estate can help individuals move into a different wealth class and the benefits of owning rental properties. Changes in the Real Estate Market [00:04:06] Explains how the real estate market has changed over the years, with property prices catching up to rents and the decrease in cash flow opportunities. Taking Advantage of Low Mortgage Rates [00:07:53] Highlights the opportunity for investors to take advantage of low mortgage rates offered by builders and the benefits of using their preferred lenders. (Yes, even here in 2023. We have 4.75% and 5.75% rates that builders buy down.) The housing market correction [00:11:31] Discussion on the correction in the housing market and its localized impact on different regions. Economic landscape of the United States [00:16:09] Overview of the US economy, including GDP growth and the strength of consumer spending. Wage growth and home price appreciation [00:20:16] Comparison of wage growth outpacing home price growth, impacting housing market affordability. Consumer Confidence and Spending [00:21:24] The correlation between consumer confidence and spending during the pandemic, the impact of subsequent waves of COVID, and the role of pent-up consumer demand and government stimulus. Red Flags in Consumer Spending [00:22:25] The disconnect between consumer spending and low confidence scores, the record level of consumer credit card use, and the decrease in personal savings rates. Inflation and the Federal Reserve [00:25:44] The high inflation rate in 40 years, the actions taken by the Federal Reserve to control inflation, the impact on housing costs, and the potential for a recession. Yield Curve Inversion and Recession Predictions [00:31:07] Discussion on the yield curve inversion and its historical correlation with recessions. Impact of Recession on the Housing Market [00:32:04] Exploration of the potential impact of a recession on the housing market. Part Two: State of the Housing Market and Future of Investment Real Estate [00:33:03] Teaser for the next episode, which will analyze the state of the housing market and the future of investment real estate. Resources mentioned: Show Notes: www.GetRichEducation.com/466 Rick Sharga on X (Twitter): @RickSharga Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY' to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   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.

More homeless people have been created due to the housing supply crisis. Homelessness is up 11% since last year, per the WSJ. The opioid crisis, consumer inflation, and NIMBYism have contributed too. California has the most homelessness on both a total and per capita basis. States with higher housing costs have more homeless people. I share our poll results: “Should we pay to house the homeless?” Are you a NIMBY? We find out today. We can increase housing supply with rezoning, construction training, and lower mortgage rates. The cycle of investor emotions led to wild investing manias. It was tulip bulbs in the 1600s Netherlands and Beanie Babies in the 1990s United States.  I discuss exactly why “buy low, sell high” is more difficult than it sounds. Timestamps: The correlation between homelessness and the housing market [00:00:00] Discusses the relationship between the housing market and the increasing problem of homelessness in America. Investing manias and lessons from history [00:00:00] Explores the phenomenon of investing manias and the lessons that can be learned from historical examples. The tight inventory market conditions and potential solutions [00:04:56] Lawrence Yun, Chief Economist of the National Association of Realtors, discusses the tight housing market conditions and suggests tax incentives to increase housing supply. Timestamp 1 [00:10:32] Affordability of moving to different cities and the proposal of a tax incentive for real estate investors. Timestamp 2 [00:11:49] Discussion on the housing supply crisis, mortgage rates, and the homeless population in the US. Timestamp 3 [00:14:14] Increase in homelessness in America, reasons behind it, and the correlation between housing prices and homelessness rates. The impact of high density housing on quality of life and home value [00:21:12] Discussion on the potential negative effects of building high density housing near single family homes, including reduced home value, increased traffic and noise, and loss of nearby open space. Alternative solutions to increase housing supply and reduce homelessness [00:23:30] Exploration of alternative measures to address homelessness, such as trade training for the homeless and relaxing excessive safety requirements in home building. Giving real change to the homeless [00:25:50] Encouragement to give directly to homeless shelters or soup kitchens instead of giving small change to individuals on the street, with the concept of "give real change not small change" explained. Note: The timestamps provided are approximate and may vary slightly depending on the podcast episode. The Origins of Tulip Mania [00:31:37] Tulips were introduced to Europe in the 1500s and became a luxury item for the affluent. The cultivation of tulips locally in the Netherlands led to a flourishing business sector. The Tulip Bubble [00:32:55] By 1634, tulip mania had swept through the Netherlands, with the demand for tulip bulbs exceeding supply. Prices reached exorbitant levels, and futures contracts were being bought and sold. Lessons from Tulip Mania [00:37:53] Tulip mania serves as a model for financial bubbles, with similar cycles observed in other speculative assets like beanie babies, baseball cards, NFTs, and stocks. It highlights the dangers of excess, greed, and speculation without tangible value. The cycle of investor emotions [00:44:32] Explanation of the different stages of investor emotions, from optimism to panic, in relation to stock market investing. The peak of the stock market [00:46:43] Discussion on the peak of the stock market being the point of maximum financial risk and the difficulty of selling at the right time. Real estate as a stable investment [00:51:56] Comparison of real estate investment to speculative bubbles, highlighting the stability and income stream provided by real estate. Explains how the integration of HOA (Homeowners Association) helps maintain uniformity and cleanliness in the rental property investing world. Details about the upcoming real estate event [00:38:31] Promotion of a live event where listeners can learn about new construction fourplexes and have their questions answered in real time. Resources mentioned: Show Notes: www.GetRichEducation.com/463 Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY' to 66866 Will you please leave a review for the show? I'd be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE' to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith's personal Instagram: @keithweinhold   Complete episode transcript:   Welcome to Get Rich Education. I'm your host, Keith Weinhold. America's homeless problem has become FRIGHTENING. I describe how that correlates… with the housing market.  Then, investing MANIAS. What drives people to spend more for one tulip flower bulb than they would for an entire luxury home?    And lessons you can learn that'll benefit you the rest of your life from other manias throughout history. All today, on Get Rich Education.   ___________   Welcome to GRE! From Seaford, DE to Carmel-by-the-Sea, CA and across 188 nations worldwide, you're listening to one of America's longest-running and most listened to shows on real estate investing. Along with plenty of ongoing hot takes on wealth mindset and the real estate economy.    I'm your host, Keith Weinhold.    See, the crash in the SUPPLY of available American homes is bad and it isn't just creating more upward prices, it's a contributor to homelessness.    Let's talk about some of the drivers of homelessness, understand the problem a little more, how many homeless people ARE there in America, and then… what can we do about it?   As you'll soon see, one prominent real estate industry influencer actually suggests that you actually SELL your rental single family homes in order to help serve the homeless. More on that shortly.    Also, I have the results from a GRE Instagram Poll. The poll question is: “Should we pay to HOUSE the homeless?”    And the answers that you - the GRE listeners gave… actually surprised me. I'll give you those super-interesting poll results later, because I have more to explain there.   But first, what IS a homeless person? Let's define it. I think most anyone knows that since it's a person without a home, it's thought of as living on the street.   Really, then, that person might not be homeless but “houseless” in a literal sense. Even if they live in a tent under a bridge, that is then, their home. Though it might be INADEQUATE housing.   More accurately, the unsheltered or undersheltered population could be more apropos.     Then there's vagrancy. A vagrant is defined as a person without a settled home OR regular work… who wanders from place to place and lives by begging.   So vagrants are PART of the homeless population then. This all helps DEFINE what we're discussing.   Now, the lack of available American housing supply - especially the affordable segment - is OBVIOUSLY a big contributor to homelessness.   For example, anymore, how many builders even construct a new-build entry-level home for $200 or 250K? Practically nobody… anywhere.   And just how bad is the supply problem now? Well, the NAR has been tracking housing supply since 1982 and it just hit its lowest level ever this summer - EVER - and that's in 40+ years of tracking.    That's one reason why just last week, it was announced that Warren Buffett is making a big bet on housing by investing in homebuilders.   Now to keep consistent with the same stats I've been reporting to you for you, to update that, again 1-and-a-half million available homes is the baseline supply. That's the long-term “normal” per the FRED Active listing count.   And through last month, it's still under 650,000. That is STILL a housing SUPPLY crash of 57% from its peak of 1 ½ million.   I want you & I to listen to this upcoming piece together. This recent interview with NAR Chief Economist Lawrence Yun is from the 8th of this month.   Yes, HE is the one that basically wants you to sell your SF rental properties. And he makes his case for an inducement to get you to do this. (Ha!)   He's not proposing anything COMPLETELY ludicrous. It's REALLY interesting. Listen closely for that.   This about 5 minutes in length and there's a lot of material here within this clip - a nutrient dense piece, so I've got SO much to say about this when I come back to comment.    [Yun clip]    Yeah, the NAR Chief Economist there talking about how, much like I have for years, great opportunity is in the Midwest and Southeastern parts of the US.    With this greater ability for people to work from anywhere, when people move in from the pricy coasts, it's sooo affordable to them.   Moving from Manhattan to Cincinnati feels incredibly affordable.  Moving from San Francisco to St. Louis feels like you've upgraded from serfdom to a kingdom. Moving from Boston to Jacksonville feels like a total life makeover.   That's why, here at GRE, we're focused on properties in those INbound destinations.    Before I continue, especially for those outside the US, I know that it seems a little odd that Ohio and Indiana are in what we call the Midwest when they're actually in the northeastern quadrant of the nation.   But the fact that they ARE midwestern states is rooted in history and in cultural tradition.   So, getting back some new angles on the housing supply crisis.   Lawrence Yun proposed that a tax incentive be introduced to unleash the inventory of SF rentals from individual REIs.    And says that there are over 20 million single-family housing units that are rented out.    If we reduced or canceled the capital gains tax & just got 1% of that inventory on the market, he states that that would help.   Well, yeah, but even that then would only put about 200,000 units of the market - and they'd get snatched up so fast.   Now, if mortgage rates come down to say, 5%, it would unleash both housing demand AND supply.    Both - like Lawrence Yun says. So it's not apparent that that would help this shortage, if both demand and supply go up.   In a nation of about one-third of a BILLION people now - that's how I like to express it this year - America now has one-third of a billion people… also known as 333 million - how many do you think are classified as homeless?   As you think about that - as you think about how many of America's 333 million Americans are homeless, this homeless population figure that I'm about to share with you is from HUD and it's through last year, so it's their latest year-end figure.    And I'll tell ya, it's hard to believe this number. The Department of Housing and Urban Development states that about 582,000 Americans are experiencing homelessness.   Now, how HUD does this is that their number is a snapshot of the homeless population as of a single night at the end of January each year.    The total number of people who experience homelessness for SOME PERIOD each year will be higher than that.   I just did the math and then that means that just 1 in every 572 Americans are homeless. C'mon. Do you believe that? Only one in every 572 Americans are homeless?   I might believe that it's something like more than 1 in 200. What are your thoughts?   Even HUD would probably concede that there are shortcomings in that stat and that it's only a starting point.   And over the last decade, according to HUD, the homeless population is little changed… apparently until just this past year.   Homelessness is surging in America. The number of people experiencing homelessness in the US has increased 11% so far this year over 2022. That would be the biggest jump by far in equivalent government records beginning in 2007.   Now this 11% homeless jump is according to a WSJ analysis of hundreds of smaller & local agencies.    Most  agencies say the alarming rise is because of the lack of affordable housing and rental units, and the ongoing opioid crisis.   Inflation is part of that affordable housing problem. Inflation widens the disparity between the haves and have-nots.   To cut some slack to census-type of surveying, homelessness can be hard to measure. Some live on skid row, some live in the woods, some homeless people live in their cars.    Some aren't interested in being counted. Others are essentially invisible. I mean, if someone's between jobs and needs to couch surf at their aunt and uncle's place for three months, are they homeless or not? So, to be sure, there's a lot of leeway in those numbers.   One in 572 as homeless - that should just be a minimum - a starting point in my opinion.   Now, homelessness broken down by STATE is really interesting.   California at 171,000, has the most of any state, more than double of next-most New York, and then Florida is third.   But let's break that down by rate - on a per capita basis. So… think of this as the highest CONCENTRATION of homeless:   Washington DC has 65 homeless per 10,000 people. That's not really a state though, so…   #1 on a per capita basis is STILL California, with 44 per 10,000. So California leads in the nation in homeless on both bases then - both absolute and relative.   The second highest rate is Vermont.  Third Oregon Fourth Hawaii Fifth is New York And then numbers 6 through 10 on the most homeless per capita are Washington, Maine, Alaska, Nevada, and Delaware.   Now, strictly anecdotally. You've probably seen just what I've seen in the last year-plus - more visible homeless people in your city and other cities.   The state with the FEWEST homeless of all 50 states is Mississippi - and see, housing is quite affordable there. MS is one of the most affordable states for housing.    There is at least SOME correlation between your cost of housing and homelessness.   Recently on our Instagram page, and the handle there is easy to remember - it's @getricheducation - if you want to participate in future polls, we ran a poll on homelessness.   Here is the poll question that we ran - and I'd like you to think about your answer to this too.   “Should we pay to house the homeless?”    That's the question.    And in polling, the way that the question is phrased, of course, can skew your answer.    See, if instead, we phrased it as, “Should the government house the homeless?” you might have more ‘yes' answers - even though it's the same question - because you FUND the government.    But the question as we phrased it: “Should we pay to house the homeless?” - it also showed a photo of vagrants on a street curb under the question.   Here we the results, which surprised me, to:  Should we pay to house the homeless?   Those answering “Yes” were just 6% The no's were 45% But we also had a third option: “It's complicated”. 48% answered with that option.   So again, just 6% of you said we should pay to house the homeless and 45% said “no”. “48% said it's complicated”.   In a way, that makes sense to me since we have a largely entrepreneurial, self-made type of audience. I thought that might have happened.   But what surprised me is in how emphatic it was. It was a landslide. 7 to 8 TIMES as many of you said we should not pay for the homeless as those that said we should.   Well, the reason that I added - and I'm the one that ran the poll myself - they're quick to do. I added the paying to house the homeless “It's complicated” option because it IS complicated… that WAS the most popular answer.   I mean, why should you go to work and pay to house a stranger that has no income because he or she doesn't want to work?   But what if they're disabled and they can kinda work but not really work… or a zillion other complications.    Substance abuse is obviously a big problem that keeps homeless people homeless… and there's a substantial thought paradigm that says, if they're an abuser, then why would I pay for THEIR housing?   Substance abuse is just one reason that there is a population that's VOLUNTARILY homeless. They don't want to have to comply with a group home's ban on substances.    I wanted to address the homeless problem somewhat today, because here we are on Episode 463 of a real estate show and this is the most that we've even discussed it.   I think the perspective it gives you is that it helps you be grateful for what you've got.    But it's abundance mentality here. You can be grateful for what you have and at the same time, grow your means.   What else would help with more housing supply which would also move us toward mitigating the homeless problem?   Well, we've already discussed a number of them so I'll only go in depth with some fresh angles here.   Obviously, more homebuilding. We've done episodes on how 3D printed homes and shipping container homes are not quick, easy answers. Tiny homes might be but then you could get into a zoning density problem again.   Just last week, my assistant brought me this Marketwatch article that reported that the average American home size is shrinking just a little & that often times, new-build houses tend to be a little closer together.   That's what gets us into relaxing zoning requirements. But you know something, OK, this is going to be interesting.    This plays into NIMBYism. Not In My Backyard: communities saying that they don't want high-density housing built next to them.    Now, I think that there are a lot of critics of NIMBYism. But the criticism comes from people that live far out of that area and aren't affected.   Let me just play a fun little experiment with you here. Let me paint a picture of a fictitious life for you and just… place yourself there.   Say that you live in a nice single-family home, with a quarter acre lot. It's not a sprawling estate but you've got a good measure of privacy that way.   You're in a SFH, quarter-acre lot and two car garage. That is classic suburbia.   And… just a hundred yards away from your home there's a big, wide-open field where you walk your dog and use as a little makeshift golf driving range or whatever. Nice open space nearby.   Say you've got a fairly idyllic life here. It's always been this way since you bought the home years ago.   Suddenly, in your neighborhood of all SFHs, you learn that they want to build a bunch of fourplexes in the nearby lot where you used to throw tennis balls to your dog.   What can that do to your quality of life & your home's value, now that a bunch of new fourplexes and eightplexes were built nearby?   It reduces your home's value because there are less valuable, high density properties nearby.   It also increases the amount of traffic & even noise in your neighborhood. Now you can't use that nearby park anymore - it's been all-built up with these higher-density apartments.   So, let me go back and ask - point blank - did you really want all those new high-density developments near your home?   If that made you uncomfortable, that's NIMBYism. So it's quite natural to evoke that feeling type. You're just a human being.   How else can we increase housing supply to help reduce homelessness?   NOT with rent control. Over time, capping the amount of rent that a LL can charge gives property owners no incentive to improve their property and neighborhoods end up dilapidated.   We need more training for tradesman and laborers. How about training the homeless for that? But then someone's got to pay for that training.   Another measure that's become ridiculous is that we've gotta relax these excessive safety requirements in homebuilding. Now, some safety is good.   But when every single home - entry-level and all needs to have fire-rated shingles and fired-rated doors and GFCI outlets and smoke detectors in every room and carbon monoxide detectors all over the place, sheesh! Well, that raises the cost of housing for everyone.   In some earthquake-prone areas, you've got to have seismic restraining straps on your water heater or you can't even sell your home. Do you know how big of an earthquake it would take to damage your water heater like that?   And an excessive safety PROPONENT might say, yeah, but did you hear about that one family that died ten years ago that would have lived if they had carbon monoxide detectors?   Well, the counterargument to that is, yeah, but what about all the homeless people that were exposed to the elements and died in the cold because they couldn't AFFORD the more basic housing, the prices of which have escalated for all this excessive safety stuff.   Are you saying a middle class person's life is worth more than a poor, homeless person's life? That's the counterargument.    Again, some safety is good. But we've gone overboard in too many places - in housing & beyond.   Rising housing costs keep people homeless. A few weeks ago, I did that episode about escalating insurance costs.   I now own some properties that have extremely low mortgage rates and the insurance has gone up to the point where I pay more in monthly escrow expenses than I do principal & interest.    But, hey. I'm not homeless, and if you're listening to this, neither are you.   So when it comes to helping the homeless in the short-term, that campaign called, “Give real change, not small change.” - that really resonates with me.   Don't give 5 bucks to a vagrant on the corner. That just keeps them showing up at that corner, plus they're going to spend your 5 bucks on a cheap bottle of Monarch vodka.   Instead, if you're going to give, give to a homeless shelter or soup kitchen.    That's what's meant by “Give real change, not small change.” And that's something actionable.   Coming up next, investing MANIAS. How wild it gets - paying more for a tulip flower than a SFH, shooting and killing someone over a Beanie Baby toy… and then I'm going to wrap it all up with what all this has to do with the cycle of your investor emotions.   Around here, we don't run ads for the Swiffer. This week's sponsors that support the show are people that I've personally done real estate business with myself and have benefited from.    Ridge Lending Group specializes in INVESTMENT property loans in nearly all 50 states. Start your prequalification at: RidgeLendingGroup.com    Then, for super-passive real estate returns, check out Freedom Family Investments. Right now, what you can do, is just text “FAMILY” to 66866.   I'm Keith Weinhold. You're listening to Get Rich Education. ___________ Welcome back to the GRE Podcast. I'm your host and my name is Keith Weinhold.    If you've got a friend or family member that you think would benefit from the knowledge drops here on the show, you can simply tell them to grab the free Get Rich Education mobile app.   That's a convenient option for listening every week for both iOS and Android.   Today's topics of homelessness and investing manias could very well bring a new audience here, so…    A little more about my backstory. I'm from PA but got my real estate comeuppance in Anchorage, Alaska of all places & grew out nationally & internationally from there. I had humble beginnings and wasn't born anywhere near wealthy. I had to figure out how to build it myself.   But see, if I were born wealthy, I wouldn't have learned how to build it, and then I wouldn't be of much help to you. Likewise, if you're building it yourself, you'll be able to help others too.   BTW, I was born in the same PA town as Taylor Swift.    Though she & I don't have much ELSE in common, I guess that she & I are both best-known for using a microphone.   Though I think that I'm about as likely to start using this microphone to sing into your ears like Taylor Swift does… as Taylor is to launch a real estate investing show.   For hundreds of years, the tulip has been one of the most-loved flowers in the Netherlands. It's an enduring icon - as synonymous with the country as clogs, windmills, bicycles, and cheese. The tulip has a long and storied history - including the infamous shortage in the 1600s known as “tulip mania”. If you're someone that has even a fleeting interest in investing, you should at least know what this is.   Tulips first appeared in Europe in the 1500s, arriving from the spice trading routes… and that lent this sense of exoticism to these imported flowers that looked like no other flower native to the continent. It's no surprise, then, that tulips became a luxury item destined for the gardens of the affluent.  According to The Library of Economics and Liberty, “it was deemed a proof of bad taste in any man of fortune to be without a collection of [tulips].” Hmmm. Well, following the affluent, the merchant MIDDLE classes of Dutch society sought to emulate their wealthier neighbors and also demanded tulips. So to start out with, it was purchased as a status symbol for the sole reason that it was expensive. But at the same time, tulips were known to be notoriously fragile, and would die without careful cultivation. In the early 1600s, professional cultivators of tulips began to refine techniques to grow and produce the flowers locally in the Netherlands. They established a flourishing business sector that persists to this day. By 1634, tulipmania swept through the Netherlands. The Library of Economics and Liberty writes, “The rage among the Dutch to possess tulip bulbs was so great that the ORDINARY INDUSTRY of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade. Now, everyone's in - rich to poor. It's a little hard to say for sure how much people paid for tulips.  But Scottish journalist Charles Mackay, wrote an extremely popular 1841 book - you've probably heard of this book - it's called the Memoirs of Extraordinary Popular Delusions and the Madness of Crowds… It does give us some points of reference such that the best of tulips cost upwards of $1 million in today's money (but a lot of bulbs traded in the $50,000–$150,000 range).  By 1636, the demand for the tulip trade was so large that regular markets for their sale - like a little Dow Jones Industrial Average - got established on the Stock Exchange of Amsterdam, in Rotterdam, Haarlem, and other towns. It was at that time that PROFESSIONAL TRADERS got in on the action - that's all that some people do now - is trade tulips… and everybody appeared to be making money simply by possessing some of these rare bulbs.  Dutch speculators at the time spent incredible amounts of money on bulbs that only produced flowers for a Week—many companies were formed with the SOLE PURPOSE of trading tulips.  To everyone, at the time, it seemed that the price could only go up forever. Pretty soon, demand for tulips EXCEEDED THE AVAILABLE SUPPLY of tulips by so much that people were into buying futures contracts, basically saying, I'll pay you this much money TODAY for a tulip that you provide to me in 3 years. By the last 1630s, these futures contracts were like a crack that appeared in the price runup. Demand began to wane when people were just buying a token for a future tulip that hadn't even started growing yet.  People felt like they weren't buying anything tangible anymore. That's one factor that helped create an oversupply of tulips in the market and started depressing the prices. Supply caught up with - and exceeded - demand. A large part of this rapid decline was driven by the fact that people had purchased bulbs on credit, hoping to repay their loans when they sold their bulbs for a profit. But once prices started to drop, holders were forced to sell their bulbs at any price and to declare bankruptcy in the process. So people had begun buying tulips with leverage, using margined derivatives contracts to buy more than they could afford. But as quickly as the run-up began, confidence was dashed. By the end of 1637 is when prices began to fall and never recovered.   And the bubble burst. Buyers announced that they could not pay the high price previously agreed upon for bulbs, and that made the market fall apart.  While it wasn't actually a devastating occurrence for the entire nation's economy, it did undermine social expectations. The event destroyed relationships built on trust and people's willingness and ability to pay. It's been said that “the wealthiest merchants to the poorest chimney sweeps jumped into the tulip fray, buying bulbs at high prices and selling them for even more.” Well, this is what can happen - today it happens with financialization and nothing real backing up purchases. Tulipmania is a model for the general cycle of a financial bubble. That's what happened with Dutch tulips. Now, here in more recent times, similar cycles have been observed in the price of Beanie Babies, baseball cards - I got caught up in the baseball cards as a kid, owning more than 100,000 baseball cards at one time, also non-fungible tokens (NFTs), and shipping stocks.       The example of tulipmania is now used as a parable for other speculative assets, such as cryptocurrencies today or dotcom stocks from around the year 2000. So, when you hear someone likening an investment to a Dutch tulip bulb, now you'll know what they're talking about. It's a symbol of excess, greed, and FOMO. But there has been a good bit of more modern scholarship that tells you that tulip mania did indeed occur in the 1600s Netherlands. But that the tale has been exaggerated and it's something that the upper classes of society were mostly involved in. Now, that's the Dutch tulip bubble. But for a more modern-day parable about an investing mania, there's a new movie about the rise & fall of BEANIE BABIES that's on Apple TV+. These were little stuffed, plush toy animals that became more popular among adults than children. The rise and fall of Beanie Babies—toys that people mistakenly thought would make them rich. The movie is called “The Beanie Bubble”.  It's a MOSTLY TRUE account of the lovable toys' boom and bust in the '90s -  comparable to the meme stock frenzies that took place during the Covid-19 pandemic. These $5 pellet-stuffed plush toys had astronomical appreciation estimates: Stripes the Tiger, released in 1996, was predicted by collectors to surge from $5 to $1,000 by 2008.  Forecasts like these were so enticing that one dad invested his kids' college funds in Beanie Babies, thinking he'd resell them later for a hefty profit. At the height of the frenzy, people were ruining relationships and committing felonies to get their hands on some of these sacks of fuzz. Border officials confiscated more than 8,000 smuggled Beanie Babies at a US–Canada border crossing in 1998. A West Virginia man shot and killed a former coworker in 1999 after an argument partly about $150 worth of Beanie Babies. That same year, a divorcing couple couldn't agree on how to split up their collection, so the judge made them divvy up the toys in person, right on the courtroom floor. How did that all happen? Barely anyone cared about Beanie Babies when a company called Ty Inc. launched them in 1994. Stores only got lines out the door once the toy's creator, now-billionaire Ty Warner, began pulling strings to juice demand. Here's what Warner did. OK, so here's how you induce people into a speculative bubble. He refused to stock Beanie Babies at Toys R Us and Walmart. Instead he created an illusion of rarity by only selling them at small toy stores and independent shops. Even if you did find a retailer, every store's supply of Beanie Babies was limited to 36 of each animal, so inventory restocks drew a crowd. This, combined with Warner's decision to start “retiring” certain animals in 1995, created artificial scarcity and a mass panic to stock up on Beanie Babies.  Soon, an aggressive resale market was born, replete with magazines and blogs and even trade shows for these Beanie Babies. One woman's guide to the secondary Beanie Babies market got so popular that she was selling 650,000 copies per month and, on many days, she did two or three radio interviews before her kids woke up for school. Ty Inc. later gave her an award for boosting sales. At Peak Beanie mania, Ty Inc. and legions of speculators actually made hordes of money: The stuffed animals accounted for 6% of eBay's sitewide sales in 1997 and 10% in 1998. Beanies averaged a resale value of $30—six times their retail price—but rare ones, like the Princess Diana bear, went for hundreds or thousands of dollars (and now you can find one online for $15 bucks). Ty Inc. hit $1.4 billion in sales in 1998, which is what Mattel grossed in Barbie dolls in 1995. At the end of the year, Ty Warner gave all ~250 employees holiday bonuses equal to their annual salaries. But most regular people didn't sell their Beanie Babies at their peak price. And unfortunately for them, the hype subsided. Anticipating a drop in interest as more kids reached for Pokémon and Furbies, Ty Inc. announced it would stop making Beanie Babies at the end of 1999, and that poked a hole in collectors' this-will-never-not-be-popular mentality and that sent demand plummeting. There were no underlying fundamentals to Beanie Babies' value. That's all that I've got on that speculative craze.   So let's review how this happened with both speculative crazes - Dutch tulips and Beanie Babies: Investors lose track of rational expectations. Psychological biases lead to a massive upswing in the price of an asset or a sector. A positive-feedback cycle keeps inflating prices. And soon, investors realize that they are holding an irrationally-priced asset. Prices collapse due to a massive sell-off, and an overwhelming majority go bankrupt. Now, much stock market investing is based off of buy low and sell high mentality. And stock investors can get caught up in similar crazes.    But because many stocks are tied to productive companies, the stock investor deals with smaller bubbles. A lot of times, the stock price can double, triple, or even 10X even though that company is not even profitable. Buy low & sell high. Well, that sounds easy. But why is this harder to do than it sounds? It's called the cycle of investor emotions.   It starts here with… optimism. Because you HEAR about 10% stock returns or people making money with Dutch tulips or Beanie babies.    Let's say that you aren't fully invested in the stock market. But some friends are, and they're achieving small gains.   Then comes excitement. The market is now up some more. Hey, what's in motion tends to stay in motion.   More friends are telling you how much money they're "making".    You're soon experiencing a full-blown case of FOMO—Fear Of Missing Out.   The next stage is the Thrill you feel. So you jump into the stock market fully, rationalizing with something like, "Hey, I'm a momentum investor". Sounds pretty good, I guess.   Now that you're in, it actually feels fantastic to you for a short time. You figure that some days, you're making more from stocks than your job. Winning activates dopamine.    Dopamine is a brain chemical that's known as the “feel-good” hormone. It gives you a sense of pleasure. It also gives you the motivation to DO SOMETHING when you're feeling the pleasure.    So then, you add MORE shares… at an elevated price until you are FULLY invested. Now everyone is "making money", even your Uber driver.   The next stage is Euphoria - The peak! As you can see, this is the Point of Maximum Financial Risk.    OK, now, remember the simplicity of “buy low, sell high”?   Well then, savvy stock investors should now be SELLING here in my example - at the HEIGHT.   Now be “selling”? Leaving the party at its crescendo? Stopping the dopamine flow? Yes, exactly… and THAT'S why it's so difficult.    What happens after the stock market peak? Overbought, with bloated price-to-earnings ratios, the market soon drops 10% from its recent high.    That's what's known as a correction - a drop of 10% or more. Now you feel a little ANXIETY. Your dopamine flow is stifled.   Next, you tell yourself, "I shouldn't be worried because I'm a long-term investor." It's down 15%. You're experiencing DENIAL & FEAR.   Now you're checking the Robinhood app almost hourly to see if it will recover.   Next, comes Desperation & Panic - Stocks are down 20%, that's the definition of a bear market. You're devoting more mindshare to this each day than what's healthy.   Then there's Capitulation - Down 30%, you finally surrender to a FEAR of FURTHER LOSS. You're getting so sick of months of losing. You finally do it and cash out your stocks into a safe money market fund. Now you're out.   And you rationalize and justify doing this because you tell yourself, "You know, at least when I wake up tomorrow, I'll know that I haven't lost money AGAIN. And THAT gives me certainty.”    The next stage in the Cycle of Investor Emotions is Despondency - You realize that what you've done is the polar opposite of successful investing. It's complete. You've now bought high… and then sold low.    Next, stocks completely bottom out. But this is actually the Point of Maximum Financial Opportunity. Instead, you should be buying.   But you can't. Because you're experiencing the next investor stage - Depression. You're so full of contempt for the situation that the idea of actually buying at bargain-basement levels again is simply inconceivable. You've been burnt badly.   Then, there's Hope & Relief - The market has begun ticking up after the crash. It soon should be clear that share prices are FAIRLY VALUED again.    But you don't buy the recovery story. You wait until enough price growth occurs that the confidence and Optimism stage is felt again before you'll even consider getting back in and buying.   And the entire pattern repeats.   That's the “cycle of investor emotions”. There's an average of 3-and-a-half years between each stock bear market, BTW.   Of course, we've been kind to call this all “investing”. It's more like speculating.   But here's the real problem—most investors THINK they're better than average stock pickers, so they keep playing this game. This effect has a name. It's called illusory superiority.   It's like how at least 70% of people think they're better than average drivers, despite the statistical impossibility.   Even professional money managers fall prey to this! Fewer than 10% of active U.S. stock funds manage to beat THEIR benchmarks.   The renowned British economist and value investor Benjamin Graham once said: "The investor's chief problem—even his worst enemy—is likely to be HIMSELF." Well, as real estate investors, we largely SIDESTEP the cycle of investor emotions for two main reasons.   Returns are more stable.   Real estate, we sidestep this emotional roller coaster. Not only do we have stable prices, but appreciation is one of just 5 ways that you're simultaneously paid.   RE also has monthly income. Dutch tulips or Beanie Babies don't pay you a durable monthly income stream. They don't provide an income stream at all.   And finally, RE is a REAL asset that fulfills a REAL human need.   I hope that you enjoyed this journey through speculative bubbles today and how they play into human psychology and investor emotions.   Go ahead and tell a friend about Get Rich Education.   If you've got a friend or family member that you think would benefit from the knowledge drops here on the show, you can simply tell them to grab the free Get Rich Education mobile app.   That's a convenient option for listening every week for both iOS and Android.   My name's Keith Weinhold and I'll be back with you right here… next week. Don't Quit Your Daydream!