553: "Tariffs Will Create Empty Shelves and Economic Disaster" -Father of Reaganomics, David Stockman Joins Us

12 mei · Get Rich Education

00:53:30

The Father of Reaganomics, David Stockman, joins us to explore the complex world of international trade and its impact on investors.

Key insights include:

Challenging conventional wisdom about trade policies

Understanding economic forces that drive investment opportunities

Gaining expert perspective on global economic trends

Stockman provides a candid analysis of current trade strategies, revealing:

The true drivers of economic competitiveness

Potential pitfalls of protectionist approaches

Critical insights for strategic investors

The episode cuts through political noise to offer clear, actionable economic intelligence for informed decision-making.

Smart investors look beyond headlines to understand the deeper economic forces shaping their financial future.

Resources:

Check out David Stockman’s Contra Corner Newsletter

Show Notes:

GetRichEducation.com/553

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching: GREinvestmentcoach.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

Best Financial Education:

GetRichEducation.com

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Our YouTube Channel:

www.youtube.com/c/GetRichEducation

@getricheducation

Complete episode transcript:

Automatically Transcribed With Otter.ai

Keith Weinhold 0:01

Welcome to GRE. I'm your host. Keith Weinhold, I sit down with a long time White House occupant who was the official economic advisor to an ex president. We get the real deal on tariffs and what they mean to you. Trump gets called out and the ominous sign about what's coming six months from now, today on, Get Rich Education.

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 the flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests 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 1:14

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:30

Welcome to GRE from Brookline, Massachusetts to Brooklyn, New York and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education, just another shaved mammal behind this microphone here. I recently spent some time with the father of Reaganomics, David Stockman, in New York City, and sometimes an issue so critical surfaces that real estate investors need to step back and understand a broader force in the economy. Three weeks ago, here, I told you how the second and third way, real estate pays you. Cash flow and ROA are sourced by your tenants employment and the future of your tenants employment is influenced by tariffs and other policies of this presidential administration. This is going to affect rates of inflation and a whole lot of things. Now, an organization called the American Dialect Society, they actually name their word of the year, and this year, it is shaping up to be that word, tariff. In fact, Trump has described that word as the most beautiful word in the dictionary. And I think we all know by now that a tariff is an import tax that gets passed along to consumers when it comes to materials used in real estate construction that's going to affect future real estate prices. Well, several key ones so far were exempted from recent reciprocal tariffs, including steel, aluminum, lumber and copper exempted. Not everything was exempted, but those items and some others were but who knows if even they are going to stay that way. And now, when it comes to this topic. I think a lot of people want to make immediate overreactions in even posture like they're an expert in become an armchair economist, and I guess we all do a little of that, me included. But rather than being first on this and overreacting, let's let the policy which Trump called Liberation Day last month when he announced all these new tariffs. Let's let policy simmer a little and then bring in an expert that really knows what this means to the economy and real estate. So that's why I wanted to set up this discussion for your benefit with the father of Reaganomics and I today. In fact, what did Reagan himself say about tarrifs back in 1987 this is part of a clip that's gained new life this year. It's about a minute and a half.

Speaker 1 4:13

Throughout the world, there's a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. Now there are sound historical reasons for this. For those of us who lived through the Great Depression, the memory of the suffering it caused is deep and searing, and today, many economic analysts and historians argue that high tariff legislation passed back in that period called the Smoot Hawley tariff greatly deepened the depression and prevented economic recovery. You see at first when someone says, Let's impose tariffs on foreign imports, it looks like they're doing the patriotic thing by protecting American products and jobs, and sometimes for a short while at work. Price, but only for a short time. What eventually occurs is first, home grown industries start relying on government protection in the form of high tariffs. They stop competing and stop making the innovative management and technological changes they need to succeed in world markets. And then, while all this is going on, something even worse occurs. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars. The result is more and more tariffs, higher and higher trade barriers, and less and less competition, so soon, because of the prices made artificially high by tariffs that subsidize inefficiency and poor management, people stop buying. Then the worst happens, markets shrink and collapse, businesses and industry shut down, and millions of people lose their jobs.

Keith Weinhold 5:50

Now, from what I can tell you as a listener in the GRE audience, maybe you're split on what you think about tariffs. In fact, we ran an Instagram poll. It asks, generally speaking, tariffs are good or bad? Simply that 40% of you said good, 60% bad. Over on LinkedIn, it was different. 52% said they're good, 48% bad. So it's nearly half and half. And rather than me taking a side here, I like to bring up points that support both sides, and then let our distinguished guests talk, since he's the expert. For example, if a foreign nation wants to access the world's largest economy, the United States, does it make sense for them to pay a fee? I mean, it works that way in a lot of places, when you want to list a product on eBay or Amazon, you pay them a fee. You pay a percentage of the list price in order to get access to a ready marketplace of qualified buyers. All right. Well, that's one side, but then the other side is, come on, let's look at history. Where have tariffs ever worked like Where have they ever been a resounding, long term success? Do they have any history of a sustained, good track record? I generally like free trade. Then let's understand there's something even worse than a steep tariff. There are quotas which are imposed, import limits, trade limits, and then there are even all out import bans. What do terrorists mean to the economy that you are going to live in and that your tenants live in? It's the father of Reaganomics, and I on that straight ahead on Get Rich Education. I'm your host. Keith Weinhold.

you know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lock ups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text, family to 66866, to learn about freedom, family investments, liquidity fund, again. Text family to 6686

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

Hey

Robert Helms 9:28

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

Keith Weinhold 9:48

when it comes to White House economic policy like tariffs, taxes and inflation, don't you wish you could talk to someone that's often been inside the White House. Today, we are even better. He was the official advisor to an ex president on economic affairs, a Wall Street and Washington insider and Harvard grad. Today's guest is also a former two time congressman from Michigan. He's 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. He was first with us last year, but so much has happened since. So welcome back to the show. David Stockman,

David Stockman 10:26

very good to be with you, and you're certainly right about that. I think we're really in uncharted waters. Who could have predicted where we are today, and therefore it's very hard to know where we're heading, but you have to try to peer through the fog and all the uncertainty and the noise and the, you know, day to day ups and downs that's coming from this White House in a way that we've never seen before. And I started on Capitol Hill in 1970 so I've been watching this, you know, for more than a half century, actually, quite a while. And man, it's important to go through all this, but it's sort of uncharted waters.

Keith Weinhold 11:04

Sure, it's sort of like you wake up every day and all you do know is that you don't know. And David, when it comes to tariffs, I want to give you my idea, and then I want to ask you about what the tariff objective even is. Now, to be sure, no one is asking me how to advise the President. I'm an international real estate investor, but I do most of my business in the US, and I sure don't have international trade policy experience. It seems better to me, David, that rather than shocking the world with new tariffs that kick in right away, it would have been better to announce that tariffs begin in, say, 90 days, and then give nations space to negotiate before they kick in. That's my prevailing idea. My question to you is, what's the real objective here? What are terrorists proposed to do? Raise revenue, onshore companies merely a negotiation tactic? Is the objective? Something else?

David Stockman 12:00

Well, it might be all of the above, but I think it's important to start with a predicate, and that is that the problem is not high tariffs abroad or cheating by foreign competitors or exporters. There is a huge problem of a chronic trade deficit that is not benign, that does reflect a tremendous offshoring of our industrial economy, the loss of good, high paying industrial and manufacturing jobs. So the issue is an important one to address, but I have to say, very clearly, Trump is 100% wrong when he attempts to address it with tariffs, because foreign tariffs aren't the problem. Let me just give a couple of pieces of data on this, and I've been doing a lot of research on this. If you take the top 51 exporters to the United States, our top 51 trade partners, and this is Mexico and Canada and the entire EU and it's all the big far eastern China, Japan, South Korea, India, you know, all the rest of them. If you look at the and that's 90% of our trade, we have 2.9 trillion of imports coming in from all of those countries, and the tariff that we Levy, this is the United States, on those imports, is not high. It's higher than it was in the past, mainly because of what Trump did in the first term, but it's 3.9% now compared to bad times historically, decades and decades ago. That's relatively low. But here's the key point, if we look at the same 51 trading partners in terms of the tariffs they levy on our exports to China and to the EU and to Canada and Mexico and South Korea and all the rest of them. The tariff average, weighted average that they levy is 2.1% so let me restate that the average US tariff is about twice as high 4% around things as what our partners imposed 2% now the larger point is whether it's 4% or 2% doesn't make a better difference. That's not a problem when it comes to 33 trillion of world trade of which we are, you know, the United States engages in about five and a half trillion of that on a two way basis, import, export, in the nexus of a massive global trading system. So he's off base. He's wrong. The target is not high tariffs or unfair foreign trade. Now there are some people who say, Well, you're looking at monetary tariffs. So in other words, the import duty they levy on, you know, exports to South Korea or India or someplace like that, right? And that, the real issue, supposedly, is non tariff barriers. For instance, you know, some governments require you that all procurement by government agencies has to be sourced from a domestic supplier, which automatically shuts out us suppliers who might want that business. Well, the problem is we're the biggest violator of the non tariff barrier in that area. In other words, we have something like $900 billion worth of state, federal and local procurement that's under Buy America policies, which means EU, Mexico, Canada, China, none of them can compete. Now I mention that only as one example, because it's the kind of classic non tariff barrier, as opposed to import duty that some people point to, or they point to the fact that while foreign countries allegedly manipulate their currency, but you know the answer to that is that number one, overwhelming, no doubt about it, largest currency manipulator in the world, is the Federal Reserve. Okay, so it's kind of hard to say that there's a unfair trade problem in the world because of currency manipulation. And then there is, you know, an argument. Well, foreign governments subsidize their exporters. They subsidize their industrial companies, and therefore they can sell things cheaper. And therefore that's another example of unfair trade, but the biggest subsidizer of tech industry, and of a lot of other basic industry in the United States is is the Defense Department. You know, we have a trillion dollar defense budget, and we put massive amounts of dollars in, not only to buying, you know, hardware and weapons and so forth, but huge amounts of R and D that go into developing cutting edge technologies that have a lot of civilian applications that, in fact, we see all over the world. That's why we're doing this broadcast right now. The point is that problem is not high tariffs because they're only low tariffs. The problem is not unfair trade, because there's all kinds of minor little interferences with pure free markets, but both, everybody violates those one way or another due to domestic politics. But it's not a big deal. It doesn't make that big a difference. So therefore, why do we have a trillion dollar trade deficit in the most recent year, and a trade deficit of that magnitude that's been pretty continuous since the 1970s the answer is three or four blocks from the White House, not 10,000 miles away in Beijing or Tokyo. The answer is the Federal Reserve has in the ELLs building there in DC, not far from the White House. Yes, yes, right there, okay, the Eccles building the Fed has a huge, persistent pro inflation bias, sure. And as a result of that, it is pushed the wage levels and the price levels and the cost levels of the US economy steadily higher, and therefore we've become less and less competitive with practically everybody, but certainly a lower wage countries nearby, like Mexico or China, far away. And you know, there's, it's not that simple of just labor costs and wages, because, after all, if you source from China, you've got to ship things 10,000 miles. You've got supply chain management issues, you've got quality control issues, you've got timeliness issues. You have inventory carry costs, because there's a huge pipeline, and of course, you have the actual freight cost of bringing all those containers over. But nevertheless, when you factor all that in, our trade problem is our costs are too high, and that is a function of the pro inflation policies of the Fed. Give one example. Go back just to the period when the economy was beginning to recover, right after the great recession. And you know the crisis of 208209 and I started 210 unit labor costs in manufacturing in the United States. Just from 210 that's only 15 years, are up 55% that's unit labor costs. In other words, if you take wage costs and you subtract productivity growth in that 15 year period, the net wage costs less productivity growth, which is what economists call unit labor costs, are up 53% and as a result of that, we started, you know, maybe with a $15 wage difference between the United States and.China back in the late 1990s that wage gap today is $30 in other words, the fully loaded way at cost of average wages in the United States. And I'm talking about not just the pay envelope, but also the payroll taxes, the you know, charge for pension expense, health care and so forth. The whole fully loaded cost to an employer is about $40 an hour, and it's about $10 in the United States and it's about $10 an hour in China. Now that's the reason why we have a huge trade deficit with China, because of the massive cost difference, and it's not because anybody's cheating. Is because the Fed, in its wisdom, decided, well, you know, everybody will be okay. We're going to inflate the economy at 2% a year. That's their target. It's not like, well, we're trying to get low inflation or zero inflation, but we're not quite making it. No, they're proactive. Answer is, we've got to have 2% or the economy is not going to work. Well, well, 2% sounds well, that's a trivial little number. However, when you do it year after year, decade after decade, for a long period of time, and the other side is not inflating at the same rate, then in dollar terms, you have a problem, and that's where we are today. So this is important to understand, because it means the heart of the whole Trump economic policy, which is trying to bring manufacturing home, trying to bring industry back to the United States, a laudable objective is based on a false diagnosis of why this happened, and it is unleashed ball in the china shop, disruption of global economic flows in relationships that are going to cause unmitigated problems, even disaster in the US economy. Because it's too subtle, when you think about it, the world trade system just goods. Now, we've not even talking about services yet, or capital flows or financing on a short term basis. The World Trade in goods, merchandise, goods only is now 33 trillion. That is a hell of a lot of activity of parts and pieces and raw materials and finished products flowing in. You know, impossible to imagine directions back and forth between dozens and dozens of major economies and hundreds overall. And when you start, you step into that, not with a tiny little increase in the tariff. To give somebody a message. You know, if our tariffs are averaging 4% that's what I gave you a little while ago. And you raise tariffs to 20% maybe that's a message. But Trump didn't do that. He raised the tariff on China to 145% in other words, let's just take one example of a practical product, almost all the small appliances that you can find in Target or even a higher end retail stores United States or on Amazon are sourced in China because of this cost differential. I've been talking about this huge wage differential. So over the last 20, 25, years, little it went there now 80% of all small appliances are now sourced in China, and one, you know, good example would be a microwave oven, and a standard one with not a lot of fancy bells and whistles, is $100 now, when you put 145% tariff on the $100 landed microwave oven is now $245 someone's going to say, Gee, are we going to be able to sell microwaves at $245 they're not certain. I'm talking about a US importer. I'm talking about someone who sells microwaves on Amazon, for instance, or the buyers at Walmart or Target, or the rest of them, they're going to say, wait a minute, maybe we ought to hold off our orders until we see how this is going to shake out. And Trump says he's going to be negotiating, which is another whole issue that we'll get into. It's a lot of baloney. He has no idea what he's doing. Let's just face the facts about this. So if orders are suddenly cut back, and the flow that goes on day in and day out across the Pacific into the big ports in Long Beach in Los Angeles is suddenly disrupted, not in a small way, but in a big way, by 20, 30, 40, 50% six or seven months down the road, we're going to have empty shelves. We're going to have empty warehouses. We're going to have sellers who suddenly realize there's such a scarcity of products that have been hit by this blunderbuss of tariffs that we can double our price and get away with it.

Keith Weinhold 25:00

Okay, sure. I mean, ports are designed. Ports are set up for stadium flows, not for surges, and then walls and activity. That just really doesn't work.

David Stockman 25:08

And let me just get in that, because you're on a good point. In other words, there is a complicated supply line, supply chain, where, you know, stuff is handed off, one hand to another, ports in China, shipping companies, ports here, rail distribution systems, regional warehouses of you know, people like Walmart and so forth, that whole supply chain is going to be hit with a shock. Everything is going to be uncertain in terms of the formulas that everybody uses right now, you know that you sell 100 units a week, so you got to replace them at the sales rate, and you put your orders in, and know that it takes six weeks to get here, and all this other stuff, all of the common knowledge that's in the supply chain that makes it work, and the handoffs smooth and efficient From one player in the supply chain to the next, it's all going to be disrupted. But the one thing we're going to have is we're going to have shortages, we're going to have empty shelves, and we're going to have price which I'm sure that Trump is not going to start saying price gouging of a you know, right? But that's not price gouging. If you have a you know, go to Florida. We have a hurricane. Where we live in Florida and New York, we have a hurricane. All of a sudden the shelves are empty and there's no goods around, because everybody's been stocking up getting ready for the storm. And then all of a sudden, the politicians are yelling that somebody's price gouging, because they raised their prices in a market that was in disequilibrium. Well, that's not price gouging. That's supply and demand trying to find a new balance basic economics. You know, when the demand is 100 and the supply is 35 okay, but I'm kind of getting ahead here, but I think there's very good likelihood that there's going to be a human cry right before, you know, maybe in the fall or right before Christmas, about price gouging and Trump then saying, Well, I was elected to bring prices down and bring inflation under control. It's out of control because all of these foreigners raised their prices. And no, they did, and it was the tariff that did it, and all the people in the supply chain are trying to take advantage of the temporary disruptions. So I think people have to understand, and I can't say this, and I don't like to say it, because I certainly didn't think the other candidate in the last election had anything to offer in terms of dealing with our serious economic problems in this country. I'm talking about Harris. But the fact is, Donald Trump has had a wrong idea for the last 40 to 50 years of his adult life. In that core idea is that trade deficits are a sign of the other side cheating. They're a sign that you're being exploited or taken advantage of or ripped off, or it's not at all okay. Trade deficits are a consequence of cost differences between different jurisdictions, and to the extent that we've artificially, unnecessarily inflated our costs. We need to fix the problem at the source. He ought to clean house at the Federal Reserve. But the problem is, Trump wants lower interest rates when, in fact, the low interest rates created all the inflation that led to our loss of competitiveness and the huge trade deficits we have today. So to summarize, it is important to understand, do not have faith in Trump's promise that we're going to have a golden age of economic prosperity. We are going to have a economic disaster, and it's a unforced error. It's self inflicted, and it's the result of the wrong fundamental idea of one guy who's in the oval office right now throwing his considerable weight around and pushing the economy into upheaval that really is totally unnecessary. He should have done what he was elected to do, and Matt's work on getting production up and costs down, that's not going to be solved with tariffs. David, I have another important point to bring up. But before we do just quickly, are those two to 4% tariffs you mentioned earlier. Those are the tariff levels pre Trump second term correct.

We could clarify that those are for the year 2023 that was the latest full year data that we have with great deal of granularity.

Keith Weinhold 29:56

The point I want to bring up is there any history? That tariffs actually work. Some people cite the Smoot Hawley Tariff Act from the 1930s and that it drove us deeper into the Great Depression. And David, on the one hand, when we think about, do tariffs actually work? If Indonesia can make shoes for us for $11 why would we want to onshore an activity like that? That is a good deal for us. And then, on the other hand, you have someone like Nvidia, the world's leading semiconductor company, they announced plans to produce some of their AI supercomputers entirely on American soil for the first time recently. And you have some other companies that have made similar announcements. So that's a small shred of evidence that tariffs could work. But my question is, historically, do tariffs actually work?

David Stockman 30:44

That's a great question, and there's a huge history. And you can go back all the way the 19th century, where Donald Trump seems to be preoccupied, but what he fails to recognize is that they worked in the 19th century because they were revenue tariffs. It wasn't an effort to, like, bring jobs back to America. We were booming at the time. Jobs were coming to America, not leaving, and it was the federal government's main source of revenue. Because, as you know, prior to 1913 there was no income tax, right? So that was one thing. Okay, then when we got into the 20th century and host World War Two, it became obvious to people that the whole idea of comparative advantage, going all the way back to Adam Smith, and that enhanced a global trade where people could specialize in whatever their more competitive advantage is, was a Good thing. And so we had round after round of negotiations after World War Two that reduced tariff levels steadily, year by year, decade by decade. So by the time we got to the 1990s when China, then, you know, arose from the disaster of Mao and Mr. Dang took over and created all the export factories and said, It's glorious to be rich and all these things is we got red capitalism. But if we start in the 1990s the average tariff worldwide, now this is weighted average on all goods that are bought and sold or imported and exported, was about 9% and there were have been various free trade deals done since then. For instance, we had NAFTA, and the tariffs on Mexico and Canada and the United States went to zero. We had a free trade deal in 212 with South Korea. This never comes up, but the tariff on South Korean goods coming the US is zero. The tariff on us, exports going to South Korea is zero because we have a free trade agreement, and it's worked out pretty well with South Korea. Now we're not the only ones doing this. Countries all over the world. The EU is a total free trade zone in economy almost as big as the United States that used to have tariff levels between countries. Now it's one big free trade zone. So if you take the entire world economy, that 9% weighted average tariff of the early 90s, which was down from maybe 2025, 30, pre World War Two in this Smoot Hawley era, was down to 2.25% by the time that Donald Trump took office, the first time around in 2017 now 2.25% is really a rounding error. It's hardly when you have $33 trillion worth of goods moving around, you know, container ships and bulk carriers and so forth all around the world, and air freight and the rest of it, rail. 2% tariff is not any kind of big deal, as I say in some of the things I write, it's not a hill of beans. So somehow, though 45 years ago, Trump got the idea that tariffs were causing a problem and that we had trade deficits, not because our costs were going up owing to bad monetary policy, but because the other guy was cheating. Remember, this is Trump's whole view of the world. It's a zero sum game. I win, you lose, and if I'm not winning, is because you're cheating. Okay? In other words, I'm inherently going to win. America's inherently going to win unless the other guy is cheating. Now, Trump sees the world the same way that I think he looked at electrical and plumbing contractors in the Bronx, you know, in the 1980s and 1990s when he was developing his various Real Estate projects. These are pretty rough and tumble guys. It's a wild, easy way to make a living. So there's a lot of, you know, there's a lot of pretty rough baseball that's played that mentality that the other guy is always trying to screw me, the other guy's always cheating, the other guy's preventing me from winning, is, is his basic mentality. And it's not Applicable. It's not useful at all to try to understand the global economy. Try to understand why America's $29 trillion economy is not chugging along as strongly and as productively as it should be, why real wages are not making the gains that workers should be experiencing and so forth. So he ought to get out of this whole trade, tariff trade war thing, which he started, I don't know how he does, it's a little late, and focus on the problems on the home front. In other words, our trade problem has been caused by too much spending, too much borrowing, too much money printing on the banks of the Potomac. It's not basically caused in Beijing or Tokyo or Seoul or even Brussels, the European Union. And we need to get back to the basic and the real culprit, which is the Federal Reserve and its current chairman, Paul, if he wants to attack somebody, go after the Fed. Go after Paul. But ought to give them a mandate to bring inflation to zero and to stop fooling around with everything else and to stop monetizing the public debt that is buying government debt, take care of your own backyard first before you start taking, yeah, sure, yeah, exactly. You know, I've been in this for a long time. I start, as I said, I started on Capitol Hill. There have been a lot of protectionist politicians, but they always argued free trade is good, but it has to be fair trade. And you know, we have this example in our steel industry, for instance, where we producers abroad are competing unfairly for one reason or another. But the point I'm getting to is they always said this is an exceptional case. Normally we would go for free trade, but we got to have protection here. We got to have a temporary quota. Even when I was in the Reagan administration, we had a big argument about voluntary quotas on Japanese car exports, and I was totally against it. I thought the US industry needed to get its act together, get its costs down. Needed to get the UAW under control, because it had pushed wages, you know, way, way, way too high terms of total cost. But they argued, yeah, well, you're right, but we have to have 10 years in order to allow things to be improved and adjusted and catch up. So this is only temporary. This is just this. Yes, this is protectionism, but it's temporary. It's expedient that we can avoid and so therefore we'll make an exception. But there is no one, and most of these people were, you know, in the payroll of the unions, or they were congressmen from south to South Carolina going to bad for the textile industry, or congressman from Ohio going to bat for the steel industry, whatever, but there was no one who ever came along and said tariffs are big, beautiful things, and we need to have permanent high tariffs, because that's the way we're going to get prosperity back in United States. It's a dumb idea. It's wrong. It's disproven by history and people. Even though Trump has done a lot of things that I like you know, he's got rid of dei he's got rid of all of this green energy, climate crisis nonsense, all of that that he's done is to the good when you come to this basic question, how do we get prosperity in America? The answer is, through free market capitalism, by getting the government out of the way, by balancing the budget and by telling the Fed not to, you know, inflate the economy to the disadvantage that it has today. That's how you get there. And Trump is not a real Republican. Trump is basically what I call a status. He's for big government, right wing status. Okay, there's left wing, Marxist status, then there's right wing status. But you know, all of this tariff business is going to create so much corruption that it's almost impossible to imagine, because every day there's someone down there, right now, I can guarantee it at the, you know, treasury department or at Commerce department saying, but we got special circumstances here in terms of the parts that we're making for aircraft that get assembled in South Korea or something, and we need special relief. Yes, every industry you're doing is putting in for everybody's going to be there the lobby. This is the greatest dream that the Washington lobbyist community ever had. Trump is literally saying he put this reciprocal tariff. You saw the whole schedule. That he had on that easel in the White House on April 2, immigration day. It was called Liberation Day. I called it Demolition Derby Day. There was a reciprocal tariff for every single country in the world based on a phony formula that said, if we have $100 million deficit with somebody, half of that was caused by cheating. So we're going to put a tariff in place closes half of the difference. I mean, just nonsense, Schoolboy idiocy. Now it is. I mean, I know everybody said, Oh, isn't it great? We've finally got rid of the bad guys, Biden, he's terrible, and the Democrats, I agree with all that, but we replaced one set of numb skulls with another set. Unfortunately, Republicans know better, but they're so intimidated, apparently buffaloed by Trump at the moment, that they're going along with this. But they know you don't put 145%tariff on anything. I mean, it's just nuts. David, I feel like you're telling us what you really think and absolutely love that.

Keith Weinhold 41:04

Interestingly, there is a Ronald Reagan clip about tariffs out there in a speech that he gave from Camp David, and it's something that's really had new life lately. In fact, we played the audio of that clip before you came onto the show today, Reagan said that he didn't like tariffs and that they hurt every American worker and consumer as Reagan's economic advisor in the White House. Did you advise him on that?

David Stockman 41:27

Yes, I did. And also I can give you a little anecdote that I think people will find interesting. Yeah, the one time that he deviated in a big way from his free trade commitments was when he put the voluntary export quota on the Japanese auto industry. That was big. I don't remember the exact number, but I think it said they couldn't export more than 1.2 million cars a year, or something like that the United States. And the number was supposed to adjust over time, but we had huge debates in the Cabinet Room about those things, and at the end of the day, here's what he said. He said, You know, I've always been for open trade, free trade. I've always felt it has to be fair trade. But, you know, in this case, the Japanese industry came to us and asked for voluntary quotas, so I didn't put up a trade barrier. I'm only accommodating their request. Well, the Japanese did come to him and ask. They did, but only when they were put up to it by the protectionists in the Reagan administration who, on this took them on the side, you know, their negotiators and maybe their foreign minister. I can't remember exactly who commerce secretary and said, If you don't ask for voluntary quotas, we're going to unleash Capitol Hill and you're going to get a real nasty wall put up against your car. So what will it be? Do you want to front for voluntary quotas? Are we going to unleash Congress? So they came to Reagan and said they were the Japanese industry said they're recommending that he impose voluntary restraints on auto exports. That was just a ruse. He wasn't naive, but he believed what you told him. He believed that everybody was honest like he was, and so he didn't understand that the Japanese industry that was brought to meet with him in the Oval Office had been put up to, it been threatened with, you know, something far worse, mandatory quote is imposed by Congress. But anyway, it's a little anecdote. What happened? On the other hand, he continued to articulate the case for small government sound money. We had deficit problems, but he always wanted a balanced budget. It was just hard to get there politically. And he believed that capitalism produces prosperity if you let capitalism work and keep the government out of the marketplace. And there is no bigger form of intervention and meddling and disruption in the capitalist system, in the free market, in the marketplace, than quotas on every product in every country at different levels. They're going to have 150 different countries negotiating bilaterally deals with the United States. That's the first thing that's ridiculous. They can't happen. The second thing is they're going to come up with deals that don't amount to a hill of beans, but they'll say, we have a deal. The White House will claim victory. Let me just give one example. As we know, one of the big things that Trump did in the first administration was he renegotiated NAFTA. And NAFTA was the free trade agreement between Mexico, Canada, United States. Before he started in 2017 the trade deficit of the US with Mexico and Canada combined with 65 billion. And he said, That's too big, and we got to fix NAFTA. We have got to rebalance the provisions so that the US comes out, not on the short end of the stick 65 billion. So they negotiated for about a year and a half, they announced a new deal, which he then renamed the United States, Mexico, Canada agreement, usmca, and, you know, made a big noise about it, but it was the same deal with the new name. They didn't change more than 2% of the underlying machinery and structure, semantics. Well now, so now we fast forward to 2024 so the usmca Trump's pride and joy, his the kind of deal that he says he's going to seek with every country in the world is now four years into effect. And what is the trade deficit with Canada and Mexico today, it's 230 5 billion okay? It's four times higher now than it was then when he put it in place. Why? Because we have a huge trade deficit with Mexico. Why because, you know, average wages there are less than $10 an hour, and they're $40 an hour here. That's why it has nothing to do with a bad trade deal. It has to do with cost differences.

Keith Weinhold 46:27

David, this has been great, and as we're winding down here, we have a lot of real estate investor listeners tell us what this administration's overall policies, not just tariffs, but overall policies, mean for future employment, and then tell us about your highly regarded contra corner newsletter.

David Stockman 46:45

Well, those are that's a big question. I think it doesn't mean good, because if they were really trying to get America back on track our economy, they would be fighting inflation tooth and nail to get it down to zero. They would be working day and night to implement what Musk came up with in the doge that is big spending cuts and balancing the budget. They're not doing that. They're letting all these announcements being made, but they're not actually cutting any spending. They would not be attempting to impose this huge apparatus of tariffs on the US economy, but they're not doing that. So I'm not confident we were going in the wrong direction under Biden, for sure, and we're going in an even worse direction right now under Trump. So that's the first thing. The second thing is, I put out a daily newsletter called David stockman's Country corner. You can yes signers on the internet, but this is what we write about every day, and I say A plague on both their houses, the Democrats, the Republicans. They're all, in many ways, just trying to justify government meddling, government spending, government borrowing, government money printing, when we would do a lot better if we went in the opposite direction, sound money, balanced budgets, free markets and so forth, so. And in the process, I'm not partisan. You know, I was a Republican congressman. I was a budget director of the Reagan administration. I have been more on the Republican side, obviously, over my career than the Democrats, but now I realize that both parties are part of the problem, and I call it the uni party when push comes to shove, the uni party has basically been for a lot of wars abroad and a lot of debt at home, and a lot of meddling in the economy That was unnecessary. So if you look at what I write every day, it tries to help people see through the pretenses and the errors of the unit party, Democrats and Republicans. And in the present time, I have to focus on Trump, because Trump is making all the noise.

Keith Weinhold 48:59

100% Yes, it sure has kept life and the news cycle exciting, whether someone likes that news or not. Well, David, this has been great. In fact, it sounds a lot like what Reagan might have told me, perhaps because you were a chief economic informant for him, smaller government, letting the free trade flow and lower inflation. Be sure to check out David stockman's contra corner newsletter if you like what we've been talking about today, just like it was last year, David, it's been a real pleasure having you on GRE today.

David Stockman 49:30

Well, thank you very much. And these are important issues, and we've got to stay on top of them.

Keith Weinhold 49:41

Oh, yeah. Well, David Stockman truly no mincing words. He doesn't like tariffs. In summary, telling GRE listeners that the problem with trade imbalances is inflation attack that instead quell inflation, don't impose tariffs. A lot of developing nations and China have distinct advantages over manufacturing in the United States, besides having the trained labor and all the factories and systems in place, think about how many of these nations have built in lower costs they don't have to deal with these regulatory agencies, no EPA, no OSHA, and not even a minimum wage law to have to comply with. And here in the US get this, 80% of American workers agree that the US would benefit from more manufacturing jobs, but almost 75% disagree that they would personally be better off working in a factory themselves. That's according to a joint Cato Institute in YouGov survey. It's sort of like how last century, Americans lamented the demise of the family farm, yeah, but yet, they sure didn't want to work on a farm themselves. Now there are some types of manufacturing, like perhaps pharmaceuticals or computer chips that could likely be onshore, because those items are high value items. Their value can exceed the cost of being produced in the USA, but a lot of these factory goods, not again. If these topics interest you do a search for David stockman's contra corner, or you can directly visit David stockman's contra corner.com. Big thanks to the father of Reaganomics, David Stockman on the show this week. As for next week, we're back more toward the center of real estate investing. Until then, I'm your host. Keith Weinhold, don't quit your Daydream. Y

Unknown Speaker 51:42

nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC

Keith Weinhold 52:02

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long. My letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called The Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866

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

Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
Abonneren Afmelden
Deel

Afleveringen

554: How to Borrow Tax-Free Like a Billionaire
19 mei· Get Rich Education
Keith discusses the mortgage landscape, emphasizing the benefits of cash-out refinances with Ridge Lending Group President, Caeli Ridge.

They unpack the Trump administration’s plan to privatize Fannie Mae and Freddie Mac, which could impact the mortgage market.

Investors are discovering powerful strategies to leverage property equity and optimize their financial portfolios.

By understanding innovative borrowing techniques, savvy real estate investors can access tax-efficient capital and create sustainable wealth-building opportunities.

Consider working with a lender that specializes in investor-focused loan products and provides comprehensive education on the options available.

Resources:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

Show Notes:

GetRichEducation.com/554

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching: GREinvestmentcoach.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, we're talking about the mortgage loan landscape in this era. Is title insurance a rip off today? Is it worth it for you to pay discount points at the closing table to get a lower interest rate? Learn about how a cash out refinance. Is your ability to borrow tax free, much like a billionaire does, and what are the dramatic changes that the current administration could take to alter the mortgage environment for years, all today on get rich education.

Speaker 1 0:34

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, 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 1:20

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:36

Welcome to GRE from Liverpool, England to Livermore, California and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education, the voice of real estate. Since 2014 it's been estimated that there are about 800 billionaires in USA, and hey, you might be one of them, but there's a pretty good chance that you aren't well. When it comes to lending and mortgages, you can actually take a page out of a billionaires playbook and do something very much like what they do whenever you perform a cash out refinance if you've got dead equity in a property, and you can borrow against your own home to a greater extent than you can against your rental properties, even either one of those is a tax free event, you've now got tax free cash, and you can use that money on anything from investing it in the stock market To using your proceeds for a down payment on more real estate or buying a boat or going to Disneyland, and you didn't have to relinquish your asset at all. You continue to hold on to the asset. Now, the mechanics are somewhat different, sure, but when you do a cash out refinance like this, it's a bit like billionaires borrowing against their stock. Instead, you're borrowing against the value of your real estate. In fact, listening to this short clip, it's Trevor Noah talking about how billionaires do exactly this, and you'll notice that the crowd laughs because it actually sounds funny that you can really do this,

Speaker 2 3:22

the shares that they hold in a company, because it is an unrealized gain, right? So they go like, yeah, you're worth 300 billion, but we can't tax you on those stocks because you haven't sold the shares, so you don't, like, have the money. And I understand the argument. They go like, No, you don't have it. It's just what it's worth, because it will also crash, and then you have nothing, so we can't tax you on it. Then I'm like, Okay, I understand that. Then Elon Musk offers to buy Twitter, all right? He offers to buy it. And then he says in his offer, he goes, I'm putting up my Tesla stock as collateral. Then I'm like, so you do have it? Then he's like, no, no, no, no, I don't have it. I don't have it. I'm just gonna say so then they accept the offer. He now buys Twitter. Now that they've accepted his offer, he now goes to private equity and banks and like other rich people and whatever. He goes like, can you guys borrow me the money to buy Twitter? And then he's like, I'm I want to buy Twitter because I don't want to sell any of my Tesla shares, so I want to use your money to buy Twitter. And then it's like, but then they're like, What are we loaning it against? And he's like, Well, my Tesla shares. Then I'm going, like, Wait, so, so you, you can, you can buy a thing based on what you have, yes, but when we want to tax you, you can say, I don't have it. Do you hear what I'm saying here?

Keith Weinhold 4:46

Yeah, you can borrow against your real estate if you have substantial equity in it. We'll talk about just how much now billionaires borrow against their stock holdings using financial products like portfolio lines of credit or. For securities based loans. These are the names for how they do it, essentially taking out loans and using their stock as collateral. And this allows them to access cash without selling their assets and without incurring capital gains taxes, much like you can so you can say that you don't want to sell your property in you don't have to go through some capital raising round either, like a billionaire might have to when they're borrowing against their stock. You can just have a more standard mortgage application for your cash out refinance, and you don't even have to have a huge portfolio. I mean, even if you just own one 500k property with 50% equity in it, you can do this so it's available to most any credit worthy person, again, tax free. But of course, this doesn't mean that you always should take this windfall, because it often creates a higher monthly payment. You've got to be the one that makes that decision in controlling your cash flows, that is key. I'll talk about that some more with today's terrific guests. Also the Trump administration's desire to privatize Fannie Mae and Freddie Mac we're going to talk about that and what that would do to the mortgage landscape. I am in the USA today, next week, I'll be bringing you the show from London, England for the first time, the following week, from Edinburgh, Scotland. Yes, the mobile GRE Studio will be in effect. I typically set it up myself, and I usually don't need the help of the hotel staff for an appropriate Sound Studio either. And then shortly after that, I will be in Anchorage, Alaska, where I'm competing in these fantastic mountain running races. And then by next month, that's where I hope to meet up with you in person for nine days of learning and fun, as I'll be in Miami as part of the faculty for the terrific real estate guys invest or summon at sea, where we're all going to disembark from Miami and go to St Thomas, St Martin and the Bahamas, and then after that great event, it is a long flight from Miami back to Anchorage again. And that's got to be one of the longer domestic flights, not just in the nation, but in the world, Miami to Anchorage, and then shortly after that, I will be in the Great Northeast early this summer, New York and Pennsylvania, including for my high school reunion. So I'll really be putting the miles on these next couple months. One interesting thing that I've noticed for next week's show, where I'll be joining you from London, is how much I'm paying per night at both my hotel in England and then later my hotel in Scotland. That's obviously a short term real estate transaction. These are some of the more expensive places in the world, really. So next week and then the week after, I just think you'll find it interesting. I'll tell you how much I'm spending per night in both London and then Edinburgh. And they're both prime locations, where the hotels are the center of London and then right on Edinburgh's Royal Mile. That is in future weeks as for today, let's talk about the mortgage landscape with this week's familiar and terrific guest.

I'd like to welcome in one of the more recurrent guests in our history, so she needs little introduction. She's the longtime president of the mortgage company that's created more financial freedom for real estate investors than any lender in the nation because they specialize in income property loans. It's where I get my own loans for my own rental properties. Ridge lending group. Hey, welcome back to GRE Caeli ridge.

Caeli Ridge 8:57

Thank you, Keith. You know I love being here with you and your listeners. I appreciate you having me.

Keith Weinhold 9:01

You've helped us for so long. For example, who can forget way back in episode 56 Yeah, that's a deep scroll back when Chaley broke down each line of a good faith estimate for us, that's basically a closing statement sheet. She told us exactly what we pay for at the closing table, line by line like origination fee, recording costs and title insurance so helpful. It's just the sort of transparency that you get over there. Buyers pay for title insurance at the closing table. It is title insurance a rip off. A few years ago, a lot of people speculated that title insurance would fade away because the property's ownership could be transparent and accessible to everybody on the blockchain, but we don't really see that happening. So tell us about title insurance, and really, are we getting value in what we pay for there at the closing table?

Caeli Ridge 9:54

Well, I think the first thing I would say is that it really isn't going to be an option as far as I. Know, as long as the individual is going to source institutional funding leverage use of other people's money, they're going to require the lender, aka Ridge lending, or whoever you're working with, they're going to require that title insurance that ensures their first lien position. Doing that title search, first and foremost, is going to make it clear that there isn't some cloud on title, that there isn't some mechanic lien that had been sitting out there for however many years it may have just been around. And those types of things never go away. So for a lending perspective, it's going to be real important that that title insurance is paid for and in place to protect their interests, things like judgments, tax liens, like I said, a mechanic's lien, those will automatically take a first lien position in front of a mortgage. So obviously we're not going to risk that and find ourselves in second lien position in the event of default and somebody else is getting paid before we are. So not really an option. Is it a rip off? I don't know enough about how often it's paid out, and not to speak to that, but I will tell you that it isn't a choice.

Keith Weinhold 11:07

Title Insurance, like Shaylee was talking about. It protects against fraud related to the property's ownership, someone else claiming rights to the property, and this title search that an insurer does it also, yeah, it looks for those liens and encumbrances, including unpaid taxes, maybe unpaid HOA dues, but yeah, mortgage lenders typically require title insurance, and if you the borrower, you might think that's annoying. Well, it does make sense, because the bank needs to protect their collateral. If a bank ever has to foreclose, they need to have access to you, the borrower, to be able to do that without any liens or ownership claims from somebody else. Caeli, how often do title insurance companies mess up or have to pay out a claim? Does that ever happen?

Caeli Ridge 11:50

I mean, if I have been involved in a circumstances where that was the case, it's been so many years ago, they're pretty fastidious. I don't know that I could recall a circumstance where something had happened and the title insurance was liable. They go through the paces, man, they've got to make sure that, and they're doing deep dives and searches across nationwide to make sure that there isn't any unnecessary issue that's been placed on title Not that I'm aware of. No.

Keith Weinhold 11:50

Are there any of those other items that we tend to see on a good faith estimate that have had any interesting trends or changes to them in the past few years?

Caeli Ridge 12:27

Yeah, I've got a good one, and this is actually timely credit reports. So over the last couple of years, something has been happening with credit reports where, you know, maybe three, four years ago, a credit report, let's say a joint credit report, a husband and wife went and applied that credit report might cost 25 bucks. Well, now it's in excess of 100 plus. Some of what we're going to be talking about today, it kind of gets into the wish list of Jim neighbors, who is the president of the mortgage brokers Association. He's been talking to the administration about some of his wishes, and credit report fees is actually one of the things that they're wanting to attack and bringing those costs down for the consumer. So when we look at a standard Closing Disclosure today, credit report costs have increased significantly. I don't have the percentages, but by a large margin over the last couple of years,

Keith Weinhold 13:21

typically not one of your bigger costs, but a little noteworthy. There one thing that people might opt and choose to have on their good faith estimates, so that borrower therefore would actually pay more out of pocket with today's higher mortgage rates. And I'm sure not to say high, because historically, they are not high. Do we see more people opting to pay discount points at the closing table to get a lower rate and talk to us about the trade offs there

Caeli Ridge 13:46

right now, first and foremost, that there isn't a lot of option for investment property transactions, whether it be a purchase or refinance. There's not going to be that option where the consumer gets to choose to say, Okay, I want to pay points for a lower rate or not pay points for a higher rate the not paying points is the key here. There isn't going to be a zero point option for investment property transactions. And this gets a little bit convoluted, and then I'll circle back and answer the question of, when does it make sense to pay the points, more points versus less points? We have been in a higher rate environment that I think a lot of people have become accustomed to as a result secondary markets, where mortgage backed securities are bought and sold, they keep very close tabs on the trends and where they think things are headed. Well, something called YSP, that stands for yield, spread, premium, under normal market circumstances, a consumer can say, okay, Caeli, I don't want to pay any points. Okay, I'll take this higher interest rate, and I don't want to pay any points, because that higher interest rate is going to have YSP, yield, spread, premium to pay compensation to a lender, and you know, the other third parties that may be involved in that mortgage backed security. But. Sold and traded, etc, okay? They have that choice under normal market circumstances. Not the case right now, because when this loan sells the servicing rights, whoever is going to pick up the servicing rights, so when Mr. Jones goes to make his mortgage payment, he's going to cut a check to Mr. Cooper. That's a big one, right? Or Rocket Mortgage, or Wells Fargo, whoever the servicer is, the servicing rights are purchased at a cost. They have to pay for the servicing rights, and let's say that's 1% of this bundle of mortgage backed securities that they're purchasing. Well, they know the math is, is that that servicer is going to take about 36 months before that upfront cost is now in the black or profitable. This all will land together. Everybody, I promise you stick with me, so knowing that we've got about a 36 month window before a servicer that picked up the rights to service this mortgage is going to be profitable in a higher rate environment, as interest rates start coming down, what happens to the mortgage that they paid for the rights to service 12 months ago, 18 months ago, that thing is probably going to refinance right prior to the 36 month anniversary of profitability. So that YSP seesaw there is not going to be available for especially a non owner occupied transaction. So said another way, zero point rates are not going to be valid on a non owner occupied transaction in a higher rate environment when secondary markets understand that the loans that are secured today will very likely be refinanced prior to profitability on the servicing side of that mortgage backed security that is a risk to the lender, yes. So we know that right now you're not going to find a zero point option. Now that may be kind of a blanket statement. If you were getting a 30% loan to value owner occupied mortgage with 800 credit scores, you know that's going to be a different animal. And of course, you're going to have the option to not pay points. The risk for that is nothing. Okay, y SP is going to be available for you, the consumer, to be able to choose points at a lower rate, no points higher rate. When does it make sense to pay additional points? Let's say to reduce an interest rate, the break even math. And you know, I'm always talking about the math, the break even math is actually the formula is very simple. All you need to do is figure out the cost of the points. Dollar amount of the points, let's say it's $1,000 and that's what it's going to cost you to, say, get an eighth or a quarter or whatever the denomination is, in the interest rate reduction. But you aren't worried about the interest rate necessarily. You're looking at the monthly payment difference. So it's going to cost you $1,000 in extra points, but it's only going to save you $30 a month in payment when you divide those two numbers, what's that going to take you 33 months? 30 well, okay, and does that make sense? Am I going to refinance in 33 months? If the answer is no, then sure pay the extra 1000 bucks. But that's the math, the cost versus the monthly payment difference divide that that gives you the number of months it takes to recapture cost versus cash flow or savings, and then you be the determining factor on when that makes sense.

Keith Weinhold 18:10

It's pretty simple math. Of course, you can also factor in some inflation over time, and if you would invest that $1,000 in a different vehicle, what pace would that grow at as well? So we've been talking about the pros and cons of buying down your mortgage rate with discount points before we get into the administration changes. Cheley talk about that math in is it worth it to refinance or not? It's a difficult decision for some people to refinance today with higher mortgage rates than we had just a few years ago, and at the same time, we've got a lot of dead equity that's locked up.

Caeli Ridge 18:40

I would start first by saying, Are we looking to harvest equity? Are we pulling cash out, or are we simply doing a rate and term refinance where we're replacing one loan with another loan, if it's for rate and term, if we're simply replacing the loan that we have today with a new loan, that math is going to be pretty simple. Why would you replace 6% interest rate with a 7% interest rate? If all other things were equal, you wouldn't unless there was a balloon feature, or maybe an adjustable rate mortgage or something of that nature involved there that you have to make the refinance. So taking that aside, focusing on a cash out refinance, and when does it make sense? So there's a little extra layered math here. The cash that you're harvesting, the equity that you're harvesting, first of all, borrowed funds are non taxable. What are we going to do with that pile of cash? Are we going to redeploy it for investing more often than not talking to investors? The answer is yes. What is that return going to look like? So you've got to factor that in as well, and then we'll get to the tax benefit in a moment. But generally speaking, I like to as long as the cash flow is still there, okay, you've got to have someone else covering that payment. Normally, there's exceptions to every rule. I don't normally advise going negative on a cash out refi. There are exceptions. Okay, please hear me. But otherwise, as long as the existing rents are covering and that thing is still being paid for by somebody else, then what you want to do is look at that monthly payment. Difference again, versus what you're getting out of it. And then you divide those two numbers pretty simply, and it'll take you how long. And then you've got a layer in the cash flow that you're going to get from the new acquisitions, and whether that be real estate or some other type of investment, whatever the return is, you're going to be using that to offset. And then finally, I would say, make sure that you're doing adding in the tax benefit. These are rental properties guys, right? So closing costs can be deducted now that may end up hurting debt to income ratio down the road. So don't forget, Ridge lending is going to be looking at your draft tax returns. Very, very important to ensure that we're setting you up for success and optimizing things like debt to income ratio on an annual basis.

Keith Weinhold 20:40

Now, some investors, or even primary residence owners might look at their first and only mortgage on a property, see that it's 4% and really not want to touch that. What is the environment and the appetite like today for having a refinance in the form of a second mortgage? That way you can keep your first mortgage in place and, say, 4% get a second mortgage at 7% or more. How does that look for both owner occupied and non owner occupied properties today?

Caeli Ridge 21:07

you're going to be looking at prime, plus, in many cases, if you don't want to mess with a first lien, a second lien mortgage is typically going to be tied to an index called prime. Those of you that are familiar with this have probably heard of that. Indicee. There's lots of them. The fed fund rate, by the way, is an index. There's lots of them. The Treasury is also another index. Prime is sitting, I think, at seven and a half percent. So you're probably going to be looking at rate wise, depending on occupancy and credit score and all of those llpas that we always talk about, loan level, price adjustment. You know, it could be prime plus zero, it could be prime plus four. So interest rates could range between, say, seven and a half, on average, up to 11 even 12% depending on those other variables. More often than not, those are going to be interest only. So make sure that you're doing that simple math there. And I would prefer if I'm giving advice the second liens, the he loan, which is closed ended, very much like your first mortgage, it's just in second lien position. It's amortized over a certain period of time, closed ended. Not as big a fan of that. If you can find the second liens, especially for non owner occupied, I would encourage it to be that open ended HELOC type.

Keith Weinhold 22:15

What are we looking at for combined loan to value ratios with second mortgages

Caeli Ridge 22:19

on an owner occupied I think you'd be happy to get 90. I think I've heard that in some cases, they can go up to 95% in my opinion, that would go as high as they'll let you go right on a non owner occupied, I think you'd be real lucky to find 80, and probably closer to 70.

Keith Weinhold 22:34

That really helps a lot with our planning. Well, the administration that came in this year has made some changes that can create some upheaval, some things to pay attention to in the mortgage market. We're going to talk about that when we come back. You're listening to get rich education. Our guest is Ridge lending Group President, Caeli Ridge I'm your host, Keith Weinhold.

The same place where I get my own mortgage loans is where you can get yours. Ridge lending group NMLS, 42056, they provided our listeners with more loans than anyone because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. Start your prequel and even chat with President Chaeli Ridge personally while it's on your mind, start at Ridge lendinggroup.com. That's Ridge lendinggroup.com.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing. Check it out. Text family to 66866, to learn about freedom. Family investments, liquidity fund again. Text family to 66866

Hal Elrod 24:38

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

Keith Weinhold 24:55

Welcome back to get rich education. We're talking about mortgages again, because this is one. Where leverage comes from. I'm your host. Keith Weinhold, we're sitting down with the president of ridge lending group, Caeli Ridge, and I know that she has some knowledge and some updates on new administration leadership and some potential changes for the market there. What can you tell us? Caeli

Caeli Ridge 25:16

I'm pretty excited about this one, and I'm watching very diligently to see how it unfolds. So the new director of the FHFA Federal Housing Finance Agency, all is Bill Pulte. This is the grandson of Pulte Homes. Okay, smart guy. I'm excited to see what he's going to come in and do. Well. He had recently, I think in the last couple of weeks, he put out in the news wires asking for feedback from the powers that be, related to Fannie and Freddie, what improvements they would like to see. So first up was Jim neighbors. He is the president of the mortgage brokers Association. He had a few very specific wish list items, if you will. And the first one on his list was the elimination of LLP, as for non owner occupied and second home. So let me just kind of paint a picture here, because there's some backstory I think is important. So an LLPA, for those of you that have never heard that term before, stands for a loan level price adjustment. And a loan level price adjustment is a positive number or a negative number that associates with the individual loan characteristics. So things like loan to value or loan size, occupancy is a big ll PA, the difference between an owner occupied where you live and one that you're going to use as a rental property, that's a big one. Credit score, property type, is it a single family? Is it a two to four? Is this a purchase? Is it a refi? Anyway, all of those different characteristics are ll pas. Well, if we take a step back in time, gosh, about three years ago now, Mark Calabria, at the time, was the director of the FHFA, and he had imposed increases, specific increases. This was middle of 22 I want to say specific increases to the LL pas for non owner occupied property. So if anybody kind of remembers that time, we started to really see points and interest rates take that jump sometime in 2022 more than just the traditional interest rate market and the fluctuations. This was very material to investment property and second home, but we'll focus on the investment property. So Mr. Jim neighbors came in and said, first and foremost, I'd like to see those removed, and I want to read something to the listeners here, because I thought it was very interesting. This is something I've been kind of preaching from the the rooftops, if you will, for many, many years. Yeah, we've got neighbors sticking up for investors here. He really is. And I Yeah, well, yes, he is. And more often than not, they're focused on the owner occupied so I'm just going to kind of read. I've got my cheat sheet here. I want to make sure I get it all right for everybody. So removal of the loan level price adjustments on investment properties and second homes, he noted that these risk based fees charged by Fannie and Freddie discourage responsible buyers from purchasing second homes and investment properties, with that insignificant increase to cost. And here's the important part, originally introduced to account for additional credit risk, many of the pandemic era llpa increases were not based on updated risk metric. In fact, data has shown that loans secured by investment properties often have strong credit profiles and lower than expected default rates. I mean, anybody that has been around long enough to see what we've come from, like, 08,09, and when we had the calamity of right, the barrier for entry for us to get any conventional financing as investors has been harsh. I mean, I make that stupid joke of vials of blend DNA samples. But aside from it being an icebreaker, it kind of feels true. We really get the short end of the stick. And I feel like as investors especially, post 08,09, our credit profiles, our qualifications, the bar is so high for us, the default risk there has largely been removed. We've got so much skin in the game. With 20 25% down, credit score is much higher, debt to income ratios more scrutinized, etc, etc. So I think that this is, if it passes muster. I think this is going to be a real big win for the non owner occupied side of agency, Fannie, Mae, Freddie, Mac lending.

Keith Weinhold 29:13

The conventional wisdom is, is that if you the borrower, get into financial trouble, you're more likely to walk away from your rental properties than you are your own home and neighbors, sort of like a good neighbor here sticking up for us and stating that, hey, us, the investors, we're actually highly credit worthy people.

Caeli Ridge 29:29

Yeah, absolutely. So fingers crossed. Everybody say your prayers to the llpa and mortgage investor rates gods.

Keith Weinhold 29:37

we'll be attentive to that. What other sorts of changes do we have with the administration? For example, I know that Trump and some others in the administration have talked about privatizing the GSEs, those government sponsored enterprises, Fannie, Mae, Freddie Mac and what kind of disruption that would create for the industry. Is it really any credence to that?

Caeli Ridge 29:58

They've been talking about it for. For quite a while. I mean, as long as Trump has been kind of on the scene, that's been maybe a wish list for him. I don't see that happening over the next years. That is an absolute behemoth to unpack and make a reality. Speaking of Mark Calabria, he was really hot and heavy on the trails of doing that. So what this is, you guys so fatty Freddy, are in conservatorship that happened back post 08,09, and privatizing them and making them where it is not funded, or conservatorship within the United States government. Now it still has those guarantees against default. It's a very complicated, complex, nuanced dynamic of mortgage backed securities, but if we were to privatize them at some point now, am I saying that that's a bad thing? No, not necessarily, but I think it has to be very carefully executed, and because there are so many moving parts, I do not think that just one term of presidency is going to make that happen. If we do it, it's going to be years down the road from now. Is my crystal ball. I don't think we're going to see that anytime soon.

Keith Weinhold 30:58

That's interesting to know. Are there any other industry changes that are important, especially for investors, whether that has to do with the change in administration or anything else?

Caeli Ridge 31:08

Well, specific to that wish list from Mr. Neighbors, one of the other things that he had asked, and there were quite a few, for owner occupied changes as well, he wants to reduce the seasoning for cash out refinances of investment properties, which would be huge good. Yeah, right now it's 12 months on a cash out refinance given very specific acquisition details. Okay, I won't go down that rabbit hole, but currently, if you haven't met exactly these certain benchmarks, you may have to wait 12 months to pull cash out of a property from the day that you acquire it, he's asking that that be pulled back to about six months, which would be nice

Keith Weinhold 31:46

reducing the seasoning period from 12 months to six months, meaning that an investor a borrower, would only need to own that property for that shorter duration of time prior to performing a refinance.

Caeli Ridge 31:58

Cash out refinance, no seasoning required on a rate and term. This is specific for cash out. But again, for cash out, but exactly right

Keith Weinhold 32:04

now, one trend that I think about sometimes, especially when I think back to 2008 2009 days since I was an investor through that time, is, are there any signs in the reduction of the appetite or the propensity to lend, to make loans. So how freely is credit flowing?

Caeli Ridge 32:25

I think pretty freely. I'm not seeing that they're tightening the purse strings. That's not the lens that I'm looking at it from, and I try to keep that brush stroke broad. There have been, I think that on the post, close side, there's been a little extra from Fannie Freddie, and I think that has to do with profitability markers. But overall, I'm not seeing that products are disappearing necessarily, or that guidelines are really becoming even more cumbersome. If anything, I would say it's maybe the reverse of that, and I do believe that probably is part and parcel to this administration and the real estate background that comes with it.

Keith Weinhold 32:59

One other thing I pay attention to, but it just really hasn't been much of a story lately. Are delinquencies in foreclosures. It seems like they've ticked up a little bit, but they're still both really historically low and basically a delinquency being defined as when a borrower makes one late payment, and foreclosures being the more severe thing, typically a 120 days late or more. Any trends there? I'm not

Caeli Ridge 33:24

seeing any now. And in fact, I would tell you that, because we focus so much on investor needs, first payment default is I can count on less than one hand, if I had to, how many times I've seen that happen with our clients over 25 years. So nothing noteworthy there for me.

Keith Weinhold 33:40

Yes. I mean, today's borrowers are just flush with equity. Nationally, there's a loan to value ratio of 47% which is healthy, in a sense. On average, borrowers have a 53% equity position. Of course, the next thing, I think, is like, I don't really know if that's a smart strategy. They're not really getting that much leverage out there. But I think a lot of people just have the old mentality of get it paid off.

Caeli Ridge 34:06

And I think that depending on where you are in your journey, I mean, if you're in phase three, right, where you're just really looking at these investments, these nest eggs to carry you into your retirement and or for legacy reasons, fine, but otherwise, I may argue the point in that I don't care that you have a 3% interest rate on an investment property, or whatever it may be, if it's sitting there idle and as long as it can cash flow, the true chances of those individuals of keeping that mortgage that they got in 2020, 2021, etc, at those ridiculously low interest rates and stroking 360 payments later to pay it to zero is a fraction of a percent right now, whether they're on the sidelines for something else, I don't know, but that debt, equity, I think, is hurting them more than a 3% interest rate is helping them.

Keith Weinhold 34:52

And a lot of times, the mindset of someone is, if they don't need to build wealth anymore, and they're older and they already built wealth, they don't care if they're loaned to value. Was down to zero, and they have it paid off, whereas someone that's in the wealth building phase probably wants to get more leverage. Yeah, Chaley at risk lending group, there you see so many applications come in, and especially since you're an investor centric lender, I like to ask you what trends you're seeing. What are people buying? What are people doing? Are they refinancing? Are they paying loans off? Are they trying to take out more credit? Are there any overall trends with investors that you see in there

Caeli Ridge 35:29

right now? I think the all in one is a clear winner there. The all in one, that first lien, HELOC, that you and I talked about, we broke my little corner of the internet with that one, that one is a front runner for sure, on the refinance side, specifically, we are seeing quite a bit more on the refi side of things, that equity is kind of just sitting there. So even though, if the on one isn't a good fit for them, I'm seeing investors that are willing to tap into that equity instead of just sitting around and waiting for them to potentially lose some equity if the housing market does start to take some decline. And then I would say, on the purchase transaction side, something that's kind of piqued my interest is the pad split. I'm looking at that more often where, for those that are not familiar, you can probably speak more to this, Keith, they're buying single family resident properties, even two to four unit properties, and a per bedroom basis, turning those into rental properties. And they're looking to be quite profitable. So I've got my eyes on that too.

Keith Weinhold 36:23

before we ask how we can learn more about you and what you do in there at Ridge Kayle. Is there any last thing that you'd like to share? Maybe a question I did not think about asking you, but should have.

Caeli Ridge 36:35

I would like to share with your listeners that if they are not working with a lender that focuses on their education and has that diversity of loan product that we have, that they're probably in the wrong support group. You need to be working with a lender that has a nationwide footprint and that has diversity of loan product to cover whatever methodology of real estate investing that you're looking for, and really puts a fine touch on the education of your qualifications and your goals as they relate to underwriters guidelines

Keith Weinhold 37:10

what we're talking about, and I know this through my own experience in dealing with Ridge, since I use them for my own loans myself, is sometimes Ridge might inform You that, hey, you can go and do this and make this deal now, but that's going to mess up this bigger thing 12 months down the road, whereas if you talk with an everyday sort of owner occupant mortgage company, oh, they're just not going to talk like that, because owner occupants, they might only buy every seven years, or something like that. And investors are different, and you need to have that foresight and look ahead. Caeli, this has been great, a really informative conversation about the pulse of the market. Tell us what products that you offer in there.

Caeli Ridge 37:50

Our menu is very, very diverse. I would say what. It's probably easier to describe what we don't offer. We do not have bear lot loans or land loans. We're not offering those right now. We do not have second lien HELOCs currently. We suspended that two years ago. But otherwise, guys, we're going to have everything that you're going to need. So just very quickly, I'll rattle off Fannie Freddie, okay, those golden tickets that we talk about, we've got DSCR loans, bank statement loans, asset depletion loans, ground up construction, short term bridge loans for fix and flip or fix and hold. We have our All In One that's my favorite first lien. HELOC, we have commercial loan products for commercial property and residential on a cross collateralization basis. So very, very robust in the loan product space.

Keith Weinhold 38:33

Caeli Ridge, it's been valuable as always. And then Ridge lending group.com, or your phone number

Caeli Ridge 38:39

855-747-4343, 855-74-RIDGE, , and then to reach us an email, if that's your better mechanism to contact us [email protected]

Keith Weinhold 38:50

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

Caeli Ridge 38:53

Appreciate it. Keith,

Keith Weinhold 39:00

Yeah, terrific information from Chaley. As always, if you're enamored of borrowing tax free, like a billionaire, against your real estate, they sure can help you out with that and determine whether that's right. It doesn't mean that you always should, but if you have investment ideas for debt equity, and you're attentive to cash flows, run the numbers with them and see if it's worthwhile. As far as new purchases, we all know that soured affordability has made it especially tough for first time homebuyers, and there's more data out there that shows that tenant durations are historically long, longer than they usually are. Tenants are staying in places longer because they have to. Investor purchases have stayed strong, though investors have been buying about the same proportion of single family homes and making them rentals that they have historically and Redfin tells us that. The value of properties that investors have purchased is up more than 6% year over year, so investors are still buying and that makes sense. We're in this era where there's more uncertainty than usual, there's higher stock volatility than usual, and more people are sort of asking themselves, where would I get a better return than on income property, and where would my return be more stable today than in income property as well? If you work with Ridge lending group for a time, you're probably going to understand why I personally use them for my own loans. You'll notice that they really understand what investors need. Thanks to Caeli Ridge today and thank you for being here too. But as always, you weren't here for me. You were here for you until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 3 40:56

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 41:20

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers. It's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text. GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866

The preceding program was brought to you by your home for wealth, building, get rich education.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
553: "Tariffs Will Create Empty Shelves and Economic Disaster" -Father of Reaganomics, David Stockman Joins Us
12 mei· Get Rich Education
The Father of Reaganomics, David Stockman, joins us to explore the complex world of international trade and its impact on investors.

Key insights include:

Challenging conventional wisdom about trade policies

Understanding economic forces that drive investment opportunities

Gaining expert perspective on global economic trends

Stockman provides a candid analysis of current trade strategies, revealing:

The true drivers of economic competitiveness

Potential pitfalls of protectionist approaches

Critical insights for strategic investors

The episode cuts through political noise to offer clear, actionable economic intelligence for informed decision-making.

Smart investors look beyond headlines to understand the deeper economic forces shaping their financial future.

Resources:

Check out David Stockman’s Contra Corner Newsletter

Show Notes:

GetRichEducation.com/553

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching: GREinvestmentcoach.com

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, I sit down with a long time White House occupant who was the official economic advisor to an ex president. We get the real deal on tariffs and what they mean to you. Trump gets called out and the ominous sign about what's coming six months from now, today on, Get Rich Education.

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 the flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests 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 1:14

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:30

Welcome to GRE from Brookline, Massachusetts to Brooklyn, New York and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education, just another shaved mammal behind this microphone here. I recently spent some time with the father of Reaganomics, David Stockman, in New York City, and sometimes an issue so critical surfaces that real estate investors need to step back and understand a broader force in the economy. Three weeks ago, here, I told you how the second and third way, real estate pays you. Cash flow and ROA are sourced by your tenants employment and the future of your tenants employment is influenced by tariffs and other policies of this presidential administration. This is going to affect rates of inflation and a whole lot of things. Now, an organization called the American Dialect Society, they actually name their word of the year, and this year, it is shaping up to be that word, tariff. In fact, Trump has described that word as the most beautiful word in the dictionary. And I think we all know by now that a tariff is an import tax that gets passed along to consumers when it comes to materials used in real estate construction that's going to affect future real estate prices. Well, several key ones so far were exempted from recent reciprocal tariffs, including steel, aluminum, lumber and copper exempted. Not everything was exempted, but those items and some others were but who knows if even they are going to stay that way. And now, when it comes to this topic. I think a lot of people want to make immediate overreactions in even posture like they're an expert in become an armchair economist, and I guess we all do a little of that, me included. But rather than being first on this and overreacting, let's let the policy which Trump called Liberation Day last month when he announced all these new tariffs. Let's let policy simmer a little and then bring in an expert that really knows what this means to the economy and real estate. So that's why I wanted to set up this discussion for your benefit with the father of Reaganomics and I today. In fact, what did Reagan himself say about tarrifs back in 1987 this is part of a clip that's gained new life this year. It's about a minute and a half.

Speaker 1 4:13

Throughout the world, there's a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting fair and free competition. Now there are sound historical reasons for this. For those of us who lived through the Great Depression, the memory of the suffering it caused is deep and searing, and today, many economic analysts and historians argue that high tariff legislation passed back in that period called the Smoot Hawley tariff greatly deepened the depression and prevented economic recovery. You see at first when someone says, Let's impose tariffs on foreign imports, it looks like they're doing the patriotic thing by protecting American products and jobs, and sometimes for a short while at work. Price, but only for a short time. What eventually occurs is first, home grown industries start relying on government protection in the form of high tariffs. They stop competing and stop making the innovative management and technological changes they need to succeed in world markets. And then, while all this is going on, something even worse occurs. High tariffs inevitably lead to retaliation by foreign countries and the triggering of fierce trade wars. The result is more and more tariffs, higher and higher trade barriers, and less and less competition, so soon, because of the prices made artificially high by tariffs that subsidize inefficiency and poor management, people stop buying. Then the worst happens, markets shrink and collapse, businesses and industry shut down, and millions of people lose their jobs.

Keith Weinhold 5:50

Now, from what I can tell you as a listener in the GRE audience, maybe you're split on what you think about tariffs. In fact, we ran an Instagram poll. It asks, generally speaking, tariffs are good or bad? Simply that 40% of you said good, 60% bad. Over on LinkedIn, it was different. 52% said they're good, 48% bad. So it's nearly half and half. And rather than me taking a side here, I like to bring up points that support both sides, and then let our distinguished guests talk, since he's the expert. For example, if a foreign nation wants to access the world's largest economy, the United States, does it make sense for them to pay a fee? I mean, it works that way in a lot of places, when you want to list a product on eBay or Amazon, you pay them a fee. You pay a percentage of the list price in order to get access to a ready marketplace of qualified buyers. All right. Well, that's one side, but then the other side is, come on, let's look at history. Where have tariffs ever worked like Where have they ever been a resounding, long term success? Do they have any history of a sustained, good track record? I generally like free trade. Then let's understand there's something even worse than a steep tariff. There are quotas which are imposed, import limits, trade limits, and then there are even all out import bans. What do terrorists mean to the economy that you are going to live in and that your tenants live in? It's the father of Reaganomics, and I on that straight ahead on Get Rich Education. I'm your host. Keith Weinhold.

you know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lock ups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text, family to 66866, to learn about freedom, family investments, liquidity fund, again. Text family to 6686

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

Hey

Robert Helms 9:28

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

Keith Weinhold 9:48

when it comes to White House economic policy like tariffs, taxes and inflation, don't you wish you could talk to someone that's often been inside the White House. Today, we are even better. He was the official advisor to an ex president on economic affairs, a Wall Street and Washington insider and Harvard grad. Today's guest is also a former two time congressman from Michigan. He's 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. He was first with us last year, but so much has happened since. So welcome back to the show. David Stockman,

David Stockman 10:26

very good to be with you, and you're certainly right about that. I think we're really in uncharted waters. Who could have predicted where we are today, and therefore it's very hard to know where we're heading, but you have to try to peer through the fog and all the uncertainty and the noise and the, you know, day to day ups and downs that's coming from this White House in a way that we've never seen before. And I started on Capitol Hill in 1970 so I've been watching this, you know, for more than a half century, actually, quite a while. And man, it's important to go through all this, but it's sort of uncharted waters.

Keith Weinhold 11:04

Sure, it's sort of like you wake up every day and all you do know is that you don't know. And David, when it comes to tariffs, I want to give you my idea, and then I want to ask you about what the tariff objective even is. Now, to be sure, no one is asking me how to advise the President. I'm an international real estate investor, but I do most of my business in the US, and I sure don't have international trade policy experience. It seems better to me, David, that rather than shocking the world with new tariffs that kick in right away, it would have been better to announce that tariffs begin in, say, 90 days, and then give nations space to negotiate before they kick in. That's my prevailing idea. My question to you is, what's the real objective here? What are terrorists proposed to do? Raise revenue, onshore companies merely a negotiation tactic? Is the objective? Something else?

David Stockman 12:00

Well, it might be all of the above, but I think it's important to start with a predicate, and that is that the problem is not high tariffs abroad or cheating by foreign competitors or exporters. There is a huge problem of a chronic trade deficit that is not benign, that does reflect a tremendous offshoring of our industrial economy, the loss of good, high paying industrial and manufacturing jobs. So the issue is an important one to address, but I have to say, very clearly, Trump is 100% wrong when he attempts to address it with tariffs, because foreign tariffs aren't the problem. Let me just give a couple of pieces of data on this, and I've been doing a lot of research on this. If you take the top 51 exporters to the United States, our top 51 trade partners, and this is Mexico and Canada and the entire EU and it's all the big far eastern China, Japan, South Korea, India, you know, all the rest of them. If you look at the and that's 90% of our trade, we have 2.9 trillion of imports coming in from all of those countries, and the tariff that we Levy, this is the United States, on those imports, is not high. It's higher than it was in the past, mainly because of what Trump did in the first term, but it's 3.9% now compared to bad times historically, decades and decades ago. That's relatively low. But here's the key point, if we look at the same 51 trading partners in terms of the tariffs they levy on our exports to China and to the EU and to Canada and Mexico and South Korea and all the rest of them. The tariff average, weighted average that they levy is 2.1% so let me restate that the average US tariff is about twice as high 4% around things as what our partners imposed 2% now the larger point is whether it's 4% or 2% doesn't make a better difference. That's not a problem when it comes to 33 trillion of world trade of which we are, you know, the United States engages in about five and a half trillion of that on a two way basis, import, export, in the nexus of a massive global trading system. So he's off base. He's wrong. The target is not high tariffs or unfair foreign trade. Now there are some people who say, Well, you're looking at monetary tariffs. So in other words, the import duty they levy on, you know, exports to South Korea or India or someplace like that, right? And that, the real issue, supposedly, is non tariff barriers. For instance, you know, some governments require you that all procurement by government agencies has to be sourced from a domestic supplier, which automatically shuts out us suppliers who might want that business. Well, the problem is we're the biggest violator of the non tariff barrier in that area. In other words, we have something like $900 billion worth of state, federal and local procurement that's under Buy America policies, which means EU, Mexico, Canada, China, none of them can compete. Now I mention that only as one example, because it's the kind of classic non tariff barrier, as opposed to import duty that some people point to, or they point to the fact that while foreign countries allegedly manipulate their currency, but you know the answer to that is that number one, overwhelming, no doubt about it, largest currency manipulator in the world, is the Federal Reserve. Okay, so it's kind of hard to say that there's a unfair trade problem in the world because of currency manipulation. And then there is, you know, an argument. Well, foreign governments subsidize their exporters. They subsidize their industrial companies, and therefore they can sell things cheaper. And therefore that's another example of unfair trade, but the biggest subsidizer of tech industry, and of a lot of other basic industry in the United States is is the Defense Department. You know, we have a trillion dollar defense budget, and we put massive amounts of dollars in, not only to buying, you know, hardware and weapons and so forth, but huge amounts of R and D that go into developing cutting edge technologies that have a lot of civilian applications that, in fact, we see all over the world. That's why we're doing this broadcast right now. The point is that problem is not high tariffs because they're only low tariffs. The problem is not unfair trade, because there's all kinds of minor little interferences with pure free markets, but both, everybody violates those one way or another due to domestic politics. But it's not a big deal. It doesn't make that big a difference. So therefore, why do we have a trillion dollar trade deficit in the most recent year, and a trade deficit of that magnitude that's been pretty continuous since the 1970s the answer is three or four blocks from the White House, not 10,000 miles away in Beijing or Tokyo. The answer is the Federal Reserve has in the ELLs building there in DC, not far from the White House. Yes, yes, right there, okay, the Eccles building the Fed has a huge, persistent pro inflation bias, sure. And as a result of that, it is pushed the wage levels and the price levels and the cost levels of the US economy steadily higher, and therefore we've become less and less competitive with practically everybody, but certainly a lower wage countries nearby, like Mexico or China, far away. And you know, there's, it's not that simple of just labor costs and wages, because, after all, if you source from China, you've got to ship things 10,000 miles. You've got supply chain management issues, you've got quality control issues, you've got timeliness issues. You have inventory carry costs, because there's a huge pipeline, and of course, you have the actual freight cost of bringing all those containers over. But nevertheless, when you factor all that in, our trade problem is our costs are too high, and that is a function of the pro inflation policies of the Fed. Give one example. Go back just to the period when the economy was beginning to recover, right after the great recession. And you know the crisis of 208209 and I started 210 unit labor costs in manufacturing in the United States. Just from 210 that's only 15 years, are up 55% that's unit labor costs. In other words, if you take wage costs and you subtract productivity growth in that 15 year period, the net wage costs less productivity growth, which is what economists call unit labor costs, are up 53% and as a result of that, we started, you know, maybe with a $15 wage difference between the United States and.China back in the late 1990s that wage gap today is $30 in other words, the fully loaded way at cost of average wages in the United States. And I'm talking about not just the pay envelope, but also the payroll taxes, the you know, charge for pension expense, health care and so forth. The whole fully loaded cost to an employer is about $40 an hour, and it's about $10 in the United States and it's about $10 an hour in China. Now that's the reason why we have a huge trade deficit with China, because of the massive cost difference, and it's not because anybody's cheating. Is because the Fed, in its wisdom, decided, well, you know, everybody will be okay. We're going to inflate the economy at 2% a year. That's their target. It's not like, well, we're trying to get low inflation or zero inflation, but we're not quite making it. No, they're proactive. Answer is, we've got to have 2% or the economy is not going to work. Well, well, 2% sounds well, that's a trivial little number. However, when you do it year after year, decade after decade, for a long period of time, and the other side is not inflating at the same rate, then in dollar terms, you have a problem, and that's where we are today. So this is important to understand, because it means the heart of the whole Trump economic policy, which is trying to bring manufacturing home, trying to bring industry back to the United States, a laudable objective is based on a false diagnosis of why this happened, and it is unleashed ball in the china shop, disruption of global economic flows in relationships that are going to cause unmitigated problems, even disaster in the US economy. Because it's too subtle, when you think about it, the world trade system just goods. Now, we've not even talking about services yet, or capital flows or financing on a short term basis. The World Trade in goods, merchandise, goods only is now 33 trillion. That is a hell of a lot of activity of parts and pieces and raw materials and finished products flowing in. You know, impossible to imagine directions back and forth between dozens and dozens of major economies and hundreds overall. And when you start, you step into that, not with a tiny little increase in the tariff. To give somebody a message. You know, if our tariffs are averaging 4% that's what I gave you a little while ago. And you raise tariffs to 20% maybe that's a message. But Trump didn't do that. He raised the tariff on China to 145% in other words, let's just take one example of a practical product, almost all the small appliances that you can find in Target or even a higher end retail stores United States or on Amazon are sourced in China because of this cost differential. I've been talking about this huge wage differential. So over the last 20, 25, years, little it went there now 80% of all small appliances are now sourced in China, and one, you know, good example would be a microwave oven, and a standard one with not a lot of fancy bells and whistles, is $100 now, when you put 145% tariff on the $100 landed microwave oven is now $245 someone's going to say, Gee, are we going to be able to sell microwaves at $245 they're not certain. I'm talking about a US importer. I'm talking about someone who sells microwaves on Amazon, for instance, or the buyers at Walmart or Target, or the rest of them, they're going to say, wait a minute, maybe we ought to hold off our orders until we see how this is going to shake out. And Trump says he's going to be negotiating, which is another whole issue that we'll get into. It's a lot of baloney. He has no idea what he's doing. Let's just face the facts about this. So if orders are suddenly cut back, and the flow that goes on day in and day out across the Pacific into the big ports in Long Beach in Los Angeles is suddenly disrupted, not in a small way, but in a big way, by 20, 30, 40, 50% six or seven months down the road, we're going to have empty shelves. We're going to have empty warehouses. We're going to have sellers who suddenly realize there's such a scarcity of products that have been hit by this blunderbuss of tariffs that we can double our price and get away with it.

Keith Weinhold 25:00

Okay, sure. I mean, ports are designed. Ports are set up for stadium flows, not for surges, and then walls and activity. That just really doesn't work.

David Stockman 25:08

And let me just get in that, because you're on a good point. In other words, there is a complicated supply line, supply chain, where, you know, stuff is handed off, one hand to another, ports in China, shipping companies, ports here, rail distribution systems, regional warehouses of you know, people like Walmart and so forth, that whole supply chain is going to be hit with a shock. Everything is going to be uncertain in terms of the formulas that everybody uses right now, you know that you sell 100 units a week, so you got to replace them at the sales rate, and you put your orders in, and know that it takes six weeks to get here, and all this other stuff, all of the common knowledge that's in the supply chain that makes it work, and the handoffs smooth and efficient From one player in the supply chain to the next, it's all going to be disrupted. But the one thing we're going to have is we're going to have shortages, we're going to have empty shelves, and we're going to have price which I'm sure that Trump is not going to start saying price gouging of a you know, right? But that's not price gouging. If you have a you know, go to Florida. We have a hurricane. Where we live in Florida and New York, we have a hurricane. All of a sudden the shelves are empty and there's no goods around, because everybody's been stocking up getting ready for the storm. And then all of a sudden, the politicians are yelling that somebody's price gouging, because they raised their prices in a market that was in disequilibrium. Well, that's not price gouging. That's supply and demand trying to find a new balance basic economics. You know, when the demand is 100 and the supply is 35 okay, but I'm kind of getting ahead here, but I think there's very good likelihood that there's going to be a human cry right before, you know, maybe in the fall or right before Christmas, about price gouging and Trump then saying, Well, I was elected to bring prices down and bring inflation under control. It's out of control because all of these foreigners raised their prices. And no, they did, and it was the tariff that did it, and all the people in the supply chain are trying to take advantage of the temporary disruptions. So I think people have to understand, and I can't say this, and I don't like to say it, because I certainly didn't think the other candidate in the last election had anything to offer in terms of dealing with our serious economic problems in this country. I'm talking about Harris. But the fact is, Donald Trump has had a wrong idea for the last 40 to 50 years of his adult life. In that core idea is that trade deficits are a sign of the other side cheating. They're a sign that you're being exploited or taken advantage of or ripped off, or it's not at all okay. Trade deficits are a consequence of cost differences between different jurisdictions, and to the extent that we've artificially, unnecessarily inflated our costs. We need to fix the problem at the source. He ought to clean house at the Federal Reserve. But the problem is, Trump wants lower interest rates when, in fact, the low interest rates created all the inflation that led to our loss of competitiveness and the huge trade deficits we have today. So to summarize, it is important to understand, do not have faith in Trump's promise that we're going to have a golden age of economic prosperity. We are going to have a economic disaster, and it's a unforced error. It's self inflicted, and it's the result of the wrong fundamental idea of one guy who's in the oval office right now throwing his considerable weight around and pushing the economy into upheaval that really is totally unnecessary. He should have done what he was elected to do, and Matt's work on getting production up and costs down, that's not going to be solved with tariffs. David, I have another important point to bring up. But before we do just quickly, are those two to 4% tariffs you mentioned earlier. Those are the tariff levels pre Trump second term correct.

We could clarify that those are for the year 2023 that was the latest full year data that we have with great deal of granularity.

Keith Weinhold 29:56

The point I want to bring up is there any history? That tariffs actually work. Some people cite the Smoot Hawley Tariff Act from the 1930s and that it drove us deeper into the Great Depression. And David, on the one hand, when we think about, do tariffs actually work? If Indonesia can make shoes for us for $11 why would we want to onshore an activity like that? That is a good deal for us. And then, on the other hand, you have someone like Nvidia, the world's leading semiconductor company, they announced plans to produce some of their AI supercomputers entirely on American soil for the first time recently. And you have some other companies that have made similar announcements. So that's a small shred of evidence that tariffs could work. But my question is, historically, do tariffs actually work?

David Stockman 30:44

That's a great question, and there's a huge history. And you can go back all the way the 19th century, where Donald Trump seems to be preoccupied, but what he fails to recognize is that they worked in the 19th century because they were revenue tariffs. It wasn't an effort to, like, bring jobs back to America. We were booming at the time. Jobs were coming to America, not leaving, and it was the federal government's main source of revenue. Because, as you know, prior to 1913 there was no income tax, right? So that was one thing. Okay, then when we got into the 20th century and host World War Two, it became obvious to people that the whole idea of comparative advantage, going all the way back to Adam Smith, and that enhanced a global trade where people could specialize in whatever their more competitive advantage is, was a Good thing. And so we had round after round of negotiations after World War Two that reduced tariff levels steadily, year by year, decade by decade. So by the time we got to the 1990s when China, then, you know, arose from the disaster of Mao and Mr. Dang took over and created all the export factories and said, It's glorious to be rich and all these things is we got red capitalism. But if we start in the 1990s the average tariff worldwide, now this is weighted average on all goods that are bought and sold or imported and exported, was about 9% and there were have been various free trade deals done since then. For instance, we had NAFTA, and the tariffs on Mexico and Canada and the United States went to zero. We had a free trade deal in 212 with South Korea. This never comes up, but the tariff on South Korean goods coming the US is zero. The tariff on us, exports going to South Korea is zero because we have a free trade agreement, and it's worked out pretty well with South Korea. Now we're not the only ones doing this. Countries all over the world. The EU is a total free trade zone in economy almost as big as the United States that used to have tariff levels between countries. Now it's one big free trade zone. So if you take the entire world economy, that 9% weighted average tariff of the early 90s, which was down from maybe 2025, 30, pre World War Two in this Smoot Hawley era, was down to 2.25% by the time that Donald Trump took office, the first time around in 2017 now 2.25% is really a rounding error. It's hardly when you have $33 trillion worth of goods moving around, you know, container ships and bulk carriers and so forth all around the world, and air freight and the rest of it, rail. 2% tariff is not any kind of big deal, as I say in some of the things I write, it's not a hill of beans. So somehow, though 45 years ago, Trump got the idea that tariffs were causing a problem and that we had trade deficits, not because our costs were going up owing to bad monetary policy, but because the other guy was cheating. Remember, this is Trump's whole view of the world. It's a zero sum game. I win, you lose, and if I'm not winning, is because you're cheating. Okay? In other words, I'm inherently going to win. America's inherently going to win unless the other guy is cheating. Now, Trump sees the world the same way that I think he looked at electrical and plumbing contractors in the Bronx, you know, in the 1980s and 1990s when he was developing his various Real Estate projects. These are pretty rough and tumble guys. It's a wild, easy way to make a living. So there's a lot of, you know, there's a lot of pretty rough baseball that's played that mentality that the other guy is always trying to screw me, the other guy's always cheating, the other guy's preventing me from winning, is, is his basic mentality. And it's not Applicable. It's not useful at all to try to understand the global economy. Try to understand why America's $29 trillion economy is not chugging along as strongly and as productively as it should be, why real wages are not making the gains that workers should be experiencing and so forth. So he ought to get out of this whole trade, tariff trade war thing, which he started, I don't know how he does, it's a little late, and focus on the problems on the home front. In other words, our trade problem has been caused by too much spending, too much borrowing, too much money printing on the banks of the Potomac. It's not basically caused in Beijing or Tokyo or Seoul or even Brussels, the European Union. And we need to get back to the basic and the real culprit, which is the Federal Reserve and its current chairman, Paul, if he wants to attack somebody, go after the Fed. Go after Paul. But ought to give them a mandate to bring inflation to zero and to stop fooling around with everything else and to stop monetizing the public debt that is buying government debt, take care of your own backyard first before you start taking, yeah, sure, yeah, exactly. You know, I've been in this for a long time. I start, as I said, I started on Capitol Hill. There have been a lot of protectionist politicians, but they always argued free trade is good, but it has to be fair trade. And you know, we have this example in our steel industry, for instance, where we producers abroad are competing unfairly for one reason or another. But the point I'm getting to is they always said this is an exceptional case. Normally we would go for free trade, but we got to have protection here. We got to have a temporary quota. Even when I was in the Reagan administration, we had a big argument about voluntary quotas on Japanese car exports, and I was totally against it. I thought the US industry needed to get its act together, get its costs down. Needed to get the UAW under control, because it had pushed wages, you know, way, way, way too high terms of total cost. But they argued, yeah, well, you're right, but we have to have 10 years in order to allow things to be improved and adjusted and catch up. So this is only temporary. This is just this. Yes, this is protectionism, but it's temporary. It's expedient that we can avoid and so therefore we'll make an exception. But there is no one, and most of these people were, you know, in the payroll of the unions, or they were congressmen from south to South Carolina going to bad for the textile industry, or congressman from Ohio going to bat for the steel industry, whatever, but there was no one who ever came along and said tariffs are big, beautiful things, and we need to have permanent high tariffs, because that's the way we're going to get prosperity back in United States. It's a dumb idea. It's wrong. It's disproven by history and people. Even though Trump has done a lot of things that I like you know, he's got rid of dei he's got rid of all of this green energy, climate crisis nonsense, all of that that he's done is to the good when you come to this basic question, how do we get prosperity in America? The answer is, through free market capitalism, by getting the government out of the way, by balancing the budget and by telling the Fed not to, you know, inflate the economy to the disadvantage that it has today. That's how you get there. And Trump is not a real Republican. Trump is basically what I call a status. He's for big government, right wing status. Okay, there's left wing, Marxist status, then there's right wing status. But you know, all of this tariff business is going to create so much corruption that it's almost impossible to imagine, because every day there's someone down there, right now, I can guarantee it at the, you know, treasury department or at Commerce department saying, but we got special circumstances here in terms of the parts that we're making for aircraft that get assembled in South Korea or something, and we need special relief. Yes, every industry you're doing is putting in for everybody's going to be there the lobby. This is the greatest dream that the Washington lobbyist community ever had. Trump is literally saying he put this reciprocal tariff. You saw the whole schedule. That he had on that easel in the White House on April 2, immigration day. It was called Liberation Day. I called it Demolition Derby Day. There was a reciprocal tariff for every single country in the world based on a phony formula that said, if we have $100 million deficit with somebody, half of that was caused by cheating. So we're going to put a tariff in place closes half of the difference. I mean, just nonsense, Schoolboy idiocy. Now it is. I mean, I know everybody said, Oh, isn't it great? We've finally got rid of the bad guys, Biden, he's terrible, and the Democrats, I agree with all that, but we replaced one set of numb skulls with another set. Unfortunately, Republicans know better, but they're so intimidated, apparently buffaloed by Trump at the moment, that they're going along with this. But they know you don't put 145%tariff on anything. I mean, it's just nuts. David, I feel like you're telling us what you really think and absolutely love that.

Keith Weinhold 41:04

Interestingly, there is a Ronald Reagan clip about tariffs out there in a speech that he gave from Camp David, and it's something that's really had new life lately. In fact, we played the audio of that clip before you came onto the show today, Reagan said that he didn't like tariffs and that they hurt every American worker and consumer as Reagan's economic advisor in the White House. Did you advise him on that?

David Stockman 41:27

Yes, I did. And also I can give you a little anecdote that I think people will find interesting. Yeah, the one time that he deviated in a big way from his free trade commitments was when he put the voluntary export quota on the Japanese auto industry. That was big. I don't remember the exact number, but I think it said they couldn't export more than 1.2 million cars a year, or something like that the United States. And the number was supposed to adjust over time, but we had huge debates in the Cabinet Room about those things, and at the end of the day, here's what he said. He said, You know, I've always been for open trade, free trade. I've always felt it has to be fair trade. But, you know, in this case, the Japanese industry came to us and asked for voluntary quotas, so I didn't put up a trade barrier. I'm only accommodating their request. Well, the Japanese did come to him and ask. They did, but only when they were put up to it by the protectionists in the Reagan administration who, on this took them on the side, you know, their negotiators and maybe their foreign minister. I can't remember exactly who commerce secretary and said, If you don't ask for voluntary quotas, we're going to unleash Capitol Hill and you're going to get a real nasty wall put up against your car. So what will it be? Do you want to front for voluntary quotas? Are we going to unleash Congress? So they came to Reagan and said they were the Japanese industry said they're recommending that he impose voluntary restraints on auto exports. That was just a ruse. He wasn't naive, but he believed what you told him. He believed that everybody was honest like he was, and so he didn't understand that the Japanese industry that was brought to meet with him in the Oval Office had been put up to, it been threatened with, you know, something far worse, mandatory quote is imposed by Congress. But anyway, it's a little anecdote. What happened? On the other hand, he continued to articulate the case for small government sound money. We had deficit problems, but he always wanted a balanced budget. It was just hard to get there politically. And he believed that capitalism produces prosperity if you let capitalism work and keep the government out of the marketplace. And there is no bigger form of intervention and meddling and disruption in the capitalist system, in the free market, in the marketplace, than quotas on every product in every country at different levels. They're going to have 150 different countries negotiating bilaterally deals with the United States. That's the first thing that's ridiculous. They can't happen. The second thing is they're going to come up with deals that don't amount to a hill of beans, but they'll say, we have a deal. The White House will claim victory. Let me just give one example. As we know, one of the big things that Trump did in the first administration was he renegotiated NAFTA. And NAFTA was the free trade agreement between Mexico, Canada, United States. Before he started in 2017 the trade deficit of the US with Mexico and Canada combined with 65 billion. And he said, That's too big, and we got to fix NAFTA. We have got to rebalance the provisions so that the US comes out, not on the short end of the stick 65 billion. So they negotiated for about a year and a half, they announced a new deal, which he then renamed the United States, Mexico, Canada agreement, usmca, and, you know, made a big noise about it, but it was the same deal with the new name. They didn't change more than 2% of the underlying machinery and structure, semantics. Well now, so now we fast forward to 2024 so the usmca Trump's pride and joy, his the kind of deal that he says he's going to seek with every country in the world is now four years into effect. And what is the trade deficit with Canada and Mexico today, it's 230 5 billion okay? It's four times higher now than it was then when he put it in place. Why? Because we have a huge trade deficit with Mexico. Why because, you know, average wages there are less than $10 an hour, and they're $40 an hour here. That's why it has nothing to do with a bad trade deal. It has to do with cost differences.

Keith Weinhold 46:27

David, this has been great, and as we're winding down here, we have a lot of real estate investor listeners tell us what this administration's overall policies, not just tariffs, but overall policies, mean for future employment, and then tell us about your highly regarded contra corner newsletter.

David Stockman 46:45

Well, those are that's a big question. I think it doesn't mean good, because if they were really trying to get America back on track our economy, they would be fighting inflation tooth and nail to get it down to zero. They would be working day and night to implement what Musk came up with in the doge that is big spending cuts and balancing the budget. They're not doing that. They're letting all these announcements being made, but they're not actually cutting any spending. They would not be attempting to impose this huge apparatus of tariffs on the US economy, but they're not doing that. So I'm not confident we were going in the wrong direction under Biden, for sure, and we're going in an even worse direction right now under Trump. So that's the first thing. The second thing is, I put out a daily newsletter called David stockman's Country corner. You can yes signers on the internet, but this is what we write about every day, and I say A plague on both their houses, the Democrats, the Republicans. They're all, in many ways, just trying to justify government meddling, government spending, government borrowing, government money printing, when we would do a lot better if we went in the opposite direction, sound money, balanced budgets, free markets and so forth, so. And in the process, I'm not partisan. You know, I was a Republican congressman. I was a budget director of the Reagan administration. I have been more on the Republican side, obviously, over my career than the Democrats, but now I realize that both parties are part of the problem, and I call it the uni party when push comes to shove, the uni party has basically been for a lot of wars abroad and a lot of debt at home, and a lot of meddling in the economy That was unnecessary. So if you look at what I write every day, it tries to help people see through the pretenses and the errors of the unit party, Democrats and Republicans. And in the present time, I have to focus on Trump, because Trump is making all the noise.

Keith Weinhold 48:59

100% Yes, it sure has kept life and the news cycle exciting, whether someone likes that news or not. Well, David, this has been great. In fact, it sounds a lot like what Reagan might have told me, perhaps because you were a chief economic informant for him, smaller government, letting the free trade flow and lower inflation. Be sure to check out David stockman's contra corner newsletter if you like what we've been talking about today, just like it was last year, David, it's been a real pleasure having you on GRE today.

David Stockman 49:30

Well, thank you very much. And these are important issues, and we've got to stay on top of them.

Keith Weinhold 49:41

Oh, yeah. Well, David Stockman truly no mincing words. He doesn't like tariffs. In summary, telling GRE listeners that the problem with trade imbalances is inflation attack that instead quell inflation, don't impose tariffs. A lot of developing nations and China have distinct advantages over manufacturing in the United States, besides having the trained labor and all the factories and systems in place, think about how many of these nations have built in lower costs they don't have to deal with these regulatory agencies, no EPA, no OSHA, and not even a minimum wage law to have to comply with. And here in the US get this, 80% of American workers agree that the US would benefit from more manufacturing jobs, but almost 75% disagree that they would personally be better off working in a factory themselves. That's according to a joint Cato Institute in YouGov survey. It's sort of like how last century, Americans lamented the demise of the family farm, yeah, but yet, they sure didn't want to work on a farm themselves. Now there are some types of manufacturing, like perhaps pharmaceuticals or computer chips that could likely be onshore, because those items are high value items. Their value can exceed the cost of being produced in the USA, but a lot of these factory goods, not again. If these topics interest you do a search for David stockman's contra corner, or you can directly visit David stockman's contra corner.com. Big thanks to the father of Reaganomics, David Stockman on the show this week. As for next week, we're back more toward the center of real estate investing. Until then, I'm your host. Keith Weinhold, don't quit your Daydream. Y

Unknown Speaker 51:42

nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC

Keith Weinhold 52:02

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long. My letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called The Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
Zijn er afleveringen die ontbreken?

Klik hier om de feed te vernieuwen.
552: Terrible—Home Sales Now Worst Since 2009
5 mei· Get Rich Education
In this power-packed episode, Keith delivers a masterclass on the current real estate landscape, blending personal insights with market-changing trends. From the nuanced world of home flooring to the pulse of national housing markets, Keith breaks down complex real estate dynamics into actionable intelligence.

The episode reveals a market at a critical inflection point: declining home sales, shifting apartment dynamics, and emerging investment opportunities. Keith provides listeners with a strategic roadmap to navigate these changes, emphasizing the importance of adaptability and informed decision-making.

Exclusive Takeaway: Get Rich Education offers free investment coaching to help you turn these insights into wealth-building action. Your real estate success journey starts here.

Free Resources:

Connect with a free GRE investment coach at GREinvestmentcoach.com

Show Notes:

GetRichEducation.com/552

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching: GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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 0:00

Keith, welcome to GRE. I'm your host. Keith Weinhold, there's been a real estate tragedy in my family. Then this past month, national home sales have plummeted to their worst level since 2009 then something is happening in the market for apartment buildings that shocked everybody and more all today on get rich education.

Speaker 1 0:24

Since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week. Since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guessing the 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

Speaker 2 1:09

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 1:25

welcome to GRE from Montreal, Quebec to Montrose, Michigan and across 188 nations worldwide. I'm Keith Weinhold, and you are back inside get rich education here in our 11th year, you're listening to one of America's longest running the most listened to shows on real estate investing, indeed, the 552nd consecutive week before we delve into the sad topic of terrible national home sales, the worst since 2009 which is a serious topic, first, a bit More of a light hearted topic, a real estate tragedy of sorts, has taken place inside my family, right inside my parents home, the same home that I grew up in. And you know, it's been a while since I had a good rant in an episode. So before we get to our core content today, my parents just replaced the nice, plush, warm, soft, inviting wall to wall carpets in both of their living rooms with laminate, hardwood floor. Oh no, this is disastrous. I mean, this is an abject property atrocity right in the home that I grew up in. Now, if you're a longtime listener, you know what I'm talking about. If you're newer here, it's probably been a couple years since I mentioned it. You know, everyone has their own quirks and idiosyncrasies, like you have certain ways of thinking about some things in your life, where you just know that you're in the minority of society with how you behave with that thing. Yeah, there are some things that you're counter cultural on. It's part of your unique personality, and it's what makes you you, well, one of my real estate idiosyncrasies and unorthodoxies is that I love deep, plush carpet, not hardwood floor, and hey, I don't expect you to agree with me on this. It's what makes me different. Now we'll talk about the flooring that you choose to use in your rental units in a moment and compare their prices and when you might want to use those things and when you don't. But we're just talking about home here, the flooring that you live on your primary residence. Why would anyone replace carpeting with hardwood, plank flooring? It is uninviting. It is cold, hard, and it even transfers noise more than quiet, comfortable, plush carpeting. And yes, hardwood floors can be heated. And some homeowners do that. They use what are called radiant heating systems, and they are installed beneath the floor, and these systems use either electric cables or sometimes mats or hydronic tubing, which are pipes filled with hot water in order to radiate that heat upwards into the floor. Now, something like that is what you'd be more likely to do in your own home, and not a rental unit, but even if you do that, hard floors are still, well, hard and noisier, like I just don't get it deep, plush carpet is superior. I'm not talking about the shag carpet that was popular 50 years ago, just plush carpet that hit its peak. In the 1990s Oh yes, that is the stuff I'm telling you. I mean plush carpet. That is the stuff that turns a house into a home. Well, my parents did just the opposite. They turned their home back into a house. Oh, dear. And, hey, it's their home. They can do whatever they want. Now, what are the main reasons that I hear about why people prefer laminate, hardwood flooring or luxury vinyl plank flooring over carpeting? That's what the majority of people want to do, and that's not what I want. Well, one reason, and this is the main reason that my parents did it, is that it looks nicer. In their opinion, looks nicer. I don't get it at all. I mean, even most cheap $1,000 apartments have been using like hardwood, plank flooring for close to 25 years now, there's nothing special about the way that it looks. Most of it anyway, some of it can look pretty cool. Now, some people want the hardwood because, well, they say that it's easier to clean. Easy to clean. Why in the world would you have trouble keeping your own home clean? I mean, if there's any space in the world that you keep clean, it is your humble abode. Now I know that it's easier for me to say that because I don't own any pets and still don't have kids, maybe you do replacing carpet for hard flooring is just an unspeakable act. What an uncalled for abhorrence, a repugnance. Other reasons that people say they prefer hardwood or vinyl plank over carpet is that it is allergy friendly. All right. Well, I don't have any trouble with allergies. But here's the thing that's even more confounding, most people that install a hard flooring. Well, the next thing that they do, and this is exactly what my mom and dad say that they're going to do next now that they put the hardwood floor in, is find some area rugs and cover it up so people put carpet on top of the hardwood floor anyway, but then yet, that carpet cannot be plush and padded underneath like real Carpet would be, because it's just like a piece that's rolled out, plus it cancels out, then all these pet friendly and allergy free benefits, plus it might be even harder to clean, because now you got to clean both the carpet and the edges of the room where the stupid hardwood flooring is showing I mean, it makes zero sense, so this just all compounds how I am confounded on how almost everybody in the world, it seems they want hardwood floor. I feel like I'm the only person in the world sticking up for carpeting. I do not expect you to agree with me here. It is just my, I guess, oddball preference. I also do a lot of exercises down on the floor. That's where the best high intensity interval training workouts take place. Down on the floor. Plush carpet is best for that too. Oh, the myriad reasons that carpet is superior, I'll tell you. Well, I'll next be staying at my parents place in two months, as I'll spend a lot of July there, and that's when I will first be witness to this transgression, this incomprehensible abomination. I mean, it is almost malfeasance.

The reason that I care more about this than most sons of parents would is that my parents have lived in the same home since I was age one. I have a lot of memories there, and when I visit my parents in rural upstate Pennsylvania, I sleep in the same exact bedroom that I have since age one. Really special continuity there. What's more important than the flooring changing in the two living rooms is that, like I've told you before, I won the parent lottery, I did not have an affluent upbringing, but my brother and I had a top 1% childhood anyway, because we have two married, committed parents that are still together, still healthy and loved us. I phone my parents at least weekly, and I send them messages all the time. I guess it's a good time to think about that as this is the last episode before Mother's Day, and if you did not win the parent lottery, like I did in the way that I just described. Well, the good news is that you can do something about it. You can provide that same stable, nurturing environment to your children, and that way, they will win the parent lottery. Now, when it comes to. My rental properties, I do have hardwood flooring virtually everywhere and in every property, from single family rentals up to apartment buildings, because I don't have to live on it now, I probably do have some bedrooms in those rentals where there's carpeting, yeah, I mean hard floors that makes sense for the durability in a rental. I mean, with rentals, you might have to replace the carpet every three to five years. That is cost prohibitive. So for real estate investing, hardwood flooring, which, again, it's really a trend that became widespread in America about 25 years ago. I mean, that trend was really good for real estate investors. Tenants actually prefer this intolerable condition, perhaps much like you do. Now let me talk about five main types of flooring, how much they cost per square foot, and where you might want to use different flooring types in different situations, as we've already established. For me, it is carpet, carpet, carpet, wall to wall, everywhere, except for kitchens, bathrooms and maybe the laundry room. Seriously, though, for you and how you want to think about this and these prices include the total for both the material and the installation is for hardwood plank flooring, which is that atrocity that my parents committed. Expect to pay about $25 per square foot. And of course, all these costs are going to vary based on the wood species, the finish and the part of the world that you're in for LVP, luxury vinyl plank that's about $8 installed. LVP is a good choice because it mimics the hardwood esthetics. It's waterproof, and as you can see there, its cost is less than half of that of hardwood plank. So LVP can be a good choice for bathrooms and maybe a kitchen, and though the name luxury might be cheapened or diluted somewhat in that name, LVP, it's a bit over named. I suppose it's that that name is given to help distinguish it from vinyl flooring. Because when you hear the term vinyl flooring, what do you think of you think of sheets, something that comes in a roll in sheet vinyl only costs maybe about $5 installed. And then carpeting installed, my favorite at home, but not in rentals that costs about $6 per square foot. And then the last major flooring type is tile, and the cost of tile is really all over the place because of its different material types. Tile can be made of so many things, going from cheapest to most expensive ceramic. That's about $20 per square foot. Again, this is the cost installed for both the materials and the time it takes to install it, porcelain, 20 to 25 natural stone tile can be 40 bucks or more, and then glass tile can be a little more expensive than that, yet. So those are the approximate prices for your flooring, what you can expect to pay because, of course, plank flooring and tile, it doesn't have to be replaced as often as carpet and sheet vinyl. That's something to keep in mind when you think about those prices. But yeah, I have bought apartment buildings before, where, when I bought it, every unit was carpeted, and then as each tenant moved out, one by one, I would have my property managers contractor replace it with hard plank flooring, the radiant heat that you'd place beneath hard flooring that I described earlier, that is cost prohibitive to put in a long term rental in almost every case, that's something you'd only want to do in your own home, or maybe, just maybe a luxury short term rental in a cold climate, Like a ski resort town or something like that. So yes, you have now learned about one of my odd quirks, and you've learned about flooring types. Another of my idiosyncrasies is my preference for back scratching rather than massages. But that has nothing to do with real estate, and we've got more important topics to move on to heck. Come on, though, you might have some weird quirks, even more weird than mine. In fact, maybe real estate investors in general have more quirks than mainstream society. Because, you know, real estate investing is a little countercultural itself, right? We own things that pay us to own it every month with mainstream society and 401, KS, you have to pay it with every paycheck. Now. Who in the heck would do that?

The title of this week's episode has to do with the fact that spring existing home sales are now at their worst level since two. 2009 the worst in all that time. Now, and understand when I say home sales, that means the volume of sales, the number of transactions. We're not talking about the prices now, the outlook for home prices is also less rosy now as well. I'll get to that shortly. But why are the number of property transactions at their lowest level in 16 years like this? Let's listen in to Diana Olick at CNBC. She's talking about March, but that's the newest month reported. You got to remember that real estate stats run in arrears more so than most essay classes. This report is a real bellwether for the spring housing market and how this year could turn out. This is a little over a minute, and then I'll be back to comment.

We also have some housing data just cross the tape. Diana olik Has that for us. Diana, Well, David, existing home sales in March fell a much wider than expected, 5.9% from February to a seasonally adjusted annualized rate of 4.0 2 million units sales down 2.4% from March of last year, and that is the slowest March sales pace since 2009 the Great Recession. Now remember, this count is based on closing, so its contracts likely signed in January and February, when mortgage rates were over 7% but it was before the market volatility of April, supply is rising fast, 1.3 3 million units for sale at the end of March, up nearly 20% from the year before. That makes a four month supply, which is still on the lean side. Six months is considered a balanced market. More inventory and slower sales are starting to put the chill on prices. The median price of an existing home sold in March was $403,700 that's still an all time high for the month, but it's only up 2.7% from last March, and that annual comparison is shrinking. First time, buyers made up 32% of the market, the same as last year, they should be around 40% all cash dropped to 26% from 28th the year before, but investors house steady at 15% of sales. Sarah, all right, have a bad combo, weaker sales, higher prices. Diana, thank you very much. Diana Olek.

okay, we just learned that the latest month shows the slowest spring housing market for that month since 2009 and that the supply of available homes is up 20% since last year. All right? Well, if the supply of homes is up, then why is the volume of sales down? Well, it's the same reasons that we've had for a couple years soured affordability and the ongoing lock in effect, and that soured affordability is just more set in I hope you caught it. Note that this 16 year low in sales volume is for existing homes, okay, brand new home sales are healthier. The nation is still undersupplied of housing Overall, though, with four months of supply, of course, six months is that balance point. Now, the worst news here, with this low sales volume is not affecting the homeowner or the investor. It is affecting the renter somewhat more, because they're having to stay as renters. But it's really tough. Just horribly bad news for people that are in the business of home sales, like realtors and other agents. Mortgage lenders are losing business too. So are title insurers, moving truck companies, furniture companies, and for those consumers in the market to buy and sell homes. It's actually troublesome news for society. Less residential mobility means less economic mobility and more people stuck in place. And how are we going to get Americans moving again? It is lower mortgage rates. It's probably not going to come from a substantial lowering of prices. Prices keep rising, as you heard in that clip, up 2.7% year over year, but as we look out in future months, you know, I can feel it. Price growth seems to be flattening out. Zillow and some other agencies have lowered their home price appreciation forecast for the year, I really keep up on this stuff in research, in my estimate is that the consensus is that there will be zero to 2% home price growth this year. That's not me saying that. That's me amalgamating what others say, and they don't always get it right, and this year still has a long way to go, but you know, there is just this sort of general malaise in the real estate market where there's not a lot of activity for primary residence buyers. In that clip, you heard that investor purchases are steady, constituting 15, one 5% Of home purchases, just like they did in the previous period. So that's what a low sales volume means, and that's who is affected. It is not a vibrant market out there. I still don't see anything on the horizon that could make home prices jump as much as 10% this year, not even substantially lower mortgage rates could do that. In my opinion, tariffs impact to construction costs over the next few months. You know, it's probably quite a bit less than you think. The prevailing current view among the number of developers for now is that construction costs will increase between one and 3% on wood frame builds. And wood frame builds that represents the vast majority of apartment and build to rent projects and now that one to 3% that's by no means immaterial, but it's also not some crazy surge like some headlines have suggested. So as you're out there listening to media reports on the housing market, as you can see, you've got to listen closely to what you're being told. The volume of sales and the median price are two very different things, and they're both moving in different directions, sales down, price up, also the existing home market and the new build home market are, of course, different, but you got to listen closely sometimes in order to pick that up. That also helps to be attentive to if you hear that new build prices are falling, you got to think about what that means, because in recent years, builders have responded to weak affordability by building smaller homes to try to make them more affordable, so they might be selling for actually more money on a square footage basis, even though their price is lower, it's because the homes are smaller. And then another thing is, when you hear that sellers are cutting prices, be attentive to what that really means. For example, say that median home values in an area are 450k and if a seller advertises a perfectly median home for 475k therefore it's a little overpriced, and say it doesn't sell in a month, and then they drop the price to 460 and sell it for that well, then what they've done is that they cut the price, yet at the same time, they moved the median price up from 450 to 460 so despite a price cut, that was about a 2% gain in sale price there in That example, that is how a price cut results in moving up in areas median price. So there's a lot to be attentive to when you look at news like that. As volatile as stocks have been lately, a lot of people are grateful to have their dollars invested in really stable real estate. When Stocks are volatile, the rent just keeps coming in. In fact, in a let's look at history over hunch's vein, when stocks crash, which all define as a loss of 20% or more, what happens to home prices now, a while ago, here on the show, I discussed what historically happens with home prices during recessions. But this is different. This is what happens during stock market crashes, because the stock market is not the economy. Aside from the one bad mortgage blow up of a housing market induced economic recession from 2008 to 2010 which was bad. Home prices do not go down when the stock market crashes. In fact, real estate prices usually rise when stocks plunge hard. Let's look at the five other times that this has happened since 1980 and we'll take the S, p5, 100 index high to its low. All right, in november of 1980 the S P was at 135 points. And doesn't it sound funny to say that that sounds like a ridiculously small number? Yes, the S P was at 135 points. Then by August of 1982 almost two years later, it tanked to 109 during that time, home prices went up 7.2% then in the late 80s, it was August of 1987 the S P was at 329. In November of that year, it fell to 245, I mean, that was a massive stock drop of almost 35% in just about three months, the result, home prices went down 1.7% but that happens almost every year, from summer to late autumn. In August of 2000 the S P was at 1485 by February of 03 it went down to 803 37 I mean, that was a major stock crash. During that time, home prices went up 11 and a half percent, and then we got into COVID. Times, March of 2020, 3277 was the level April of 2020, just a month later, down to 2653 home prices went up 2.1% during that month. And then finally, December of 2021, 4675 October of 2022, 3726 that was a big stock market drawdown during that time, home prices went up 5.3% so there you go. The stable nature of real estate is something that's a really valuable attribute during massive stock market drops. And I think there are a lot of people that don't realize that since World War Two, home prices have only fallen significantly one time, and it was that awful period around 2008 now, in fact, you know something interesting related to this, last month, I took that cog railway tour that goes to the top of Pikes Peak in Colorado. You might have taken that train before. It's pretty popular. It's a nice way to spend an afternoon. Well, on that cog railway tour, I got talking to a passenger. He was there with his wife and family, and this was an intelligent, professional guy. He worked in the VE printing space, so he was pretty interesting to talk to. I asked him about that. And this guy, this passenger on the train, he asked me about real estate, once he knew that that's my field. He said the strangest thing to me, but I think a lot of people think this way. He asked me, don't real estate prices have a 10 year cycle? They have a price correction and go down every 10 years, and then the values start going back up again. What I didn't laugh in this guy sure wasn't stupid. I mean, hey, he's in the 3d printing space, and maybe I have some misconceptions about his field too. But it's almost as unlikely that home prices will fall appreciably than that grocery store prices would fall significantly. Both things really unlikely. I don't know how people think things like this.

To summarize what you just learned in this segment, hardwood flooring in the living room is an abomination of inhumane proportions. Existing home sales volume hit low levels not seen since 2009 home prices are still rising, but the pace of that growth is slowing, and when the stock market takes a big hit, real estate historically performs well most of the time. We're talking about residential real estate in the one to four unit space so far coming up a trend in the larger apartment building world that shocked a lot of experts. That's next. I'm Keith Weinhold. You're listening to get rich education.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing. Check it out. Text family. 266, 866, to learn about freedom. Family investments, liquidity fund again. Text family. 266, 86

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

Speaker 3 29:53

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

Keith Weinhold 30:10

Welcome back to get rich Education. I'm your host. Keith Weinhold, being springtime, it's also graduation time. If you're looking for a gift idea for a graduate, consider doing what I did. My niece is about to graduate from high school. That's my brother's oldest daughter. I gave her two gifts, cash plus gold cash because, I mean, come on, any 18 year old wants something that they can use. You want to give them something that they want. But I gave gold as well, not because it's in a massive bull market right now, which it is, but saving that can help her tangibly see and understand the diminished purchasing power of the dollar over time. Be mindful, dollars are just currency, but gold is money. So yes, I like my niece, but apparently not enough to give her a little rock turnkey property. As we know, wannabe homeowners have been roughed up with poor buyer affordability that started around 2022 they must either patiently wait for Mr. Beast to give them a home, or they need to keep renting apartment demand just could not keep up with 2023 and 2020 four's massive surge in new apartment construction that left a lot of units vacant. It meant that any new renters were quickly absorbed, and as a result, rent growth stayed flatter than a soda left open for a week. Builders overachieved, and renters under showed back then, but in 2025 and 2026 new apartment construction deliveries are going to keep falling from their peak even in 2027 that's probably going to happen. And we can already project this, because it takes two years, basically, to build an apartment from permitting to completion and permits are down. The dynamics of the apartment market are pretty straightforward. It takes around two to three months to turn permits into construction starts, and then it takes an additional 19 months to complete and deliver new units. So that's the two years or so that I'm talking about. The past high housing starts have therefore shown up as completions here. In recent months, the high completions are predominantly in southern states, and that's exactly why apartment rents have been falling in places like Atlanta, Charlotte, Tampa, Dallas and Austin. Even though those are the places that people are moving to, oppositely in California, it is especially tough to get permits, and tougher even yet to get apartments completed, there will be acute housing shortages in California. If recent past trends hold, then homelessness is going to be an ongoing problem. Moderate income workers cannot make ends meet, and therefore they're going to leave the state, California simply needs to build more housing to reduce the homeless problem and help out the moderate income workers. The real surprise is that today, national demand for apartments keeps coming in at high levels that defy even the most bullish forecasts. Real page recorded the best first quarter for net absorption in more than 25 years. It was 138,000 units. Costar called it the second best q1 in more than 25 years with 128,000 units. And now those numbers don't mean much to you until you realize that this century apartment demand absorption, you know, is typically in a range of 30 to 80,000 units per quarter, and we're looking at double, triple or quadruple that now. And what all that really means is that there is a surprisingly healthy level of well qualified demand for US apartments. All right, so this net absorption that I'm talking about, which is move ins minus move outs, that being over 100,000 units like this, that's something that you might see in busier leasing seasons, like towards summer q2 and q3 but rarely in q1 and apartment demand. It came in hot in nearly every region of the country. So what is going on here? What are the reasons for this surging apartment demand? I mean, sure, for one, it's the one that you already realized. Eyes, fewer people can buy houses. But it's more than just fewer people can buy houses, it's also, if you build it, they will come. I mean, cranes have dotted skylines in US cities for the past few years, apartment construction soared. It's also wage increases. They have outpaced inflation, and both of those have outpaced apartment rent growth, helping with affordability. Another reason for surging apartment demand are those baked in demographics. We had this surge in US births from 1990 to 2010 and that means that think about the age that they are now. That means this group is hitting peak. Let me get out of my parents house age. A whole lot of Netflix accounts are being split into those. People are moving out and getting an apartment. Well, with this in mind a surge of apartment demand in fewer new apartments being built over the next two years. You know, you think about what this means for a while here I've discussed how in real estate, today's best opportunities are one to four unit turnkey properties, especially new builds and also burr properties. I mean, those things have been the MVPs of this cycle, and you keep finding those properties and buying them at GRE marketplace, but apartment buildings, I mean, they're probably warming up in the bullpen by now, I might be able to add those to the mix soon, and to add those to the list about where the opportunity is, because apartment building values have been suppressed Ever since mortgage rates spiked in 2022 but it's probably not time to swing the bat quite yet. Of course it is in some cases. There are always some exceptions, but when you look around today, you know you got to consider apartment landlords. They still got to commonly offer concessions to fill their rent rolls. They're having to give away a free month's rent here and waived some fees over there. But demand, you know, it really tangibly, is starting to catch up with supply now, and when it comes to rent growth, it's still been pretty pathetic for apartments. Okay, apartments still lag behind single family rentals. Now apartment rents, they're only up a week, 1.1% year over year. Really weak. That's the latest figure, a paltry 1.1% apartment rent growth less than inflation then, and that's per real page market analytics, incredibly that 1.1% is actually the highest apartment rent growth rate in 21 months. So the bottom line here is that the apartment market, it has been through the wringer. They've been beaten up by rate hikes and drowned in supply and ghosted by demand. But finally, after years of gloom, the clouds are starting to part for apartment buildings, supply slows and demand grows here at get rich education, you know, I'm trying to give you the knowledge in the tools that I wish I had when I began, where the opportunities are, how to think about real estate, how to know about how you get paid. I mean, knowing all that sooner really would have made my life easier, like frameworks through which to understand real estate investing and the resources so that you can make it actionable and build your real estate portfolio. You'll notice that our provider network at GRE marketplace has recently expanded, and perhaps the best tool of all, that's our free in house investment coaching. We make it easier and hold your hand through the process of buying your first investment property. If you're a more experienced investor, our coaching helps you assess and evaluate the GRE Income Property inventory and help you decide which geographies seem to be most conducive to your goals, and of course, find that real estate pays five ways. Kind of property. Don't let uncertainty prevent you from taking action, because GRE coaching is free access those off market deals. There's no agent that has to be compensated. You'll get free help along your journey, from making the offer, submitting your earnest money, inspection, appraisal, your management agreement, what your closing day is like, and more or perhaps the coaching will help you decide that it's not the right time for you to add income property based on your own unique circumstances. We help you do it all and make it easy. I often like to leave you with something actionable for a free GRE investment coaching Strategy Session customized just exactly to you. Start at GREinvestment coach.com until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 4 40:03

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 40:27

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access and it's got paywalls and pop ups and push notifications and cookies, disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called The Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE 268, 66 while it's on your mind, take a moment to do it right now. Text GRE 266, 866,

Speaker 1 41:42

The preceding program was brought to you by your home for wealth, building, get richeducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
551: Is Florida Real Estate Doomed?
28 apr· Get Rich Education
Keith discusses strategies for building wealth in real estate, emphasizing efficient property operations and leveraging. He suggests setting tenant occupancy limits, sub-metering utilities, and increasing rentable space.

He explains the leverage ratio, which measures the relationship between debt and equity, and advises maintaining a high ratio for better returns.

Hear his take on the Florida's real estate market, including falling property values, oversupply, and rising insurance premiums. Despite these issues, Keith remains optimistic about Florida's long-term potential due to its population growth and low taxes.

Free Resources:

Connect with a free GRE Investment Coach at GREinvestmentcoach.com

Show Notes:

GetRichEducation.com/551

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: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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 0:00

Welcome to GRE I'm your host. Keith Weinhold, today, the two things you've got to focus on if you're ever going to build wealth as a real estate investor, why Trump wants to fire Fed Chair Jerome Powell, then, is Florida real estate doomed with falling property values, a housing oversupply, spiking insurance premiums and slowing population growth. It's episode 551, of get rich education.

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 the flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, who delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Speaker 1 1:16

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 1:32

Welcome to GRE from Manhattan, Kansas to the finance capital of Manhattan in New York City, and across 188 nations worldwide, you are back inside get rich Education. I'm your host, and my name is Keith Weinhold. I think you know that by now, because we deliver weekly shows more steadily and predictably than a new tariff policy. I've got more on tariffs in a funny clip on Trump wanting to fire Jerome Powell in stories on that level soon. But first, you know one thing that I've made you mindful of lately is that a successful real estate investor needs to pay attention to two big things if you want to build wealth First, keep your property operations efficient. This is your cash flow function. And second look at your net worth statement, and be mindful that you are leveraging as many dollars as you responsibly can. Let me break down both of these for you so that you can see what I really mean here the first one, keeping your property operations efficient. That means that right up front, with a new tenant in the application, find out how many tenants are going to live there, and firmly let them know that they cannot exceed this or that they're in violation of the lease. Can you get 20% more rent, or even 50% more rent by furnishing your unit and marketing it not as a long term rental, but as a midterm rental, and targets, say health professionals that are traveling if you're in a hot rental market. Can you simply keep the rent the same, but have new incoming tenants pay a utility bill for you that you had previously been paying by sub metering your utilities. Other examples of taking the rental property you already have and making it more efficient, you know, there are more classic items, like increasing your rentable space, renting out separate on site, storage space, adding a carport, charging pet rent or just boosting the curb appeal. Can you build an adu on your property? How about appealing your property taxes or automating your rent collection. Why don't you take a look at your insurance policies? You know, a lot of them have $1,000 deductibles. Well, if you're an economically resilient investor, consider raising your deductibles to 5k that way you lower your insurance premium and increase your cash flow that way. I mean really, putting in insurance claims can be somewhat of a pain anyway. Okay, well, right. There were maybe, I don't know, 10 or 15 quick ideas for streamlining your property's operations and increasing your cash flow. Now, don't try to do every one of them, but if there's at least one or two that you can think of as low hanging fruit to go ahead and harvest with the nature of what you've got going in your portfolio. And you know, ideas like I just shared there, you can hear about that on some other real estate investing platforms. But you know what the bigger gain. Is that you can actually make they take less work and fewer people talk about these things all right, and that's the second thing I'm talking about. Yes, it is typically more profitable for you and less work for you. If, instead of all those things, you increase your leverage ratio. Now, doing this does not help your cash flow, it helps your net worth. And net worth is something that you can later convert to cash flow. And this second one increasing your leverage that's a strategy that you just don't hear about on very many real estate investing platforms. So I haven't discussed leverage ratio in a long time. So let's talk about what it is, how you can improve yours, and then what it does for building your wealth. Okay, it's the relationship between your debt and your equity, and here's how to determine yours, and then I'll tell you how you're performing. Once you've determined yours, you might even be able to do it roughly in your head. All you do is take the total value of all the real estate that you own and divide it by your loan balances. That's it. Say you own a million dollars worth of real estate and you've got 500k of total debt on all that real estate. Well, it's really simple. Just divide your value a million bucks, buy your debt, 500k and your leverage ratio is two to one. Let's just call that two. If you're looking to build wealth, that number of two is kind of low. It should be higher. It means that you've got 50% equity in your property. Now say that instead, on the day that you bought that million dollars in real estate, you only made a 200k down payment. That's awesome. A million bucks divided by 200k your leverage ratio is five. All right. Well, what are these numbers really mean? Like this two and this five? All right, it's important because it is what you use to multiply your real estate's rate of appreciation by in order to find your rate of return. So just say that your real estate appreciates 4% this year. If your leverage ratio is just two, that's only an 8% return on your skin in the game. But if you've got more debt and your leverage ratio is five, then a 4% return means you've got a 20% return on your skin in the game. Do that keep your leverage ratio high? Now, what if your leverage ratio falls all the way down to a one. What does that mean? Oh, dear, you're not really doing much to build wealth because all of your properties are paid off. You don't have any mortgages on them. So if you're down to a one, all you've got working for you, from an appreciation standpoint, is compound interest. That's the point at which you've fallen from a compound leverage instrument down to a compound interest instrument. And as we know here at GRE which is counter to the mainstream world. And yeah, the mainstream world is where you have to work all of your life at a job you hate. And that's what you'll do if all you have is unlevered compound interest, all right, and if all you have is unlevered compound interest, well, don't book your Blue Origin flight quite yet. You're not going to go on one you can count on sitting behind a desk for decades instead.

All right. Well, how do you determine your leverage ratio? Again, it's your total real estate value divided by your equity. All right. Now, how do you keep your number high? By making new purchases with 20 to 25% down payments, and by not making new purchases is another way, and instead performing cash out refinances or doing both, you know another way to increase your leverage ratio, and you might not have thought about this, it's when real estate values fall. Now, that's surely not a desirable way to do it, and it doesn't happen often, but when real estate values fall, that drops both your real estate's value and your equity value by the same amount. And interestingly, with some of the ways that I described that you can add value to a property earlier, like a carport, that makes your cash flow better, but it does make your leverage ratio worse at the same time, a way to decrease your leverage ratio fast and lower your wealth building potential fast is to make an extra principal payment of a few 1000 bucks. I mean that one act alone might drop it from, say, a 3.14 to a three point. One Two over night. But look, I don't know what real estate markets you're invested in, and if you tell me what your number is, I'm gonna know how much your future wealth building power is, because you're keeping dollars not merely compounding, but leveraged. And if your number falls below about two and a half, which means 40% equity, that's typically when I begin looking to refinance or sell an equity heavy property, to do a 1031 into a bigger one. So two and a half, that's the number where you often want to take action. And really this is all just a fresh way of approaching an enduring mantra here at GRE Oh yeah, financially free beats debt free, and this sure can make you a mutineer among the masses. And I've been talking about these mutineers sort of things a lot lately, even with a tinge of irreverence. Perhaps you might remember that three weeks ago here on the show, I discussed how, depending on your circumstance, you can even make a car loan good debt, and how a seven figure income is the new six figures and then, yes, perhaps more irreverence. Last week in your free audio course, it was pretty iconoclastic to break down in detail how a 38% rate of return from just everyday buy and hold real estate is not risky at all. And last week's episode 550 the free course, that's probably the most important episode we've done in a long time. For a beginning real estate investor, if you've got any relative or friend in your life that you know, do you have someone around you that just doesn't get it about real estate investing, that really doesn't understand why you do this, please go ahead and share last week's episode with him. Episode 550 now on to the actual person of one, Donald John Trump. And why do I always say his name that way? I don't know. I'm not sure how that ever got started, but I don't say that as often as I call myself a remorseless slack jaw. In any case, the President wants to fire the Fed Chair Jerome Powell. This is nothing new. It just flared up again. I mean, here's the latest flare up. Listen to how Trump says he's never been fond of Powell. Okay, key in on that. This is Tom llamas on NBC, nightly news. You'll also hear the voices of Trump, Powell and Elizabeth Warren in Washington.

Unknown Speaker 8:38

There's a mounting standoff between President Trump and the Chairman of the Federal Reserve. The President blasting Jerome Powell for not lowering interest rates, accusing him of playing politics. Gabe Gutierrez is at the White House with markets on edge and his trade war escalating. President Trump is lashing out at the Federal Reserve Chairman he once appointed, writing on social media that Jerome Powell's termination cannot come fast enough. I don't think he's doing the job. He's too late, always too late. Slow. And I'm not happy with him. I let him know it, and if I want him out, he'll be out of there real fast, believe me, the rebuke coming after this warning from Powell Wednesday, tariffs are highly likely to generate at least a temporary rise in inflation, the President now slamming him for not cutting interest rates to help the economy. We have a Federal Reserve Chairman that is playing politics, somebody that I've never been very fond of, actually, but he's playing politics. Powell says the Fed needs more clarity before making a move. We're never going to be influenced by any political pressure. People can say whatever they want. That's fine. Trump had previously said he would not try to replace Powell, and earlier this week, the Treasury Secretary stressed the importance of an independent federal reserve. I believe that monetary policy is a jewel box that's got to be preserved. Democrats warning of chaos if Powell is ousted, if Chairman Powell can be fired by the President of the United States, it will crash the markets in the United States. Powell, whose term as Fed Chair ends next year, has said the President does not have the legal authority to fire him. If he asked you to leave, would you go? No.

Keith Weinhold 14:38

In that clip, Trump said he's never been very fond of pow dude. You appointed him, you You appointed him as Fed Chair in your first term, where you must have liked him more than any of the other candidates. Geez. Now you may or may not like Powell, but I don't see how. He's playing politics before lowering interest rates, it's completely sensible for him to see how the tariffs play out first. The Fed has long been independent of the executive branch, so they're supposed to be Trump wants Powell to lower interest rates. And remember, Powell already cut rates a full 1% late last year, and I really don't even agree with that cut when inflation was still elevated. Trump says Powell is always too late. Well, everyone agrees that Powell was too late to raise rates back in 2022 I mean, that had to do with the whole gaff where he said that inflation is just transitory, and no one will let Powell forget that. But do you give pal credit for a soft landing? I mean, he since brought down inflation while keeping us out of a recession, that's the definition of a soft landing. You know, I don't fully give pal credit there, just a little but remember, by that point, the inflation damage has already been done. It's already hurt a lot of people, and that's not changing. Now, of course, the inflation enriched you and it enriched me, because we're the real estate investors, and inflation is always going to do that for us. What happened is that Trump is frustrated because he saw the European Central Bank just lower their rates. So that's why he wants to see that happen here too. Because of course, lower rates can help the economy, at least in the short term. So I wondered about what you think. So what I did is I asked you in our latest Instagram poll, the question I asked was simply, should Jerome Powell be retained or fired? I was a little surprised at the result. 38% of GRE Instagram poll respondents said pal should be retained, and 62% said fired. I didn't think as many as 62% would say fire Powell. My best guess is that it's because you want lower interest rates on mortgages, and my next best guess is that you want to fire Powell, not because you dislike him, but more because you want to abolish the Fed completely, which I guess means that Powell would be fired that way. Did you hear about what happened when Donald Trump called tech support? Yeah. He told them, my tariffs aren't working. Tech Support responded with, did you try turning them off and back on again.

Hey, coming up shortly is Florida real estate doomed. If you'd like to reach out to us here at the show, you can do so at get rich education.com/contact, that's whether you have a comment or a question or a concern or a content suggestion you can communicate either through voice or email on our contact page, there one thing that we don't need, respectfully, are booking agents for shows reaching out to us. You know, I used to say that we have 50 times as many guest requests to be on the show with me here as we do available spots, but now it is more than 50x and I'm really grateful to host a platform where I guess a lot of people want to join in and contribute here, but the reality is that we only have one show a week, and a lot of weeks like this one I don't have any guests at all on the Show. That page is monitored by my terrific executive assistant, Brenda, just like most everyone here at GRE She's an active real estate investor too, and again, comments, questions or concerns about the show, please contact us at the contact page and get rich education.com/contact. More. Next you're listening to get rich education.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing. Check it out. Text family to 66866, to learn about freedom family investments, liquidity fund again. Text family to 66866

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

T. Harv Ecker 20:45

This is the millionaire minds. T. Harv Ecker, you're listening to the powerful Get rich education with Keith Weinhold. Don't quit your day dream.

Keith Weinhold 21:10

Welcome back to get rich Education. I'm your host. Keith Weinhold is Florida real estate doomed. Most anyone that pays attention has probably noticed that the Sunshine State has some areas, well, really, a number of them where property values have actually fallen. This is tied to the fact that there's an inventory over supply. There have been spiking insurance premiums tied to hurricanes. And what about the slowing population growth, and since the pandemic, Florida has had some of the fastest growing, highest appreciating markets in the entire nation. But today, in fact, there's a giant home builder there KB Homes that finds Florida's housing market. In their words, it's weak enough that they are cutting prices this spring. And KB Homes is ranked number 545 on the fortune 1000 so they're pretty sizable. And then an even larger home builder, Lennar, they basically said the same thing. The CEO of KB Homes said, quote, demand at the start of this spring selling season was more muted than what we have seen historically, despite a healthy level of traffic in our communities. So we took steps to reposition our communities to offer the most compelling value, and buyers responded favorably to those adjustments. End of the quote, yes, that is a genteel way of saying that we had to cut prices to get buyers like I mentioned to you, starting, gosh, probably a year ago or more, that other home builders have, instead of cutting prices, offered mortgage rate buy downs to buyers, be mindful though of how much your home builder is paying for those buy downs and how much you are at the closing table. Now, as we know, nationally, there's still a housing supply shortage, but KB, who does business in other states, says that Florida is the weakest, and that's due to over supply. Now let's forget about in migration for a second. Okay, that weakness is because a lot of communities are overbuilt to the point that the in migration rate cannot keep up with the over building. And of course, it's hard to generalize. Florida is a big, populous state of 23 million people. Southwest Florida has been hit the hardest that's pretty well documented. Punta Gorda, home values are down 9% year over year. Cape Coral down 7% let's go to the opposite end of the state, and Jacksonville, up in Northeast Florida that has about seven months of housing supply. It's actually pretty close to a balanced market between buyers and sellers, and then in the center of the state, Orlando, there's six months of supply that is a balanced market where there is normalcy in negotiation between buyers and sellers and a smattering of offers on one property And no one rushing and doing things like waving their inspection and then Miami Fort Lauderdale, you know, I really don't talk about them much on the show, because their prices are too high to work well as long term cash flowing rentals, both KB and Lennar say that they're keeping an eye on tariffs and that the changes to immigration have not changed their operations very much yet, because, remember, a lot of construction laborers are immigrants, and if they get deported, and then you need to hire native born US labor. Well, home prices go up, all right. Well, what about the Florida insure? Crisis. You know, over the past few years in Florida, a bunch of carriers have just withdrawn. They have pulled out of the state, farmers, insurance, bankers, insurance, Lexington insurance, all pulled out. Farmers told The New York Times that this business decision was necessary to effectively manage risk exposure. Similarly, AAA is another carrier, and they said that they're not going to renew some policies. They said the markets become challenging. 2022 catastrophic hurricane season that really contributed to an unprecedented rise in reinsurance rates, and that made it more costly for insurance companies to operate there at all. And prior to that, the market was already strained and had increased claims costs due to inflation and excessive litigation. That's what triple A said. All right, so where does this leave homeowners? Well, some are already relying on state and federal insurance programs, like the National Flood Insurance Program. There's a state carrier called citizens now, flood insurance is not required outside of a special hazard flood area, but that doesn't mean that a home is going to escape flooding if a hurricane passes through, but having insurance it does help along and accelerate the recovery process. Florida has some of the best Building Code adoption and enforcement in the country, and that fact alone has saved 1000s of homes and billions of dollars. But modern building codes are not necessarily applied retroactively to older homes. So it's those homes and properties that really have more exposure to hurricanes, those older properties, and a lot of Floridians are just skipping insurance coverage altogether so that they don't have to pay the premiums. They don't have any coverage. If you don't have a lien holder, you can do that. You can skip it, right? Well, like, How bad is it? Exactly? Just, how much have Florida insurance premiums been jacked up at this point. They've increased 60% on average between 2019, and 2023, and while homeowners and investors are primarily bearing that rising cost burden, I mean, insurers are feeling that squeeze as well. It's not just that the incidence of hurricane events is up, but premiums rise, of course, when the cost of labor in materials that it takes to replace and rebuild a damaged home have gone up as well things like concrete and structural steel and now, of course, as real estate investors, we can eventually pass on the cost of our higher insurance premiums to the tenant in the form of a rent increase, But when it goes up 60% in just four years. It's really hard to keep up with that. Florida's infrastructure is under some strain, too, and I see this when I drive the Tampa area. Every few years, I see more and more traffic. It takes me longer to get places like it takes me two or three cycles to go through a traffic light, where it only took me one cycle a few years ago. So roads and schools and utilities are under some duress to keep up with the population growth over the past decade, statewide commute times are up 11% you know, really that shouldn't be a surprise. I mean, that is common in any high growth area. Now, when it comes to insurance rate increases, there is a good chance that the worst is now over. Yes, Florida, insurance rate increases have been slowing down. The average rate increases have dropped quite a bit from 21% back in 2023 to a projected just two tenths of 1% for 2025 okay. I mean, that's basically no change expected for this year. Citizens, property insurance, that state option that I mentioned earlier, their rates are also shrinking, with some policyholders experiencing rate decreases of 5% or more. Now, I told you on a previous show that if you're looking to add rental property in Florida, go with new build properties for low insurance rates. But now I actually got a hold of some real policies between some of my properties and some of my friends properties. I've got them right in front of me here on a 1970s build single family home. I mean, the premiums can be high. We're basically paying 1% or more of the property's value in insurance premiums each year. So a 250k A valued single family rental that was built 50 years ago has a premium of $3,000 in some cases. I mean, that's a lot, but a close friend of mine recently went to GRE marketplace, got connected with one of our Florida providers. There, he bought a new construction duplex for I forget it was either 400k or 420k it's in Ocala, Florida, which is the central part of the state, and his 12 month insurance premium is $694. Wow. What a low premium for a duplex. That's why you go new build in Florida. Newer properties were built to today's construction and wind mitigation codes, and they have low insurance rates. And his duplex also appraised for 10k more than the purchase price. He has both sides already rented. And in fact, he closes on the property today, and yeah, I recommended that he go to GRE marketplace and get into Florida property, because that is indeed what he was interested in, and I sure wasn't going to stop him. So suffice to say, I clearly do not believe that Florida real estate is doomed. Florida has long been the antidote to high tax, high cost states, it has attracted snowbirds and retirees and hourly workers and increasingly younger professionals unable to crack housing markets elsewhere. Since the pandemic, millions of people have flocked to the state. I mean, when you look at a list of the fastest growing metro areas of the United States. I mean, Florida domination continues. You've still got big ones up there, like Lakeland of Florida is actually at the top of the population growth leaderboard nationally for metros with 500,000 or more people, Port St Lucie is also up there. It's third nationally, and Orlando is fourth. Three of the top four population growth metros are still in Florida, but this promise of sunshine and opportunity that has been replaced by something just a little less Sunny. I mean, you've got the rising home prices like Florida's not that cheap anymore, this diminishing affordability and this growing pressure on infrastructure, but Florida has definitely not completely lost its shine. People across the country are still moving to Florida, but not at the same rate that they did a few years ago, and the state is still seeing more people arrive then depart, besides the weather and the beaches that people love, of course, there's zero state income tax, and Governor Ron DeSantis has even proposed eliminating the property tax, like I mentioned to you on the show a while ago, although we can't count on eliminating the property tax anytime soon, if it ever happens. But wow, what a real estate boom that property tax elimination would create. So for the long term, which is what real estate investing is, I still like Florida. One thing that I don't like is trying to catch a falling knife, and that is analogous to say, investing in an area that is going down and has no future. Florida's got a future. It's got some challenges, just like anywhere in the US, but the reason it has a future is because more population growth is almost a guarantee. You don't get many guarantees in investing. Just look at the decennial census figures. Okay, this is the population of Florida every 10 years, starting in the year 1900 that's when they had 528,000 people, yeah, only about a half million people in the entire state, and I'll do some rounding here every 10 years after that. So in 1910 it was up to 750,000 people, then a million, 1,000,005 1,000,009 now we're up to 1950 where it grew to 2.8 million people, and then 5,000,006 point 8,000,009.7, 1316, 18.8 and then 21 and a half million in 2020, and it's 23 and a half million today. Now I only went as far back as 1900 there, but their census data goes back to at least 1830 and the growth has always been torrid, just uninterrupted. Every 10 years. There has been substantial to massive growth for at least 200 years, and Florida has still. Grown more than 2% per year each of the past couple years. In fact, it is still first place of all 50 states for population growth. So areas that are over supplied with housing in Florida are going to be absorbed. So Florida real estate is definitely not doomed. And in fact, adding more Florida real estate at this time, you know, that could very well be the type of thing where 10 years from now, or even five years from now, when their population is substantially bigger and there's less housing available. I mean, it could potentially look like a wise buy that you're able to get property at this time with less competition and maybe even a small discount here in the mid 2020s, and today, you can find three Florida markets listed at GRE marketplace. What else is happening at GRE marketplace? We've added two new markets, and they are also in the South. They are Jackson, Mississippi and Montgomery, Alabama. Yes, these areas are investor advantaged, and they have prices lower than most Florida markets. Though, I don't know that you'll see the net migration inflows into Jackson and Montgomery that you will in a lot of Florida markets. Jackson has a metro population of 600,000 and Montgomery 400,000 they both have really low property taxes. And there's something else that these two new GRE marketplace cities have in common. Any guess both Jackson and Montgomery are state capitals, yes, so they do have a base of government jobs. So check out gremarketplace.com read more about those cities. And of course, we even connect you with free investment coaching there to help you get matched up with some good property. Thanks for listening. Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 37:10

Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC exclusively.

Keith Weinhold 37:34

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter. You also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text, GRE to 66866.

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
550: Real Estate Pays 5 Ways: Your Audio Masterclass to Financial Freedom
21 apr· Get Rich Education
Unlock the Wealth-Building Secrets of Real Estate Investing! Learn how strategic real estate investing can dramatically transform your financial future.

Discover the Revolutionary "5 Ways You Get Paid" Strategy, updated for today's times:

Appreciation: Turn a 5% property value increase into a potential 20% return

Cash Flow: Generate steady monthly income from tenants

Return on Amortization (ROA): Let tenants build your equity for you

Tax Benefits: Enjoy generous government incentives for providing housing

Inflation-Profiting: Transform economic challenges into your personal wealth generator

Key Highlights:

Potential 38% first-year return on investment

No special certification or license required

Ethical wealth-building using other people's money

Proven strategy for creating generational wealth

Simple, accessible investment approach for ordinary people

Your wealth-building journey starts today!

Share the wealth by sharing this episode with a friend.

Free Resources:

Connect with a free GRE investment coach at GREinvestmentcoach.com

Download the infographic gift summarizing the five ways real estate pays here.

Show Notes:

GetRichEducation.com/550

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, real estate pays five ways updated for today's times, even with conservative assumptions, watch your total return from real estate climb to great heights today. You'll understand what billionaire real estate investors don't understand a new free audio course today on get rich education.

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

Speaker 1 1:12

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:28

Welcome to GRE from Belgrade, Serbia to Bellingham, Washington and across 180 nations worldwide. I'm Keith weinholder. You are back inside get rich education. Today you're going to understand real estate investing really well, probably better than anyone that you know, in less than an hour. Now, before I begin investing in real estate, I seriously wondered how in the world it could possibly be a lucrative investment vehicle. I mean, like, how would that even work? Because you've got this physical structure where elements wear down the outside, tenants wear down the inside, and the whole thing only appreciates it about 5% a year. Yawn. That is really boring. Well, later I would start to put the pieces together. And actually didn't really understand leverage in cash flow until after I had bought my first rental property, I became the person, however, to coin the real estate pays five ways concept, and I discussed that years ago on the show here, and now I have updated it for today's times. So the principles remain the same, but the numbers are different. That's because today, cash flows are lower and interest rates are higher than they were five and 10 years ago. So let's see what total rate of return we come up with today, and just how we get there. And on the way, you'll see even more evidence of why compound interest does not build wealth, and getting your money to work for you doesn't build wealth either. And to say that is total heresy. In a lot of financial circles, you'll clearly see how real estate has really made more ordinary people wealthy than anything else. This is course level instruction, and you're getting it all free right here today as part of one of our weekly episodes. This will help you retire earlier than you ever imagined, or just find the time for yourself to become the best version of yourself. Now, for long time, listeners, I've got to tell you first, much of today is going to sound like a review, but I've got a really surprising twist at the end here, in the fifth of five ways that you're paid, I also have a free gift to give to you and to all listeners today. And this is not in any way, replay of old material. It's not AI generated. It never is. It is me talking to you updated for today's times. And this is we're about to get started. This is just with simple buy in hold real estate. So you don't even have to be a house flipper or a wholesaler or a landlord, and you can just use normal 30 year mortgage loans. And as we see, it doesn't even take a ton of money. These are fundamental wealth building attributes that lay people don't understand and will change your life. I mean, more than 95% of real estate investors don't even understand what I'm about to share. We're going to calculate your rate of return from each of the five ways we'll calculate, then your cumulative return on investment until it builds up and culminates. In your total return at the end today, and I'll tell you anything less than a 20 to 25% total return in this buy and hold real estate is actually disappointing, and you don't even need to take on inordinate risk. But you'll see the exact percentage that we get up to today, and how it gets even higher than 20 to 25% I mean, this is how real estate creates Young Money and old money and Fast Money and slow money, and gives you access to other people's money. Ethically, all of that, we have some new listeners dropping by today. So if you're new here, I'm Keith Weinhold, get rich education founder, Forbes real estate council member, best selling author, and long time real estate investor, also an incomprehensibly slack jawed and snaggletooth to podcaster. But see here in the audio only, you only have to hear the slack jaw, but video platforms where you'll find me and this course on YouTube and rumble, oh, through a disaster, because you both hear my slack jaw and have to see my snaggletooth. It's dreadful.

Getting back to the course here, you know, school did little to teach you and I about the most important things in life, like nutrition or relationships or money. And you know what drives most divorces? Can you guess what it is? I mean, it's not arguments over trigonometri or English grammar or the periodic table of the elements. No, it's money problems. Well, the financial education in this course, it's gonna help you solve that as much as anything you need to take on the mindset of how you must unlearn what you've learned before you can believe something else.

We're gonna use this same simple example of a $200,000 income property throughout the course a rental, single family home. Yes, you can still find many of these, and it's with a rent paying tenant. Now, if you want to think bigger than a 200k property, no problem. Say you want a $20 million apartment building, you can just multiply everything by 100 because we're talking about ratios today. Say that when you buy this property, your down payment and closing costs have you putting in 25% All right? So you've now got 50k invested on this 200k property.

Well, in the first of five ways you're paid appreciation is what it's called. Well, historically, real estate appreciates at about 5% per year. All right, see your 200k Income Property appreciates to 210k There's your 5% yawn, boring. That might only be about the real rate of inflation. That's what most people think. But look at what you just did there already. You just did something amazing. You already benefited from a force greater than compound interest. You just created compound leverage, and most people don't even know it, because your return is far greater than the 5% total appreciation your return on investment is your gain, which is 10k divided by the amount that you have invested, which is 50k because that's all that you put into this. You just got a 20% return from only the first of five ways you're paid appreciation. And now, if you're scratching your head wondering how that just happened, how did 5% return go to 20% no worries, I will slow it down. And this course never gets more complicated than this, you achieved a 5% return on both your 50k invested and the 150k that you borrowed from the bank. See the return on the bank's money doesn't go to the bank, it goes to you all while the tenant pays the interest on the mortgage loan. We'll get to that part later for you, this could be your first moment of epiphany in this course, a light bulb moment. Yes, today you'll get more light bulb moments than Thomas Edison. That is the magic of leverage. It's so simple ethically use other people's money, but most people are only getting compound interest, a return on their money, only not theirs and others like they could have great so where does appreciation come from? What is its source? Supply versus demand for real estate an area's wage growth, population growth, a region's infrastructure improvements contribute to this. The shrinking availability of developable. Land and more. Now what if real estate prices go down? You're covered. That will be addressed shortly. Here we are just scratching the surface. You're starting to figure out why wealthy people's money either starts out in real estate or ends up in real estate. And the thing is, is you can do this the same simple way that I did when I began as a real estate investor. You don't need any degree or certification or real estate license in order to do this. Real Estate pays five ways.

Now that you know about the first appreciation, leveraged appreciation in real estate's case will carry forward your 20% gain and add it onto the second of five ways you're paid, cash flow. For many, this is the most important one. One way for you to think about this second way cash flow is that it's the recurring income from your tenant that shows up, whether you had any involvement with the property that month or not. That's why this is passive income most months. This one is the most liquid of the five ways, because it pays you cash every month, and therefore you can immediately either reinvest it or just spend it and increase your standard of living. This is effectively your salary increase plan. Yes, it's the opposite of a 401 k, which is a salary reduction plan, which actually was an early name of 401 K plans, since this income is sourced by your tenant rent payment, minus the property expenses. Your Cash Flow is sourced by jobs, because that's how your tenant gets their rent payment that they pay you, and this is why I like larger metro areas, your market selection is more important than your property. That's a huge lesson right there, because it's about the durability of this cash flow. All right, we're about to run the numbers and see what your rate of return from passive cash flow is. Let's do it. We'll build on our example of your ownership of a 200k income property with your 50k down payment. All right, on the 200k rental single family home, say that your rent is $1,500 a month. That is therefore $18,000 of annual rent income. But then you need to deduct out your expenses, and you do have a lot of them. They are your mortgage and your operating expenses, like I've shared with you before. The easy way to remember those operating expenses is with the acronym VIMTUM, vacancy, insurance, maintenance, taxes, utilities and management, and paying that manager is what keeps this mostly passive for you. So to be clear, your rent income minus your mortgage in VIMTUM operating expenses equals your cash flow. You can kind of think of that as your rent overflow. Okay, here we go. Say you figure that from your 18k of annual rent income that you need to pay out 15k worth of annual expenses, that leaves you with $3,000 of cash flow, or so you thought, but you have a freak plumbing problem that creates a bill of 1000 bucks. However, you have property insurance, but say your insurance deductible is $1,000 so you've just got to come and pay out of pocket for your managers, plumber to fix it, and now the $3,000 of annual cash flow you thought you'd have only leaves you with $2,000 somewhat of a thin cash flow. Then that's a higher maintenance expense than you had previously forecast in your pretty looking pro forma projection. That often goes wrong, because something stupid often happens out of the blue in real estate investing, all right, well, with your $2,000 of cash flow, which is passive income, that's divided by your same 50k invested that gives you a return of 4% from the second of five ways you're paid. That number is what's known is the cash on cash return. You thought it would be 6% but we're being conservative. The Freak plumbing problem made it just 4% add this to the 20% from leverage depreciation in the first video, and you now have an accumulated 24% total rate of return from this income property already, and we still got three ways to go. We're just gonna keep piling onto this return in the next three ways you're paid. How high is this going to go? And you know what's interesting with this? Luke. Conservative math adding up your lofty return. It's actually conservative as we proceed, you'll note that I'm using simplification and rounding you're going to see me round down more than round up. To keep this conservative and real estate math is simple. It's just add, subtract, multiply or divide. There's nothing complex, no trigonometri or calculus or exponents. This is easy. You just have to know what numbers to use, and that's what you're learning and reinforcing today.

Now here's a weird scenario. Imagine if you had a stranger out there funding a bank account for you, making monthly contributions into this illiquid savings account. I mean, does that sound too good to be true? Nope. It exists. The third of five ways that real estate pays is exactly why this is real, as this free audio course, real estate pays five ways continues for you. Real estate has so many ROIs returns on investment that one of the five is called an Roa. That's the third way you're paid. And none of this material is new or esoteric or avant garde. It's always been out there. There's just been no one else that's put it together before this, most people were never taught how to build real estate wealth in the real world. And what's insane about this third of five ways you're paid is that now you're probably already getting paid more ways than you ever have. I mean, instead, what is most people's investing experience, it's in stocks, bonds, mutual funds, ETFs, gold or Bitcoin. I mean, that's where you're typically only paid one way, capital appreciation, if you even get that, and maybe a second way is if you have a dividend paying stock. But I mean, that's all you've got. One way, maybe two. If you want to build wealth, you've got to give your money multiple jobs. That's exactly what we're doing here. ROA stands for your return on amortization this third way you're paid is the monthly principal pay down portion of your mortgage. That's your return. So we're going to add your ROA to the 24% total return that we've accumulated so far. And now you might think you already have experience with an ROA if you have a mortgage on your own home, your primary residence, but no, not actually, because in your own home each month, a portion of your mortgage payment goes toward principal pay down and the rest of pay interest, but all you did in your primary residence is you went and you had to work to earn money all month. All you did at the end of that month was move that money from your cash pocket over to your equity pocket when that mortgage payment gets made. So that's merely a transfer of funds, but with income property, your tenant earned that cash that month to pay your mortgage principal payment, and we'll tally that up in a moment. On top of the principal, they pay your entire interest payment, plus your tenant pays you a little on top of that each month called cash flow, which was the second way you're paid. So yes, your tenant is going to work for you. If your tenants rent payment is a third of their income, they're working close to 10 days a month just for you, just to pay your rent. I mean, that is amazing. If you add properties with rent paying tenants like this. It's sort of like you have all these employees out there working for you, and yet you don't have to manage them at work. It is amazing this third of five ways focuses on that return on amortization, and the etymology of the word amortize that comes from the old French meaning death. And that makes sense, your tenant is slowly killing off your mortgage balance for you over time. So let's do this. Let's add up your ROA, all right, we're using this same example where you got a 150k loan on your 200k rental, single family home. Let's say that you got a 7% interest rate on a 30 year fixed rate mortgage, so just the plain everyday loan. Just look up any amortization calculator, enter those numbers in there, and you'll see that in year one, your tenant pays down over $1,500 of your income properties mortgage balance for you, let's round it down to just 1500 bucks, because it could have been some vacancy in there as well. Your ROA is simply this year, one principal pay down divided by your amount invested again, that is 1500 bucks divided by your 50k Of down payment and closing costs that you have in the property your skin in the game. And this is another 3% return for you. That's your Roa. I mean, you are beginning to really build wealth now. This is somewhat of a hidden wealth generator that a lot of investors never consider. Many of them are aware of this, though, it's like your tenant is funding an ill, liquid savings account that has your name on it. We'll add this 3% ROA to the tally of a 24% cumulative return that we figured from the first two ways. Yes, you are now up to a 27% total rate of return from appreciation, cash flow, your ROA, and we still have two of the five ways to discuss. We're just gonna keep piling onto your return. What is the source of your Roa? This 3% it is jobs again, your tenants income. If interest rates fall and you refinance, you'll get an even higher annual chunk of tenant made principal pay down, even with the initial loan kept in place this 7% mortgage note, how in future years, your amount of 10 it made principal pay down. Only keeps increasing over time. But we're only talking about year one in this whole example. We're going to carry forward your 27% total rate of return so far into the next one as this real estate pays five ways. Audio course will continue here in Episode 550 of the get rich education podcast, yeah, even the episode number has some fives in it as we roll on, breaking down just how the five ways build wealth more after the break, I'm your host, Keith Weinhold, this is get rich education.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time, in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text family to 66866, to learn about freedom family investments, liquidity fund again. Text family to 66866. 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.

Speaker 2 23:45

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 24:10

Welcome back to get rich Education. I'm your host. Keith Weinhold, as we continue with the real estate pays five ways audio course, before the break, we're rolling forward a 27% total ROI from the first three ways that you're simultaneously paid. Again, nothing complicated, just with a piece of buy and hold real estate that you purchase carefully. You don't have to do any renovations. You don't have to be a landlord. This is how you're going to build forever wealth, legacy wealth, if you don't come from money now, money can come from you. This can shake up your entire family tree. After today, you'll have a concrete plan. I don't come from wealth. I build it myself, and I'm laying out the architecture of how I did. Just that in a simple way for you, the fourth of five ways you're paid is that real estate investors are rewarded with a generous basket of tax benefits from the government because you are doing what the government wants. You're providing others with housing. Informed people know that if you spend money on certain things like solar panels for your home or education expenses, you get a tax break for spending that money. Well, with real estate, you don't even need to spend any money to get a tax break every single year. Incredibly, you get the tax deduction anyway. It's easy. Let's do it here. And you know, it's time to make something crystallized for you. And this can rock your world and even induce some disbelief. Some people say, don't get your money. Get your money to work for you. We've all heard that. Here is the heterodox. Here is the paradigm shift. If you want to build wealth, don't get your money to work for you. Outside of this show, I bet you have never heard that iconoclastic stance your best and highest use as an investor is not to get your money to work for you. It's making other people's money work for you. OPM, now, you probably heard that before as well, but I've got a twist on that. But see if you want to build wealth, do you think you'd have to both think and act differently than the masses? I mean, yes, you certainly do, but this is your differentiator, even multi decade billionaire real estate investors don't realize what I'm about to share with you forever. Wealth is built. Early Retirement, wealth is built. Your standard of living is indelibly elevated beyond what you ever thought possible because you are ethically using other people's money three ways at the same time, the bank's money for leverage in the loan, which we covered in the first way, you're paid the tenants money for cash flow and loan pay down, which we covered in videos two and three. And now here you are using the government's money for generous tax benefits at scale, which we're covering in this fourth of five ways you're using other people's money, three ways at the same time within this, this is why you're building wealth. And of course, this does not mean you're exploiting people by using their money, just the opposite. You're doing good in the world. Provide people with housing that's clean, safe, affordable and functional. Do that, and you'll be profitable in the long term and never get called a slum lord. Rental property income is generally taxed at ordinary income tax rates, but you don't have to pay tax on all of your rental income. The tax deductions are generous from rental property, you can deduct out your mortgage interest and your operating expenses, which I will not cover in our example. You also get a depreciation deduction. We'll look at that one closely, and when you sell, you can endlessly defer your capital gains tax so you never have to pay it all of your life, all right. Well, what does this really mean? If you buy a rental property for 200k and after a bunch of years you sell it for 500k your capital gain was 300k in most investments, you need to pay capital gains tax of at least 15% on this you would take a $45,000 tax hit. But with real estate, when you sell if you generally replace it with a property of equal or greater value, your capital gains tax is zero, absolutely zero. Now, rental property taxes are somewhat complicated, and I am not a CPA, I'm giving general guidance. I'm not going to get into things like your adjusted basis and other details. In fact, I'm not even going to consider this benefit of deferred capital gains tax in tallying up your rate of return. So instead, let's only look at your return from the tax depreciation portion of your full basket of tax benefits. It's going to keep things simple, and it'll also keep our example more conservative. Yes, even though your 200k rental property in our example tends to appreciate in value, the government says you can get a tax break because they say that the property wears out over 27 and a half years. That's just what the IRS guideline is. This only applies to rental property. There's no depreciation deduction on a primary residence. Let's do it on your 200k property, you can only depreciate the structures value called the improvement, not the land portion. We'll say that your structure or house's value is 150k and the land is 50k even the IRS knows that land doesn't wear out, only the structure. Divide your 150k structure value by 27.5 Yep. Pretty weird, arbitrary number, but that's how long the IRS says it takes to wear out. That gives you $5,454 that's how much you can depreciate or shelter from taxes if you're in the 24% tax bracket, that's $1,309 in tax savings for you. Divide that by how much you have invested in this 200k property. Again, that was 50k when you made the down payment and closing costs. This is a 2.6% return. Let's keep being conservative and round that down to 2% there it is our number from the fourth of five ways you're paid. We are layering on another 2% return. Now, can you really call a tax break part of your return? Is that fair? Should that be considered? Yes, it is, in this case of tax depreciation, because you did not even have to incur an expense in order to get that deduction, that's why some people call it the magic of depreciation. Usually, to get a tax break, like I was saying earlier, you have to make an out of pocket expense, like pay for fees to attend a conference or buy solar panels or pay automobile expenses. But you don't have to do that here, so the 2% rate of return for your tax benefit is even more conservative when you realize that we also are not digging into how this piece of real estate can also make you eligible for other tax benefits like a qualified business income deduction, a cost segregation and bonus depreciation. And for simplicity, we're not going to go run examples on different marginal tax brackets, and there are income thresholds and other thresholds, whether you're married or single. And of course, we are excluding that erstwhile capital gains tax that you can legally duck out of to collect all the tax benefits without me having to get deeply involved. At the end of each year, my property manager just sends my property's financials directly to my bookkeeper. And yes, I know we've got some CPAs listening to this right now thinking that 2% that is much too low of a return from your basket of tax benefits, but that is all we're going to use. We're going to add this to the ROIs that we accumulated from leverage appreciation at 20% in the first way, cash flow at 4% in the second way, and an ROA of 3% in the third way, plus this 2% from tax benefits here in the fourth way, here we are up to a 29% first year total ROI from your 200k single family income property that you so wisely purchased. Now you know how to use other people's money three ways at the same time again, the banks, the tenants, and with these tax breaks the governments.

Let's move on to the fifth of five ways. Add up your total rate of return, and then I'll give you some more important takeaways to give this context, and I'm going to give you your free gift. Your fifth way is your second biggest profit center, and most real estate investors don't even know that it exists, you're going to profit from something that actually makes most people poorer. So we're going to take our 29% add the fifth way to it, and it's going to culminate in your total number. The fifth way is called inflation profiting. Remember, it's not inflation hedging. Real Estate bought the right way is not an inflation hedge. Hedging is defensive, meaning that you break even from inflation, but no instead, you're actually profiting from inflation. That's different. This is offensive. Now a conventional financial advisor. You know, they're often out there selling investment products that tout something like a 10% rate of return. You know, synonymous with a return from the s, p5, 100. Ask your financial advisor about the five drags on that return. It's 10% minus inflation, emotion, taxes, fees and volatility, and your adjusted return is often less than zero. Just look at their track record. Stocks and mutual funds don't make anyone wealthy. They might just preserve wealth if you already have it strategically bought. Real estate has hegemony over all the other. Set classes precisely because it pays five ways. Either you can be a conformer or you can build wealth. If you want to escape financial mediocrity, you can't run with the herd. You need to get into a lot of good debt. It sounds scary until you realize that debt is tied to a carefully selected income property, meaning your entire debt payments are therefore reliably outsourced to tenants. DEBT, TAXES and inflation are three forces that make most people poorer. It makes most people poorer because they either don't have the resources, or they don't have the know how to arrange their financial life. They don't have any strategy. Well, today, you're learning how to make these three forces, DEBT, TAXES, inflation, those three wealthier with the Debase purchasing power of the dollar. You know most people, they see the price of a new car that goes from 50k to 60k or that their favorite Subway sandwich goes from nine bucks to 10 bucks, and then they just kind of hope that their salary keeps up. You know, that's sort of the average experience with inflation. Now, you and I, we would not save by stashing a million bucks under the mattress, because 3% inflation would de base its purchasing power by 30k every single year. That's why we do the opposite of saving. We borrow. For every million you borrow, we'll every year say that with inflation, your wage, salary, rent, income, all go higher by 3% now it gets easier to pay back your million dollar loan all while the tenant pays the interest, and you're profiting 30k each year. So after one year, you only owe the bank back 970k and inflation adjusted dollars and 940k after year two, and 910k after year three, inflation debases savings and debt at the same rate, so borrow instead of Save and see, this is the reason why the top selling financial author of all time, Robert Kiyosaki, a frequent guest on our show here, he says, savers are losers, debtors are winners. In an inflationary world, don't be a saver. Be a savvy debtor, because in the future, you can count on more inflation. See, the government needs inflation to occur. The easiest way for the US to repay its 10s of trillions of dollars in debt is to just keep printing lots of dollars, and that process debases every dollar that you're currently holding on to. Who cares about your debt when both tenants and inflation are just relentlessly paying it down for you? That is if you're doing real estate right, which means buying an income producing property with a loan. That's the whole formula here. That's all we're doing, buying a rental property with a loan. But when you understand how inflation both pumps up your real estate value and simultaneously debases your debt, it turns your world upside down, you almost become this inflation cheerleader, because inflation is now good for you, as this audio course is now covering the fifth of five ways you're paid. Please understand some risk still exists. You could buy in the wrong market, hire the wrong property manager, or just buy the wrong property no matter what, you're going to have some inevitable problems along the way, like that plumbing problem I mentioned earlier in the second of five ways you're paid over leverage is a risk over leverage means that you take on so much debt that you can't make the monthly payments so you can still lose money. But from listening today, you vastly increase your chances of being profitable, and that's why we say that carefully bought real estate has the best risk adjusted return. Here we go, following through with our example across all five ways on your 200k income property that you made a 50k down payment on, that is therefore a $150,000 loan that you took out at a 3% inflation rate each year, your debt is then being debased by $4,500 this is a quiet, hidden wealth generator that most investors don't even know about. $4,500 of inflation profiting divided by your same 50k down payment means that you have another 9% rate of return. Wow, a 9% rate of return that you're getting that most investors don't even know about. I mean, in the conventional financial world, I mean, they're proud to offer you a nine. Percent mutual fund return over time, and they advertise that as something good here by putting a down payment on a rental property. This 9% is another sweetener that no one even notices, and that gets added on to everything else. It's just incredible. Yes, 9% now, in the past, I used to think this return was just the inflation rate that we're using here, 3% but see, this is leveraged as well a 9% return from inflation profiting. And like I mentioned, uh, towards the beginning of the show, this is the twist for a long time get rich education. Podcast listener, see 3% that would merely be a hedge. So add this 9% to the 29% running total in the first four ways, and there you have it, an astounding 38% total rate of return from the five ways that real estate pays 38% I mean, you are really understanding why wealthy people's money either starts out or ends up in real estate, and that you don't have to be wealthy to start everything we discussed there was in year one. I mean, if someone asks you why you're investing in real estate, you can just hold up five fingers and share this episode with them. I mean, this says it all, and we could have surely come up with a higher number than 38% if you had used a 20% down payment instead of 25 then you'd have more leverage, and your total ROI would be in the mid 40s percent, and we really handled the tax portion conservatively. Here another reason your return could be higher, this was with a 7% mortgage rate and a pretty modest 4% cash on cash return as well. Yes, your total ROI is 38% now after year one returns fall over time due to the accumulation of equity in your property, so the denominator for the calculation is larger. You got 38% in year one, perhaps year two is 31% and year three is 24% but you can really see how you're getting ahead of the world in three years like that in other episodes of the show. Here, I do talk about how to limit the return attrition through refinancing and some other techniques, but these are amazing rates of return, compounding evidence that compound leverage blows away compound interest, and again, it's DEBT, TAXES and inflation that are making you wealthy. How you should know by now the formula is really simple. Just buy an income producing property with an everyday 30 year loan, even if real estate values fall, you can get paid for other ways and still have a positive return. Real estate values have always bounced back even after 2008 and see if the property is temporarily suppressed in value, you're going to have little concern with wanting to sell it when tenants are still paying you a monthly income during that time. Very few veteran real estate investors understand the five ways. Most real estate educators don't understand this either, but now you do, and to get this 38% total ROI again at times I simplified throughout I mean, your real world return is likely going to be different. It's going to be higher or lower than 38% probably. But now you know about a vehicle for actually creating durable wealth, and I would like to think that what you learned today is the most complete yet still concise way of understanding how a real estate investor gets paid. You gotta know this. This is the motivation for wanting to do this in the first place.

And hey, if you like what I've shared so far, I'd love to ask you for something, and then I have more important things to tell you and give you your free gift. As I made this course free. Hey, if you would please just share the wealth. Share this episode with a friend. I'm sure you know somebody that would benefit from this. It's really a big aha moment when you finally know how it all goes together. If you subscribe to our newsletter, you were already sent the video version of this course here in just the past couple weeks that's going to help you see how all the numbers go together. And the video course was also released free on YouTube, so if you're listening to this within a few weeks or months of the episodes release, it's still easy to find on our get rich education YouTube channel and four. Finally, in order to make this actionable and actually profit from what you learned, you can just copy me and buy properties from where I buy them at GRE marketplace, that's where there are properties conducive to the five ways you're paid. It probably does take about a minimum, oh, of a 35k to 55k down payment in order to get started. Properties are either new build or renovated. Tenants are in place. There's a property management solution, if you like, and optionally, our free investment coaching service there learns your goals, then helps match you with the right areas and properties and hey, I'm happy to tell you and announce that you can now connect directly with our completely free investment coaching service at GREinvestment coach.com, yes, this is a new URL to make it easier for you to connect with a GRE investment coach. Yeah, I kind of thought that was a good one, huh? How do you connect with a free GRE investment coach? Well, at GREinvestment coach.com I've got a free gift for you. Everything that we discussed in this course today was distilled down into one colorful infographic that we designed and laid out here so you can view it, download it, or even print it out on one eight and a half by 11 inch sheet of paper. Yeah, my team and I went back and forth on this infographic for quite a few rounds to make it just right. I like how it looks, and I've never known anyone else to do this all the ways real estate pays concisely onto one sheet of paper. The link for that infographic gift is in the show notes for this episode at get rich education.com/ 550 since this is episode 550 get it at getrice education.com/ 550 Yeah, the infographic gift is a memento of this course and the time that we spent together today. Think of it as your diploma, and it's a diploma that doesn't come with 12 years of student loan payments either. Yes, it is just a piece of paper, but is it worth more than the piece of paper known as your bachelor's degree or your MBA? I don't know. You can be the judge. So congrats, graduate. Now you know how real estate makes ordinary people wealthy, but learning this today really doesn't benefit you if you don't find the right property in the right market with a property manager. If you so choose a property manager, you've got to take action. You usually want to start small, including with investor advantage, single family rentals for as little as 200k just like our example, some cost even less. We will help you do just that, and do it for free with our coaching book a time and get it on the calendar at GREinvestmentcoach.com that's GREinvestmentcoach.com

I'm get rich education's Keith Weinhold, thanks for being here, but you weren't here for me. You were here for you. I'll see you next week. Don't quit your daydream.

Speaker 3 48:25

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 48:49

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why this is the golden age of quality newsletters, and I write every word of ours, my self, it's got a dash of humor, and it's to the point, because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866.

The preceding program was brought to you by your home for wealth, building, get rich, education.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
549: Who You Are vs. Who You Could Be with Loral Langemeier
14 apr· Get Rich Education
Keith introduces the three types of freedom: time freedom, money freedom, and location freedom, and how real estate investing can provide all three. He is joined by special guest, Loral Langemeier, a global wealth expert, who shares her journey from a $25,000 investment to becoming a millionaire through real estate and mentorship.

Debt is Not Negative: Loral emphasized that debt is simply the cost of money and can be a positive tool when used responsibly.

Tax Strategies for Wealth Building: She introduced the "tax trifecta" - understanding how you make money, how to activate tax code deductions, and how to invest in alternatives like real estate to reduce taxes.

Active Engagement and Mentorship: Loral stressed the importance of actively engaging in your wealth-building journey, getting the right mentors, and continuously learning. She believes the difference between those who succeed and those who struggle is their level of active participation and willingness to learn from experts.

Resources:

Ask questions and make requests at AskLoral.com to receive free tickets, ebooks, and other resources.

Show Notes:

GetRichEducation.com/549

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, it's the first time that we have a certain legacy finance personality on the show. We're talking about how you can cultivate your own personal wealth mindset, how to creatively add value to your real estate and how to put your kids to work for big tax deductions and more. Today on get rich education.

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

Corey Coates 1:12

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:28

Welcome to GRE from the second state of Pennsylvania to the second to last State of Alaska and across 188 nations worldwide. I'm Keith weinholding. You are back for another wealth building week. This is get rich education, and coincidentally, they are the two states where I've lived my life. Every single one of us has a gap in our lives. There is a gap between who you are and who you could be. And today, my guest and I will talk about this some more. Look, there are people who should already be financially free, but they're not. Their residual income could exceed their expenses by now, yet they aren't financially free. It's not because they're lazy, it's not because they're stupid, it's because they're stuck in one of these three traps. Number one, they're working harder instead of smarter. Number two, they're playing small instead of playing to win, which is like paying off low interest rate debt instead of keeping their own money, like I discussed last week, or thirdly, investing in all the wrong things, or not investing at all. And the worst part is that these people don't even realize that they're doing it. Most people aren't even cognizant. They don't have any awareness of the gap. You're not going to make progress on closing a gap that you don't know exists, you've got no chance of hitting a bull's eye when you're aiming at the wrong target. And I think it helps to develop a structure in your life where you have to tell yourself, I better do a good job here, or else. Yeah, it's the or else part that's a motivator. Now, some people won't extrapolate that mantra beyond the workplace. The number one thing that keeps employees showing up at work is fear. They tell themselves, I better show up at work on time, or else, I better do a good job on this project, or else I better give a great sales presentation. Or else. Now that's all well and fine, but to close the gap between who you are and who you could be, tell yourself something on a higher level, like I had better get some residual income outside of work, or else I'm going to stay stuck in a soulless job forever, and I'll never get that time back. So you've got to set up the right for else consequence for yourself. And then, yeah, of course, there are smaller ones like, I better avoid eating kettle chips, or else I'll gain weight. Let's be mindful that there are three types of freedom. You've got three types time freedom, money freedom and location freedom. Real Estate Investing gives you all three. You can make an unlimited income. There's the money freedom part. You can remotely manage your property managers from anywhere. There's your location. Freedom. And since you're not directly responding to your tenant, your property manager is, well, there's your time, freedom, you've got a buffer from emergencies, once you get this dialed in, and it does take a few years, oh, now you've got the time freedom, the money freedom and the location freedom. What do you want to avoid only making a big income? It was recently reported that Wall Street bonuses were way up this past year. Okay, yeah, but how happy are those finance worker Manhattanites who wear an iron pressed button down shirt and a Patagonia vest for 14 hours a day. That's not time freedom for sure, and it isn't location freedom either, unless it's 100% work from anywhere. You know, in my life, I recently got a great reminder of this. It really hit me. I have this close friend. He was the valedictorian of our high school class. I think I brought him up before. He's still a tight friend. I mean, sometimes we go on vacations together. Well, we have a high school class reunion back in Pennsylvania this summer, and among him and our other like, closest group of friends, my tightest guys, I'm always encouraging everyone to, hey, spend at least a week together, because we can't all get together like this that often, and because I have the time freedom to kind of suggest that and even push for that. Well, my valedictorian friend, he is a surgeon in St Louis, and among this tightest knit group of friends, he's the only one that cannot get the week off so that we can all hang out together more after the reunion. Instead, he can only get three or four days. He's got to get back to work as a surgeon in St Louis. Now, I'm sure he's compensated really well, and he doesn't live a bad life, but as a surgeon, you know, it's just become blatantly obvious that he doesn't have either the time freedom or the location freedom. Yet I do as a remote real estate investor, even though it's not something that I studied in college, but my valedictorian surgeon friend, you know, he had a long educational path, you know, undergrad and med school and residency and a ton of training and all these years tied up in his medical education. Therefore, you know, sometimes when people do that, they feel obligated, like that's what they should do, that's what they have to do, because he's already put so much into it. But he only has one of the three types of freedom. And no matter what you went to school for, if you find out about something better, like a great business idea or remote real estate investing, you've got to consider pivoting into that and go into that if it makes sense for you, the world changes. It keeps getting faster, and you've got to change with it. So obtaining financial freedom through real estate helps you deal with an external locus of control issue where life is constantly happening to you, rather than something you can influence. When you're an employee, life happens to you more often than when you're the one pushing the buttons, when you control the three freedoms now, you are narrowing that gap between who you are and who you could be.

I didn't mention it previously. Two weeks ago, I brought you the show from Las Vegas, Nevada, last week, from just outside Colorado Springs. And today I'm here in Anchorage, Alaska, where I'll be for a few weeks before heading to London, England, and then from there, on to Scotland. I plan to visit the former home of the father of economics when I'm in Edinburgh, Scotland, of course, that is Adam Smith, the author of The Wealth of Nations. I might tell you more about that at that time.

Before we bring in our guest this week, a quarter recently ended. Here is our asset class rundown. The NAR reported that the median sale price of an existing home rose 3.8% year over year in February, marking the 20th straight month that sale prices increased year over year. Mortgage rates fell from 6.9% to 6.6 per Freddie Mac this is all year to date. Q1, the S, p5, 100 was down four and a half percent. The NASDAQ down 10 and a half percent. That's officially correction territory, as those tariff years dominated. The quarter interest rates of all kinds are a little lower yield on the 10 year, Tino falling from 4.6 to 4.2 despite inflation concerns, inflation hovering just under 3% for most of the quarter, Bitcoin down 12% oil is still super cheap, beginning the quarter where it ended near 70 bucks. Gold has been the star performer this year. Are up 17% just in the quarter, and for the first time in history, has searched the over $3,000 an ounce, its best quarter since 1986 in fact, this century, gold has now outperformed the S, p5 100 by two and a half times. Just incredible. There's our asset class rundown. Let's speak with this week's guest.

This week's guest has been a long time, prominent, well known name, perhaps even a household name. She is a global wealth expert, six time New York Times, best selling author, and today, she runs integrated wealth systems and other alternative asset platforms since 1996 she's been involved in multiple areas of finance, mentoring, real estate investment, business development and gas and oil. And much like me, she teaches people her strategies on how to make money, invest money and keep money, but together, you and I can look forward to getting her spin today, and you've seen her seemingly everywhere over time, in the USA Today, The Wall Street Journal, the view Dr Phil in every major legacy network channel, many times she is on a mission to change The conversation about money. She was known as the millionaire maker from back when a million was actually a lot of money. Welcome to GRE Loral Langemeier.

Loral Langemeier 11:31

hey, thank you. It's great to be here. Look forward to talking with your audience,

Keith Weinhold 11:35

Laurel, though we're a real estate investing show and audience here, I think that you and I would agree that wealth building starts in the mind that most valuable six inches of real estate between our ears. What's your take on cultivating a wealthy mindset?

Loral Langemeier 11:50

You got to hang out with millionaires. I said the fastest way to become a millionaire is hang out with them. Is for me. I knew that's what happened. 1996 Bob Proctor introduced me to Robert Kiyosaki, Sharon Lechter, I flew down, sat at her kitchen table. I walked out that day. I flew in as an exercise physiologist for Chevron, building fitness centers in their blue collar like offshore oil rigs, refineries like the sexiest places in the world, Kazakhstan and goal Africa. I went in as an exercise physiologist. I went out the next day as a master distributor with a cash flow game. And I jumped, I quit my job and said, I'm going to go follow this Japanese kind of game around. And I was teased and teased and teased. Keith because, I mean, Rich Dad, Poor Dad didn't really hit until 1998 so sort of this risky proposition. But like with anything you say yes, you figure it out. And I knew people asked me over the time. They said, What would have happened if Rich Dad, Poor Dad didn't hit, if it didn't become as big? I said, we just opened up another door that's such a message for people, their need to see the path of how to do everything before they move is honestly one of their biggest saboteurs. So for mindset, I think mindset also goes with knowledge, because I just know, having taught this, you know, just this whole millionaire hold like a millionaire maker book. And for all your listeners, I can give them a ebook copy of the millionaire maker. So love to give that out to everybody for free. However. You want to do that in the show notes, but becoming a millionaire is the same thing as take like you said, you got to learn to make money. As an entrepreneur, even if you have a job, you've got to learn to make money. You've got to learn to keep it through better tax planning, and you have to invest in alternatives, which is why real estate was my first millionaire status. And I've been a millionaire now in nine industries. So that's kind of exciting new hit nine industries this last year. So done in a lot of different categories. Real Estate was my first in 1999 and during that period, if it wasn't hanging out with Robert Sharon, Keith Cunningham, like Bob Proctor. I mean the guys. I mean when you're living around millionaires, the fastest way to not only get your mindset, but then your behavior and your knowledge levels just skyrockets because you're around I mean people who live it, and they're living it every day. I think those who sit on the bleacher seats, I call it Keith, where they're just watching, reading, but never getting in the game. They're the ones who like they're sitting in the oyster seats, right? They're just watching. They're not actually get on the playing field.

Keith Weinhold 14:09

Sure, it harkens back to the classic Jim Rohn quote, you are the average of the five people that you spend the most time with. Laurel when it comes to mindset, one thing I think about is that every single day, 8.2 billion humans wake up, and every single one of us has this gap between who we are and who we could be, yet most of us make zero progress on this ever present gap. So when it comes to wealth mindset and finances, what can we do?

Loral Langemeier 14:38

You gotta get a mentor and a coach. And I got a mentor and a coach when I was 17, what shifted me and really changed the whole trajectory of my life. I grew up at farm in farm girl in Nebraska, and at 17, I was going off to university, also going to play basketball. And so I went to one of those pre sports seminars, and Dennis Whateley was a speaker. And. And I ran to the front of the stage, and I got the book, Think and Grow Rich, and that I can tell you, a farm girl 17, going like, there's a whole other way to live. So instead of going to school to get a law degree, which is what I went into, which I still think I'd be a heck of a little debater and negotiator, but I do that enough in business now, I got a finance degree, and I just studied. And my first mentor at 17, I walked into a bank, and I remember asking the bank president, will you mentor me? Because rich people put their money here. I need to understand money, because I don't understand it. And I was never really raised in that conversation, which I would say, 99% of the planets that way. And I have taught and traveled this work since, you know, 1999 when I became a millionaire, Keith, I've put this work into six continents, all but Antarctica. So I know it works in principle. Everything we will talk about today works in every continent. The benefit is the United States has the most corporate structure, the best tax structure, the best tax strategist, stack strategies. So even my high net worth international clients end up, typically in Nevada, with a C Corp or some sort of asset company or trust, where then they can buy us real estate, US gas and oil and activate our tax code for them. So we do a lot of really high, high level international strategies. Just because I bent all over to do that, when very blessed to do that, it's interesting, because I think mentoring, you're not going to be taught this. And what drives me crazy when people say, and I'm sure you've heard this a million times on your podcast too, Keith, schools should teach this. No, they shouldn't. Parents, you need to teach it. You need to be more active in your household than your family. And instead of letting Tiktok raise your kids, you need to raise your kids. So I do a lot of work in this category, because my kids are now 18 and 25 raised them a single mom, but legacy work is critical, and that's why I have a game. I have a millionaire maker game. So from the cash flow game, I have a game, and I think the parents have got to put the conversation about money in the household, and they got to monitor like, what they say, you know, don't ever, ever say to a child. Don't ask for it, or, you know, or we can't afford it, because you can afford anything you want if you learn to make money. And I think Keith is part of this. I know we're in a real estate show, but you know, how many people want to be real estate millionaires and never make it? How many people want to do like you said, whatever, the life they're really meant to live? But again, I think they're in I don't think I know their environment, who they hang out with, who they spend time with, what they read there. Are they binging your podcasts and my YouTube channel, or are they binging Netflix and Hulu and watching John like how you feed your mind and what content, how many books you read? I don't care if they're ebooks audiobooks, but you've got to put new content in your brain all the time and be around the people making it happen.

Keith Weinhold 17:41

Oh, that's great. Sure. To change yourself. You got to change your five, change your mentors, change your influencers, and, yeah, be that parent that teaches your children about money, and you don't have to teach that money is a scarce resource. I really just think that's one part of a mindset. That's where most people's mind goes when they think about money. They think about it as a scarce resource for one thing, and it's pretty counterintuitive with the mindset. I mean, if you want to be in the top of 1% you're probably going to be misunderstood and even iconoclastic.

Loral Langemeier 18:13

Yep, I would agree. And you know, another thing with mindset that I think is interesting is, and again, I'm gonna go back to knowledge, about consuming the right knowledge. And on my YouTube channel, which is, you know, Laura Langmuir, The Millionaire maker, it's family friendly. It's for five years old and up. We actually have a YouTube journal, Keith, that we did, where it says, What day did you watch the video? What did you learn? What will you do? And in 365, days, because I'm there every day, here is your this. And that's what I tell parents. I said, get yourself and get your kids a journal and at least one lesson from every recorded, you know, video. So I would say, give me five to 10 minutes a day just for a new piece of content. And the biggest one that is searched on my channel. I want to relate this to real estate is people's mindset and understanding with debt. They have such a negative, negative relationship to debt. And I want to start with this. Debt is the cost of money period. It is not negative. I think it's the most positive thing you could do. And as a real estate investor, arbitraging debt, meaning, if you can get debt for two, 3% or 0% I have over 500 sources, I can get 0% financing for 21,24 months, that's free money that's not hard money, that's not 13% 14,15, that's free. And I would go into a million dollars of 0% debt I have, and I will at the end if I can invest it and make 10,12, 20, 30% so people need to learn, debt is your friend. If you use it in a responsible, organized and educated way, it is absolutely your enemy if you're using it to buy lifestyle crap. So like, debt is such a weird thing. Keith and I don't care how long I've had clients, if they grew up with a lot of debt and a negative impact around money, they can be a millionaire and still have this weird relationship to death. Oh my god, debt, and it's literally. They tremor. It's like it's just money, and there's plenty of it. It's just the cost of it. Or is it being paid to you, or are you paying it out and arbitraging that that range could build. I mean, that alone, if you just learned that strategy and applied it on top of your real estate strategy, would triple, if not 10x your portfolio,

Keith Weinhold 20:19

like we say around here at GRE financially free beats debt free. You understand the difference? So does our audience. A lot of people don't. In fact, trying to retire your debt and slow your progress toward being financially free. I love it. Yep, you know what's funny, Laurel, just like you're coming on this show today, sometimes I'm a guest on other shows, and the way I've started to have the host introduce me to say, Hey, if you want your show to get some attention, say that our guest today, me has millions of dollars in debt, and he has from a young age that attracts attention. They think it's a negative thing. They don't know that my debt is outsourced to tenants. They don't realize a net worth statement. That's only the debt side of the column. We haven't talked about the asset side of the column, so it's really just an example of being paradoxical and iconoclastic. There we move beyond the mindset Laurel. I know you have some really actionable things on how you can help people build wealth quickly. Tell us about that.

Loral Langemeier 21:16

So again, using debt is a massive piece of it. I'll just talk about some of the stories, like when I got into real estate in 1999 real estate in 1999 I lived in Marin, California, Sausalito, specifically right on the water. I shouldn't be on one side, right the San Francisco Bay. And got pregnant at 19 January, 8 was like, Oh, little sticks like, Oh, I'm gonna be my mom. And I knew I'd be a single mom. So I entered parenting as single mom, and I struck that, you know, another check for $25,000 seems to be the number for a real estate mentor that I've been kind of putting off. And I said, Oh, it's time. I said, so right now let's go. I have nine months. And he said, Why do we have nine months? I said, I'm really close to being millionaire, but I gotta hit millionaire status. And I need this much cash flow by my 34th birthday, which was June that year. I said, because in September, I'll be having a baby. And he went, what dropped the phone, and so he said, All right, so I wired him the money, and he said, meet me in Oklahoma City the next day. Yeah, well, there's a ticking clock. Yeah, there was my timeline nine months. But we went straight to the streets. And I think for the for me, I was privileged to be with a whole team, and I don't think I am a massive advocate. If you don't know what you're doing and you haven't done it, why take 100% risk in any industry that you've never played so I only got 15 20% of that run. But here's what I came with. In 1999 I knew how to build a database because Bob Proctor taught me that. So during the cash flow era, I bought my own inventory, took out debt, bought $500,000 of games, put them in my own warehouse so I could collect my own database. So from 96 to 99 I had acquired 18,000 people who had bought Rich Dad, Poor Dad books, cash flow, cash flow, 101202, all his the products, and I had my own financing. So I was doing my own product. I had my own stuff. And all this is a big backstory, because a lot of you in real estate don't have a database. And here's the value I brought to that team that earned me another almost 10, 15% of equity is I brought 18,000 people, and when they saw that, they're like, you could help us raise the money, I said, I don't know to raise money. And they said, we do so again, I bought my way into a team for 25,000 in a mentoring program. There's about 10 of us that met in Oklahoma City, went down to Norman, and within less than a month, we raised $16 million out of that database. They did. I didn't know how to do it again. I sat on the sideline, but highly mentored and guided. So I was on a winning team from the beginning. We bought so much real estate, and then we went into the remodel. And so right then it's like, well, let's own the construction company, so that way we could get better buys. We can buy for the whole street. We can buy for the whole apartment. So we bought we started construction companies. We started being the distributor of the windows and doors in Oklahoma. We did that in Kansas. Now we do flooring as part of the distribution. We've done stoves. I mean, you name it, if you're going to buy it, buy it from yourself, or some way that you get paid extra. And then, like I told you before we went on the show, I would have the property management company. So we would start that, which was then came along with the cleaning companies. Gotta have the cleaning companies, the cleaning crews, the hauling crews. You're gonna pay one 900 got junk, buy your own truck, lease your own truck, haul your own stuff, and then rent it out lease it to others. So when we say cash flow fast in real estate, I went all in. So I own 51% of every property management company, and I put a ad in the paper for an electrician or a plumber, because they were mine most of two expensive things. And so they became partners. And I just made a lot of stuff, quite frankly, but I made it up with a lot of mentoring and guidance, of which those guys are still great, great friends of mine. We still own a little bit of property together. We went to Mexico and did a whole run through Mexico. The team was the most vital part. And what I say to folks in real estate, if you want to go big is you better get a database. I just find key that so many people in real estate don't understand. The Association of having a database, and the way I describe it is, today I might not want to buy, but if you don't have my name, phone number and email, and you don't continue to market to me the day, I am ready to buy or sell, you're no longer on my radar because you're not keeping in touch with me. Your job is an agent, a broker, an investor, I mean, is to build this database of people who then will go along with you on a journey. And I can tell you, it was a very blessed to have done it that way, but that 18,000 is what helped me become a millionaire. Because I had the people. I didn't know what to do with them. I didn't know how to raise my I didn't know anything about a PPM. I knew nothing, but I learned it all, and I was under a very, very successful. You know, decades and decades of success team. So, you know, they were 20,30, years my senior, but boy, I learned. I really leaned into it. And I think people do buy into programs and mentoring communities, but they don't do the work. And I see it all the time, I don't know how many people, and I'm holding up my millionaire maker book, and then this latest one, which is how I made my kids millionaires on paper at 10, again, by using trust real estate. Put them in my real estate company, shareholders,

Keith Weinhold 26:05

make your kids millionaires. Is the title of the book you just held on that second one.

Loral Langemeier 26:10

That one's a 2022, that was my latest best seller, and how I did it with my kids. And again, this back to The Parenting. So I can go a lot of ways, Keith, but I think the do it fast is go wider. I think so many people just go into buying just the asset, and they don't like I'm in the cannabis space right now in Nevada, legal. I'm an illegal cannabis I have licenses and very similar, if you're going to go in and you say seed to sale, you own everything like so I mean, the guy who's running my farm, he owns the label makers. He owns the, I mean, if you name it, he owns the nutrient company, because you need nutrients for the plant you're going to own. You're going to own. So the more you own of what you do and you have to pay, the more you keep your cash flow. And again, I see that mistake with real estate people subbing all the work to so many people. It's like there's so much cash that just went out that could be at least a percent of that could have stayed home with you. Sure

Keith Weinhold 26:59

100% there's an awful lot there. You're a big believer in vertical integration, in bringing in all these levels and stages of construction and management and so on, and bringing them in house. And yeah, it's interesting. You talk about the importance of the team. Here, we talk about how your team, whether that's your property manager, your mortgage loan officer, your 1031 exchange agent, how your team is actually even more important than the property itself. And yeah, when it comes to having a database these names Laurel, it's amazing, in a way, reassuring, in a high tech world with AI, that it still comes down to that primordial human connection of people and who you know you're the listener. As you've listened to Laurel, you could probably tell that she was a star student, which is why she's now a star teacher and mentor so much more when we come back with Laurel Langemeier, this is Get Rich Education. I'm your host. Keith Weinhold.

you know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text family to 66866, to learn about freedom. Family investments, liquidity fund again. Text family to 66866.

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

Hal Elrod 29:43

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

Keith Weinhold 30:01

Welcome back to get rich education. We have a well known name in the finance space. For decades, Laurel Langemeier with us. She has done an awful lot of real estate investing in her career, and as you can tell, she's got her own recipe, her own formula. She does things differently, she integrates. She brings things in house. Has multiple companies, and Laurel knows that you can be a profiteer when you serve the customer or the tenant, really, to the maximum amount. A lot of people have a gap there, and there's an opportunity cost. And Laurel, I know that one way you serve people is with Airbnbs in the Ozark region of Arkansas. Tell us about what you're doing there. That's really interesting.

Loral Langemeier 30:41

So we bought pretty big houses, and a few of them we actually the one we were remodeling it, and that's when we really got to know the Ozarks. And there's a lot of tentacles. And so to get, like, from the properties we were buying to where you would rent a boat or a jet ski or get your watercraft, it was all the way around the lake. I mean, that's two lane roads, and it just took forever. And I thought, well, let's so we have another LLC that we bought some boats and jet skis. And again, when you get to know what do people really go to the Ozarks part that we call it the Redneck Riviera. They go to party. They go to party more than they need some bougie house to stay in. That's not what they really come they want to stay on the docks. So instead of putting a lot of money, we said, how can we force Do we have one property has 22 beds, so 22 people can sleep, but they just barely sleep there because they party. So we put more money in rehabs, into the dock, expanding the dock, big sound systems, a big bar, refrigerators, just made it super fun. And then when the tenants come, they don't just rent for the night. We also give them. We'll get your groceries and booze. We'll stock your bar down on the dock if you want. We'll pull up our boats and jet skis. So we had our own small fleet. Again, we just stacked on more service. So when the tenants arrived, a we got, you know, anywhere between depending on the boats and the jet skis and the tubes and all the ropes and everything they wanted, water skis. I mean, whatever they wanted to rent. Basically, we became like a rental company, and everybody freaked out, and they said, Oh my gosh, you're going to get killed in insurance. You're not. I mean, yeah, it's a lot more planning, and it's more work to get all that prepared. But that was anywhere between 500 to 1000 more a night in just the Airbnb. So again, why? If you're going to do one thing, do more for them, the more you serve a client, I don't care what area it is, yeah, the more you serve people, the more money you will make, because they're going to buy it, they're going to have to go get their booze on their own. They're going to have to go get groceries like that's a whole day of getting all that gear to their property versus, let us just save you a day on your holiday and let us do it all for you. There's so many creative ways that you could just serve people, and if you don't know what to do, ask them, What a novel concept. I do surveys all the time, like always doing polling and surveys. Hey, I'm a money expert. What do you want me to talk about? That's what right now, if you really look at a lot of my YouTube and a lot of my social media, people want reduced taxes. So like, I'm doing a heavy, heavy lift, because it was a survey that told me to do it, not just because Laurel decided to do it. And I think so many of you don't realize your audience will tell you what they want and how they want to be served. If you're listening, that's how you make money. And so many people as you know too Keith, that come as the entrepreneur saying, This is what I'm going to teach you. Well, nobody asked, nobody asked for that content. You wonder why it's not working. Is because you're pushing your agenda versus pulling and giving and serving their agenda?

Keith Weinhold 33:23

Well, that is a great point. How do you know what people want? Two words ask them, which is exactly what you're doing there and the way that you're adding value and amenities onto a property there, like with what you're doing with Airbnbs in the Ozarks. It actually brings up a thought for another Jim Rohn quote. Jim Rohn said money is usually attracted, not pursued. Tenants are attracted to your rental units, new luxurious floors, and you'll soon profit when they compete over it.

Loral Langemeier 33:52

Yeah, it's a lot of this stuff. It's not difficult. It's just different. And I use that saying all the time because people are like, Oh my gosh, it's so scary. He said, It's not scary. The only reason why people put fear and risk and that kind of negative energy and words, you know, language around, I think real estate or money or any of that, is the lack of knowledge. Because if they don't know, anything that you don't know is scary, like you and I talked before the show about aliaska. I mean, if you don't know how to ski and you try to go to aliaska, good luck. You would be scared out of your mind. But once you learn, it's exhilarating. And I find out with everything. So anything you approach and just notice the hesitation, is it because you need to learn it then lean in and find the best in class to teach you and like, shortcut your learning curve. You don't have to study for years and years and years and years. Becoming an entrepreneur is a decision right now, today, in two minutes, make a decision, and then get to work on what your offers are. You say, Well, what am I going to offer? People ask them, and they'll tell you what they're going to buy from you, because they're buying stuff all day long in this economy, they are buying and going to continue to buy.

Keith Weinhold 34:56

If you yourself have a question for Laurel, you can always ask. Ask it at Ask loral.com L, O, R, A, L and Laurel, what are some of the more outstanding questions that you get over there, and how do you help them with some of the most important ones?

Loral Langemeier 35:12

I'd say the number the biggest flood of content and questions right now is, how do we reduce taxes? I made up this term called the tax trifecta, because what affects your tax return is how you make your money. If you're just an employee, meaning a w2 like in America, that's what it's called. And Kiyosaki said it best in Rich Dad Poor about there's two tax systems. You're an employee, you're going to get tax pieces. You live on what's left. You're an entrepreneur, and you make money inside of a company. You activate 81,000 pages of tax code, and then you pay tax. So you decide how, where you want to pay tax. I call this living corporate life. So when how you make your money inside, what kind of a company? Right? And then activate the 81,000 pages of code for the deductions. Like I teach my people, they'll never go on a vacation. They're gonna have a business trip. And when you're in real estate, you can go anywhere in the world legally on a business trip, as long as you do what's required to actually make it a business trip by looking at real estate, and it's not that difficult. I mean, the reason I'm in a lot of different businesses is my kids have never been on a vacation. I don't take vacations because they're not deductible. I take business trips. So I teach families how to employ their kids. How to do all of that, like, how do you activate your kids? I mean, when my son was born in 1999 he was employed day one. He had Roth IRA By the second day of his life, and he was funded every day. And he's 25 now, just that one move made him a millionaire, just the one move of maximizing your Roth IRA strategically using it to invest in real estate. So I use a lot of participating notes. I did all sorts of different plays to grow their Roths tax free, tax deferred. So I'm super active about the whole family being in a real estate business. I think real estate is it's the first one I went after, and it's still the first one I tell lots of families. I mean, it's got to be in your portfolio. I still own a lot of commercial real estate, some residential, I said, in the Ozarks, but most of mine went commercial within the last especially COVID, I went all commercial for the most part, besides a few pieces of residential. Back to what do I that tax trifecta, how you make money, how you activate the tax code. And then the biggest one that nobody in financial planners will not tell you about it, your tax, your CPA, won't tell you about it. TurboTax is never going to tell you about it. It's how you invest in alternatives. So real estate, obviously, is a big one. Gas and oil is a massive one. Aviation, water rights, mineral rights, conservation easements, carbon credits, those are the ones that affect your tax, because you get the depreciation schedules. So it's how you make it, how you use deductions and how you invest collectively makes up your tax. And so those are the kind of questions key some category of that, like I told you before the show, I have a new guy that just joined by over $20 million of real estate and only a few LLCs, no S corp, no C Corp, no trust. I'm like, and then you have these ridiculous insurance agents who say insurance will cover it all. You don't need to have an LLC or an S corp RC. You do? You do too. I would never live on just insurance that is such as 1960s conversation, like you guys got to grow up?

Keith Weinhold 38:17

Yeah? Well, you know, totally. And you mentioned Rich Dad, and it's really the Cash Flow Quadrant. And one thing that the Cash Flow Quadrant helps delineate is you touched on it your tax treatment. Tom wheelwright is the most frequent guest that we have ever had here on the show, being the tax guy coming from the rich dad school. And Tom wheelwright was really the first one to inform us that something like 98 to 99% of the tax code is actually a road map for where the deductions are. Only one or 2% of maybe are the tax tables and what you must pay almost all the rest of it, is this roadmap to give you a guaranteed ROI if you follow it, something that you don't usually get in investing. And you brought up a few interesting tax strategies there. I think one of them is how you employ your kids and get deductions that way, while your kids learn. Tell us more about that.

Loral Langemeier 39:11

I mean, when Logan was two, I put him out. He was painting buildings. He was around all sorts of, you know, title companies and closing tables. And then my daughter's same thing. So I take them with me. There's again, part of parenting is they have to be involved in your life. And I think so many parents just leave their kids home. They leave them with the device or their phone or some iPad. None of us have it like if they're gonna sit at a time, you know, a closing table, then I want them if they may not know everything at that moment, but that experience in that environment of just being a natural environment for them to know, to do business deals. It changes them. Changes your kids drastically. And then fast forward, when my kids are 18, they get an LLC for their birthday, and they're added on shareholders in a bigger way, because then I use again the roadmap. Because, you know, well, I always. Laugh, I say, but people read fiction novels and junk whatever. I'm reading the tax code. I think the tax code is the most creative, freeing body of work that has ever been done. It's fascinating. It's so creative. My son's becoming a CPA because of it. So when my son went to school, he was on a football scholarship. He played for Georgia, Southern starting center five years because I'm a single mom and I only make $42,000 I don't even own a phone. I don't own a car. I don't own a home, actually, because it's held in LLC It's an estate property

Keith Weinhold 40:32

I put or on paper or on papers.

Loral Langemeier 40:34

No companies own it all and trust on it all. So I own nothing like I literally live Rockefeller style, and I teach people that this really was beyond the millionaire maker stuff. But my point with the kids is then when he goes to school. So instead of going every Friday to watch him play football, on a Saturday, I went on a business trip to see my son, and he and I actually are looking again. That's in states pro Georgia, where Georgia's other is buying some apartments that we can then back into, and then then we go to the athletic department, and we know how much they will guarantee rent paying scholarship men to live in our apartment, like there are so many cool ways, and that that's how my son will get involved. So during all of my trips to watch him, Yes, I took one hour to watch him play football. Otherwise, I went to see my business partner. So my point is, and when he came home, he had to come home, not to just come home, but he came home to see his business partner happened to be his mom. So there's a way to put your kids into these businesses early and put them through school, have school that can't be written off. And even though he's done a scholarship, all that travel was still not a deduction, unless we structured it as a deduction to the real estate company. There's so many strategies that I honestly, Keith, I made a lot of these up. And I went to, you know, my top tax team, and I said, why can't we do this? I said, I want this to be done. Tell me the legal way to do it, and then they would guide me. So then I just turn around and I teach other people that when you do your own taxes, number one, you're not educated enough to do your own taxes, so why people do Turbo Tax or even H R Block? I mean, that's where kindergarteners play. And if you want to be a millionaire, you have to get experts around the table that really know what they're doing. I mean, a proper tax strategist at the level we have, and I have, like, 28 people on my financial teams that integrate. I mean, they have masters of accounting. So they've gone to school five and six years. They've sat for four exams and had 2000 hours of audit. So whenever, like an engineer or somebody, even a real estate investors, try and do their own taxes, I'm like, it's a highly, highly skilled expertise. So anyway, I could go into the team approach. I don't think Keith, I know so many people are so close to getting it really all right, but their sequence is completely out of order, and they're just at call tax and invisible paying. You're just used to it. You're just used to paying it because you think you have to. And you've been scared by the media that it's this big, scary thing, and the IRS is going to come get you. It's like, no, they're not. This is legal to do all this stuff. You just have to do it right and document it right

Keith Weinhold 42:57

right. And that's part of your team, your tax team, and that's another good ROI. If you pay a tax preparer and strategist 5k which is more than most people, maybe they're making you 10x that or more with their knowledge of the tax code. And for you, the listener that might find the tax code to be dry reading, you know, for a lot of people, you're probably right that it is dry reading. But if you think of it this way, if I act on what I read, then I am getting paid for what I'm reading here in the IRS tax code. Well, Laurel, do you have any just last thoughts, overall, whether that's about wealth, mindset or real estate or anything else, as we're winding down here

Loral Langemeier 43:35

any question ever you just go to ask Laurel, A, S, K, L, O, R, E, L, ask questions. Make a request you can ask about I have online events. You can ask for free tickets. You can ask her ebooks. So ask her whatever you want. We're super generous on giving gifts away to especially our new listeners and new folks. But a lot of it's, I'm going to say it's active engagement. That's a term I've used as I walked into 25 and I look at the people I've made over 10,000 millionaires, probably 12, 14,000 by now. But the difference between those who make it and those who still struggle is active engagement. I'm showing this on your screen just to have it on video, but I got this magic wand because people say I have a magic wand. I said, I do. I naturally now officially have one, and it comes with pixie dust. But it doesn't really matter. It won't work. I can't just, you know, anoint you with my little wand, and all of a sudden it's magically going to change. You have to actively, like you said, study the IRS code, study my books like my millionaire maker is a blueprint for how to be a millionaire. So there's seven families in the book. Pick which one you're closest to and what you've done to yourself, and then start the pattern, and there's a pattern and a sequence for everybody, for seven different kinds of family, and what you've done to yourself. And I also live the last kind of words I would say to people is that I've been doing this way too long. I have no judgment, no criticism about what you did to yourself. A lot of people are ashamed or embarrassed, like I can't believe I'm this old and I should be farther along. So what now? What is my. Saying, so what happened or how you got here? What do you want to do about it now? So we start with a new, fresh line and stand and let's go and you can create anything you want with the right team around you and the right initiative. So just know you'll be actively engaged in this. This isn't me, doing it for you or to you. It's with you, and you have to own it. You have to own your own wealth. Nobody else cares about it more than you.

Keith Weinhold 45:23

these strategies work as long as you do. Laurel, it's been a great mindspring of ideas for the listener here. Thanks so much for coming onto the show.

Loral Langemeier 45:32

Thank you. Appreciate it. Look forward to hearing from many of you and helping you out.

Keith Weinhold 45:35

Oh, yeah, a wide range of expertise from Laurel Langemeier there. And you know, we're talking about the awareness of the gap between who you are and who you want to be earlier. Really, there could be a gap between how you're utilizing your rental property currently and what it could be Laurel found more ways, for example, to serve her short term rental tenants in the Arkansas Ozarks with providing boats and jet skis dockside to her tenants. In fact, there's a book all about this called the gap and the gain. It was published about five years ago, and let me tell you what it's about and maybe save you 10s of hours of reading most people, especially highly ambitious people, are unhappy because of how they measure their progress. We all have an ideal. You have an ideal. I have an ideal. It's a moving target that is always just out of reach. Well, when you measure yourself against that ideal, you're in the gap. However, when you measure yourself against your previous self, you're in the gain measuring your current self versus your former self, that can have enormous psychological benefits. That's how you can feel like you're making progress, and that gives you confidence, and you make more progress. You might have only owned two rental properties last year, and you're going to have four this year. So you want to make that comparison, don't make the comparison that Ken McElroy has 10,000 units and you never will big thanks to the driven and experienced Laurel Langemeier, today, I feel like she has a narrow gap between who she is and who she could be.

There is a lot happening here at GRE in our newsletter called The Don't quit your Daydream letter. I recently let you know about what chat gpts ai updates mean for real estate investors, and I showed you that before and after photo of how you can now tell AI to just renovate your rental unit, and within just a minute, it shows a pre and post renovation, it shows what the renovation would look like. AI is also being used for fraud, like to generate fake receipts or insurance fraud that makes a property look damaged when it really isn't. And every few weeks, I like to send you a good real estate map, like the recent one that I sent you, showing the cost of living by county and how that map was almost like a cheat code on how you can find the best real estate.

Also here at GRE our free coaching is helping connect you with properties. Many of you are interested in BRRRR strategy properties lately, I recently reshot the entire real estate pays five ways course, and I updated it for today's times with today's numbers. I'm giving that away for free, those videos and even giving a free gift at the end of the course, I share those resources with you in the Don't quit your Daydream letter as well.

And then, of course, I sent you details on the Great Investor Summit at sea cruise starting in Miami, sailing the Caribbean June 20 to 29th and how you can have dinner with me and the other faculty, like Robert Kiyosaki, Robert Helms, Peter Schiff, Ken McElroy and more. And this particular cruise event is not cheap to attend, although I don't make any money from the event, but our Don't Quit Your Daydream letter is totally free. I would love to have you as a reader, and you'll stay informed on all these Real Estate Investing Insights and trends and events and more, otherwise, you're really missing out. See, the reason that I write the letter is that I have visual things to show you that I cannot do on an audio medium here, like this, like those real estate maps. And before and after photos. I write the letter myself. You know so many other letters are now AI generated. I write this myself. It is all from me to you. And if you aren't already a reader, you can get the Don't quit your Daydream. Letter free right now, just text text GRE to 66866, and by the way, we don't text you the letter each week. That would be intrusive. The letter is emailed. It's just a convenient way for you to opt in. You can do that while it's on your mind again. Text GRE to 66866, and I'll turn it alternative way to get the letter is to visit get rich education.com/letter that's get rich education.com/letter. I've got a lot more for you next week. Until then, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 1 51:01

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 51:25

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers. It's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866.

The preceding program was brought to you by your home for wealth, building, getricheducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
548: A 7-Figure Income is the New 6-Figures, Car Loans, Pros and Cons of Turnkey Real Estate
7 apr· Get Rich Education
Keith discusses the shift from a six-figure to a seven-figure income being necessary for a comfortable lifestyle and argues that a $5 million net worth is a minimum for financial security.

He explains the benefits of leveraging a car loan for arbitrage, using a 3.99% interest rate to invest in real estate with a 20-25% total return. He also discusses the current state of the real estate market, noting that home prices and rents are expected to increase by 3-5% annually.

Lower mortgage rates could increase affordability and bring more buyers into the market, potentially leading to higher home prices.

Two-bedroom rents have increased by 3.7% nationwide, with significant growth in Nebraska metros.

Resources:

Get our wealth-building newsletter free—

text ‘GRE’ to 66866

Show Notes:

GetRichEducation.com/548

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold today, why earning a seven figure income is the new six figures? Then a discussion on the direction of real estate prices and rents. I just bought a car though I could have paid all cash. Why did I get a loan instead? Then learn about how to perform due diligence on buying an income property with the pros and cons of turnkey real estate investing and the mistakes you must avoid today. On getricheducation.

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

Corey Coates 1:20

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:36

Welcome to GRE from the first State of Delaware to the 50th state of Hawaii and across 400 nations worldwide. I'm Keith weinholden. This is get rich education, the voice of real estate investing Since 2014 Are we really gonna change the name away from the Gulf of Mexico? Well, I'll tell you one thing. There is zero history of hurricanes in the Gulf of America, therefore, I expect the appropriate adjustment to my insurance premiums big savings. Hey, you know, despite being a geography guy, I'm really not emotionally invested in this movement to change the names of giant pieces of real estate like Denali back to Mount McKinley and the Gulf of Mexico to the Gulf of America. It's only a little interesting to me. I mean, there are just more significant things to concern oneself with. So call it either one. I don't care. I know what you're talking about. Before we talk real estate, let's discuss your personal finances. I recently watched Dr Steven Franson speak surfacing this topic, and it got me thinking, when it comes to annual income, is you earning seven figures like the new six figures. Now, I guess that earning six figures could still be a short term goal to some people that are new to the working world, but maybe as little as a decade ago, having a six figure income was aspirational, or even a sign that you made it, or could even feel wealthy. I remember that today that is so far gone. Now, of course, it depends on where you live, but today, you need 50k just to survive. Your housing would be pretty standard in that case, and I don't know that you could get much fresh, healthy food at 50k per year, you might still have to be living with your parents. You need 100k just to sort of live. Perhaps that's if you're single and you're near the coasts, or you're married without children today, you need 200k for a life with travel and some dining out. I mean, you couldn't really even ball out on your vacations, like on 200k you're gonna balk at 500 bucks a night for a resort hotel. I mean, you're staying at more of a hotel than a resort, but at 200k of income, you can usually do some discretionary spending. At 300k in a lot of places, that's what a full family needs, a household with kids in order to live a little bit beyond that, and that's a combined income both spouses. If you make 450k today, now you're able to travel pretty well. You're probably still flying coach more than first class at 450k you may or may not be paying for the airline lounge, but you are staying at some comfy hotels. You really need to make $1 million a year today to live pretty close to all out fly first class travel well. But you're still flying commercial on a million dollar salary. You're not chartering anything. If that has not bought you time to cook, you can afford an executive chef with a million dollars so that you don't have to eat restaurant food. You know, restaurant food, even at finer restaurants, is laced with seed oils. This is why what used to be a six figure lifestyle is now a seven figure lifestyle. My spin here on this also is whatever you do at any income level, 50k a year to a million bucks a year or more, buy enough time to exercise that's something that's going to matter both to you and to those that you love over the long term. All right, so that's income. How about when it comes to net worth? There is a minimum amount in my mind that you need to have in net worth for me to say that you've got it made in America today. What do you think that number is? How about that? What do you think is the threshold? What's your thought? It is $5 million that is just a starting point, a minimum net worth that you need, if you just invested that you could probably live off its income for the rest of your life. For most people, compound interest will not get you to the $5 million net worth Mark anytime soon. Only leverage will. But yeah, after the COVID induced wave of inflation years ago, you've gotta recalibrate what you think of as a lot of money, and some people haven't caught up with this still. Now, I was on that great riverboat tour of Chicago not long ago. I think I brought this up to you in a previous episode, but you know, one thing that struck me as odd was that the tour guide, he was describing Chicago skyscrapers and the architecture around us, and he said they poured millions into that project. I mean, really emphasizing that millions were spent. I mean, today millions can mean as little as 2 million. That's an amount so tiny today for a construction project that what is that like, four average homes would be $2 million I mean, some entire counties in the Bay Area have a median home price of more than $2 million just one mediocre home. So let's talk about the direction of home prices and rents nationally here. Now I do not think that home prices or rents can really climb a whole lot over the next year, like 10% appreciation. I don't see it now. I also don't see how home prices and rents could fall substantially. The reason that prices cannot spike dramatically, it's still due to an affordability constraint, and I don't expect that prices or rents are going to fall a good bit either, or really fall significantly at all, because housing demand still exceeds supply. So that's the constraint on the downside. Really, nothing has changed there. The average for sale home today, it gets between two and a half and five offers that obviously depends on the area, so you keep seeing both prices and rents increase at this range of three to 5% that's the zone that we're in now, and we've been in that zone for most of the last Two years. Really pretty modest, not exciting, appreciation rates. Zumper tells us that two bedroom rents are up 3.7%

nationwide. Rents have actually declined in some Sunbelt cities, Durham, North Carolina and Nashville are some big losers I was describing Austin to you a few weeks ago. Do you know that two national leaders in rent growth are both in the same state. Yes, these two cities are both up more than 20% in rents year over year. It's in the Midwest. Any idea where I'm talking about it is Lincoln and Omaha, Nebraska both up over 20% and perhaps recent GRE listener guest grant Frankie is happy about that. He's the only person I know that invests predominantly in Lincoln, and this is due to strong job growth and also that supply that still hasn't kept up with demand. Now back to my point about how nationally, both rent growth and price growth are still pretty modest, which is still a highly profitable formula for a leveraged investor that bought right But historically, it is kind of boring. Many believe that as soon as mortgage rates fall sharply, and a lot of surveys show this, if. That five and a half percent is the magic mortgage rate level that will increase affordability so much that home prices will soar. I'll tell you my spin on that is maybe even that remains to be seen from listening to me for 10 and a half years now, you know that the direction of the economy has a substantial effect on housing, rents and prices, a force bigger than just mortgage rates. And when mortgage rates fall and other interest rate types fall, that usually means that the economy needs the help, which might mean that employment is down. If employment falls, home prices can still rise. They usually do, but perhaps not as much as you thought they would. So my point is, is that when mortgage rates fall significantly, that does not automatically translate into soaring price growth. Again. You gotta take history over hunches. If there's one thing that feels a little different in this cycle though, it's that we do have this palpable amount of pent up housing demand, so lower rates really could bring a lot more buyers off the sidelines. So therefore, it is possible that home prices will soar if rates really plummet. It is just not axiomatic. Now I just bought a new car, though I could have paid all cash. I chose to get the loan. And before I tell you about why I considered not getting a car at all and just using Uber Lyft ride sharing services forever. But sometimes I like to go off the beaten path and trek in some remote places. So that just wouldn't work. I also travel a good bit, and I considered not owning any car that's tethered to just one place. It's just not that efficient. But it came down to freedom. I enjoy my freedom and autonomy to hop in my own car and drive it on a whim. Though I could have paid all cash for this new car purchase, I chose to put the minimum amount down, and I got a loan for about 95% of the cost of the car. Why would I do that? Car debt is surely not as good as real estate debt. With car debt, I have to repay my own loan. I cannot outsource these car debt payments to tenants, and the payment is about $900 a month. I'll have to pay all of that myself. Also, unlike real estate, a car is a depreciating asset. Unlike mortgage interest, car loan interest is typically not tax deductible either. I'm not going to rent this car out through Toro and try to get an income stream off the car. Nothing like that. So this might sound like three strikes against a car loan. I've got to make the payment myself. It's declining in value, especially as a new car. It starts depreciating fast as soon as I drive it off the lot, and I'm not going to have any tax breaks. Oh, come on. I mean, that might sound like bad debt to a lot of people. Leading GRE I am a staunch advocate for good debt. So why did I embrace a car loan to the maximum leveraged amount? Because I am making my car loan good debt. The definition of good debt is debt that makes money for you. Car loan debt is secured, meaning there is underlying collateral, the car itself. And by the way, credit card debt is an example of unsecured debt. The big reason, though, is the financing through the dealership BMW is a 3.99% interest rate for five years, my credit's perfect. So I got a good rate there. Therefore this car loan is a simple arbitrage play. I'm borrowing at a lower rate to invest at a higher rate. Look, even if my car loan rate were double 8% I would probably still get this car loan, but it's 3.99How do I have confidence that I'm going to beat that on an annualized basis over the next five years? Well, first future inflation expectations are elevated, like I touched on on last week's show, if true, inflation the real diminished purchasing power of your dollar over the next five years is 4% I mean, that's a break even for me, right there already, but I'm gonna do a lot better than that. As a real estate investor, I know that instead of sinking this money into the car, that's enough of a down payment for a rental single family. Home or almost a low cost duplex, and being cognizant that real estate pays five ways, I expect a minimum of a 20 to 25% total rate of return with low risk. Now, if you're a new listener, that last part sounded far fetched. I know that's okay. You just don't know how to calculate your ROI for an income property with a loan. Yet another way to describe my strategy here is though I could pay cash, why would I tie up that many funds in a car? So I'm cognizant of opportunity cost. Opportunity cost means that you're missing out on a greater benefit when you choose one option over another. This loan approach also keeps me more liquid. Look, keep your money. Don't give it to a bank. Make your bank take five years to get all the money, while my $900 monthly payment stays fixed the whole time as inflation just keeps relentlessly debasing the bank's payment that they get from me. I mean, with that part, it works the same way as it does in real estate or any fixed rate loan that you could get. Be mindful, by paying all cash, you would not improve your net worth at all. Nothing happens to your net worth. Paying all cash reduces both your asset column and your debt column by the same amount, and it hurts your liquidity. Now, if you've got an emergency, you could be in a case where all of your funds would be gone if you paid all cash, they're inside the car, and you might not be able to extract them back out. All right. Well, what about the depreciating asset part of this equation? That's what most cars are. Well, just like a piece of real estate, your car's value will rise or fall regardless of your equity position. That doesn't influence it at all. So I will be underwater on the car. That's a way that some people might look at it. That means that I'm going to owe more on the balance than the car is worth. That appears irresponsible to some people. Well, yeah, that just means that the bank's money is tied up in the car, not mine. I've got it off giving me a good return. Look, when you have loans, you have another type of leverage, and it's not the mathematical type that I often discuss here. I mean, have you ever owed a friend money when something untoward happens? Who is motivated to talk between the two of you? You are your friend, your friend. They're going to be the one that's willing to work with you and help you out. They've got to give you levers when there's a mal apropos occurrence and the borrower loses their job or has a medical disaster and a huge bill, the person that's owed the money is always going to keep communication lines open with you, you as the borrower, are the one that is in control. Keep your debt on, keep your own money, stay in control. And how is this car loan making money for me, if I get a, say, 23% total return from income property and keep paying a 4% car loan, that is 19% arbitrage, I mean, what an easy choice. Again, the definition of good debt is debt that is used to increase your wealth. So getting the Max car loan allows me to avoid paying that opportunity cost of having all the funds tied up in a depreciating asset. And that is how a real estate investor buys a car. Now you're a smart investor. I mean, we have a really wise, responsible audience comprised of people just like you. But what would be some reasons that a real estate investor should pay all cash? Because there are some, and a lot of them revolve around, if you're financially irresponsible, if instead you got a car loan so you could stay liquid and maintain your life as a profligate and reprobate gambling degenerate and lose it all on sports gambling through the freaking Draft Kings and FanDuel apps. Okay, that's not a good reason. But as a GRE listener, that probably is not you. I was probably not talking about you, right. There another reason to pay all cash rather than getting the loan like I have, is if you don't have the liquidity to service the 900 Dollar monthly debt payment yourself, you could be over leveraged. See the chunk that I'm investing in real estate instead of the car that real estate will produce income for me, but it actually will not produce as much as $900 in cash flow to fully offset the car payment. Now it's going to produce a few $100 but my arbitrage is being created with the summation of all of real estate's five profit centers. I've got the whole shebang now, the leverage appreciation, the cash flow, the ROA, the tax benefits and the inflation profiting all coming at you. All five. My liquidity comes from elsewhere. A third reason why a real estate investor would want to pay all cash for a car is because say that you would effectively be forced to pay all cash for the car. Because if you took on a $900 monthly payment, that would dent your mortgage loan qualifications, debt to income ratio that mortgage loan underwriters are going to look at it would hike up your DTI so much that you couldn't qualify for future income property loans. So right, there are, what was that? Three reasons that a real estate investor would want to pay all cash if they could. But let's not lose the bigger point I was talking about the exceptions there. The bigger point is that consider getting the maximum loan for your next car, or even getting a loan against your current car if you already have one without any debt on it. It's actually a rational approach, because you want to consider the loan first, since this is your money, you earned it, approach it with the strategy first of keeping your own money that you traded away your finite life's time for. Think of keeping it first and only then consider giving it away next. I am getting the biggest car loan that I can and making the minimum monthly payments all 60 months five years, I did the same thing with my last car. It is an easy choice for me in just one word, it is for the arbitrage one word, most experienced financiers and real estate investors have not been exposed to those ideas that I just shared with you, and at the least, I am confident that I just gave you something to chew on mentally. There I've been talking about the intersection of your personal finances and real estate investing. Today, I'm your host, Keith Weinhold here on episode 548 of the get rich education podcast

what have GRE listeners been doing these past few weeks, they have been scooping up BRRRR properties, employing the buy, renovate, rent, refinance and repeat strategy fueled by GRE 's recent live event. You can watch the video of the event on demand right now, get an understanding of the strategy, see why it's so lucrative, and if it interests you, even get you paired up with actual property addresses conducive to the strategy. You can do that at GRE webinars.com this event can indelibly elevate your entire socio economic class and shape your legacy. That is a deep statement. Hey, this is what 8x leverage and $500 plus of cash flow on each single family rental property can do for you with the burr strategy in Cleveland. I mean, how much earlier will this allow you to retire? The event is free to watch. You can watch from home. I mean, come on, what else are you going to do at home tonight? Spend that time cleaning out your closet or smoking meats. Maybe at least, spend that time getting a car loan. What's the opportunity cost of you smoking meats tonight when you can actionably Build a real estate legacy with the BRRRRstrategy? Strategically outsource the meat smoking to somebody else. That's what I do. It does not take much to get started. These pre renovated homes are often about 60k some GRE followers have already bought two or three at a time. You'll see Jerry's investment coach Naresh and event co host Phil. I mean, just watching him talk is amazing. Phil is America's preeminent authority on burr real estate investing. Again, you can watch the event right now, and I don't know how long we'll keep it up for, just visit GRE webinars.com

Next fatal mistakes that you've got to avoid when buying income property with some vital due diligence tips. I'm Keith Weinhold. You're listening to get rich and. Vacation.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it. If I wasn't invested myself, you can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text family to 66866, to learn about freedom, family investments, liquidity fund, again. Text family to 66866

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 Chaeli Ridge personally. Start Now while it's on your mind at Ridge lending group.com that's Ridge lending group.com

Robert Kiyosaki 26:49

this is Rich Dad, Poor Dad. Author Robert Kiyosaki, listen to get rich education with Keith Weinhold. And the reason I respect Keith, He's a very strong, smart, bright young man.

Keith Weinhold 27:10

Welcome back to get rich Education. I'm your host. Keith Weinhold, it's been a while, but I know that I shared with you before that my first ever out of state rental property that I bought ended up being a loser, and this is despite the fact that the turnkey provider and property manager that I was hiring for the property, they even told me not to buy the property because they couldn't keep it occupied in that neighborhood, and they told me to buy a different one instead. I didn't listen. I bought it anyway, and I lost we couldn't keep it occupied, so after a few years, I sold it to an owner, occupant, family for a small profit, but it was after years of negative cash flow, so there really wasn't any profit there, because, like I just said, we couldn't keep it occupied with a rent paying tenant that was back in 2012 near Fort Worth Texas. I bought it because it was cheap, just 153k and it looked pretty. It was brick. Those are both bad reasons to buy. Cheap doesn't always mean good. And the fact that a property looks pretty, I mean, I guess that's a somewhat good thing, but it should not be a deciding factor. I was never going to live there facts Trump feelings in investing. So my first bad experience was totally avoidable. I can only blame myself. Let me tell you about some other fatal mistakes to avoid, as we talk about some turnkey real estate investing due diligence. Since turnkey means all done for you, or another way to describe the property is a rent ready property. You know that word turnkey? It's sort of this compelling, even seductive buzzword, and it just might make you think that, ah, everything is just handled now and forever. It's gonna sail along just fine. No, it won't. Now, this is the type of investing that can change your life. This is the real estate pays five ways. Compound leverage Trumps compound interest, type of vehicle. Financially free beats that free type of vehicle. You're winning the inflation Triple Crown all those great, formulaic GRE mantras, but you better check to make sure before you get too far into it. And that's why we're talking about vital due diligence here. I think you know by now that turnkey, it means a property that's really just got three things. It's already renovated or new. Secondly, has a tenant in it, and it has professional property management from day one. Now, the property providers at GRE marketplace, they are some of the good ones. They have good reputations. Many have been in business for a long time, but some others do not. So what about a provider? Provider that's in, say, Oklahoma, but you live out of the area on one of the coasts, and this Oklahoma provider, they're trying to pass off a property in Oklahoma City or Tulsa to you, it's actually in a class D neighborhood the worst. And they're sort of presenting it like it's a Class B minus neighborhood, right? How can you hedge against that? How can you know that things are not being misrepresented to you? Well, of course, everyone knows about Google Street View. You're probably going to look at that first that's going to tell you about the street scene. It's free to use a paid service that gives you neighborhood analytics. Is it neighborhoodscout.com you want to verify crime rates in areas, income levels, poverty levels, education levels and school quality to make sure that the property characteristics are what you are being told, and some of those attributes always matter with property. I mean, crime rates matter because even though you're not living there so you're not going to be able to retain respectable rent paying tenants that would tolerate a high crime neighborhood. Understand, though, that not all crime data is the same. Violent crime is probably the worst shoplifting, I'll call that in the middle. And then most traffic violations, they're light crimes. Now, if you're buying a single family rental type, of course, the quality of the school district, well, that's going to matter more than if you're buying a building of little efficiency apartments where the school district hardly matters there, because you're not catering to families. I've mentioned before that we go look.com. Is a service where you can hire an independent inspector, not even a real estate related person, necessarily, but just an independent on the ground inspector to just go check out a neighborhood at any hour of the day or night. Now, if you have any question about the out of state neighborhood that you're buying in an easy way to get a check on the decency of the neighborhood is something really simple. Make sure the turnkey provider owns properties in the area that they're selling to you. This helps ensure that they're not offloading their problem properties onto you. That's something that's probably only going to happen with an inexperienced provider that doesn't have a reputation to protect yet. But when it comes to neighborhood quality, once I'm pretty serious about buying a property, do you know who I usually get reliable information from? And it's virtually free, and you're contacting this party anyway, so it's so easy for you that is just simply ask your property inspector. I mean, you always want that independent, certified Property inspector to walk inside every room of your prospective purchase, and they make that punch list for your seller before you close that's on either a renovated or a new build property always get that inspection. I've talked about that before, and that often costs $500 or less on a single family home, and today it's about $800 or less on a duplex, well before my inspector even checks out the place. I like to let them know that I live outside the area, and I want their insight on the neighborhood as well. I mean, inspectors live locally there, so they'll probably be able to give you a good answer before they even do your physical inspection. They already know the area really well, and it doesn't even cost you any more above your normal inspection cost to just get a little on the ground intelligence. And of course, your inspector works for a company independent of your property provider, so their information should be unbiased. They work for you. Now after the inspection, how about your appraisal and some due diligence with that, what if your appraisal comes in low. Everyone wants to talk about if your appraisal comes in high, that's instant equity that you have, but see if the appraisal comes in low with a turnkey property where everything was renovated, that may or may not be a problem, because the comparables that were used for your valuation, they don't have everything renovated in them like your property does. So the subject property, the one that you've got under contract to buy that could very well have a lot of say, new plumbing, electrical, HVAC, the roof, bathrooms, paint, flooring, lighting, kitchens. I mean, most, or all of those components could be new in yours. It's common for yours to have all those components, and then the comparables do not have those now, you and your seller, you will have to negotiate on who's going to close the appraisal gap. I've discussed that part on a previous episode, but I'm point. Out how you can still be getting value even when your appraisal is low and it's worth it. Down the road, you're going to have less maintenance headache than your appraisal comparables will most of the time. Turnkey properties are renovated to cover major systems, and that means you do not have major expenses. Soon these expenses get wrapped into your mortgage payment, and that's a lot better for you than coming out of pocket three years later to replace an entire roof. Another thing to keep in mind is that a property provider that's been in business for a lot of years, they do not have interest in selling you a lemon of a property and hurting their reputation, but that seller does have a little interest in getting the maximum dollar. I mean, that's almost intrinsically natural in human beings. I mean, everyone has that motivation, just like you do when you sell your property down the road. So these rent ready or turnkey properties, they're almost always better if you're a busy professional or you just want to spend your time doing something else. I mean, I think that's a pretty well established concept in the investing industry, but I really think these rent ready properties, they are better for even more people than just busy professionals. I mean, consider the alternative, if you try to screen and identify a property yourself and do all the rehab and manage the contractors. I mean, first of all, you can be dealing with a hard money loan where you're paying four or five points plus a 12% interest rate, since that's all that's available for distressed properties, and unless you have experience managing contractors, oh, boy, you could have construction timelines that go over by several months. Well, now that can eat a huge portion of your investment that you thought you were making. You're paying 12% and you have no tenant all this time, but instead, when you buy a rent ready property, and you've got the best mortgage rates and terms from day one, and you've got a rent paying tenant from day one, and not all these headaches and time lost and contractors are trying to manage with turnkeys at GRE marketplace, those rehabs are done by crews that work full time for the turnkey provider, so they work at more affordable rates than what you could get as an out of state buyer if you're trying to patch together contract and crews yourself. So at scale GRE marketplace providers, they're also dealing with the same material types over and over again, so they're faster at doing it. The materials are also reliably sourced. You won't have the 10s or hundreds of hours managing all this, checking with the rehabbers, checking for quality control, making sure the amount of work that you were paying for was actually done. I mean, some people listen to this show and they had that real estate pays five ways, epiphany, that big light bulb moment, but then they try to do this rehabbing and investing themselves to save a few dollars, is what they thought, and it's rarely worth it. So avoid the massive time commitments with all this. I mean, you're also going to be doing other things, coordinating inspections and permits with city municipalities. I mean, what a nightmare. GRE marketplace providers, they've already done all of that for you and more now that you've bought the property, all right, what about the potential for poor management? Choosing your property manager is of utmost importance, because that person or firm, they're going to vet your tenants, handle the repairs, collect your rents and take care of any other issues at your rental property. They'll understand the local landlord and tenant law, you're going to be seeing the property infrequently, if you ever see it at all, so keeping an eye on things becomes key. Now, once you own the property and you have the tenant in there, there is always the potential for your property manager to do a poor job, costing you money, making your investment less lucrative, I like to ask my manager if they do regular property inspections, like getting inside the unit every six months. Now, you can read online reviews, like the star reviews, the number of stars for property managers. I mean, that could be helpful. It can also quickly get misleading. You can get a lot of bad reviews on an adequate manager. Because property management is such a tough job, I think that one of the best things you can do when vetting a property manager is to ask a friend. A lot of people don't have that option. So then do a search on the bigger pockets. Forums for your prospective property manager. So read reviews. Don't just look at star ratings. And I'll tell you, property management is one of the few areas in my life where I am willing to accept a service level of adequate or mediocre. Almost no one raves about their property manager, but I do have managers because they are the guardians of my quality of life, of your standard of living. We want them to serve our tenants, but I don't want 80 tenants being able to text message me. So there you go, armed with a number of due diligence items that can help you make sure that you buy your next income property, right? GRE marketplace, we typically connect you with the experience providers, but I'm telling you this because it's prudent to do some checking on your own and inquiring like this too, in case you have any doubt. Now, you notice on GRE marketplace, where you can connect with free investment coaching as well, that the properties, at times, they seem less expensive than you would expect. Why is this? Well, investor advantage markets, they have low prices. I mean, that's just one reason that they are investor advantaged like Ohio, Indiana, parts of Pennsylvania, Michigan, Missouri, Kansas, Nebraska, Tennessee, Arkansas, Georgia, Alabama, Oklahoma, Texas and some of the other Mid Atlantic states And Florida, another reason the GRE market prices seem low is that there is no agent that has to be compensated. It is a direct model. Another reason is economies of scale. Providers provide homes in bulk, so there are savings that way, and there also aren't any owner occupied emotions evolved with income properties. Those emotions can run up the price, or what they really do is they keep it stuck at a high price. So to help you review what you've learned today, a seven figure income is the new six figures. Real estate prices and rents just keep moving up, but modestly for the time being, a car loan can be good debt when you have a reasonable expectation that you can create arbitrage and sufficient liquidity in your life. And though income property is perhaps the most proven wealth generator ever, there are some mistakes to avoid when it comes to buying right between the guidance that you have today and the help of our completely free investment coaching another safety layer. If you're confident that it can benefit you, I encourage you to engage and move at the speed of instruction. It's the only way that you'll benefit I built this resource. I really wish it existed when I started out, and it's available for you at GRE marketplace.com, until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 1 43:18

Nothing on this show should be considered specific, personal or professional advice, please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively.

Keith Weinhold 43:42

You know, whenever you want the best written real estate and finance info, Oh, geez. Today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers. It's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long. My letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866.

The preceding program was brought to you by. Your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
547: Is Hyperinflation Ahead? People are Frightened About a Coming Depression
31 mrt· Get Rich Education
Keith shares some historical perspective on inflation highlighting the cost of a Taco Bell meal in 1999 to its cost today. He also touches on the concept of service inflation, where services like mail delivery and self-checkout at grocery stores have become less convenient but not cheaper.

Keith reviews the historical performance of real estate during the last eight recessions, noting that housing prices usually rise during recessions. He explains the concept of the Inflation Triple Crown: asset price inflation, debt debasement, and cash flow enhancement.

Housing prices usually rise during recessions, as demonstrated by historical data.

Resources:

To learn more about the Inflation Triple Crown go to: getricheducation.com/itc.

Show Notes:

GetRichEducation.com/547

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, is higher inflation or even hyper inflation now in our future, and is an imminent recession, or even worse, a depression lurking. What's it all mean for your investments and your real estate? We'll investigate exactly what happens to real estate during recessions, historically today, on get rich education,

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 and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Corey Coates 1:19

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:35

Welcome to GRE from Hartsdale, New York to Springdale, Utah and across 488 nations worldwide. I'm Keith Weinhold. I think you know that by now, you are inside one of America's longest running and most listened to real estate investing shows. This is get rich education. Most people have two plans. Plan a get rich. If that doesn't work out, the alternative is Plan B, which is hate rich people.

We are firmly rooted in plan a for you here. So yes, we're about building your wealth, but ultimately we are a lifestyle improvement show. I'm going to get to high inflation and the potential for a recession or depression in just a minute. But I recently got a reminder on the fragility of life and its finite nature. My oldest friend recently died. He was almost like a mentor to me, a friend of mine's grandmother recently died, shattering her world, and it's a reminder that you won't be remembered for the money that you make. You won't even be remembered the real estate portfolio that you build. I mean, that surely won't last. The tennis that you serve, they'll die as well. I will be forgotten. This show will be forgotten. The people that love you, their opinions will die with them. Your Haters, their opinions will die with them. You can confirm that this is true right now by naming your eight great grandparents for me, there. Go ahead. You can't do it. I can't either. So what can you do, at least in this finite life that you have on earth? What you can do is enjoy your existence. The good news is, because you can control this, you can control enjoying your life and existence as get rich education is ultimately a lifestyle improvement show, and we are squarely helping you do that right here. And one way that I've done that over the years is by pointing out how inflation is actually advantageous to real estate investors. Well, it impoverishes most people. You're initiated on that by now. That's something that you really found out tangibly back during the pandemic. Now today, though, wow, people are frightened. I've got some contemporaneous material to share with you today, but I'll give you some lessons so that even if you're listening to this 10 years from now, you're going to learn some lessons. Americans inflation expectations for the next five years. They just hit the highest level since 1993 Yeah, expecting a lot of inflation, tariff pressures are a huge concern now. Last week, inside our newsletter, I sent you something that gave you some perspective on inflation. I sent you a photo of a Taco Bell receipt from 1999that might have left your mouth agape if you didn't see it. I'll tell you about it here and expand on this. And yes, it could leave you aghast, stupefied, gobsmacked, or even flabbergasted. In a sense, 1999 was not that long ago. It's sure not like ancient history. I mean, I was alive then, yes, I am here, and I'm from the 1900s. Well, this 1999 Taco Bell receipt that someone found perfectly preserved in the pages of a book. It shows a complete meal that was purchased for $3.50 it was actually just $3.26 and then the rest was tax added in. That's 350 for a chili cheese burrito, a taco nachos and a 16 ounce Pepsi. That's not the price for each item. That is the combined total from 1999 All right, how much do you think those same items would cost today? I don't eat there. I went to the Taco Bell website and found out. I mean, what an inflation measuring stick. This is what cost, 350 A Taco Bell in 1999 costs $11.44 today I use the same sales tax rate to come up with that. So today it's 1144 and today they also ask you a question a Taco Bell, if you want to round up for the kids or something like that, and then just watch, pretty soon, they're gonna request a tip too. That's a 327% price increase, and few people's wages have risen that much since 1999See, I told you that you would be left slack job and flabbergasted. All right, so let's look at where we are today. Now it's not an apples to apples comparison, but you know, Taco Bell is a fast food restaurant. Let's look at the price of a consumer item at a sports stadium today. All right, because both are places that everyday Americans frequent college basketball's March Madness tournaments have been taking place the last few weeks. Well, for the first time ever, the SEC is selling beer at its tournament. The price for one large premium draft beer is $17.50 so before tax or tip, 1750 for one beer all in that might be $20 or more, and I doubt that the beer is really that premium. I mean, you know what kind of beer you get at stadiums. So we look at inflation, one beer today is at least five times the cost of a complete Taco Bell meal in 1999

that's price inflation, and that's the stuff that's highly perceptible. Okay, you've been seeing that effect all of your life. It's making most people poorer. It's making real estate investors wealthier. And then there's the inflation that few people consider the less perceptible stuff, service inflation. And what are some examples of service inflation growing up the postal service delivered mail right to my parents porch, and they still do deliver mail right to my parents porch. Their neighborhood was built more than 100 years ago, but look, when new neighborhoods are built today, like places I've lived and perhaps where you live now, the postal service doesn't deliver your mail right to the individual mailbox on your porch. Today, you've got to walk both ways to your neighborhood's mailbox cluster. Some people even have to drive to get their mail. So your mail is no longer being delivered. Really, you have to go pick it up. Well, they don't lower the price for that reduced service level. That's service inflation. A second example is more obvious, grocery self checkout. You're taking the time and doing the work of scanning your groceries, but yet, they sure aren't lowering the prices of your lettuce and your beef jerky. And look service, inflation is here to stay. That is because companies make investments in it. The Postal Service bought those mailbox clusters, the supermarket bought those self checkout kiosks.

All right, so with this ramp and price inflation and service inflation, along with it, and the other forms of inflation that I've talked about on the show before, like stagflation, tip inflation and Shrink flation and skimpflation. What is an individual investor like you supposed to do? Well, stock and mutual fund investors get killed by inflation. I mean, think about it this way, just killed if the Sp5, 100 gains 10% but there's 5% inflation. That's a 50% hidden tax on your gain, plus you might pay capital gains tax. On top of that, savers really get obliterated. I mean, just destroyed if your bond yield or your savings account pays 4% interest, and there's 5% inflation. That is a 125% hidden tax on your gain, and then you might pay regular tax on top of that. So stocks and mutual funds and savings accounts are not the answer. What is the answer? Real Estate and borrowing the opposite of saving. And let me address now, whenever people get fearful that another wave of inflation is coming, whether that's tariff induced or otherwise, let's not get carried away and think that Hyperinflation is right around the corner, although definitions of hyperinflation vary, the most accepted one by economists is a 50% inflation rate per month, not annually, per month. So that would be over 600% a year, with compounding. I mean, that would be really hard to get, but what we do know is that inflation is still elevated above the Fed's 2% target. It's 2.8% today. And what we do know is that more inflation is coming at what rate nobody knows. These facts almost necessitate that you have either got to start your own business, which is tough, or become a real estate investor which is easier, in order to escape this and acquire some lasting wealth. Any devoted listener here knows that the formula for beating it is luckily, not highly sophisticated, not esoteric, not anything that you need a degree or certification for, just own income properties with loans, and that's when inflation produces three profit centers. As we know that is something that I coined as the inflation triple crown. So if you're new, you're learning something. If you've been around here for a while, here's a little comprehension test for you. What are the three crowns in the inflation Triple Crown, you win with asset price inflation, debt debasement and cash flow enhancement. Asset price inflation benefits you because you have leverage gains debt debasement passively lightens our debt burden for us, and then cash flow enhancement, that boosts our cash flow above the inflation rate, because our principal and interest payment stays fixed. And you can learn more about that totally free. You don't even have to leave your email address or anything. You can watch the three videos of the inflation Triple Crown at get rich education.com/itc. For inflation, Triple Crown, it's just good free learning for you there I've made available at get rich education.com/itc, it is a foundational financial education. Is a recession or even a depression eminent, that's straight ahead. I'm Keith Weinhold. You're listening to get rich education.

You know what's crazy? Your bank is getting rich off of you, the average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text family to 66866, to learn about freedom. Family investments. Liquidity fund again. Text family, to 66866

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

you

Dani-Lynn Robison 15:45

This is freedom. Family investments. Co founder, Danny Lynn Robinson, listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 16:00

Welcome back to get rich Education. I'm your host. Keith Wynne Holland, you are inside episode 547. I'll tell you, being a landlord or real estate investor can really change you now. I was using the stair climber at the gym just before talking to you today, I like to set up a big fan down on the floor to keep me cool before running or climbing. Plug it in, set up a fan. When I'm done, I turn off the fan. It's just a habit. I don't pay the electricity bill at my gym, but it's just the way that I would want to be treated. But you know what? When I find a fan that's already set up before I grab it and start on the treadmill. That fan is always running when no one is using it. No one turns off their fans when they don't have to pay for the electricity. And this reminds me of when I owned apartment buildings in Anchorage, Alaska, and tenants kept their windows open, even during the frigid winter, so that they could get fresh air. Yeah, you can guess who was paying the heating bill. It wasn't the tenant. It was me. The larger the apartment building is, the more likely that the owner is the one that pays for more of the utilities. And of course, in that case, you can look into utility sub metering. That process can be costly, but it might be worth it. It can increase your cash flow and your net operating income, which, when it increases your net operating income, that means that it also increases the apartment buildings value. And you know, in real estate today, you've got to look for where the opportunities are. There are opportunities in every market today. For places where there are specifically good opportunities are apartment buildings where their values have fallen 20 to 30% in some markets, it's wise to invest in beaten down sectors that you just know are going to come back like you know, the demand for apartment buildings is going to be there long term. This doesn't mean that you want to invest in any beaten down sector, like Office real estate in general. I don't see how that's coming back. A second strong real estate opportunity today is to find over built pockets, especially ones that exist in Texas and Florida. I mean, this is why they call them buyers markets. A Texas or Florida seller might make you a deal, and that doesn't mean everywhere in these states. For example, Southwest Florida is one area that's specifically over built, even amidst the national landscape that's under built. A third and a fourth area of specific real estate opportunity today are two that I have mentioned before, but they persist. That is still brand new, properties where many builders are still motivated to buy down your mortgage rate to about 5% even 4.75% in some cases, and new builds have low insurance premiums too. And then a fourth opportunity. That's something that we've covered a good bit here these past few weeks. BRRRR, real estate investing, buy, rehab, rent, refinance and repeat. That's a specifically good strategy if you don't have, say, hundreds of 1000s of dollars in liquidity to invest. Now you might ask, do those four strategies have validity? Do they have cogency in today's market, where there are these fears of an economic slowdown. Oh, yes, they do, or I would not have gone over them, but these palpable recession Fears are growing, and some are even asking, is a new Great Depression eminent? There is tons of bad economic news right now, not just in the US, but the global economy is on the edge, starting earlier this month, stock market tremors have turned into full blown convulsions. Trillions of dollars in wealth have just vaporized, wiped out. Investors are rattled, consumers are anxious. Business owners are confused, and those in power in the administration, they insist that tariffs and policy swings are all just part of a transition period, but a transition to what some have even asked, Is the everything bubble finally about to pop. Is this the brink of a recession or something even deeper, a D pressure? Well, one thing is undeniable, from stocks to crypto asset prices recently made a free fall, and I've got some long term lessons for you today, even if you're listening to this years from now, including what a phenomenon like this historically means for the real estate market, it's about what really happens to property values during an economic recession. Stocks recently had their worst week since 2023 barreling toward an all out bear market crash. A bear market means when 20% of the value has been lost from a recent high. Even Bitcoin, the poster child of speculative excess, has cratered. The carnage has been everywhere. But yet, instead of taking steps to prevent an economic meltdown, the administration in power, whether you like them or not, they have introduced more and more radical policies that could accelerate the crisis. Now, some of the tariffs could help long term, but the short term pain is perceptible, and you've got to be able to survive it. We've got new tariffs on multiple countries, and these are our biggest trading partners, even if these import taxes diminish, this is already strained friendships long term, especially with Canada. These countries keep retaliating with tariffs of their own, Canada, Mexico, China and the EU government spending is being slashed. Mass layoffs of federal employees have been underway for a while now. This is not just an economic experiment. I mean, this is a high stakes gamble with global consequences. So is this a detox period, or is it an economic freefall? Treasury Secretary Scott tebescent described this economic shift as a necessary detox period. That's the phrase that he used, and yes, I need to acknowledge there is no more grandma Yellen running the Treasury for long time, listeners, that is a reference to the long running joke about how my late grandmother resembled former Fed chief and former Treasury Secretary, Janet Yellen, but anyway, according to Besant, the US must break free from what he calls its addiction to government spending in return to private sector growth. Now, hey to me, that sounds good. Actually, that sounds like a good plan for the long term. But here's the problem, that addiction has been the lifeblood of the US economy for decades. And you know, this is something that regular GRE guest macroeconomist Richard Duncan has talked about when he's here. Remember what he's told us for over a decade here on the show, if the US doesn't have 2% real credit growth, credit expansion, well then we go into a recession. Well, what happens when the government cuts spending during soaring consumer prices due to trade wars? What happens when businesses hesitate to invest in the face of extreme uncertainty? Well, the bad news is that tariff whiplash and massive layoffs mean that businesses can't plan, and when businesses can't plan, they freeze. Look, just the other day, I talked to the President of a manufacturing company they make stainless steel tube valves and fittings. Due to all the tariff uncertainty, he's had to set up a reserve account based on what happens next, all right. Well, with that reserve account, that means that that's not money that's going into equipment reinvestment, that's not money that's going into making new hires. What happens when more confidence shatters and markets spiral lower? We may be about to find out. So has the recession, which is a precursor to any depression, already begun? Well, the warning signs are multiplying. Most ominously at last check, the respected Atlanta Fed tracker is now forecasting a more than 2% contraction in US GDP this quarter. That is quite a drawdown and two negative GDP quarters in a row. I mean, that is the definition of what a technical recession is. And here's a quick history piece for you in 1930 to try to quell the effects of the Great Depression, tariffs were passed. Alright. Do you know how badly that turned out back then in 1930 it was called the Smoot Holly Tariff Act. It raised tariffs to try to collect more revenue for the government. It didn't work, and the US sunk deeper into the Great Depression, with rampant unemployment and poverty and social unrest. There was a rise in crime, there were bank failures, even hunger and malnutrition. That's what a depression looks like, right there. Well, back to today. Right now, consumer confidence is collapsing. Retail Sales are plunging. The bond market is signaling distress, and yet those in power appear kind of oblivious to the magnitude of the risk. So what if it's not a transition and it is a start of something far worse? And see, this is just part of what's made investors raise their bets on a recession. Stocks are down like a global trade war has begun. Crypto has fallen like risk appetite has collapsed. Bond prices are rising like inflation is declining, and experts have priced in a 52% chance of a recession in the next 12 months. Okay, 52 that's like flipping a coin and just hoping that it lands on good news. Now in the real estate world, when we talk about direct threats from tariffs, as I've touched on before, the biggest direct threats are tariffs on lumber and on gypsum board. The lumber is used in house framing and trusses. Gypsum board, that just means drywall, the base case for tariffs on Canadian lumber alone, that adds about $10,000 to the cost of a new build typical single family home, which in turn jacks up all existing housing prices and their replacement cost. But let's look beyond that now at market factors. How is real estate adversely affected if the economy slows? Though historically. Let's look at how recessions really affect housing prices, and this is, again, as I like to say, where we take history over hunches. It's easy to have a hunch about what you think is going to happen, but let's look at what has really happened. How do real estate prices perform during recessions. When we look at the last eight recessions, okay? And the most current of those was in 2020, and then when we go back eight recessions ago, that is the 1960s Okay. Well, let me move along in chronological order here, during those eight recessions, starting in the 1960s leading up to today, housing prices, and this includes single family homes up to multifamily apartment buildings, they were just rounding to the nearest whole number here, up 5% there in The late 60s, in that recession, and then up 18% up 14% in the next recession, and then no change, down 1% and then up 6% and then down 13% that was during the 18 month recession, around 2008 and then finally, home prices were up 8% in the latest recession, alright. So in our total of eight recessions since the 1960s home prices only fell significantly one time, and they usually rise that one timethey fell. Let's explore that. That was during the 2008 global financial crisis, which involved more than just the recession. It was a deep recession, that's why it's called the Great Recession, but it also involved more than that. 2008 was special because that was a time of housing oversupply and low homeowner equity positions and a complete mortgage meltdown backed by flimsy liar loans. Well today we are in the opposite of all three of those conditions. We have a housing under supply. Americans have a record 300k plus in protective equity that they are not going to walk away from. And more.

Underwriting is stringent, the opposite of a liar loan. So housing prices usually rise in recessions, and if we're teetering on the brink of a recession, there are a lot of reasons to think that housing prices will go up yet again. And by the way, I felt what was happening back in 2008 I invested through it. I think I let you know before that, that's when I owned two four Plex buildings, 2008 but it didn't feel that bad to me, because my properties were temporarily suppressed in value, and that part didn't feel good, but my rents and rental demand went up because no banks would give loans to borrowers to buy properties, so I wouldn't want to sell when the buildings were paying me a higher than ever monthly income. But let's not lose the greater point what I'm telling you here that housing only fell significantly one time through the last eight recessions. That demonstrates the resilience of the housing market. And by the way, those stats were sourced by the NAR and the NB er National Bureau of Economic Research. All right, so why is this? Why is housing resilient in the face of a recession? There are a few reasons, but a main one is see, even if and when times get tough, people still need a place to live, and they will pay for it, especially now, when they have record equity, people are motivated to make mortgage payments and make rent payments, or else they are going to be homeless. So tough times when consumers they get less likely to pay for their car loan are less likely to pay for student loans, and when they default on credit card payments, that's when this stuff happens, but people will fight like heck to avoid losing their home. I mean, people will pay for food, shelter and safety. And also, when it comes to recessions, let's not forget how many bad just God, awful, wrong recession calls there were from over the past two to three years. I mean, the so called experts were wrong, wrong, wrong. Today, the economy is actually starting from a good place. And what do I mean here today, consumers still have money to spend, and they probably will. This is huge, because consumer spending is 70% of the economy, but how will they respond when these higher tariff induced prices hit more shelves at Walmart and Target? We'll see unemployment is still so low that it's practically down there doing squats. But you know these numbers, they're always backward looking, so it does only aim to get worse. The labor market is firm. Interest rates have been pretty steady. They've fallen a little. Energy prices are still down. So really, the bottom line with what I've shown you so far is that federal policies have induced economic trauma, and it does increase the chance of recession over the next 12 months. During recessions, housing is a top performer, and interest rates usually fall as well, and specifically interest rates of all types, including the Fed funds rate, mortgage rates, pretty much every interest rate type, they tend to fall in the mid and late stages of a recession. So this is what you can expect based on history, not hunches. But as for a depression, that is super unlikely. We haven't had one in 90 years, and today. I mean, come on, we have seen what the powers that be do. We can see how they respond to crises. They will just print and print and print more dollars to help pave over any problem. And that's not responsible long term, and it creates more inflation, but that's exactly what the government did to pull us out of the Great Recession and to pull us out of the COVID slowdown. We'll review what you've learned today in just a minute, but let me tell you, though you may very well have the majority of your capital smartly invested in real estate, since that's where the long term wealth creation is, those funds are not very liquid. So what about your liquid funds? Like I pointed out early in the show today, amidst higher inflation expectations, inflation really destroys those in the stock market, and it absolutely crushes savers. Savers really get destroyed, because if your bond yield or your savings account pays you 4% interest, and there's 5% inflation, that is a 125% hidden tax on your gain. And if that's the. Damaging enough there might be tax that you have to pay on that gain, which is not really a gain. This whole thing was a big loss.

So for some people, including me, what I do is become a lend. Lord, yes, I get a higher yield by lending to others a lend. Lord. I mean, why settle for just a, say, four and a half percent yield on your liquid funds? I mean, that's the level at both the 10 year bond and the savings account yield today, about four and a half percent. I've parked my own liquid funds for a steady 8% yield that I've been getting for years with a long time established real estate company. I make the loan to them, they have paid on time, every time, for that steady 8% return. And see, when you understand that directly investing in real estate pays five ways, and that a 20 to 30% total ROI, therefore is common and even expected. You can understand how they can pay you and me an 8% return on your liquid funds. You can see where the arbitrage is. Just a little insider tip here. It's called Freedom family investments. If you want to learn more, text family to 66 866. Their minimums are pretty low to 25k and you don't have to be accredited. So for steady 8% returns from the same place in the same vehicle where I've been getting my 8% you can just do it right now. What's on your mind? Text the word family to 66866.

Let's review what you've learned today, Americans have higher long term inflation expectations than they've had since 1993 a 1999 Taco Bell receipt really brings to light how much inflation you have experienced in your life. Though, higher inflation can come. Hyper inflation is unlikely. Let's not get carried away. The prospects for a recession are 52% in the next 12 months, per a plurality of experts, but a depression is really unlikely. Now you know how real estate performs in recessions and why it holds up so well it even tends to appreciate coming up here on the show are some prominent guests, including the leader of rezzy club. You might know about them. Sometimes I share their great charts in our newsletter. Yes, rezzy Club's Lance Lambert will be with us. Also, Legacy finance expert Laurel Langemeier will be here with us on another upcoming episode. Thanks for being here, but you weren't here for me. You were here for you. I'm Keith Weinhold. Don't quit your Daydream.

Dolf Deroos 37:53

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 38:16

You know, whenever you want the best written real estate and finance info. Oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers. It's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read. And when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream letter. It wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text. GRE to 6866 while it's on your mind, take a moment to do it right now. Text, GRE to 6866

The preceding program was brought to you by your home for wealth, building, get rich, education.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
546: What the Bible Says About Money
24 mrt· Get Rich Education
Keith hosts a discussion with Pastor Jon Sanders on the Bible's teachings about money.

They explore the context of biblical verses, emphasizing that wealth itself is not sinful but how it's used matters. They discuss tithing, noting it's a principle of generosity, not a legalistic rule. The Bible does not condemn real estate or property ownership, as it is not explicitly forbidden.

Wealth can be a tool for doing good and providing housing for others.

Resources:

Explore the EntrePastors platform to learn more about Pastor Jon Sanders' work in helping pastors with entrepreneurship and financial management.

Show Notes:

GetRichEducation.com/546

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, what does the Bible say about money? Is it virtuous to acquire wealth, or are you going to hell for that one Bible verse reads, "it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God". I asked Pastor John Sanders all about it, as well as what other religions say about money today on get rich education

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

Corey Coates 1:19

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:35

Welcome to GRE from Bel Air, Maryland to Bel Air, California and across 188 nations worldwide. I'm Keith Weinhold, and this is get rich education. I hope that your week's off to a good start with 546 weekly episodes. We've approached investing from a lot of angles. Commonly, it's a strategic approach, but there are other wealth building approaches we discussed here, like mindset, what type of vehicle you're going to use, the academic perspective, the protective approach, then there's a mathematical angle. But today, for the first time, it's the theological perspective. Now, even if you're not a Christian or religious at all, what the Bible says about money has import, because the Bible is the number one selling book of all time, so it surely affects the mindset and the approach of those around you. I've got a pretty inflammatory question for you, if money is the root of all evil, then why do they ask for it at church? Now I say that a little jokingly. We're going to debunk that in fact and more as Pastor John joins us shortly, I will hit that verse head on and ask him about it, the verse that says it is easier for a camel to go through the eye of a needle than for a rich man to enter into the kingdom of God. I'm really interested in what he says about that. I mean, in fact, that's actually something I wanted to know about for decades. That's always piqued curiosity inside me, and especially since I'm the 10 plus year host and founder of a platform called get rich education. There's a lot I'd like to ask about that. There is more that I'd like to ask about, if we get time. I'd also like to know what the Bible says about tithing and real estate and gambling and more. Let's meet Pastor John.

With over 20 years in pastoral ministry, this week's guest, also has a passion for using his voice to motivate and inspire ministry leaders. His father was also a pastor. He is non denominational. Hey, welcome to GRE Jon Sanders.

Jon Sanders 4:04

Keith, this is my pleasure to be here. Man, been looking forward to this conversation, so thanks for having me on the show

Keith Weinhold 4:09

me too. We're doing something really different this week. I've been anticipating it, and I sure have some specific things I want to ask you, even some Bible verses later that are somewhat antagonistic to wanting to build wealth. But before we drill down and get into that, just big picture, John, when we talk about what the Bible says about money broadly, what should we keep in mind

Jon Sanders 4:34

with anything when it comes to Scripture? One of the greatest principles to keep in mind is that context matters, because without context, you can make the Bible say about anything you want it to say. And that's probably what we're going to dig into a little bit, is that if you just read a verse in one little snippet and divorce it from not only its context, but the rest of Scripture, you can come away with a pretty skewed view, as many people in the world. Have, as well as many people in the church, many Christians have a skewed view about money and about wealth because of some, you know, certain verses that I'm sure we'll get to today, I would say just an overarching principle, context matters, and hopefully we can show a little bit of that context in our conversation and just see that maybe what you thought the Bible says about money is not, in fact, what the Bible says about money. We'll see where this goes.

Keith Weinhold 5:24

Context matters and mindset matters. You know that we're a real estate investing show, but episode number one of the get rich education podcast from 2014 is titled, your abundance mindset. Do Christians worship a God of abundance, where he would want you to use your God given talents to flourish and produce and make more in this world. Or do you not see it that way?

Jon Sanders 5:53

I 100% see it that way. And what's interesting to me is that as believers, we would say, many of us would agree with things like we believe in this limitless God who spoke the universe into existence by nothing more than the power of his spoken word and just the abundant world in which we live like we believe in that God who can do all kinds of miraculous things. And yet, then, when it comes to the subject of money, so often, we live out something very different than that. With such scarcity, we act as though there's such limited resources at our disposal, and our thinking is so enmeshed in poverty thinking and scarcity thinking. And I think as God's people, we ought to be some of the most abundant thinking people there is because we are supposedly tapped into the most abundant source the world has ever known. So there is a discrepancy there, but I'm 100% with where you are on that we serve an abundant God, and we would do well to think in abundant terms, because I think we're gonna find that his resources never run out.

Keith Weinhold 6:57

Right? We're here to think abundantly in flourish. One thing I like to say is, don't live below your means. Grow your means. Christians should when I'm asking you as a pastor, I would think they would believe that God was an abundant creator. He created the earth that we live on a gigantic piece of real estate.

Jon Sanders 7:17

Yeah, and so much more. And like I said, it never runs out. Whether we're talking about his physical resources or we're talking about the more intangible resources that we can't necessarily hold in our hands. There is always more than enough with the God that we serve. And yet, how then do we come to such places of scarcity and limitation? I would contend this Keith that if someone is actually reading the Bible, applying the principles to their life, they will inevitably, more and more grow in their wealth and in their abundance and in their ability to manage well the resources that God has put into their hand. Now that's not the same as what some might put into the category of what they'd call the prosperity gospel, where God wants everyone to be rich and never to have any sickness or financial difficulties like those are not the same messages. We're not all promised the same exact outcomes, but I believe if we follow the timeless principles, the laws that have been established by the Creator that he's shared with us through His word, I think we can expect to flourish and thrive and prosper and do well and continually grow whatever resources he's put into our hands. As a matter of fact, I would point to a parable that Jesus told, many of the parables that Jesus told in the Gospel accounts of Matthew, Mark, Luke and John, many of them deal with money. Now, all of Jesus's parables got to a deeper, like more Kingdom spiritual lesson. But in many of them, he used something that all of us can relate to, and that is money. Because scripture has a lot to say about money. And then, specifically, in one of those parables in Matthew 25 I believe Jesus told a story of the master who represents God in the story how he gave differing talents or financial amounts to three different servants based upon their own abilities. And right in there, there's some truth that we can learn and apply, that we don't all have the same abilities, but God allows us, He gives us certain things that are in our capability to handle, and then with that comes an expectation that we manage that well, because it doesn't actually belong to us. That's a big principle of money in Scripture is that none of it actually belongs to us. All of it belongs to the Lord, but we are stewards. That's kind of a Bible word. We are the managers of the resources He's given us. And even from that parable I mentioned in Matthew 25 there is an expectation that we take what has been entrusted to us and we multiply it. And if we fail to do that, the words of the master that Jesus. In that parable, were you wicked and lazy servants? The words of the master to the one servant who basically squandered what had been entrusted to him, he was called a wicked and lazy servant. So there's an expectation that we are not wicked and lazy servants, but that instead, we take whatever resources have been entrusted to us and multiply them for the good of God's kingdom and for His glory. So that's just one. I mean, there's countless stories that Jesus told that we can learn principles like that from.

Keith Weinhold 10:30

I think building prosperity is being the opposite of laziness or sloth. Is it bad to be wealthy?

Jon Sanders 10:39

I would say, according to the Bible, 100% No, it is not wrong or immoral or sinful to be wealthy. We can point to many heroes of our faith who were men and women of great wealth. We can also point in Scripture to wicked people who also were men and women of great wealth. So the question is not whether or not someone has money. That's not what sets them apart as righteous or wicked. It's what they do with that money. It's how they live. It's their character that really is what we measure that by. And so here's what I would contend without money, it's really hard to do good things in the world. You're very limited when you put money in the hands of good people, those people can use those resources for all kinds of good purposes and to help a lot of people. I mean, that's just common sense, and so it's not a bad thing for righteous people to multiply their wealth and to grow in their wealth in order to be in a position to help even more people.

Keith Weinhold 11:39

The way I think about it, is that producers and entrepreneurs, they need to give first before they can create any prosperity for themselves. And what's foundational in our mission here at GRE is to do good in the world, provide housing that's clean, safe, affordable and functional. You're giving you're qualifying for a loan, you're buying property, you're taking on risk before anything can possibly come back to you and John here, I've often touted, hey, we provide housing that's clean, safe, affordable and functional. We can maybe abolish the term slumlord, for example. So that's what I'm talking about with doing good in creating prosperity for ourselves as a result of that.

Jon Sanders 12:24

Yeah, and I'll point out another biblical principle that you just outlined, whether you realize it or not, and that is the law of sowing and reaping. It's the law of the harvest. You don't have to believe in God for this to be true. If you go plant something, you will get more of the thing you planted, if you tend to the soil well, and if the conditions are right, and you mentioned it, that is risk. Like there's risk involved. Every time a farmer goes and sows seed into the soil, like there's no guarantee that I'm going to get that back, things can happen. It's a believable risk. It's a relatively manageable risk. It's a risk, nonetheless, to take a great amount of seed and put it into the soil in faith. And I want to point that word out. There's faith when we as entrepreneurs go out, we're acting in faith when we take that risk. And again, it's something that we have to kind of weigh it out, is this a wise risk to take? But at the end of the day, there still is no guarantee. But there is that law of sowing and reaping and the law of the harvest. And I think God honors that, I know he honors that I believe he is honored by our faith. It literally can be an act of worship done to him was we go start businesses, as we invest in real estate, as we buy properties like that, actually can be part of our worship, and us fulfilling the very purpose for which God put us here, to manage what he's given us, to multiply it, and then to do good with it, as you're describing. I agree totally.

Keith Weinhold 13:48

that's a good point. It really is an act of faith to provide an income property, faith that you're going to have a rent paying tenant, faith that you're going to be able to maintain the place, faith that you're buying a property in a market where you have a good expectation that you're going to be able to have future rent paying tenants. Yeah, it really is an act of faith. Well, John, there are some specific verses in the Bible that are really well known and deal with money. One is the often misquoted verse that everyone is familiar with. And what's misquoted is that people say that money is the root of all evil. But as we know, that verse from the book of Timothy is misquoted. It is for the love of money that is the root of all evil. Can you tell us more about that, why it's misunderstood, and actually, just what that really means for the love of money is the root of all evil,

Jon Sanders 14:42

by the way, just stepping back a second in the conversation to your question, is it wrong to be rich? Here's another supporting text where the answer is no, because the verse you're speaking of the apostle Paul wrote this in a letter to Timothy. He's telling Timothy again, in the context, he's telling Timothy. To address the rich people in the church and say some things to them, teach the rich people some things, and he didn't tell them, you know, shame them for having wealth and for being rich. Instead, he's teaching them how to be rich, how to be a good rich person. And it's in that context where that line is found, that the love of money is the root of all evil. Fast forward to modern times. We've kind of thrown the word love out of it, and we just said, There it is. Money is the root of all evil, and we say it with a sense of self righteousness. As I'm sitting here, broke, living paycheck to paycheck, I don't want to be one of those evil rich people. That's not what it says at all. It's saying the love of money is the root of all evil, and we do need to step into this for just a moment. There are warnings in Scripture about money, because if we don't realize and recognize the power of wealth and the power of money, I believe probably one of the reasons God's word says more about money than it does so many other topics is because the danger that money has to compete with God himself. I often say I don't think it's God and the devil that are in competition with each other. In many ways, it's God and money, because Jesus even said you can't serve both. You can't have two masters. You'll either love the one or despise the other. That doesn't mean you can't worship God and have money. It says you can't worship them both, because your allegiance is going to go one way or the other, and the more wealthy we become. There is a danger in that, or maybe even before the wealth shows up. If there is this just burning desire to be rich above all else, it can pull us off course. It can pull our focus away from the Lord. So there is a warning in that that we should heed and listen to. Apparently, according to Scripture, money is powerful, and it's powerful for good and it's powerful for evil. And so if we're going to have some of it, and if we're going to grow the amount that we have, it sounds like it's a pretty powerful tool that we ought to know how to use and how to use properly, no different than when you throw the keys to the car to your teenage driver, like we just put a very powerful tool in their hands, and we pray and trust that they're going to use it wisely and not drive it off the cliff, you know, or kill someone in the process. And money's very much the same way. So the warning is good, but what's not good is to take it out of context and build this paradigm of somehow, the less money I have, the more righteous I am. And in the platform that I'm building, we have a online community. We call it entree pastors, that specifically helps pastors do better financially through entrepreneurial business man, we combat this mindset all the time, because we're dealing not only with people who've been in the church most of their life, but people who have led in the church, and there is so much scarcity thinking around money that we have to address so many of these themes that you and I are unpacking right now. So yeah, often I have found myself taking people to this Scripture and having them read it again and again until they hear themselves say that the love of money is the root of all evil, not having money that is not the root of all evil, it's the love of it. So hopefully that helps shine some light on that confusion

Keith Weinhold 18:15

yes, so one can take it too far if it becomes the love of money? Well, there is a verse in the Bible. In fact, I think it occurs in more than one place. That verse is it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God. How does someone that's building wealth for themselves square that up. We're going to talk about that more when we come back. I'm talking with Pastor John Sanders about what the Bible has to say about money. I'm your host. Keith Weinhold,

you know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk, because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text family to 66866, to learn about freedom. Family investments, liquidity fund again. Text family to 68866

Hey, you can get your mortgage loans at the same place where I get mine at Ridge lending group and MLS 420, 056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage, you can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at Ridge lending group.com, that's Ridge lending group.com

Chris Martenson 20:40

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

Keith Weinhold 20:56

Welcome back to get rich education. We've got a pretty special episode today. Our discussion is what the Bible has to say about money, and we're talking with Pastor John Sanders. He's breaking it down for us. John, this is the one thing I thought about more than any other before chatting with you today. It is that well known verse about the camel going through the eye of a needle. And John, I first remember my mom telling me about this verse. Perhaps I was as young as age 12, and that verse is, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God. Here I am a 10 plus year host of a show called get rich education, helping people build wealth ethically through real estate investing. But how do we square up that verse if we're looking to make more of ourselves financially?

Jon Sanders 21:53

Yeah, and like we said at the beginning of the show, if that's all it said, and if that's the only thing you knew, you would come away from that pretty convinced that Jesus thinks it's impossible to love God and also be rich, like there's just no way a rich person can enter the kingdom of heaven. But as we said, context matters. So if we kind of zoom out a little bit and look at the greater context of what's happening in that passage of Scripture, you will recall, and maybe some are hearing this for the first time. But there was a rich man who approached Jesus, and he basically was kind of wanting to justify himself, and so he asked the question, you know, what good things must I do to inherit eternal life and inherit the kingdom of God? And Jesus starts by saying, follow the commandments. And this rich guy basically says, I'm paraphrasing all of this. You can go read it for yourself, but he's saying I've done all those things which, by the way, side note, No, he hasn't. None of us have followed all of God's 10 Commandments and more, like we just I've broken every single one of them. We're all sinners. Probably you have too Exactly. So he's already off base, this rich guy. So then Jesus hits him where he knows it's gonna hurt, and he says, Okay, here's the one thing you're still lacking. Go sell everything you have and give it to the poor, and then come and follow Me. And what it says is that the rich man turned away very sad, because he had great wealth, and see Jesus exposed what this man really worshiped in that I don't believe that that is a commandment from Jesus to all of us to go, sell everything we have, give to the poor and come follow him. That was a specific statement spoken to this specific man, and it did exactly what it was meant to do. It kind of smoked out the real heart issue that was happening here. So then Jesus turns to his disciples after this man walks away sad because he was not willing to pay that price. And that's where Jesus makes this statement that is so classic, where we all know, you know, it's easier for a camel to pass through the eye of a needle than for a rich man to enter into the kingdom of heaven. If you keep reading a few verses later, Jesus goes on to say, with man, this is impossible. But with God, all things are possible. So it is possible for a rich man to enter the kingdom of God. It may be more difficult. It may be more challenging because, as we said a minute ago, when we do have great wealth, that wealth competes in many ways with our heart for the place that God wants to hold in our heart. It is easy when we have margin and we don't need God as much, or we don't think we need God as much. We don't necessarily have to humble ourselves as much when I have all these resources. But that's not impossible. It is possible for godly people to have great wealth and to bow in humility before King Jesus, and to worship Him, and ultimately, to inherit the kingdom of heaven and be better for it, and not, you know, worse off. So again, I hopefully that explains that a little bit or gives some more light to that, because if you just take that little snippet, you're essentially taking it out of the greater context and missing the point, and you're. Making the point something that Jesus never intended, which was to say, rich people can't get to heaven. That's a mishandling of that text

Keith Weinhold 25:08

yeah? Because I think it states that, or something close to it three times in the Bible, in the Quran, the Muslim holy book, also has something similar in it, yeah.

Jon Sanders 25:19

And again, I know in in the New Testament, where it's mentioned multiple times, it's probably because it's found in those Gospel accounts that basically tell the same story just from four different authors. So that's sometimes where you see that repetition in the New Testament is because it's the same story being told just from a slightly different vantage point a different author. But the principle is there, to try to say that scripture forbids people from being wealthy or from pursuing wealth, would be a complete misstatement. It's simply not true. You know, to read scripture in its entirety, you can walk away from it with this understanding that God, not only is he not opposed to wealth, but God is the source, because he owns it all. It all belongs to him, and he actually the more I walk in faithfulness with what he's given to me and what he's entrusted to me, the more I can actually expect will be given to me, because I will see the fruits of those labors multiplied. That's the path I'm on right now, unashamedly, unapologetically, I am working on growing wealth, not only for my family in this generation, but scripture says a righteous man leaves an inheritance to his children's children and man, what if we started telling that story more than trumpeting these verses that make it sound like God is really upset with people who have Money? What if we actually encourage God's people to go build wealth and create more of it? Yeah, because

Keith Weinhold 26:46

I've heard a few different takes on that verse, John, about a rich man not being able to enter the kingdom of God. You know, some have joked, Oh, does the church just want you to put everything in the offering plate and not have anything for yourselves? Another take on it, I guess. If I read the verse closely about how a rich man cannot enter the kingdom of God, well, don't die rich. You be wealthy and then bequeath everything to your heirs upon your death. So technically, you're not dying rich. There are a lot of takes upon that verse. Really appreciate getting your perspective and your interpretation on that context piece being really important, John, when we think about what the Bible says about money, in the intersection of both money and the Bible, oftentimes we think about tithing, which I think of that is giving a 10% of your income to the church. So do you have any thoughts about tithing, or just some of the other general things that the Bible says about money.

Jon Sanders 27:41

I certainly have some thoughts, but more importantly, Scripture says some things. So it really doesn't matter what John thinks about it, but tithing is a controversial subject, so let me start with maybe something that's not so controversial, and we can jump into the tithing. Here's something that is not controversial from Scripture. The more we give, the more of a blessing it is for us. The more that we can give, the more God blesses us. God blesses generosity. So hopefully we can all agree upon that For God so loved the world John 316 that He gave His one and only son. So there's a direct correlation between loving and giving. And the more that I give, the more God seems to bless my life. And I know it sounds cliche, if you grew up in the church, we always heard statements like, you cannot out give God. The more I give, the more God gives back. And again, I'm careful to say that because I don't want to treat God like a cosmic slot machine where I put in $1 and pull the lever and hope to get 100 it is, again, it's just one of those laws that God has established that he blesses generosity. So then the question just becomes, what does our giving look like? What does our generosity look like when we look to Scripture, Old Testament? Bottom line tithing was, I mean, it was commanded. It was part of the overall giving that God required of his people. And a tithe is a 10% of the first fruits 10% off the top. And it's like when people argue that, or they say, Well, I'm tithing 2% that's like saying you ran a three mile marathon. My marathon is not three miles, right? Yeah, tithing is 10% the question is, is tithing for modern day believers? Are we supposed to be doing that? I will share my quick thoughts with you. I believe we are under grace. We are no longer under law. So I don't think that this is a matter of salvation. It's not at that level. But I will say this, I believe Jesus commended tithing, and I'll tell you where it took place, and you can go look at this on your own if you want. I think it's in Matthew 23 again, the context is not really about tithing. The context is Jesus is dealing with the religious establishment. The people he had the harshest words forever were the religious leaders, and he's taken them to task. And he says in there, like you guys tithe off of your mint and your dill, like you're tithing off of everything, like the illegal. Stick level, and yet you're ignoring the greater elements. You know, mercy, love, sacrifice. And then he goes on to say, You should do the first without ignoring the second. And I'm paraphrasing again, so go read it for yourself. What many people look at that passage and they say, here it is, Jesus commended tithing. He basically said, No tithing is good. You should do that. One other case I would make for New Testament, tithing is simply this. When Jesus stepped onto the scene in the New Testament, He never lowered the bar that was set in the Old Testament law. He actually elevated it. I'll give an example. Jesus said something like you have heard it said, You shall not murder. But I tell you, if you hate your brother, you're worse than a murderer. So he elevates it from just the physical act of killing to the heart condition of hating that leads to the killing. He did the same thing with adultery. You have heard it said, Thou shalt not commit adultery, but I tell you, if you look at a woman with lust, you've already committed adultery in your heart. So he raises the bar, not lowers it. So my question has always been, when it comes to tithing, would we believe Jesus to lower that bar and say, Ah, it's not important. Don't do it. You don't need to do it. Or would we expect him to raise the bar? I actually think the bar has been raised. He commended the poor widow that gave everything she had, and it wasn't much, but it was 100% sacrifice, and Jesus praised her. Now I don't think he's that's prescriptive of all of us to go drain our bank accounts, but I think what God is celebrating in the New Testament is sacrificial giving. For me personally, my personal opinion is that tithing is just kind of a good starting place for biblical giving. But I don't hold it up as a legalistic rule that says Thou shalt tithe based on what we see in the Old Testament and how we see it transition over into the New Testament. That tithing is not a bad idea, but if you're a modern day Christian that says I don't believe in tithing, I don't think I need to tithe. Okay, cool. I'm not mad about it. My challenge to you then would simply be this, what does generosity look like to you, and are we lowering the bar? Are you pushing back on tithing because you desire to give less? And if so, maybe there's a heart condition. There of you wanting to cling to something instead of being open handed. It's not my place to sit and look over your shoulder and go. You need to give more of your income. I mean, the Holy Spirit does a better job of being the Holy Spirit than than I do. So really, that's between you and the Lord. But my question and my challenge to modern Christians would be, what does generosity look like for you. You know, what is your discipline or your habit, your system around giving? If there is none, I personally think that's a problem. I think there ought to be some level of generosity happening in your life, because you'll be blessed, and God will use you to bless others. And that's a pretty cool thing, when God gets to channel his resources through you to someone else. So I don't believe everything that God allows us to have in our hands is 100% for us to hold for ourself. I think some of it is he's using us as a channel or a conduit to flow those resources in other directions. So those are just a few kind of high level thoughts of not only what Scripture says about tithing, for sure, but also maybe how we might look at it in a New Testament context,

Keith Weinhold 33:23

there's some good questions for you, the listener, to ask yourself when it comes to the framing and the importance of your giving and your tithing. John, what does the Bible say about real estate or property?

Jon Sanders 33:35

There are places I can't tell you you know exact location in Scripture off the top of my head, but I know there are places in Scripture that talk about going and purchasing land, or somebody owning land, and so I believe scripture upholds the idea of personal private property, and private property ownership, obviously, under the context of what we said earlier, that all of it ultimately belongs to the Lord. But I think it's a good thing. I certainly will tell you this. It's not condemned in Scripture. I know of nowhere in Scripture where we are forbidden from pursuing real estate or pursuing land. Is it like I say on the flip side, I could find examples where people bought and sold land. I'll give you one. Just popped into my head. In the early church, Ananias and Sapphira, they actually were put to death. And it's a really deep story. The issue, the reason they were judged instantly is because they lied about it. But they had land, they went and sold it, and they did not give all of it to the church leaders. And that was not the issue. The issue was they lied about the fact that they were giving all so they wanted to look a certain way, and that's the sin that God was kind of rooting out of the early church. But right in there, I think it's in like Acts chapter four, maybe or five, right in that area, it says directly, was not the land yours before you sold it and after you sold it, was not the land the money yours to keep. Why have you done this wicked thing? And the thing, again, that they were being judged for was lying to the Holy Spirit. And it was kind of like in that moment in the early church, the Lord was saying, we're not doing this like we're not going to live this fake, hypocritical life. And he judged it instantly, kind of grateful that God doesn't still deal with us in that way. It's not to say that he could not. That's a quick story that popped into my head as an example of buying and selling land. So if you do buy and sell land, just don't lie to the Lord about about how much you sold it for, because he knows it was his in the first place. He knows how much you sold it for. So just be honest in your dealings. There you go.

Keith Weinhold 35:39

Well, I'm grateful that the Bible doesn't say you have a limit of five rental properties. That's really good to hear. Right? Well, John, as we're winding down here, we've talked about Christianity and what the Bible says about money. Are there any non Christian religions that, just if you could spotlight one, that have a really interesting approach to money, whether that's Muslims avoiding debt, or anything, Hindus or Buddhists believe just any one thing. That's particularly noteworthy with non Christian religions approach to money.

Jon Sanders 36:09

I'm going to acknowledge a lot of my ignorance when it comes to other world religions. I can speak of one thing very locally to where I live, I don't know. It's kind of a religious thing. It's kind of a cultural thing. So where I live in South Dakota, I'm surrounded by, you know, an Indian reservation not too far from me. And the Native American culture is very prevalent here. And one thing that's been interesting to me to learn over the years is that, as I understand it, the Native American culture does not believe that you can own property. So they don't own land. They don't believe in owning land, at least historically, traditionally. So again, is that a religious thing? Is that a cultural thing? Not exactly sure. I don't share that belief, but it's an interesting take on things. So I'm sure there's so much more that a different guest could give you in terms of insight on other world religions when it comes to, you know, their view on certain deaths and philosophies around finances and things like that. For me, I really have studied one very deeply, and that's Christian faith. So I don't really feel like I'm much of an expert to speak from those other perspectives.

Keith Weinhold 37:18

Well, John, this has been enlightening to me. I've learned some things, and I sure might now know how to explain my way out of the whole camel in the eye of a needle. Verse there, if someone wants to learn more about you, tell them how

Jon Sanders 37:34

you can look me up online. I have a website called entrepastors.com me and my partner, les Hughes, as I said earlier, we help pastors provide better for their families through entrepreneurial business. If you want to connect with me, if you just go to entrepasters.com all of the links to connect with my social media and everything else are right there, and I'd be happy to jump on a call or serve you in any way that I can. So I would welcome you reaching out.

Keith Weinhold 38:01

Oh, thanks a lot for offering that to our audience. It's been a pleasure hosting you.

Jon Sanders 38:05

Thanks, Keith. Been a fun conversation. I appreciate you having me.

Keith Weinhold 38:15

Oh, yeah, good stuff from Pastor John today. I did not know that Pastor John would agree with me this much. I guess I'm frankly, a little relieved I learned some things too. Check out his platform again. It's called entre pastors. This was definitely an anticipated episode here today. The good news is we've got more anticipated episodes amidst an expected economic slowdown in potential recession. What actually happens to real estate in a recession? I will cover that and then with a lot of political turmoil and policy change coming from the White House that promises to massively swing the economy. I would like to have someone that's inside the White House and advising President Trump himself on his economic policy to come here on the show so that I can go ahead and ask them about it. Well, that's hard to do while they're in office and the administration is in full swing like this. So speaking of anticipated shows coming up here on the GRE podcast in future weeks, we have the financial advisor, the budget director of a past president that advised that president in the White House. He will be our guest here on the show. You'll learn what you can expect from him for the next nearly four years. And you know, something that might be even better to have that past president's White House Advisor here on the show, because he will feel emboldened to be more critical. Perhaps. Stay tuned for that big thanks to the terrifically knowledgeable John Sanders today in. Till next week, I'm your host, Keith Weinhold, don't quit your Daydream.

Dolf Deroos 40:07

Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC exclusively.

Keith Weinhold 40:31

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video, course, it's all completely free. It's called the Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 66866.

The preceding program was brought to you by your home for wealth, building, getricheducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
545: Eliminating the Property Tax, DC Real Estate Crash, Future Inflation and Interest Rates
17 mrt· Get Rich Education
Register here for the live online event to learn about ‘Cleveland’s Amazing Cash Flow Opportunities’ on Thursday 3/20.

Keith discusses the potential elimination of property tax, highlighting its impact on home affordability, rent stability, population influx, and retiree financial relief. Florida Governor Ron DeSantis supports a constitutional amendment requiring 60% voter approval to abolish property tax.

Hear about the broader economic implications, including the potential for increased sales tax and widened wealth inequality.

GRE Coach, Naresh, analyzes the impact of federal layoffs on the DC housing market, predicting a decline in home values and increased private sector job opportunities. Both emphasize the importance of the BRRRR strategy for real estate investors.

Show Notes:

GetRichEducation.com/545

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, there's a proposal to eliminate the property tax. Is a Washington DC real estate crash upon us, then a terrific guest and I are talking about the future of interest rates in inflation. And finally, an event you won't want to miss all today on get rich education.

Speaker 1 0:23

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 Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with get rich education podcast, sign up now for the get rich education podcast, or visit get rich education.com

Corey Coates 1:09

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education. You Keith,

Keith Weinhold 1:25

welcome to GRE from Fort Carson, Colorado to Carson City, Nevada and across 188 nations worldwide. I'm Keith Weinhold, and you are in for another wealth building week at get rich education. I don't like to predict interest rates, because it's really hard to do. But it does get interesting today, because our guest says that he will with his tight read on the economy, this is a unique time, perhaps in my entire life, where we have more new policies shaping the economy and real estate. Then, anytime I can remember, policies are made by politicians, but we don't get into the politics here, rather the policies and how it affects you and her. Any of these policies spicier than this one from earlier this month. Be mindful that this voice is from a person that made his name as a real estate investor.

Donald Trump 2:29

I also have a message tonight for the incredible people of Greenland. We strongly support your right to determine your own future, and if you choose, we welcome you into the United States of America. We need Greenland for national security and even international security, and we're working with everybody involved to try and get it. But we need it really for international world security. And I think we're going to get it one way or the other. We're going to get it. We will keep you safe. We will make you rich, and together, we will take Greenland to heights like you have never thought possible before. It's a very small population, but very, very large piece of land and very, very important.

Keith Weinhold 3:17

Yes, the long time New York City Real Estate Investor there has gone well beyond Gotham now with plans to expand America's real estate empire, if you will.

Is this imperialism or America First policy? Or is it abject comedy? I guess that it could be all three. I'll let you decide. Well, the federal policy shakeups like that, also what they seem to be doing are emboldening others, including at the state level, where Florida, interestingly, recently proposed eliminating the property tax, taking it to zero. What is property tax free? Real Estate coming to you as well. Let's look at the prospects for this and what the effects would be of eliminating the Property Tax with some things that you probably never thought about before, and yes, your mind might shoot ahead. You might anticipate saving 1000s in lost tax dollars every year, even saving over 10,000 bucks a year per single family home in high tax areas. And you know, property taxes, sharpest critics, they say you have got to get rid of this thing, because you basically just endlessly rent your house from the government, and the rent goes up every year, and so therefore it's like forever rent that you have to pay. What's even worse is that the. Amount of property tax you pay is based on your homes or your apartment buildings market value. Well, because the government prints so much money and creates inflation that pumps up all the housing values, many of which are fake, inflated gains, and then your property tax goes up based on this phantom gain. And we've really seen that over the last five years, both real gains and Phantom gains. And then, plus, of course, each full dollar that you earn from your work right now is already taxed, say, down to just 70 cents, is what you've got left over. Well, then your 70 cents is further whittled down by property tax and all the other taxes that you have to pay out of that currently, all 50 states have a property tax every one of them, and you might already know that property taxes, they're basically highest in really two main places. When we look at property tax as a percent of your income. Those places are Texas and the Northeast, where they're upwards of 4% even 5% in fact, it's more than 5% of your income every year that goes to property tax in the state of Maine, but it's 4% or more in a number of states. And of course, if you don't pay them every single year until you die, the government will repossess your home from you. And almost 5 million Americans lose their home every year, many of them to this tax foreclosure. And in the US, the property owner pays the property tax, of course, but effectively, renters do too, because as landlords, we pass it along to tenants. It's embedded in that market rent amount, all right. Well, can we end the property tax? Well, former presidential candidates like Ron Paul and Herman Cain have proposed it. They didn't get elected. Texas has discussed it a lot, but yeah, it's Florida that has newly and boldly proposed eliminating the property tax. And like falling dominoes, if this gets abolished in one state, it increases the chances that more will follow. And Florida is a big state, the third largest in population. Well, Florida Governor Ron DeSantis came out and said this, taxing land and property is the more oppressive and ineffective form of taxation. That's what he said. Now let me tell you why he says that before we look at the chances that property tax will be eliminated, DeSantis says it's oppressive, because look see, you can personally dodge your income tax by making your paycheck smaller, although that might not be desirable, you sure could, and you can certainly avoid sales tax by consuming less, but see there is no escape from property tax. That's the oppression that's being referred to here. Let me tell you where we're at with eliminating the property tax, and then what the absolutely Titanic impacts of this would be DeSantis goes on to say, property taxes are local, not state. So we'd need to do a constitutional amendment which requires 60% of voters to approve it, to eliminate them, which DeSantis supports, even to reform or lower them. Right? But he goes on to say this, and here we go. We should put the boldest amendment on the ballot that has a chance of getting that 60% that's the end of the quote. Okay, so that's what it's going to take to eliminate property tax in Florida, where, if it happens, it could be a model for other states to follow, like we're seeing a little bit with the zero income tax states. All right, here's what I think would happen if they were eliminated. First home affordability would massively improve, skyrocketing property values. So many more people could afford the lowered monthly payment without property tax making prices soar, especially the values of lower price to median priced homes. They could really bring those into the affordability range, and they are the exact ones that make the best rental properties. What about rents? If property taxes went to zero, rents would stay stable. Landlords would do little or nothing to drop them. That's just how it works when people are already used to paying a certain price. Also population influx to the affected area. I mean that population influx that already works for states in attracting residents. That have zero state income tax, it would with property tax too. I mean that would clearly be desirable for people to own property tax free homes, especially in the beginning, before this settles in and those home prices soar. Also, retiree financial relief would take place. Those people on fixed incomes would really be helped. But you know what would not happen with governments slashed property tax revenue. They couldn't reduce their spending proportionally. I have no faith that they could. They would have to get their income from elsewhere and see shifting away from property tax over to beefing up your sales tax, that would hurt poor people the most. For example, in Florida's case, it's been studied, and they discovered they would have to increase their sales tax from the current 6% up to 12% to maintain the same services. Can you imagine 12% sales tax, and another effect of abolished property tax is that wealth inequality would widen because the property owners are the ones that benefit the most. So those are the big effects. But look, there are more problems eliminating property tax, that means the areas would need to find another way to pay for schools and roads and parks and local services like police and emergency responders. Maybe some of that stuff could be privatized. But if the tax, if that were just shifted away from local government and that went toward state and federal government, well, then local control would be lost. So that is a really undesirable side effect. But as a real estate investor, come on. The prospect of an abolished property tax that has got to excite you. I wouldn't count on it happening anytime soon, but now you know more about the prospects for it happening and what the impact would be with an elimination of property tax.

coming up soon. Here on the GRE podcast, what the Bible says about money when Pastor John joins us, it's going to be a show unlike any we've ever done before, and maybe will ever do again. You might not be a Christian or religious at all, but this is still relevant to you, because the Bible is the top selling book in the history of the world, and it has an indelible influence on the people around you. The book the Bible, says some things that make you wonder if wealth accumulation is even virtuous. We're gonna face those verses head on and get pastor John's insights there. That's a really anticipated show. I'm also gonna ask him what other religions have to say about money. Also some well known guests down the road here on the show, including the get rich education debut of Laurel Langemeier and more. LAUREL she was known as the millionaire maker since back in the days when a million dollars was actually a lot of money. To be sure that you don't miss these upcoming episodes on your pie catching device, hit the Follow button right now while it's on your mind and you'll be all set. Let's meet with this week's guest.

This week's guest is a familiar one, because he's on Team GRE, yeah, it's an in house chat with our super helpful investment coach. What he does is he helps you devise your big picture real estate strategy all the way down to connecting you with the exact right property addresses. He does that free at GRE marketplace business speaker Jim Rohn said, formal education will make you a living. Self education will make you a fortune. He's got both with an MBA from Duke. Then he worked at both banks and financial publishing companies before landing here at GRE in 2021 but importantly, for years now, he's been an active real estate investor, just like you and I are. Hey, a big welcome back to the show. Naresh Vista,

Naresh Vissa 14:13

hey, thanks for that wonderful, wow, amazing introduction, and thanks for having me back on. It's been a few months.

Keith Weinhold 14:20

Yeah, we haven't heard from you since October here. So what's going on in the real estate and economics world? From your vantage point, everyone's got a different slant on it based on what they see.

Naresh Vissa 14:32

There's a lot happening. As you know, Keith and our listeners, I'm not sure if they're following, but we're seeing tremendous, tremendous changes in the financial markets in general, and the financial markets include the real estate markets, and the impact is going to be widespread for better or for worse, I think, for better over the long haul. So what I'm talking about right now is, for example, interest rates, mortgage rates, home value. Use inflation, those are all very important parts of the economy. And we have this new government department called Doge, the Department of government efficiency. And Doge has gone in. And I loved your newsletter where you talked about Doge a little bit, and the walk that I took, as you called it, the awkward walk with a box full of your stuff or something like that. The sure, because I've been fired before. Yep, yep, it's happened to me once too. I took the awkward walk with the box of of random stuff. Yeah, lots and lots of of layoffs are happening within the government. The private sector continues to lay off people as well, like it usually does, and this is a big deal. The reason why it's a big deal is because aggregate demand. I don't want to say it will be killed, but we're already seeing an impact on home values in places that are very dependent on government workers, places like Washington, DC, Virginia, Maryland, there's actually a 10% year on year decline in home values in those areas. I don't know if you knew about that, Keith, but that's been the impact, and that's based off of the February statistics, the February numbers. So we've seen a decline, and that decline will likely spread to other areas that are dependent on federal workers, or where federal workers make up a good chunk of the local economy. I bring this up because we have providers in Maryland who we work with, who GRE has worked with for three or four years now, and they're seeing somewhat of a decline in the area as well. Because just you don't have to work in DC to be a federal worker. You can work in a major city like Baltimore or in a suburb in between Baltimore and BC. So we're seeing somewhat of a decline in our investors have all of a sudden gotten interested in investment property in the Maryland area because they knew, hey, we know GRE works in the Baltimore operates in the Baltimore area, and just want to scope out some homes. So previously, two years ago, three years ago, when list price was not negotiable. Now all of a sudden, the sellers are open to offers when there was no budging on offers three years ago. So I bring this up because the Department of government efficiency, I believe, to my knowledge, we're up to six figures. More than 100,000 workers have either been laid off or taken the buyout package, so we're somewhere in the six figures of people who got that now, they do have eight months severance. But with that being said, you would think that most humans, they'll immediately start looking for the next job. They're not gonna just enjoy for eight months and then scramble to find that next job. So this is having a widespread impact on housing, home values on it's going to have an impact on interest rates. We're seeing that interest rates are coming down, and if there's any sign, which I don't think there is, but if there's any sign of a recession, if there's any sign of bleeding, then the Fed is going to start cutting interest rates again. So I think we saw peak interest rates a few months ago, those interest rate values, those mortgage rates, aren't going to be going back up anytime soon. We know that almost it's almost a fact that we know that, because the Fed is not going to be raising rates, the most punishing thing they can do is just keep rates steady for a long period of time. But I didn't anticipate that later this year, they're going to start cutting again because of these widespread mass layoffs.

Keith Weinhold 18:32

And of course, Washington, DC is essentially ground zero for these federal layoffs. Federal jobs account for about 25% of DC jobs. You the listener, probably find it to be no surprise that that is the highest in the nation. But of course, this can also affect private companies, those private companies that have federal government contracts as well, and Naresh, before we open it up to the nation, we just think about DC. Do we have any idea of what properties are going to be hurt the most? A lot of times you might think of that in the case of what is the income range of these federal employees that are being laid off now, a lot of them are probationary employees, meaning that they're in their first year of employment.

Naresh Vissa 19:19

Well, it's a huge mix keep. That's a really good question, because I think a broker, like a real estate broker who's trying to sell will try to beef up the price and say, Oh, this doesn't affect us, and this only affects very high income folks. Well, that's the fact of the matter. Is there, if you work for the federal government, you're not necessarily ultra high income or ultra high net worth, you get the perks, and you get perks of working a government civil servant Job while taking somewhat of a lower pay. So it's actually a mix, because you have people in the first two years of employment. So the youngsters. Now, those aren't your homeowners, though, the 2223 24 those. Just say the people in their mid 20s, they're not the homeowners, they're the renters. So you can expect them to leave. They'll probably if they can't find a job, which it's going to be much harder to find a job in that DC area, they may move to Philadelphia or New York or California or wherever they can find a job. They'll just get up and move and move, and that's one of the benefits. I did that when I was in my early and mid 20s, many times where I just packed up and moved. I was more than happy to do it. So they're not your homeowners, but the homeowners are going to be the people who are getting laid off. So there are mass layoffs happening right now, and those people are homeowners, and then the people who are taking the buyout packages very likely, because they're either approaching or at retirement age, and it remains to be seen whether those people it's like a retirement gift, like, Hey, this is a great party. You know, getting eight months of free pay. Like, that's pretty amazing and happy retirement. Or maybe folks were like, they didn't say for retirement all that much, and they were planning to work another 10 years. Those are the people who could be sellers. Bottom line is, when you have this amount of mass layoffs, and we're seeing it in the data, there are more homes for sale today in that DMV area. I By the way, I used to live there. I used to live in in Maryland, great. More homes for sale today than I believe in the lab, definitely over the last five years. And it could be even over the last 15 years, to my knowledge.

Keith Weinhold 21:29

And for those that don't know DMV, that means Delaware, Maryland, Virginia, that area, yep. So

Naresh Vissa 21:34

there are more homes for sale, and the home values actually are now. This is a crazy thing. The home values in on average are back at 2020 levels. So basically, the peak of 2020, is what the home values are at today. And just my prediction. I don't think it takes a genius to predict this, but the layoffs are just getting started. They're just scratching the surface, and they're going to continue, because this Doge is a an 18 month program or an 18 month project. It's supposed to, it was called the Manhattan Project of our time. So they're just scratching the surface. And I'd expect home values in those areas to continue to fall. And you're gonna see it's not immediate. It's not like there are mass layoffs one day and then home values fall the next month. A lot of these effects, we won't start seeing them where the DC area won't start seeing them. 678, months down the road,

Keith Weinhold 22:27

Doge is more than just a meme coin. Now our own in house investment coach, Naresh Vissa and I are talking about the state of real estate today. More we come back, including nuracious thoughts on the future direction of inflation. This is Get Rich Education. I'm your host. Keith Weinhold

you know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lock ups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing. Check it out. Text family to 66866, to learn about freedom family investments, liquidity fund again. Text family to 6686

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

Jim Rickards 24:34

this is author Jim Rickards. Listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 24:49

welcome back to get recidiation. I'm your host. Keith Weinhold, it's an in house chat with our own GRE investment coach, Naresh Vissa. He's been talking about the fallout on DC area. Jobs with the regime shakeup that we had in the White House starting earlier this year. And Naresh, I know that you have some thoughts about what this can do to the future direction of inflation. Tell us about it.

Naresh Vissa 25:12

Well, the first thing Keith is, if you look throughout history, or even your lifetime, what we saw from 2021 until today, really, because inflation is going up. I don't want to say it's going back up, but it is going up. We've seen an inflationary cycle that I've never seen in my lifetime. It's worse than any short term inflation cycle that this country has faced, at least in my lifetime. And I was born in the late 80s, let's just say 1990 and moving forward. So I bring that up because this is some pretty bad inflation that the world and that the United States has seen, and we don't need to get into all the details about how it happened or the mistakes that were made at the time when the Fed should have started raising rates, when the government should have stopped spending. That's all history. Moving forward, I'm actually very optimistic now that we've actually reached peak inflation. And when I say peak inflation, I mean during this micro cycle where inflation has gone back up from a 2.4% rate to a 3% rate. I think that's the highest we're going to get during this micro cycle. It did reach some I believe it was above 9% in 2022 yes, we're definitely not going to going to reach that. But 3% is still too high for the Federal Reserve. It's still too high for Americans. It's a major reason why Americans went to the voting boots and or the ballot boxes and made the decisions that they made because of inflation. It's the most important issue on most Americans minds. And I bring this up because I'm very optimistic that we've seen this 3% peak and that we're going to be going down moving forward because of the first half of this interview, the fact that all of a sudden, it is a sudden thing, because a lot of people weren't expecting this, I was, but a lot of people weren't expecting these mass government layoffs. And these mass government layoffs, they hit corporations. They hit private businesses. Anyone with a government contract is going to be hit anyone who was profiting off of waste, fraud, abuse, which you'll be surprised how many private and many times this is legal, like it's legal waste, it's legal abuse, and all of a sudden those checks are going to stop coming in, or the way of doing those business practices are going to stop because the government is clamping down on it. Why? Because it's taxpayer money, and taxpayers are upset. So the pullback or the elimination of waste, fraud, abuse, is definitely a good thing, but also the mass layoffs, we're going to see a decrease in aggregate demand. And when we see a decrease, I'll just say demand. I mean, that's more common, so we'll see a decline in demand. So when there's a decline in demand, what happens? Prices go down, and we're already seeing it. There's already proof of it. I already I brought up the housing market in the DMV area, and I can also tell you oil prices, for example, which is one of the main drivers of inflation, oil and gas energy prices one of the top three drivers, along with government spending. So you got mass layoffs, which will kill a lot of that aggregate demand, you have the oil, gas and energy, and then the reduction in government spending. So all that combined is going to lower inflation, going back to the energy prices, oil is down for really since the inauguration. That trend should continue, given the policy change, and that drives it drives inflation, it drives deflation, it drives pricing, because any good that you need, it's probably going to be transported with the use of energy the microphone you're using, Keith, how was it shipped? Maybe in a truck, and the truck is powered by fuel, or maybe something was sent in an airplane or in an actual ship. All that requires energy and fuel. So if you can lower energy costs, then we're going to see a continued decline in inflation, and energy costs continue to fall, continue to plummet. So I think this is good for inflation. Yes, it is. There is pain. We talked the first entire half of this episode on layoffs. Layoffs are they're painful. Taking that Walk of Shame is painful. There is going to be pain. But at the same time, remember, there are more than 10 million available private sector jobs, and we already have more than a million jobs that are opening up as a result of investment within the United States since January, 20 of this year. We have companies like Apple. We have Taiwan, semiconductor, Eli Lilly, the list goes on and on and on, of major corporations, big corporations, mid sized companies, who are opening up more operations within the United States. So the private sector jobs, which are really the innovative, long lasting jobs, they are growing there is just a tremendous. To opportunity, especially for young people. If I was young again, I wouldn't want to work for the government. I'd want to go work for one of these companies, where they're essentially going to be recruiting and begging youngsters to come work for them

Keith Weinhold 30:12

to corroborate nourishes lower inflation expectations. Since the beginning of the year, we've had a fairly sharp decrease in bond yields now. GRE listeners know by now that mortgage rates somewhat move with Jerome Powell's federal funds rate, but they're more closely tied to bond yields, specifically the yield on the 10 year T note. Okay, so then what makes the 10 year go lower? Hence, mortgage rates along with them, that is lower inflation expectations in a slowing economy. And another reason that bond yields and hence mortgage rates with them, fall, is when people sell stocks and make a flight to safety into bonds, that pushes up bond prices and lowers bond yields. So again, those are two factors that move bond yields and, resultantly, mortgage rates. And that's what has been happening.

Naresh Vissa 31:08

absolutely. And the important thing to remember something you touched on and what I talked about earlier, which is, yes, there is going to be a reduction in federal government and federal government jobs, and I think this is going to pass on to states as well. I think many states, in fact, I know that many states, even blue states, are taking a look at their books and saying, hey, you know what? We should be making cuts too. Because states, they operate on much tighter budgets, whereas the federal government, they basically have access to a printing press. State governments do not so the point that I'm making here is that, yes, it's painful. We're going through some pain right now. The DMV area is going through some pain. The stock market has gone through some pain. The Crypto markets have gone through some pain. Everyone's gone through some pain, but they say no pain, no gain, and the jobs are being transferred, as I brought up earlier, from the government sector to the private sector, and the private sector is where we can see tremendous, tremendous growth. Look at GRE for example, we're a private company, and we've seen tremendous growth, right? Tremendous growth in just innovation and and our services and our offerings. Now, imagine a bigger company that, and how much growth they can have. I think overall, I'm very optimistic and about inflation coming down, hitting that 2% target by the end of this year. In fact, I think it'll hit that 2% target a few months before the end of the year. And once we hit that target, then the Fed is going to start cutting rates again, and there's a chance that they may even start cutting rates before we hit that 2% target. I don't think they should. I thought they made a mistake doing that last year when they started cutting, when inflation hit 2.4% I think or two and a half percent, they started cutting again. I think the inflation rate has to hit actually 2% across the board, and then they can start with their gradual cutting. So if somebody asked today, hey, narration, which many do as, hey, how low do you think interest rates are going to go this year? My answer is not very low. This here, you'd have to have a cataclysmic Black Swan event, which it's called Black Swan because none of us can predict it, none of us can see it. So you'd have to have an event like that for the Fed to just basically slash rates overnight, which I don't see anytime soon. The other most popular question I've gotten this week is, are we going to go into a recession? You know, it seems like the world is falling apart and world war three and and stocks are tanking, and crypto is tanking, and this is tanking and that's tanking. This is when people told me a few weeks ago, actually. And my answer is, No, I don't think we're going to see a recession unless there's a black swan event. But I don't think so. And the reason is because of the tool that the Fed has. The Fed can cut, cut, cut. That's one of the Ben now, if we were at low interest rates, if we were at, let's say, historic low interest rates, and we were in this situation today, I would be very pessimistic and say it's not looking good. But any sign of a recession, the Fed is going to act at their next meeting. They won't even need to call an emergency meeting. They'll act at their next meeting, whenever that may be, they'll act and start cutting rates, and that's going to quickly stimulate the economy and get investors like our folks, because that's going to affect the bond yields, that's going to affect the mortgage rates, and investors are going to jump in to buy real estate, and people are going to jump in to buy discounts in the stock market, et cetera, et cetera.

Keith Weinhold 34:44

To your point, thank goodness the Fed has some ammo. Since the federal funds rate is about 4% they do have some ammo, and they can cut that rate down. You can imagine if the Fed funds rate was zero, like it was a few years ago, and they couldn't make cuts because they don't want to. Make it negative. So Naresh and I here talking about a number of forces that are largely outside your control. So these are the sort of things you can keep your eye on. However, there is something you can do that's very much in your control, and it happens this Thursday, where you can join Naresh and a co host on our upcoming live event. Tell us about it, Naresh.

Naresh Vissa 35:22

well, like you said, it's this Thursday, we're going to be talking about the BRRRR strategy, which has become the most popular real estate investment strategy. GRE has seen in its existence. Our investors are almost hooked onto this burst strategy. We're going to talk more about it on the webinar. Burr stands for buy, rehab, rent, refinance, repeat, and we'll get into all that in the webinar. It's a great way to build equity in a property very quickly, and to use that equity towards your down payment, so that you're not paying that standard, traditional 20 to 25% down. Some of our investors have done BRRRR's in markets like Tennessee, where they put zero down, or where they even made money on the if you want to call it the flip, so we're going to be talking about them. It's specifically geared towards we've done a burr event before on the Memphis, Tennessee market. This is a burr online event that covers the Cleveland, Ohio market, and that's a market that we have not touched on much here at get rich education, we've promoted some properties here and there. It's a really popular market, and it's a state that is growing and looking if someone were to ask me, Hey, Naresh what's the one state that you think can become the next Florida. And we've covered Florida here before. I live in Florida. Politics aside, Florida has boomed Since 2020. Or so. The number of how you can judge a state's growth is by its GDP numbers. And most importantly, are people moving there? That's the key. Are people moving there? And I would say Ohio is that next state where I think many people in the Midwest are going to say, hey, you know what, I want to go move there, because they're looking to make a lot of changes that are pro growth, that are pro real estate, including potentially eliminating the property tax, school choice programs there. That's huge for kids, universal school choice, and, most importantly, potentially eliminating the income tax now, these are all long term plans. It's not happening anytime soon, but those are the visions and the goals for Ohio, and I think they're going to happen by 2030 I would expect many of these plans and policies to happen. And what that means for real estate is it's going to boom because people are going to move to Ohio because of that, there aren't a lot of states that offer no income tax. So those are my thoughts on Ohio, and we're going to talk a little bit more about that on the webinar.

Keith Weinhold 37:50

Many expect Vivek Ramaswami to be the next governor of Ohio. If that comes true, Vivek has a lot of the same pro business policies that Ron DeSantis does in Florida, for example, Ohio has a high population, a stable population, America's seventh largest population, and a slow growing one with a great diversity of industry there in Ohio and Cleveland.

Naresh Vissa 38:15

So Keith, we have we're approaching record numbers of registrations for this event. We still have room for several more people. So I highly recommend people go to GRE webinars.com. That's GRE webinars.com. You can register for the event. It's going to be fun. All of our webinars recently have been a ton of fun. We've gotten great feedback, a lot of engagement. I think you'll learn a lot for sure. So I'm looking forward to seeing everybody there.

Keith Weinhold 38:42

Your co host, Phil, was on last week's show with us, both you and Phil, we'll be talking about this burr live event in Cleveland. I really suggest you, the listener, attend live. You might get a better Property selection that way, and you'll surely be able to ask questions, and sometimes with the other participants, they ask a really good question that you had not even thought of previously. It's our live burr event for Cleveland cash flow properties. You the listener probably remember when Phil was here last week, we gave an example of where you can get eight to one leverage and up to $500 cash flow on a single family home in Cleveland. I really recommend that you attend, and you'll be hearing more from the race, then you can sign up at GRE webinars.com We'll see if we break that record of, I think, 538 registrants last webinar that we had late last year. Do you have any last thoughts about the event? Naresh,

Naresh Vissa 39:41

like I said, before our events have it's free to attend. That's the first thing. You don't need to pay us anything. But we sell out these events. So I highly recommend that people go once again to GRE webinars.com. We can only hold a certain number of people. It's a few 100 people. So we want to sell out again. We hope you can. Join us and you will not regret I think you're gonna really like the Cleveland market. We're gonna talk more about that, the Ohio market in general. And I think folks are really, really gonna like this strategy. I know a lot of you have invested in Burt, in other markets, or have been researching Burr and you really like what you hear this is the market. I think that you should pay really, really close attention to our team is really strong there. Phil's team, really strong, very honest. They're quick, they're reliable. So if you've had a bad experience doing a burr elsewhere, I think you'll have a better experience with our team over here.

Keith Weinhold 40:35

We'd call it a sellout crowd, but you don't have to pay anything. We'd call it a standing room only crowd, but you don't have to stand up. You can sit down and enjoy it from the comfort of your own home this Thursday at 8pm eastern at GRE webinars.com. Thanks for coming on to the show. Naresh,

Naresh Vissa 40:51

thanks a lot, Keith.

Keith Weinhold 40:57

Yeah, strong insights from our own new race today, inflation expectations cut back and forth like a knife with big policy decisions on layoffs and tariffs and more tariffs on lumber and gypsum board. I mean, they are two of the major inputs that can increase the cost of homes. Gypsum board just means drywall tariffs, slow trade, less fuel is used to ship things like we touched on. And a lot of people ask, well, doesn't an economic slowdown mean lower prices, but yet don't tariffs raise prices? Well, you got to take on that from Naresh today. Now, sometimes I am asked, where is the real opportunity in today's real estate market? I've been a guest on other business shows lately, and I've been asked that question, where's the opportunity in today's real estate market? And I've got two answers. If you have more money and less time. Go with new build properties, because builders are still awarding you with massive rate buy downs, often to near a 5% mortgage rate. They are buying it down for you, but instead, if you have less money and more time, because you have to wait a few months for a rehab, then go with the burr strategy. That is the other opportunity. It's going to give you a higher return than new build in most cases, because what you get is in improbably high leverage along with strong cash flow. And those are two notions that typically don't go together. Well, on Thursday, we're bringing that to you with our live event. I mean, is there a more seasoned pro with the burr strategy in the entire nation than one co host for the event? Phil and then the mind spring of knowledge and ideas from Naresh as the other co host, and they're both active investors themselves, bringing you the opportunity in Cleveland in just a few days. And of the hundreds of registrants, not all of them attend live, but do attend live. If you can give yourself an advantage, you can be connected with available properties conducive to the burr strategy. If you're interested, or maybe you're just more interested in how it all works one last time it is GRE 's live event for Cleveland's amazing cash flow opportunities this coming Thursday, the 20th at 8pm Eastern, 5pm Pacific, healthy real world monthly rents that are more than 1% of the purchase price single family properties, many for under 100k in investor sweet spots. It's free to attend. It's from the comfort of your own home. Registration is still open at GRE webinars.com until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 44:04

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 44:28

You know, whenever you want the best written real estate and finance info, oh, geez, today's experience limits your free articles access, and it's got paywalls and pop ups and push notifications and cookies disclaimers, it's not so great. So then it's vital to place nice, clean, free content into your hands that adds no hype value to your life. That's why 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 because even the word abbreviation is too long, my letter usually takes less than three minutes to read, and when you start the letter, you also get my one hour fast real estate video. Course, it's all completely free. It's called the Don't quit your Daydream. Letter, it wires your mind for wealth, and it couldn't be easier for you to get it right now. Just text GRE to 66866, while it's on your mind, take a moment to do it right now. Text GRE to 668666.

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
544: Stunningly High Returns with this Niche Real Estate Strategy
10 mrt· Get Rich Education
Register here for the live online event to learn about ‘Cleveland’s Amazing Cash Flow Opportunities on Thursday, 3/20.

Keith discusses the current state of the real estate market, highlighting that single-family rents have risen 41% since pre-pandemic times, while multi-family rents have increased by 26%. Single-family rents have been rising faster than prices for nine months, benefiting investors.

Austin, Texas, is an example of how increased supply can lower rents, as seen in their drop in rents after the city relaxed building regulations.

Real estate strategy expert, Phil, joins us and explains how this niche method can offer high leverage and cash flow.

Show Notes:

GetRichEducation.com/544

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, build it and rents will fall. I discuss the direction of rents and prices. Then a real estate strategy for all time that can generate 8x leverage with investor cash flow and the exact city that could be the most advantageous for it today on get rich education.

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

Corey Coates 1:13

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 1:29

Welcome to GRE from elizabeth new jersey to Elizabeth, Colorado and across 188 nations worldwide. I'm Keith Weinhold, get rich education, founder, Forbes real estate council member, Best Selling Author and long time real estate investor, you are inside, get rich education. What's that all really mean? Ah, I'm just another slack jod and snaggletooth podcaster.nationally, rents for single family homes are growing faster than for multi family apartments. Okay, that you might have already known, because for a few years, we've been in this era where available single family rentals are scarce and apartments are closer to being adequately supplied across the nation. We're now at the point where median single family home rents are up 41% since those blissful and Halcyon pre pandemic days, and yet, multifam rents are up just 26% since that time. So it's 41 versus 26 and that's all according to a new report from Zillow. Now you probably listen to this show every week, so although that might be a helpful update, you probably don't find those facts surprising at all. But here's a more nascent trend that could surprise you. Every single month for the past nine months now, single family rents have risen faster than single family prices. Yeah, the John Burns home value index is up 3.3% annually, and the rent index shows that those rents are up 3.6% so 3.6 versus 3.3 really not a big gap there, but single family rents rising faster than prices for nine months. You know that's exactly what swings things into your favor as a real estate investor, it increases your ratio of rent income to purchase price. This has been happening because for someone that needs housing out there, paying rent has looked more affordable than buying a home. So then those things have to soon come back into balance. Now you remember that five months ago, I visited Austin, Texas, walked the streets and with all of the new building of apartment towers there, I called it America's oversupply, ground zero for apartments. Well, I'm not sure if you've noticed, but here, a few months later, major media sources are now reporting on the same thing that I was telling you about on the ground five months ago, and this is really insightful for real estate investors in a real world case study that will be on every intro to economics syllabus this fall, rents in Austin, Texas plunged. They fell 22% from their peak a couple years ago after the city accelerated permitting processes and scaled back the rules on building height, and this is exactly what created Austin's apartment supply surplus and therefore lower prices for renters. Bloomberg was the one recently reporting on this. So Austin's, if you build it, rents will fall mantra that created about 50,000 new units over just the past two years, a 14% increase. I mean, that is the biggest spike in supply of any US city. Over that time, just tons of cranes in the air. And by the way, the median asking rent in Austin, Texas is now $1,400 remarkably, though, that is down a full 400 bucks from the height of the pandemic. I mean, that is such an aberration That is so weird and rare. Yeah, Austin rents dropped from $1,800 down to $1,400 in in fact, that is so weird, and they've fallen so much that notoriously pricey Austin is no longer the most expensive city in Texas. It's now DFW. And you know, this is astounding on a few levels, because typically rents are even more stable than home prices. Gosh, but now to take off our investor hat for just a minute. Don't worry, we'll put it right back on. This is what society needs. I mean, how in the world are we the nation that put a man on the moon in 1969 yet we can't house our own people today. It's what I've discussed before. We need to build more. If you build it, rents will fall. If you build it, home, prices will become affordable. Again, we're not doing enough of that. Not enough places are following Austin's model. Up zoning, as I've told you before, up zoning. That's the name for allowing taller building heights. And you know what? That's something that both developers and environmentalists often like. Both types developers get what they want, and environmentalists know that housing and the economics of that are more efficient. There's less energy use in everything when we build up and we build apartments rather than single family homes, Austin relaxed regulations and they got it done. So congrats to them. I mean, that is a model for what we can do to address not only housing affordability, but the swelling homelessness problem like I enjoy talking about as well. So yeah, congrats, Austin, though you might have gotten too far ahead of your growth for the short term. America really needs the housing so thank you.

Now here's some ominous news for society and the economy. I wouldn't make too much of it yet, but the Atlanta Fed tracker has plunged. They're now forecasting a shrinking economy this quarter, minus one and a half percent. GDP is a projection which that gets us going down into recession territory, and part of the reason for that is this recent drag in consumption. But news like that can come and go, and we all know how frightfully just laughably bad recession predictions have been for years. We haven't had one in five years. So I want you to get the longer term lesson here, because things pop up like this over time. What usually happens to real estate in a recession? Because we know that there's going to be one. No one knows when. What happens is that unemployment rises. That is bad, home prices go up. Yes, home prices typically rise modestly in a recession. Just remember, since World War Two, home prices only fell significantly in one period, and it was a bad one in those years around 2008 what happens to interest rates? Interest rates of all kinds. In a recession, they fall. Interest rates fall. The Fed make sure that happens, and the reason for that is rates fall because the economy needs the help to review what you've learned so far today, single family rents are rising faster than apartment rents. Single Family rents are rising faster than single family home prices, although not by much. And Austin is proof that if you build it, prices will fall. And during recessions, residential real estate is a good place to be. Then let's say it's a widespread job loss recession as we pivot into the core content of today's show, you're probably quite familiar with the turnkey real estate investing model, where ideally on day one of your property ownership, your income property is either new or renovated. There's a tenant in it. It's under management, and you might even get a little trickle of tenant rent at the closing table. All right, but instead, what if you had six months of patience you own the property for those months through the renovation, and what's your reward for doing that? It is both high leverage and high cash. Flow, potentially, and usually those notions are antagonistic. High leverage means low cash flow and vice versa, but not with what we're talking about today, my expert guest and I discuss how you can have both the cash flow, which is like your spending money, and the leverage that constitutes your long term wealth growth, and he has bought, renovated and sold more than 2000 properties. And my guest and I go back more than 10 years before I go to break where you hear who sponsored the show this week, I have a trivia question for you, and you'll see what this has to do with our episode soon enough, Ohio has six cities with a population of 100,000 or more. Name them. Name those six Ohio cities. I'll give you your answer later. I'm Keith Weinhold. You're listening to get rich education.

You know what's crazy, your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lock ups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text, family to 66866, to learn about freedom. Family investments, liquidity fund, again. Text family to 66866,

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

Richard Duncan 12:46

This is Richard Duncan, publisher and macro watch, listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 13:02

We were last graced with the presence of this week's guest about two and a half years ago. Since then, we had dinner together in Boston. He is a long time experience expert in the real estate BRRRR strategy will explain, and he knows just the exact few markets where the strategy really works and where it doesn't, and he explains how this can deeply accelerate your ROI and your portfolio growth and get this he's been a real estate investor since he bought his first rental property in 1978 he's been working the burst strategy and mentoring others on it since before there even was a burr acronym, brrr, he has mentored and coached more than 5000 investors. Oh, it's great, Phil, welcome back onto the show.

Phil Alexander 13:54

Keith. Thanks so much. It's such a pleasure to be here. It's always great to see you, and the time really flew from when we were able to break bread together in Boston, which is my hometown. And as I recall, we went to America's oldest restaurant, the union Oyster House, which was a fun experience

Keith Weinhold 14:14

right, where there are lobsters crawling all over the place. Yeah, that was a cool distinction to meet with you in America's oldest restaurant there in Boston. Pretty unforgettable. Phil, though you're from Boston, well, that's not really where the cash flowing numbers work so much you're an expert in the art of the BRRRR the real estate, buy, rehab, rent, refinance and repeat strategy, and then we'll discuss the market that you say is number one in the USA for this so really high level, big picture. For those that don't know, what is the burr strategy? What makes it so compelling?

Phil Alexander 14:55

There are a lot of different ways Keith to discuss the burr. Strategy. It really is nothing more than a turnkey property. However, in the old days, I'll say, you know, I've been in the business for over two decades, we would sell turnkey properties, and a buyer or investor would come to us, and we'd show them a number of properties that were available. They'd pick one, we'd renovate it, and then they would have it inspected, and then we would correct against that ugly inspection report, and then they probably would be using leverage, so there'd be an appraisal, and then we'd put a qualified tenant in place. And after all that had happened, we would close on the property, and they'd be cash flowing from day one. There's nothing wrong with that approach and strategy. It's very conservative, but relative to the burst strategy, Keith The one big element that's missing in the classic turnkey model, there's no built in equity. And what the burst strategy does is it allows the investor to create value through that renovation, and it's nothing more really than a developer himself or herself does when they renovate the property to create value, and in doing so, you then wait a prescribed period of time, often called a seasoning period, and then you do a cash out refi to pull out that built in equity that you created yourself. And the idea then is to recycle that cash and buy into your next property.

Keith Weinhold 16:35

Why don't you give us a real example with some numbers?

Phil Alexander 16:40

Let's say you could find a place. Now, anybody in California is going to listen to this say this doesn't happen because you can't buy houses for this. But trust me, you can't. You buy a house for $60,000 you renovate it for $40,000 that means you have $100,000 invested in that property. However, you bought that house because you knew, once renovated, it was likely to be worth, let's say, conservatively, 120,000 and yet, when you go and do the cash out refi often at six months from the time you acquired the property in the first place, you're going to be able to pull out up to 75% of that appraised value. I'll do the math for you quickly. 75% of that $120,000 is $90,000 you only put 100,000 into the property in the first place. So at a glance, that suggests that you've gotten this property for $10,000 Well, to be fair, you do have closing costs. So let's say the closing costs and the finance fees on that cash out refi loan are about $5,000 so in essence, for $15,000 you now own a property worth 120,000 now an illustration of the value of this BRRRR strategy is if you were to go and buy that very same house, 420,000 renovated, tenanted, cash flowing, it would cost you 20% down, which would be $24,000 plus finance fees and closing costs would push it to or over $30,000 here's the bottom line. Would you rather get it so it's cash flowing from day one after closing, no built in equity and 30 or $32,000 out of pocket? Or would you rather get it where you only have 15,000 out of pocket? And I can do the math on that and tell you that you're more than doubling your cash on cash return with the BRRRR strategy

Keith Weinhold 19:07

yes, and you've also increased your leverage ratio in the example that you gave after waiting six months, much of which includes waiting for that rehab to take place, you have A 120k property. Like you said, you only have 10k into it. Maybe add five more K to that for closing costs and such. So you've got 15k into a 120k property. That is an eight to one leverage ratio,

Phil Alexander 19:33

exactly. And there are numerous other examples, typically speaking, Keith in good investor advantaged markets with the burst strategy. You can expect after leverage, after that, cash out refinance loan to be netted in the range of 200 to $250 per month cash flow. That's the rental property the. Less all of the direct expenses, less your monthly payment on the loan. Your net positive cash flow every month is between 202 150 in most good markets,

Keith Weinhold 20:13

that is really good on a single family home, because typically when you have a higher leverage ratio, when you're borrowing more, that really crunches your cash flow. But in this terrific example that you gave, it does not So Phil to help distinguish the burr strategy from an investor buying a turnkey property. To make that distinction, I think of the turnkey provider is really already doing the first three letters of the BRRRR acronym for you, because the turnkey company, they buy it, they rehab it, and they rent it before selling it to you. They're doing the first three for you here, when you hang around for all five letters of the acronym, you can be the beneficiary of what you just described.

Phil Alexander 20:58

Spot on, Keith, that's exactly right. The bottom line is, I think a game changer for our company of late is that we have found a market where you could earn two to three times the net positive cash flow on a monthly basis with the BRRRR strategy.

Keith Weinhold 21:19

Yes, we're going to get into just where that market is, the number one market in the USA for the burr strategy, in Phil's opinion. But Phil, I think before some people wrap their head around the BRRRR strategy, sometimes they consider the investor doing this themselves. What's intimidating about doing BRRRR by yourself is that first R in the burr strategy, the rehab, it seems like a nightmare, especially across state lines for an investor to find and retain and to manage contractors, but you have a system where this is all integrated.

Phil Alexander 21:57

exactly, you Know, Keith, I consider the two biggest pain points for an early investor is actually that first letter the B. You can buy properties anywhere, but the trick and the key is to buy a property that you know, with proper renovation of a rental standard, in fact, will be worth, generally, 20 to 30% more than your out of pocket cost. The second pain point is the construction component, finding a contractor, managing a contractor, keeping the contractor on the job and productive and not running away with your money.

Keith Weinhold 22:44

We make you lose faith in humanity. Yeah,

Phil Alexander 22:48

yeah. We don't really even need to go into detail more on that, but you're absolutely right, and what we do, which I think has made a significant difference, we have our own crews. We're able to have the projects managed. We have detailed scopes of work, for example, that detail line by line, item by item, the scope of work and the draw schedule to renovate a property and deliver it on time, on budget, without exception,

Keith Weinhold 23:21

tell us about the track record of the team in the contractors. I think most people's bad experience starts with day one, when the contractor shows up 45 minutes late with beer on their breath.

Phil Alexander 23:35

It could be, it could be, I am blessed. Currently, I'm active in three markets, although during my career, I've worked in 19 different markets around the country, not become fickle, but because markets do come and go. But I'm in Baltimore and Philadelphia and Cleveland right now, and the bottom line is that I have cruise boots on the ground in every market, and my one general contractor that oversees all three markets, he's been with me for over 15 years. As you mentioned earlier, I've been in the business for over two decades. We've just been doing this, like you said, since before there was an acronym to what we were doing. It's just a sensible thing to do. We know each other well. We get the scope of work done accordingly. That's something that we, with pride, say is a guaranteed number, which you don't often find in this business. Meaning if we have not gotten it right, if we have screwed it up, if we find something that we missed when we were, you know, reviewing the house and drawing together the scope of work, that's not the client's problem. That's our problem. If we say the rehab is 50,000 the rehab is 50,000 period there is no cost overrun.

Keith Weinhold 24:58

We don't want. Contractors smelling like Michelob Ultra we want contractors smelling like sawdust and WD 40. But Phil, you talked about the specific markets that you work in because they're burr advantage markets, Cleveland, Philadelphia and Baltimore. Tell us about the one that is number one in the nation right now, and why

Phil Alexander 25:21

Cleveland, Ohio. And it's not because my dad was from Cleveland. When we were kids, we all played I haven't met one person who hasn't on a seesaw, if you recall, you know, and now in your mind's eye, imagine the seesaw. One end is home prices and the other end is annual return. When the home prices are high, the returns are low. When the home prices are lower, the returns are higher. That's why, sadly, for virtually everybody on the West Coast, my hometown of Boston, New York, Washington, DC, South Florida. These are amongst, to put it bluntly, the worst markets in the country to try and cash flow positive. What makes Cleveland, however, especially unique. I'm oversimplifying, perhaps, but it is blessed to have both lower home prices than most markets, but very healthy real world rents, and that's a juxtaposition that causes extreme cash flows. I think at the current moment, I might have one property that doesn't cash flow 500 or more dollars per month, net positive cash flow, as we were discussing, 200 to 250 is normal for a good market, even in my other markets of Baltimore and Philadelphia. But you come to a market like Cleveland, and it's absolutely extraordinary. This is a perfect segue, if you'll allow me to the thing that makes us and me different. There's a billionaire car dealer by the name of herb chambers in Boston. In fact, he just sold, I understand his business for $1.58 billion massive car dealer. That's not important. What is important is his whole marketing mantra, Keith, is I don't sell you cars. I help you acquire your next vehicle. I don't just sell investors houses, Keith, I have taken an approach, and I've been doing this for a number of years, where I help investors achieve their goals. I have a very specific process, and I'd be happy to share, if you'll allow me, yeah, I first ask people about their war chest. To me, that's the amount of liquid capital they have to invest when they're ready to pull the trigger. It's not just cash in the bank. It can be equity in a home that they can pull out with a home equity line of credit, a HELOC, maybe they have a retirement account that they're able to borrow against. It's their money, after all, but that amount of cash is your war chest, and frankly, I'm not one of those people who says, You can buy real estate with no money, if you have maybe $30,000 or more, I can get you in the game. The second question I ask is, what's your goal? Because every one of us in this business has a goal. Every one of us, I don't need to know the specific goal. But whether it's to have your partner give up the nine to five job, or you want to give up the 90 to five job yourself, every goal has a cost. So what I seek to find out or learn is, what is your number in terms of a goal, how many 1000s of dollars of passive income every month are you looking to achieve? And then the last question is, time frame? Are you looking to achieve that goal in? What three years, five years, 10 years. And then, simply put, whatever the answers are, I show you how it's going to happen.

Keith Weinhold 29:18

See, these are the types of questions that your everyday realtor just doesn't ask you. I mean, Phil doesn't just sell you houses. He helps you achieve your stated goals for passive income. There's nothing wrong with an everyday realtor, but that's just not the lane that 98% of them are in. And what makes this burr strategy so compelling? I'm just doing calculations, not even on the back of a napkin, but in my head here, if you've got eight to one leverage, like we do in the example here, even if you have 3% annual appreciation on a property, that's a 24% return on the 15k of skin in the game that you have here. And then additionally, if you achieve $500 Dollars of monthly cash flow once your burr property is done, that's $6,000 a year divided by only 15k of skin in the game. That's a 40 or 40% cash on cash return in addition to the leverage depreciation that stepped up. And these are two of only five ways you're paid. This is why people love the burr strategy, if you've got the patience to wait six months,

Phil Alexander 30:25

here's the other thing too. A lot of people say, Is it possible to cash out earlier? And the answer actually is yes, but you have to be prepared to decide what's that worth to you. Meaning, if you wait six months, you can expect 75% of the appraised value. However, I have some lenders that I can introduce that will do a DSCR loan, debt service coverage ratio loan, which is against the cash flow capability of the house rather than the credit worthiness of the borrower, and they'll do it at three months, and yet it'll be at 65% perhaps of the appraised value, a lower loan to value or LTV. But still, it's a cool way to roll plain and simple.

Keith Weinhold 31:18

Yes, so Phil, here, he offers you total solutions. It's not just helping you with the Property selection, it's renovation by his license, then insured crews, introductions to the financing needs that you might have hash out, refinance introductions and that all important professional property management, unless you choose to manage the property yourself. And Phil, I want to ask you more about Cleveland and just the neighborhoods that you're selecting in a moment, but I've got great news here. You get to join Phil live. He and a GRE investment coach are co hosting Cleveland's amazing cash flow opportunity with the burr strategy, and you can join from the comfort of your own home. It is just 10 days from today, Thursday, March 20, at 8pm Eastern. Registration is open now at GRE webinars.com I suggest you register. We had hundreds of registrants for our last BRRRR event, which was last year. But Phil, tell us more about what you'll let us know on that webinar when it comes to Cleveland areas and neighborhoods.

Phil Alexander 32:26

Sure thing Keith, Cleveland's a pretty dynamic and interesting town. Of course, most people know it's the home of the rock and roll, Hall of Cleveland rocks and Exactly. And there are so many things about Cleveland that I think are really kind of cool to get to know. First of all, we talk or you mentioned appreciation, home price appreciation in Cleveland last year, 7% Yeah, crazy, absolutely crazy. The cost of living is well below the national average, it's at 6% below. Now here's the interesting thing, too, the rent to own ratio of people who rent versus own, very strong 59% rent. And of course, if you're a landlord, what does that mean? It means a greater opportunity to have qualified tenants in place with very low vacancy periods regardless. Now the average rent is $1,433 a month, which, again, when you're talking about properties, the average price of which, even with the renovation, is between 100 and 130,000 let's say 14 133 is even ahead of that cool little metric that we sometimes call the 1% rule, where the rent is at or above 1% of the value of The property. It's a small city only about 360,000 people the metro area, of course, a bit larger, at 1.7 million. And there are a number of top employers, and you know, the Cleveland Clinic, obviously well known Progressive Insurance. Love their ads. Sherwin Williams, you think about that the next time you want to go paint, but it's as to where we're investing principally we target Keith. What often are called C and C plus neighborhoods this week, yeah, often on the eastern, southeastern side of the downtown. Of course, to the north, you've got Lake Erie, so you don't want to get wet, so that you stay east, west or south. And yet, there are a number of places, maybe areas, if you're familiar with Cleveland, like Shaker Heights, Maple Heights, Brooklyn Heights, Cleveland. Heights, University Heights, all of these areas are considered suburbs with high taxes, uniquely so we tend to stay away from those, but in close proximity, we're all around them, and we benefit in terms of appreciation by being all around them, but not being in them, because you don't achieve any higher rent in those suburbs, but you do have the higher taxes, and in that respect, we're able to enjoy these outsized returns.

Keith Weinhold 35:37

This is a rare opportunity for you to meet Phil, someone with this wealth of experience. And of course, the benefit of showing up live, if you so choose, is you can ask a question yourself and have it answered. Phil, do you have any last thoughts overall with anything, whether that's the burr strategy or Cleveland itself, or anything else?

Phil Alexander 36:00

First of all, a lot of people ask me, Keith, you know, with rates mortgages and this and that, what do you think I heard? Maybe they're going to go down in the spring or the summer? Should I wait? The answer is no, the best time to invest is yesterday, and you will always be able, in a market like Cleveland, for example, to enjoy strong, positive cash flow. And you know something, as I said before, I've worked in 19 different markets. As soon as Cleveland stops being such a cash cow, I guess I'll have to move on and find the next great thing. But until then, I'm in Cleveland.

Keith Weinhold 36:40

It is supply demand. Our listeners know, as I've shared with them, that the Northeast in the Midwest are under built markets. So you have the opportunity to own an asset that everyone is going to want in the future. It ought to be great. Phil, it should be terrific 10 days from now. Thanks so much for coming on to the show.

Phil Alexander 37:01

It's my extreme pleasure, Keith, I have to say, in all the years that I've known you and known your listeners, they are easily amongst the best educated and most serious investors I have the pleasure to deal with. So it's always a pleasure to come back and thank you for having me.

Keith Weinhold 37:19

That's really kind. Thanks for saying that.

Yeah, excellent. BRRRR. Breakdown from Phil the consummate expert. In fact, when we had dinner at America's oldest restaurant, we sat just across from JFK, his favorite booth. He used to dine there. He was also a Bostonian. Of course, which six Ohio cities have a population of more than 100,000 people? They are Akron, Cincinnati, then, of course, the subject of today's show and our upcoming live event, Cleveland. Also Columbus, Dayton and Toledo of all 50 states, Ohio has tons of industry diversity. They had the nation's seventh largest population, and Ohio's population is slowly growing. A number of GRE buyers, just like you, have already connected with our investment coaching, so therefore you got the introduction to Phil and have already bought BRRRR through Phil, including in Cleveland, but he is sourcing more of them for this event. Phil and I looked at some Cleveland single family rental pro formas together that utilized the burr strategy that cash flow over $600 even two properties that cash flow over $700 but I would say those results are not typical. The ARVs after repair values have been pretty good. What Phil does is he runs comps of properties within a quarter mile before the appraisal. And you know, to give you a little behind the scenes. He bought the same software that lenders use to run valuation reports. So he has it himself. Phil has shown me proformas where you get cash back at closing, and therefore what that means are infinite returns. Though that's not an expectation that you should have, though it's nice when it happens, people are often buying two or three properties at a time. And to give you a little more, behind the scenes, Phil has his own in house wholesale unit for helping source these properties. And for every 100 properties, he buys two to five of them, Cleveland rocks. But even if you're more into rep, it's completely free to sign up for our webinar. You'll learn the nuances of what makes the burr strategy so lucrative, what makes Cleveland advantageous, and have any of your questions answered. It's coming up next week, already, March 20, at 8pm Eastern. I mean, this is the kind of event that can alter the trajectory of your entire investor life. Sign up is open. Save your spot now at GRE webinars.com that's GRE webinars.com until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 1 40:20

Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively. You

Keith Weinhold 40:48

The preceding program was brought to you by your home for wealth, building, getricheducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
543: The Danger of Losing Your Job, How to Use AI for Real Estate
3 mrt· Get Rich Education
Register here for GRE's live online event to learn about ‘Cleveland’s Amazing Cash Flow Opportunities’ on Thursday, March 20th.

Keith discusses the impact of recent federal job layoffs, emphasizing the importance of diversifying income sources. 40% of Americans experience job loss at least once in their careers, with men more affected. He advocates for real investing in real estate as a safety net.

Seth Williams joins the conversation to discuss the use of AI in everyday life and real estate investing.

Hear a practical example of how AI can help with real estate due diligence, such as reviewing municipal regulations and zoning rules.

Resources:

Check out Seth's resources, including the Pulse Inner Circle community, to learn more about practical applications of AI.

Show Notes:

GetRichEducation.com/543

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, amidst 10s of 1000s of federal workers recently getting fired. It's not rare, because throughout their working career, layoffs hit 40% of Americans. How do you hedge yourself against the danger of losing your job? Then get a fascinating understanding of how you can use AI to improve your everyday life, and some applications for AI in real estate investing today on Get Rich Education.

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

Corey Coates 1:19

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:35

Welcome to GRE from Sunbury, Pennsylvania to Sun Valley, Idaho and across 488 nations worldwide. I'm Keith Weinhold, and I'm grateful to have you with me here for another week. This is get rich education. I'm known as the guy that back in 2015 was the first person to explain how real estate pays you five distinct ways at the same time when mass federal layoffs hit recently, you know you can learn something really important at a time like this. And no, it's not about the Washington, DC real estate market. That's not where I'm going here. That's not the bigger lesson, unless you're perhaps in the DC real estate market, it's shaping up to be 10s of 1000s of federal workers that are getting the boot as the result of the new administration in charge. We'll see where the number lands. But the thing is, is that federal jobs have long been deemed as the most secure, and yet more firings are coming. So if they're the most secure jobs, then what does that say about you and the safety of your job in both your near term future and your long term future, whether you're in the public sector or the private sector. I've worked in both sectors, and yeah, sadly, this is not such a rare occurrence. Many sources cite that roughly 40% of Americans get fired at least once during their working life. Job loss is more likely for a man than a woman, and it's happened to me. Yep, even I've taken that awkward and awful feeling box full of desk stuff, walk. The big lesson here is that you need to grow a second source of income, Experian and fed data. They cite that the average debt per consumer is about $39,000 worth of student loan debt, and another $24,000 worth of auto loan debt and another $6,500 worth of credit card debt. Well, those are not good debt types, like real estate debt is where you can outsource the debt to a tenants. Instead, you are the one that has to pay these type of debts, and that's why a lot of job losers are going to decline into a financial tailspin. They will default on their payments. They will become delinquent, they will descend into bankruptcy, and they will have a destroyed credit score, and the incidence of depression and suicide that even goes up for these people. Now, as we know, most of the so called financial advice out there that targets budgeting, how to cut your expenses. That's okay. You can do a little of that, but if you lose your job, a bundled cell phone plan in ditching your $7 latte is hardly going to help you. See, here's the thing that a lot of people fail around. Lies, even if you get a promotion and a raise at work, it still only pads a dangerous single source. It's still just a sole income source. Instead, what's powerful is, rather than budgeting, it is increasing your income, but it needs to be a source outside of your day job. That's how you get income diversification at the same time. I mean, you could take on a part time job or freelance work and accomplish that, but see the problem there is that you've lost your irreplenishable time. That's a one way street that time is never coming back. Don't live below your means. Grow your means. Owning an income property that can completely solve all of these problems, even a low cost income property of, say, $200,000 and Okay, a property like this, that might start with just 100 to $300 per month of residual cash flow, but that amount tends to rise even faster than inflation, because, as we know, your mortgage payment stays fixed. That's how that happens, and additionally, your 200k property at just 5% annual appreciation that grows to 255k in just five years. And if you only made a 20% down payment of 40k on this well, that property that grows to over 100k of equity in five years because you've got both the appreciation and the tenant made loan pay down. There is more to this. Besides increasing your monthly income, you can often take a chunk of this 100k plus equity with a cash out refinance that is a tax free windfall event, you heard that, right? Tax free, and you still get to hold on to the property. So a simple, low cost 200k property, just one of those, it increases your income now it gives you a second source of income, and it simultaneously gives you a leveraged windfall chunk that you can access in one nice, tax free cash lump. And one thing's for sure, you want to get a loan for income property and get that property now why you have your job? Because when you lose your job again, 40% of the time, no mortgage underwriter will qualify you when you're unemployed, relying on one income source that is kind of like playing Jenga on a wobbly legged table. So really, the bottom line here is that widespread federal job firings, they have really brought to light how many people are vulnerable with just one source of income. Why would anyone do that? Owning investment property solves the problem. Plant that second income seed now you can't have just one income stream that is too close to zero, that is precariously close to zero, and much of your life's thought pathways. They're about expectations, your expectations for the future, the way you think about your future, and if there's even a looming threat of losing your job in the future, you know that might not happen, but just the mere threat of losing your job that can induce stress. So that's why you want to do something about that, and I have a great resource to share with you shortly that me and the team here at GRE are going to help you with in you getting that vital income diversification a second source, but first Tax Day is next month. If you aren't getting an extension, you be pulling your tax documents together Trump tax changes are anticipated any time here, the highest federal income tax rate is expected to stay at 37% the standard deductions are moving up soon, indexed to inflation, $15,000 if you're single, $30,000 if you're married. Basically this means that things like your donation receipts. You know what? They are not worth saving and tracking unless they exceed those standard deduction amounts. And I like easy ways to remember things as you're pulling together documents for your tax preparer, if you are the tax preparer yourself, a w2 form shows. Income from your employer. A 1099 form shows income that's not from an employer, really. That's the distinction and an easy way to remember it. And to my point earlier about having more than just one vulnerable source of income, I hope that your 1099 income not from an employer, like the rents that your property manager collected for you that those 1090 nines are increasing faster than your w2 income, which is from an employer.

America's first car free neighborhood. I sent you more about that in our newsletter recently, and you said that you really liked learning about it. Yes, America's first car free neighborhood. It's had its share of detractors and skeptics and supporters since it broke ground in 2021 these are largely rental apartments in Tempe, Arizona, that is just the east of downtown Phoenix. Residents get around with light rail and E bikes. Studio apartments start around $1,300 a month, and three bedroom units around $2,700you can meet your neighbors more and get to know your community when everyone's not in their car and garage bubbles. So I found this really interesting. One resident of America's first car free neighborhood said We've probably made more connections here in six months than when we lived in the suburbs for 15 years. That was interesting to learn about in our newsletter.

Coming up on the second half of the show today, an expert guest and I are talking AI, think about all the time that this is going to save you. Think about all the brain damage that this is going to save you. Think about how much better informed you're going to be and how much smarter you'll feel. That's coming up shortly. Hey with what I mentioned earlier, I am announcing that coming up in just a couple weeks, here on March 20, it is our live online event for an amazing Cleveland cash flow opportunity. And why Cleveland now? Well, healthy, real world monthly rents are more than 1% of home prices. That is a lucrative ratio. And on top of this, we are layering the BRRRR strategy by rehab, rent, refinance and repeat, where cash flow averages more than $500 per door. This strategy, it allows you to put fewer dollars in the deal, and that's why it's really popular. Be sure to show up and learn more. Our last live online event was last year. It was for BRRRRs, and we had a record 538 registrants. We're going to examine single family properties in C and C plus neighborhoods. Those are the investor sweet spots here. And besides learning about real estate due diligence and the Cleveland market, there will also be a buying opportunity. Yes, the bur strategy allows you to invest with that low equity position, yes, both investor advantage areas, with the BRRRR strategy layered on top of it, it's the right opportunity for you if you need to build that second or third source of income. And besides all that, there's just the simple fact that amidst the well known national undersupply of housing. Entry Level homes, like these ones in Cleveland, they are even fewer. That entry level segment really has the scarce supply. I mean, you're going to own a scarce asset that everyone wants and needs. And this live event is one of course you can join from the comfort of your own home. It has two co hosts. You are going to be joined by one of our terrifically qualified GRE investment coaches and one of our top partners who has helped investors create wealth and grow their portfolios for over 20 years. I know him. I've had dinner with him. You can register now at GREwebinars.com Again, it is March 20. Our last one had 538 registrants. That was a record. Register while you can it is open now at GREwebinars.com more next. I'm Keith Weinhold. You're listening to GRE

you know what's crazy. Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I saw. Putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back. No weird lockups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing. Check it out. Text family to 66866, to learn about freedom family investments, liquidity fund again. Text family to 66866

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

Blair Singer 16:35

this is Rich Dad, sales advisor, Blair Singer. Listen to get rich education with Keith Weinhold. And above all, don't quit your Daydream.

Keith Weinhold 16:51

How do you really use AI? Can you believe if you have a question about anything in life, 90% of the time, it already makes more sense to ask chatgpt than a human being. That's what my longtime friend says. He's with us today, and he hosts the terrific R E tipster YouTube channel. Welcome into GRE Seth Williams,

Seth Williams 17:15

hey, Keith, great to be here. Thanks for having me. Seth, you've been interested in AI for years. Tell us how your perspective has evolved over time. A lot of people have pretty big variations in how much they use AI and how much they're even aware of it. Personally, I use it every day, like many, many times a day. Chatgpt is open almost all the time, and I use it for almost anything you can imagine, like when I have a question about almost anything, it makes more sense to ask chatgpt than it does to do a talk to a human, because I can get direct answers. It's armed with pretty much all the information that's publicly available on the world is an incredible resource. And when I talk to people and I ask them, like, Hey, do you use chatgpt? And they either say, What are you talking about, or they say, Yeah, I've used it once. It like, it just hurts me. You know, it's like, seriously, you have a superpower at your disposal here. You're not using it. It's kind of like what the internet was back in 1995 or something, where, like, some people kind of got it, but a lot of people didn't get it yet. It's pretty crazy when you can harness the power of not just chat GPT, but all of this AI stuff that's available now. Like, there's incredible, very powerful leveraging opportunity here.

Keith Weinhold 18:27

I use it about every other day. I bet after talking to you, it's gonna make me want to use it more. But, yeah, the guy that cuts my hair, he's only 25 years old. He doesn't seem very familiar with this. But like you said, it's a lot like Google in 1995 to maybe 1998 like, people just didn't automatically think of Googling something. And it's beginning to get that way, I think with using an AI like chatgpt to answer your questions, why don't you tell us about some of the biggest misconceptions that people have about AI?

Seth Williams 18:54

Well, that's good question. I guess it kind of depends on where they're coming from and what they are even aware of in terms of what is capable of. But I know one thing I hear from time to time is people will say, Well, I'm not a content creator, so I don't really have a use for that, like it makes sense if you're like a blogger or a podcaster. And I guess the good thing is that they at least have some awareness of what it can be used for. But things like chatgpt can be used by pretty much anybody who knows how to type on a computer or even speak to their phone, the chatgpt mobile app, for example, I just love this thing you do have to be a paying Plus member, which is 20 bucks a month. That is a laughably inexpensive price for everything that chatgpt could do for you, especially a mobile app. I can turn this thing on. I can use it as a camera to point to anything and have it give me insights and instructions on how to deal with this thing, whether it's a plumbing problem. I was just using it this morning. I had my phone set up on a tripod on my desk, pointed at Zapier trying to figure out how to make two complex softwares work together, and I just had to speak to it in real time. Time and ask it, this is what I'm trying to do. How do I do this? I don't get it, and it explained exactly what to do. And this was help that I could have paid a consultant money for, but it just came from this app, and all has to do is just look at my screen and it understands all of it. It sees things that I don't see. I know people that use chatgpt as the therapist. I've never done that, but I've know a whole lot of people that do that kind of thing. Yeah, and it gives them legitimate, useful feedback, and it's available 24/7, and it doesn't cost 100 plus dollars per session to talk to them.

Keith Weinhold 20:32

You the listener right now are thinking about all the jobs that this is displacing, surely, but why don't we pull back and think about no Seth. If someone is completely new to AI, what's the first thing that they should try to use it for?

Seth Williams 20:46

If you are a real estate person? Specifically, I don't know if everybody listening to this is necessarily, but as a real estate investor, the first thing I ever used it for was writing property descriptions for me, like when I had a property I was trying to sell. I know there's a great way to explain this thing, but I don't really know how to do it in my own head. Yeah. And you can just feed it basic information about the property and say, Hey, write me a beautiful, compelling property description that will make these things sellable and make people you know, respond with interest and that kind of thing. And just do that, and you'll see what I'm talking about it. It's an incredible writer. It does a great job. What's your question about where do they start with chat GPT? Is that what you're asking? Yeah, if one isn't familiar with it, where should they start? Well, another thing you could do daily use type thing. So something that I've used chat GPT for, I've taken a picture of my closet in the different clothes I have to wear, and I send it to chat gpati and say, Hey, what should I wear today? Like, what different articles of clothing would you recommend that I pair together? You could do this with your cupboard. Say, Hey, here's what I have in my cupboard. Tell me what I can make with this and then give me the recipe to make it. You could do this at the drug store. You'd go take a picture of the shelf and say, Hey, I have a splitting headache. Show me what on this shelf will solve my problem right now and get rid of my headache. I've actually got this problem worse than most people, where I can be looking right at the solution, and I don't see it like it's right there in front of me, but I miss it. But chatgpt doesn't miss anything like, if it's in the picture, or even in the the live vision camera, it's like a live video feed that you can point at anything. Like it will see it, and it will point out stuff that you very likely are missing.

Keith Weinhold 22:24

That's amazing. I haven't used its image capability that way yet, and really that brings up Seth. There are so many AI tools available, like an explosion these past couple years. How is a person supposed to decide which ones are worth using and which ones are not.

Speaker 1 22:41

It's very true, there's a lot of stuff out there. It can be a little overwhelming. I can tell you, I've used chatgpt, I've used Claude, I've used Gemini, I've used grok, bunch of different AI chat bots out there. They can all do some pretty amazing things, but if you just don't know where to start, like I'll see if I can only have one of them, chatgpt is what I would go to. I think part of that is just a level of familiarity, like I've just used it for so long now. It's like a comfortable old shoe, but it really is innovating at an incredible speed, and it's this AI boom has been happening for over two years now, and chatgpt is still arguably at the top. I mean, they've done a really good job of staying on the bleeding edge of what can be done now, and chatgpt is free, but if you pay for the $20 a month version of it, you just unlocks a lot more capability and usability. That's probably what I would do. But there's different Claude. I've seen this myself, and I've heard this from a lot of other people. If you're trying to, like, write a story, for example, Claude is actually a better writer than most things out there. So that's what you're trying to do. Like, go with quad you want, like, a one, all purpose tool that can do pretty much everything reasonably well. That's what chat GPT is, in my opinion,

Keith Weinhold 23:52

those are some great tips. And yeah, I thought it was pretty impactful last year, when even when you do a Google search, at the top of that, there is now an AI summary before you see your conventional Google Search sort of hits, which actually concerned Google advertisers for a little while. How about some of the most driest and esoteric reading that we can think of, and how AI can speed that up and make it more interesting, just say, doing due diligence in real estate, like reviewing municipal regulations or zoning rules and property restrictions. How does AI help you there?

Speaker 1 24:27

I've used it numerous times for that, perfect for that. For example, in the land business, one way that you can make money from land is by subdividing land. And one strategy within the subdividing business is to find properties that are they're called exempt subdivides, which means that you can essentially do the subdivide and not get anybody's permission to do it, like you can just split it up and not ask anyone. And you can do it, but you can only do that if the size of the property is over a certain threshold. In Texas, I think it's 10.01 acres or. Higher. There's certain places Michigan that are similar, but you can figure this out by looking at the county and the municipal guidelines to understand what is that threshold, or does that threshold exist at all? You can find these PDFs from the county or the municipal website. Upload it to something like chatgpt or Claude, and just ask the question like, how big does a property have to be before it's exempt from the subdivision rules? And it'll tell you, if it's in there, it can redo the thing in a matter of seconds and tell you what the answer is and where it found the answer, a very similar thing with like legalese and legal writing that's really hard for the average person to understand, probably by design, it can decode that for you. I've gotten this before. I've gotten really poorly written emails from people like electricians, or even just, I can't believe there's already happened exactly. They explain things using a lot of industry jargon and lingo, and I don't know what they're talking about, right? And I can copy and paste that email into chatgpt and just say, Hey, I got this email from an electrician. I have no idea what this means. Can you explain this to me? Like I'm a five year old, and it does it, and it works every time where it's like, oh, okay, that's what you meant. I can just know that instead of having to respond to them and say, Hey, can you rewrite that for me? I don't understand it, and they reply, and it's bad again. And it goes back to this a lot of questions that a lot of us have every single day. Historically, we've gone to people to ask those questions, and that's fine, but it wastes their time, and it wastes our time, and we still might not get the answers we're looking for, but with things like chatgpt, like you almost certainly will get the answer you're looking for very quickly, and it doesn't waste anybody's time other than the time you have to spend asking the question. So it's a big 8020, lever, you can get a lot more done without relying on the limits of humans to get the job done.

Keith Weinhold 26:50

We're talking about how you can use AI in your overall life and in real estate a little bit too. With Seth Williams, well, you're such a good resource. You're really pretty pioneering in learning AI and helping you with problems and solutions in both your overall life and in real estate investing. So tell us by now, what are some of the most unexpected or just like, totally impressive things that AI has helped you with, and how do you do that stuff?

Seth Williams 27:17

That's a really long list, but the thing that I have been most impressed with as of late is something that both chatgpt and Google Gemini can both do this now, kind of in different ways, but they can look at your computer screen and help you figure out all kinds of complex problems. Talked about this a little bit in part one, but earlier this morning, I had my chat GPT mobile app right here on my phone. I had it on a tripod pointed at my screen, and it was walking me through how to set up a couple new zaps on Zapier using a web hooks, which just right there I probably lost most people. It's just a confusing thing to figure out. I still don't fully understand it, but I was explaining my problem and what I was trying to do, and I could just talk for as long as I want, until I'm done talking. And then chatgpt chimed in, and in about 30 seconds, it solved my problem and told me exactly what to do. And Google has another way of doing this, where it's actually like on your computer, like seeing your entire screen, and it kind of does the same thing where a voice talks back to you. It's amazing, because I know how hard some of these things can be, the type of thing that would either make me give up and just not do what I'm trying to do, or pay somebody a bunch of money to come in fix the problem for me, or stand over my shoulder, either which way is not a great outcome. But with the help of these AI chat bots that can see everything going on, and they have basically all the knowledge in the world about how to solve the problem. They can do it really quickly and easily. And it's amazing. That's one of millions of different things you can do with chatgpt.

Keith Weinhold 28:51

Oh dear. If AI looked at my computer screen, the first thing they would probably tell me is to close half of the tabs that I have open. Oh, yeah, me too, yeah. How are you personally using AI in your real estate investing business today?

Seth Williams 29:07

lots of ways, but one thing that has been particularly useful to me is the use of what's called Custom gpts, which basically just means, right, you are training chat GP T to respond to you in a very specific way based on certain instructions you give it. So every time you start a conversation like it already knows why you're there, what you're looking for, what assumptions you want it to make. One example of a custom GPT I've made is one that can very quickly analyze big commercial projects like whether it's a self storage facility or industrial outdoor storage, I've explained to it how I want it to run the numbers based on certain information. I give it like square footage and pricing and occupancy rates and that kind of thing. So I can basically feed it like six or seven key pieces of information and 20 seconds it can tell. A give me, like a one to 10 rating based on this is a great deal, you should move forward, or this is a terrible deal. Look the other way. And the reason this is a big deal is because the way I used to handle this was I had a giant spreadsheet, and I would go line by line, filling in all these different inputs, and it would take me, at a minimum, like 30 to 45 minutes to get to the same place of understanding, like, Yes, this is good. I should keep going on this. Or no, this is a terrible deal. And it can just, like, look at a lot of stuff, a lot of data, very quickly. And it's not like the final answer necessarily, like, you don't just blindly follow whatever it tells you to do, but it can just get to the bottom of stuff, or, I guess, get further to the bottom of stuff, wasting a whole lot less time. So, you know, the real estate that's super helpful, and people in, like, banking and accounting and all this stuff fields where, like, there are full time analysts that look at this stuff all day long. And it naturally takes humans a lot of time to figure this stuff out, but AI can get there much faster.

Keith Weinhold 31:03

Yeah, that is pretty remarkable, and it sounds like you're finding a pretty high degree of reliability and not getting what we call hallucinations in the AI world.

Seth Williams 31:15

Yeah, that is sort of a developing thing. So hallucinations, it's definitely a real issue where basically we'll just make up stuff that sounds viable, but it's not right, and the only way you would really know that is if you knew better in the first place, which means, why am I even asking the question if I already know the answer? So it was kind of an issue where chatgpt and Claude and Gemini would just make stuff up. One of the ideas with some of the newer models that are coming out with, like, oh one or oh three mini now is what they've got. They use a lot more logic in these models. And the difference is, when you ask it one of these questions, and if it doesn't know the answer, it'll just say, I don't know. That's a great answer. They're hallucinating. Yeah, absolutely. And you know, chatgpt Four, oh, it's kind of like the difference between if you hire a very polite VA in on the other side of the world who's trained to be a yes man or a yes woman, like they want to make you happy, and they're going to tell you what you want to hear, whether it's right or not, whereas, you know, these more advanced logical models are more like your account or it's like, I'm not here to impress you. I'm just going to tell you the facts and how things really are, I think, depending on what you're trying to do, like, there are certain situations where you'd want the more creative four, oh, version of the situations where you'd want the logical ones. So I'm trying to, like, do code or analyze numbers or do something where accuracy is very important. That's where I want to use those logical models. But if I'm like, writing a story or song lyrics or whatever, and creativity is more important, that's what I'd want to do four Oh, so it's not that either one is like better or worse. It just depends on what you're trying to accomplish and what output you want from it.

Keith Weinhold 32:54

Sure, part of this is knowing which tool to apply. There might be a grain of gratefulness, that there are such thing as hallucinations, right? I mean, it still takes you a human being thinking to confirm, does that answer make sense and it's just simply a good idea? Or could that be inaccurate? So the human component sounds like isn't completely displaced yet at this point, starting probably more than 10 years ago, Seth, when people began to look for answers to everyday questions, oftentimes, they would go to YouTube and they would just like to get their answer that way. Why is this faucet leaking or anything else? And watch a YouTube video about that. What's your process though for using AI to take a YouTube video and summarizing it and extracting key insights that way?

Seth Williams 33:39

Well, there is a free chrome extension called glasp, G, L, A, S, P, that I just used it this morning. All the time. I've heard of it. It kind of sits on top of YouTube. So when you're on YouTube and you have this chrome extension there, this little button appears, and you can copy a transcript of the entire video and then take that and paste it into chat, G, P, T, and you can ask it whatever you want about what that video is about. You could say, summarize it in one sentence. Or you could say, Does this video talk about this issue? And if so, where or what does it say about it? You could say, take this video and turn it into a blog post for me, literally, like, whatever you can imagine that could violate come from that video. You could get that information from it. And that alone is is amazing. And it kind of goes back to, like, what is the purpose of this video, or what is my question that I'm trying to get answered? Am I looking for entertainment? You know, for example, I've been watching a lot of videos about guitars and guitar pedals and amps lately. I want to hear what this guitar sounds like. I kind of have to watch a video for that. Like, a transcripts, not really going to help me chat. GPT is not going to help me. Like, I just actually have to watch the video. So this doesn't totally render videos useless. It just depends on why you're watching it and what information you want to get, and how can you get there faster.

Keith Weinhold 34:50

This has been great. Seth, are there any last things that we should know about? Ai, whether that's misconceptions or making sure that we're using the right. AI tools and avoiding the wrong ones. Any last thoughts? Seth, if

Seth Williams 35:04

people are really interested in this stuff, I mean, there's plenty of places you can go online. This is a huge trending topic on YouTube, lots of good information out there. We actually put together a school community intended primarily for real estate investors and business people. It's you can find that at Pulse inner circle.com, P, U, L, S, E, inner circle.com. We're talking about this stuff all the time. My friend Mike balcom and I did a couple different courses on this stuff, like a guided course that was awesome. I mean, we even learned a lot of stuff going through the process. But it is a rapidly advancing area right now, and it has been ever since chatgpt came out, like, every week, there's some huge new thing out there. It's something that's worth paying attention to, because even, like, right now, it's incredible the stuff you can do. And interestingly, like, most people aren't doing it. So if you are up to speed and educated on it, you've got a superpower that most of the people don't know exists or aren't willing to learn.

Keith Weinhold 36:01

That's a great point. If you just learn 1% of this, you're going to be ahead of the general population, and it's really easy to do. Seth, I've done some learning about AI myself. This has been a great chat. Thanks.

Seth Williams 36:14

You bet.

Keith Weinhold 36:21

Check out Seth's resources and his own R E tipster podcast. Always love to chat with my man, Seth Williams, Super Down to Earth guy, and also he does not look like a dork like you might think an AI expert would. Yeah, like I told Seth, the guy that cuts my hair is 25 years old. He's a SoundCloud music artist. He mentioned to me about how he writes his own lyrics for his music. I asked him how the results were when he asked chatgpt to write his lyrics or write him some rhymes, he told me he never even thought of that. I couldn't believe it. So yeah, AI, it's just still not top of mind for people.

The two platforms that I use the most are chatgpt and venice.ai last year I told you about how you can turn any document into an AI podcast with notebook LM, and you'll remember that I also played a minute or two of that AI generated podcast right here on the show for you, you can book your travel with AI as well. Have it put together in itinerary for you. Have you asked AI who you are? I hope that you've tried that by now. When I go to chat GPT and ask it, who is Keith Weinhold, let's see, is it accurate? Well, the answer starts with Keith Weinhold, is a real estate investor, author and the host of the get rich education podcast. Well, then it goes on for a few paragraphs. It goes on to say he founded get rich education, a platform that offers educational content through podcasts, blogs and resources about real estate investing, personal finance and wealth building. His teachings emphasize the benefits of leveraging real estate as a long term wealth building tool while highlighting strategies to maximize cash flow and minimize risks. Okay, yeah, I would say that's accurate. No hallucination there. You can also ask chat, GPT or an AI, of course, about your properties. In fact, I'm going to enter the address of one of my rental properties and ask it how much cash flow it generates. So to skim the answer for you, it's okay. It looks pretty accurate. Here. It says that it is a three bedroom, two bathroom, single family home with 1300 44 square feet of living space. It shows the property was last listed for rent at $1,625 per month in March of 2024 Yep, that sounds right. Zillows rent, Zestimate estimate estimates the current rental value at $1,898 per month, is what it says. Okay, and then here's what it says about the property's cash flow. Because I asked that about the cash flow, it writes to determine the potential rental cash flow, consider the estimated monthly rental income of 1898 subtract operating expenses such as property management fees, maintenance insurance, property taxes and any mortgage payments, the resulting figure will represent the net monthly cash flow. All right, well, then it goes on with more info that's less interesting, okay, so therefore, at least this basic question that I've asked it chat GPT, I mean, it cannot know my cash flow unless they know what my loan amount was and what the mortgage interest rate is and those sorts of things. But maybe another AI knows that, though I am not sure.

Hey, coming up here on future episodes of the get rich education podcast, some well known names that haven't been here on the show. Before and another interesting upcoming episode down the road. Here is when a pastor is going to join me on the show. Here, this pastor is an expert in what the Bible says about money. You might be familiar with the Bible verse that says it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God, gosh. Well, how does that make me feel about how the pastor and I's conversation is gonna go here on a show that's called get rich education that ought to be super interesting, and I really look forward to that show. Now, even if you're not a Christian or you don't believe in the Bible, this is going to be a significant conversation, because you cannot deny the Bible's influence. It is, in fact, the greatest selling book of all time, and even if it doesn't personally affect you, it does impact other investors around you and just billions of people across the world. What the Bible says about money coming up, which could have, I guess, some uncomfortable moments here in future weeks on the show, along with a lot of other great content. If you want to be sure that you don't miss that on your pod catching app, be sure to hit the Follow button. Also, if you would please, simply tell a friend about the show until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 41:41

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 42:09

The preceding program was brought to you by your home for wealth, building, getricheducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
542: A Home Loan Where No Monthly Payments are Required
24 feb· Get Rich Education
Keith Weinhold and Caeli Ridge discuss the benefits of a type of loan that combines mortgage and banking features. This loan allows deposits to reduce principal first, every deposit acts like a payment, minimizing interest accrual. And can be used for cash-out refinancing, providing flexibility and potential tax benefits.

Hear about the importance and the difference between open-ended and closed-ended loans.

If you pay down the loan balance over time, you can have a spread that allows you to access that equity without having to requalify or pay additional closing costs.

Resources:

Explore the loan simulator at RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

Show Notes:

GetRichEducation.com/542

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

GRE Free Investment Coaching:GREmarketplace.com/Coach

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold a discussion about the future mortgage rate direction. Then there's a property loan type where you don't have to make any monthly payments, and if you do make a payment, it all goes toward principal, and nothing is lost to interest. It can save you lots in interest expense over the life of the loan today on get rich education.

since 2014 the powerful get rich education podcast has created more passive income for people than nearly any other show in the world. This show teaches you how to earn strong returns from passive real estate investing in the best markets without losing your time being a flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads in 188 world nations. He has a list show 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 1:13

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 1:29

Welcome to GRE from flaccid County, Oregon to Lackawanna County, Pennsylvania and across 188 nations worldwide. I'm Keith Weinhold, and you are back in for another wealth building week here at get rich education, just another shaved mammal with the microphone here, I have a real estate analogy for you. Growing up, my dad told me, whatever you do, do it well. And that was broad guidance for life. I like things that are easy to remember. Our simple home in Appalachian Pennsylvania was headed with a wood fired stove, so we couldn't just turn a dial and feeding the stove with those logs took time and work. It was a family effort. Dad split the firewood. My chore was to regularly move firewood from the wood pile into the home, and then Mom or Dad would start the fire and constantly tend to it and get it up to the right temperature. But you know, when that fire finally roared, it felt like it could have heated five homes. And this is like buying an income producing rental property. You can't just point and click to make income reliably appear. It takes time, and even some of this admin type of work before you feel hot returned the spark that can ignite the fire means first putting your financial house in order. Those are things like getting pre approved for a mortgage loan, and then they're stacking the firewood, which means finding a deal, making an offer, booking a property inspection, scheduling an appraisal, perhaps signing a property management agreement if you're not self managing, and then, of course, placing a tenant. But see when that investment property fire roars after a year or two that can create enough returns for five retail investors, just like our roaring wood fire could have heated five homes, even though you're only one investor getting like 5x returns, and by now, you probably felt, after a year or two of owning it, the profitable warmth of the five ways you're paid that you know so well. Those five ways are leverage, appreciation, cash flow. Tenant made principal pay down a tax benefit basket and the quiet, whispering fire of inflation, profiting on your loan, but you can't get over leveraged, meaning that you can't make the payments, or else you burn the whole house down. This means embracing the right level of debt rather than avoiding debt altogether. So yeah, you know, if you want to be in the top 1% or maybe even top 5% Do you know what that means? It means being misunderstood by the masses. And when you do this right, it's not about getting rich quick, but it's about building wealth. For sure, feel the fire and whatever you do, do it well, just like my dad told me, and oh, by the way, today, my parents still live in that same. House, but they now just turn a dial for heat.

Well, you know, there's been a lot of real estate and financial news lately, just this constant feed of news. And I really need to tell you something about that. I am not a news reporter. If some news just broke an hour ago. A lot of times people are only overreacting to something like that. So here at GRE I infuse the news longer term into our content of the show, because some of it is just too big to ignore. But often let it settle down for a little while and filter out what it really means to you as an investor. I mean, being an educational platform rather than a news platform is what it's about. So I want to make sure you understand the relationships rather than just reporting the news. I mean, for example, what tariffs can do to home prices and rents and inflation. I mean, that really impacts you and your real estate long term. Rather than just doing something like reporting that the tariff on this nation that looked like it was going to be 25% is now only going to be 10% or something like that, that really doesn't affect you so much. So now that you know more about what to expect here, which are the stories that really affect you as an investor? The last inflation report did come in at a hot 3% that startled economists that it was that high. And what that does is that makes bond yields rise, because bond investors need a real return net of inflation, and in turn, that soon makes mortgage rates rise, and also it makes Jerome Powell be in no rush to cut his Fed funds rate after this hot inflation report, either. And here's another long term relationship that can help you learn the Fed's dual mandate is, what do you know? What it is, the two things I've mentioned it to you before, the Fed's dual mandate is maximum employment and stable prices. That right there is inherently volatile, because when employment is maximized, well then employers, they have to compete with higher wages in order to attract workers, and that makes prices go up, destabilizing the prices will stable. Prices is the second part of the dual mandate. So that's why it always seems like there's this lightning rod attention on Jay Powell in the Fed. It is because the dual mandate is inherently volatile. Now, you know what I think about predicting mortgage rates. I don't like to do it because it's an almost impossible task, like the myth of Sisyphus, that Greek myth about rolling a boulder up a hill wells, Fargo says mortgage rates will go down to just six and a half percent by the end of this year, so not much of a drop. And also by the end of next year, almost two years from now, they'll still be just six and a half percent. And other C rates rising from here. So there is broad consensus that there's zero reason to think that artificially low rates are going to return anytime in the near term, perhaps even in the intermediate term, coming up on a future episode of the show here and soon, how to use AI in real estate investing today, let's talk about mortgages and a special loan type.

Today, we are back with the national leader in providing Americans with income property loans. She runs the operation at Ridge lending group. She's been doing this 25 years she's an investor herself. It is their CEO and president, Caeli Ridge,

Caeli Ridge 9:06

Keith, thank you for having me.

Keith Weinhold 9:08

There does seem to be one US president. That makes a lot of news lately, but Caeli is still the most noteworthy mortgage type of President, I suppose. And just like GRE Ridge focuses on education and Caeli mortgage rates. It's the topic that everyone wants to talk about. I don't predict mortgage rates, but I know that you'll Talk That Talk a little. And previously, many expected Jerome Powell and the Fed to drop the rate four times this year, then two and now more and more expect zero rate cuts at all this year, even opening the door for rate increases if inflation persists. So tell us about the propensities of this year's mortgage rate direction.

Caeli Ridge 9:51

I think that I agree with a lot of the volume out there related to interest rates kind of stay in the course. I don't think we're going to see too much of a decline. There's. Certainly, Keith, we talk about this at nauseum. There's all kinds of things that could derail that statement that we can't prepare for, we couldn't predict for, but I think overall rates are going to stay steady. I think that whether you like them or you don't like them, the tariffs tend to come with an inflationary tone. And if that's the case, it's going to put Jerome and his buddies at the Fed in a tough position to do what they had hoped to do with the easing, the monetary easing. So I don't expect to see it, but I'm hopeful who knows. Who knows?

Keith Weinhold 10:29

Now, for you, the listener and viewer here, when you really want to know what moves rates around, Caeli talk to us about this persistently high spread, and what that means is that historic difference between mortgage rates and the yield on the 10 year treasury note.

Caeli Ridge 10:47

I feel like a lot of what that's going to attach itself to is the inflation, and then, more specifically, when we talk about llpas, and I think we've talked about this in the past, loan level price adjustments, mortgage backed securities secondary market, right? This is an investment that is bought and sold on the New York Stock Exchange, right? These are investments that carry value. And while the Treasury is usually the one that people will look at to predict where interest rates are going to go, I feel like in this higher rate environment, the secondary market understands that these mortgage backed securities are going to be paying off in advance of profitability. Now this gets a little bit complicated, but the easy way to explain it is is that if you secure a loan today at, say, seven and a half percent, if the anticipation is that interest rates over the next three years, maybe not in the next year, but two years, even three years, are going to decline. The mortgage that was closed today will likely pay off via a refinance. In that event, it's not reached the maturity date, such that when that initial mortgage backed security was purchased on the secondary market, it will have to pay off before the investor has been made whole or profitable. As a result, the margins it's called on in my world, it's called YSP, yield spread premium will not be met. So they're baking in certain levers, or they're hedging, as another way to say it, so that they're not left with those negative balances when these things do pay off when interest rates come down, because interest rates are not a straight line, they go up, they go down, they go east, they go west. So as a result, they're planning far in advance into the future. So I think that has a lot to do with it.

Keith Weinhold 12:33

Real Estate industries are shrinking, and it's all related to the fact that back in 2021 the number of existing homes sold peaked at almost 7 million, but last year, it was only about 4 million. That is a huge drawdown. The number of US Realtors is dropping since it peaked in 2023 and Caeli, from what I can see, the number of loan officers, even operating has dropped precipitously over the last four years, it's a reminder that the strong survive and in the mortgage industry, top service is what savvy borrowers need. You go with the people that consistently advise you to take your time and look at your long term strategy and make the correct decision, not always the one giving like 1/8 of a percent lower and an interest rate, so any lender can get you the next loan, and few are going to help you with your long term strategy. With this overall lower volume of transactions taking place, what are your thoughts about how it's impacted the mortgage and lending industries?

Caeli Ridge 13:37

It's such a good question. I'm glad that you asked it, and I really do think it speaks to the experts in the space consumers, our borrowers, as we call them, have to be, I believe, a little bit more discerning about who they want to align themselves with and who they want to work with as it relates to the interest rate. We've had this conversation off book. Ridge doesn't sell rate or cost. Now we're competitive, but we're never going to be the lowest possible lender out there. There's always going to be somebody that can undercut for an eighth, like you said, a quarter point, a few 100 bucks here and there. And we just don't get into that, our value adds far exceed an eighth of a point in rate, which, by the way, you probably can predict what I'm going to say next, if you're not doing the math, just as a sidebar listener, the difference in payment, and that's really where the focus should be. The difference in payment on an eighth or a quarter percent in interest rate on $100,000 is all of 5,7,8, bucks a month. Okay, so make sure you're doing the math, but the value adds that come with the education that we provide the 49 states, large footprint and the diversity of loan product, I think, far outweigh any eighth or few $100 difference when you're comparing side by side. I'm not saying that you don't want to get comparisons and you don't want to be a smart, informed consumer, but it really does matter that your lender understands known, owner occupied understands how to. Or take you from point A to point Z today and five and 10 years down the road.

Keith Weinhold 15:05

you've been a mortgage industry leader for a long time with this lower volume. Have you seen mortgage companies implode close shop?

Caeli Ridge 15:15

Absolutely, we have access to those data points and the number of loan officers just the individual in the doing the transaction, not including processors and underwriters and funders and doctors, but just the loan officers. I believe, in 2024 reduced by a margin of 53% gosh, yeah, that's a big number.

Keith Weinhold 15:35

Yes, this is really hit the industry substantially. Are there any other interesting industry trends in this environment where we have persistently higher rates, I make sure not to say high, because historically, mortgage rates are still not high. The long term average being seven and three quarter percent on the 30 year fixed rate mortgage Are there any other trends that this loss in activity has created?

Caeli Ridge 15:58

I feel like the informed investor is still finding ways to profit in real estate. They're finding diversity is key, which I'm a big proponent of as are you. That means single family residence to two to four units, cash flow versus appreciation, the short term rental, the long term rental, the midterm rental, making sure that they have a good, rounded portfolio is key. And there are some which I think we're going to be talking about today. There are some mortgage tools that I really feel like, for an informed investor, are allowing them to continue and propel further, even scale into the 25 and 26 years.

Keith Weinhold 16:36

What's happened to the volume of owner occupied transactions versus investor transactions. I would imagine that investor mortgage transactions really aren't down that much.

Caeli Ridge 16:47

not that much. I'd say there was a small blip, but I feel like we've made those up with some of the burr strategy loans we do, of course, all kinds of mortgage related transactions specifically for investors. And one of those products is a short term bridge loan, which would apply to the BRRRR method by rehab, rent and refinance. So we've been seeing quite a bit of that, where the investor will find a good deal on market or off market, where they can put a little bit of lipstick on it and then refinance it at the ARV or after repair value. So anything that we might have lost in just a traditional 30 year fixed straight purchase transactions, I feel like we made up in the other but it wasn't a big margin.

Keith Weinhold 17:26

What if there was a mortgage product out there that just didn't work like other mortgage loan products do? For example, your deposits or the payments that you make on this special type of mortgage is applied to the principal first and only. There are a lot of other interesting characteristics about this particular mortgage product. We're going to discuss that when we come back. You're listening to get rich education. We've got the CEO and President of ridge lending group back with us, an investor centric lender. I'm your host, Keith Weinhold.

You know what's crazy? Your bank is getting rich off of you. The average savings account pays less than 1% it's like laughable. Meanwhile, if your money isn't making at least 4% you're losing to inflation. That's why I started putting my own money into the FFI liquidity fund. It's super simple. Your cash can pull in up to 8% returns, and it compounds. It's not some high risk gamble like digital or AI stock trading. It's pretty low risk because they've got a 10 plus year track record of paying investors on time in full every time. I mean, I wouldn't be talking about it if I wasn't invested myself. You can invest as little as 25k and you keep earning until you decide you want your money back, no weird lock ups or anything like that. So if you're like me and tired of your liquid funds just sitting there doing nothing, check it out. Text FAMILY to66866, to learn about freedom, family investments, liquidity fund, again. Text FAMILY to 66866

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

Rick Sharga 19:48

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

Keith Weinhold 20:06

Welcome back to get rich education. We're talking with a steady guest over time, because not only are they an income property centric mortgage loan company that do mortgage loans in 49 of the 50 states, but they're also centered on education and looking out for you, the investor, over the long term. And cheyley, such an interesting product that you offer is called the all in one loan. It's been a long time since you and I have really talked about this. What it is is a first lien HELOC. It's a way for you to use the equity in your existing properties. You can do it with either a primary residence or investment properties. There are just so many reasons why an all in one load just kicks the butt on a conventionally amortizing loan, including that all payments are applied to principal first and only, and a lot of other exciting things. So Caeli, why don't we back up and just describe what the all in one loan is big picture.

Caeli Ridge 21:05

Now there is a lot to unpack, so we're going to take our time. Listener. First of all, let me just explain. Why is it called the all in one it's called that because it doubles as both a mortgage in the form of an open ended revolving HELOC and checking and savings. Both of those two features are combined, hence the all in one as a way of diminishing the amount of interest that can accrue over time. Let me explain so any revolving account, any account, including a credit card, for example, but first lien HELOC, second lien HELOC, whichever doesn't matter, open ended revolving is the key. Any open ended, revolving account will accrue interest daily based on two factors, the first being that day's balance and that months, in this case, interest rate, fully indexed interest rate. I'll come to interest rate later. As a result, you now have control largely over how much interest can accrue. Now let's take that statement and transfer it and look at it against an amortized, closed ended mortgage. You sign up for a 30 year fixed mortgage today. Let's say it's 7% whatever the interest rate is, is really irrelevant. Your principal and interest payment are defined on day one. There is no changing that monthly payment. Now you could certainly accelerate the payoff of that mortgage debt by doing what applying additional extra principal payments, right? But what happens to that extra principal payment when you send it off with your 30 year fixed mortgage payment,

Keith Weinhold 22:34

it drops your loan balance, but your minimum payment amount is the exact same the next month,

Caeli Ridge 22:38

right? And then what happens to all that liquidity that you had prior, it's now illiquid. Right? Exactly that off

Keith Weinhold 22:45

you've just transferred your cash flow into equity. Financial freedom is created by doing the opposite thing and changing equity into cash flow,

Caeli Ridge 22:52

very illiquid, and not the way an investor typically is going to want to run his or her business. So hence the all in one. Now for those of you that have heard the term velocity banking or infinity banking, maybe whole life insurance policy has a similar tone to this. The all in one, I believe, offers even more flexibility for variety of reasons that we're going to get into. But if you've ever heard those terms, that's similar to what this is. So I want to start by I usually like to give an example, okay, and provide some visual aid so that people can connect the dots. Let's start with the 30 year or a fixed rate mortgage. Just because I feel like, especially in the US, this particular loan product, or its concept is widely used in much of the rest of the world, in the US, I feel like we're sort of preconditioned here to really only understand that closed ended, amortized mortgage. So I'm going to start with an example there that actually highlights or leads into the concept of the all in one. So I want you to imagine a 30 year fixed mortgage and a 15 year fixed mortgage. Both of these mortgages originated or started at $400,000 as the balance on day one. The 30 year fixed mortgage locked at an interest rate of 4% and the 15 year fixed mortgage locked at an interest rate of 7% now, when I go through this exercise and I give this example to people, I ask them the question, Well, which one would you choose? And without exception, if they don't understand amortization, they are going to select that 4% 30 year fixed mortgage, because they don't understand that it's about speed. When you run the math and you look at an actual amortization table, you'll see that you'll pay $40,000 more in interest on a 4% 30 year or 360 month, versus a 7% 15 year or 180 month. So the point here, and what I'm illustrating, is it's speed. Now let's segue back over to the all in one. It's all about speed and how much interest we allow to accrue over time. So as you had mentioned, to start the kick this off, Keith, every deposit acts like a payment. Now here's where I struggled with this in learning. And when this was first introduced to me years ago, this part of it really caught me off guard. I had to really dig in and try to focus on what are they talking about? What do they mean? There's no payment due on the all in one. I'm gonna say that again. There's no payment due on the all in one. Think about your 30 year fixed mortgage. If you don't make a payment, what happens?

Keith Weinhold 25:19

You're defaulting, you're in trouble. You become delinquent,

Caeli Ridge 25:23

right? So that is not how this loan is set up. And it's not smoke and mirrors, okay? It's nothing fancy. The deposits that you make from ordinary income from all sources really Okay, so we want to talk about this is really special for investors, because we have access to gross rents, the rental income that's coming in before we send it back out the door, along with our net wages and every other source of income, deposits that we're getting can be utilized to your advantage. One of the ways in which I describe this is, I like to say you've become your own bank, so you have this line of credit, and your gross rents and all of your net wages are going to deposit into your checking account, driving that principal balance down, dollar for dollar, so that the interest accrual is diminished. Because remember what I said a few seconds ago, the interest is calculated on any open ended revolving account based on two factors, the balance for the day and the interest rate, so the more you have in depository income, and you drop it into your checking account, the longer it stays there, the lower the amount of interest is going to accrue within a 30 day billing cycle. Now let me just paint one more picture, and then we can open up to what questions come from this. So I want you to imagine this is I'm going to use easy, round math. I want you to imagine that you have an unpaid principal balance on your mortgage, on your HELOC of $100,000 just for round easy mouth, and that you bring in $10,000 a month in income from all sources. And just to keep it simple, we're going to say that that 10,000 comes in on day one of month one. Okay, so here's our 100 grand sitting there. My $10,000 is deposited into my checking account. Now my balance is $90,000 right? That 10 grand is not going to be touched. You will not touch that $10,000 for 29 days out of a 30 day billing cycle. And I'm giving you optimal tricks. Okay, this is how you want to use it optimally, yeah. Day one, instead of paying interest on $100,000 you're paying interest on paying interest on $90,000 and you're going to pay interest only on $90,000 for 29 days out of a 30 day billing cycle. Well, how am I going to make all my bills? And how am I going to eat? And how am I going to pay my cell phone? And what am I going to do? You're going to use a credit card, or credit cards of your choice, the ones that provide the best points, or whichever you prefer doesn't really matter. To pay all those monthly living expenses now we don't want to pay any interest on our credit cards. Right? 18, 28% whatever it is. No thank you. So now we're going to go to day 30 of that 30 day billing cycle. Right? 29 days that 10 grand has sat in there. Our balance has been 90. Our interest has accrued on that 90. On day 30, the credit card has amassed $9,000 in expenses. You've spent $9,000 for the month on food, gas utilities, car payments, cell phone, everything goes on that card. Day 30, you go into your checking account where your 10 grand has been sitting, and you write a check to pay off the credit card $9,000 so for one day of the month, we went from 90,000 in a balance to 99,000 right. 9000 had to come out of the 10 to pay off the credit card. We had $1,000 left over. Now I want you to fast forward into month to day one our starting balance, because that $1,000 leftover was our residual income, our discretionary our savings, it's what was not spent, but I have full access to it. Should I need it? So day one, month two 99, 000 is my outstanding balance. I drop in my $10,000 of income. 89,000 is what I'm going to be paying interest on for 29 days of a 30 day billing cycle. So this should allow listeners to connect some dots. There are two components of compound interest savings, the first being daily. We've got our income dropping in there. It's just sitting so daily savings, compound interest savings. And then that leftover savings, that residual, that $1,000 is going to be left in there month after month 24/7, access. That's monthly compound interest savings. So those are the two components that make this product profoundly impactful in diminishing that interest accrual over time. Why don't I take a pause

Keith Weinhold 29:30

so with the all in one loan, we're really integrating our consumer accounts with our mortgage. Absolutely right? Is there a way to automate these payments associated with this?

Caeli Ridge 29:43

Yes, I'm glad you asked. So everything that you have become accustomed to today in your checking and savings is going to be exactly the same with the all in one this mortgage is housed by an FDIC insured banking institution. It'll be one of two places depending on which. Which ends up picking up the rights. It'll be North Point or merchants, bank, those are the two that service this loan. Feel free to check them out when you think about the automation of your checking and savings accounts with your B of A, Chase, Wells, Fargo, whomever, credit union, whomever you bank with. Now there will be no difference to that experience and this experience so online bill pay, debit cards, routing numbers, paper checks. Should you still use those mobile apps? If you get a paper check, you take a picture and it uploads to the account. All the same exact automation as you have become used to today will apply with the all in one

Keith Weinhold 30:36

and you described how the all in one loan is an open ended loan versus your plain vanilla 30 or fixed amortizing loan, which is closed ended. For those that don't know, what do those terms open ended and close ended mean?

Caeli Ridge 30:48

So amortized is predetermined over the period of time that you've gotten the mortgage for. So whether it be a 10 year, a 20 year, 2515, 30, whatever it is, it is closed ended, so the interest rate that you secured against the loan amount that you've taken, they have come up with the formula, the calculation that says, This is how much interest you're going to pay over this length of time. And the longer the amount of time that you have selected, let's say a 30 or maybe even a 40 year. Those do exist, in some cases, the longer the amount of time that closed ended amortized mortgages in play, the more interest you're going to pay. Now, it keeps your payment lower for sure, but they're going to make it up in the interest that you'll pay in the long time. Now the open ended revolving just means that it is available to pay down and draw up, and pay down and draw up. It is not closed

Keith Weinhold 31:40

and then with those conventional mortgages, typically, especially when you originate a new loan for years, most of your payment goes to interest, which would not be the case with the all in one loan.

Caeli Ridge 31:53

Exa ctly. Yeah. So anybody that's looked at an amortization table knows the first 10 ish years, we'll just keep using the most common, 30 year fixed first 10 years or so, maybe even a few years past that, 90% of your payment is going to go to the interest. You won't start chunking down any principal until the back end of that mortgage, 180 or complete flip to the all in one every dollar that goes in there drives the principal down first.

Keith Weinhold 32:18

That is huge, even if you pay a higher interest rate on your all in one loan, you can see how you have fewer dollars out of pocket in interest paid, which is what really matters to you,

Caeli Ridge 32:30

exactly, right? So think about a 20% interest rate. If you're paying 20% interest on 50,000 then 7% interest on 500,000 you can see how the math will work in your favor, regardless of the number in the interest rate in comparing side to side. And one of the other things that we haven't touched on, and maybe this is a good segue, Keith, it's not just the daily deposits. We have clients that take out a, you know, a million dollar line of credit, but they have $500,000 sitting idle for whatever it is their business needs. And in the E commerce. It doesn't even matter, but they have this amount of cash that they're simply going to take from this vehicle a regular checking account over here, and drop it in here, and that interest is saved. That $500,000 that was sitting idle doing nothing over here is now saving interest at an incredible rate. So it's not just the daily and monthly deposits. If you just have idle cash, or you know you're going to be getting a bonus or a tax refund, or whatever it is, those monies that would otherwise just sit in a one to 2% maybe interest bearing checking savings account can now be applied over here, driving down that balance further, dollar for dollar saving in that interest.

Keith Weinhold 33:39

So we are opportunistic investors here, when we see an accumulation of equity in a property or cash in an account, we want to get that moving with this all in one loan again, which is like a first lien HELOC, I would imagine that would we get plenty of room to borrow more in there, and there's been plenty of pay down, we might want to draw against it again for another purchase, and let this thing be flexible like an accordion back and forth as you're drawing the balance down and you're extending it out again. So really, the way I see the flexibility with the all in one loan is that you don't have to go through another mortgage loan origination each time you want to buy a property. You can just draw against this account.

Caeli Ridge 34:20

And we're still just scratching the surface in what this thing does exactly right? And I've said this twice now, you've become your own bank. Yeah, okay, if you pay it down over a short period of time, let's say that you had half a million dollars and you were able to reduce that down to 300,000 there's a $200,000 spread there that, at your discretion, do not have to re pre qualify and pay closing costs. Again, you don't have to ask permission or get it approved, for some reason, those are your funds, your equity, your dollars to do what you want, when you want, how you want. The other thing too is probably a good place to point this out, safety net, as long as there is a spread between what you owe and the credit limit. Whatever that is. If something were to happen That was unfortunate, some unfortunate set of circumstance befell the family, whatever, and no income was coming into the household zero. What would happen if you didn't have money to make your 30 year fixed mortgage payment? You're going to ruin your credit and go into default. Well, the reverse is true with the all in one if there is a spread between the balance and the limit and you needed to not make any deposits, the only thing that's going to happen in that case is interest is going to accrue on top of that balance. The only time a payment deposit is mandated with the all in one is when the balance is about to exceed the limit. That's the only time. Now I'm not saying that that's the way people are going to use it, but that's the reality of it. So what if this? Let's take this down the rabbit hole for a second. If you couldn't make a deposit, you're not going to go into default, right? You're simply going to add some interest on top of the existing balance. But what if you needed to draw from it for living expenses for a couple of months? Yeah? What if you needed, you know, $5,000 a month for three months until you got back on your feet, whatever it is you have access to do that. There's your safety net. You just simply draw from it, as long as there's a spread between the balance and the limit, those are your funds to do with what you choose

Keith Weinhold 36:13

if one takes out a HELOC, whether that's in an all in one loan form or not, something that I've advocated with my listeners for years is that now you do have this line that you can draw against to your point Haley, it's effectively another layer of insurance for that borrower or investor. So if you're interested in keeping down your insurance premium, you can get a HELOC or an all in one loan increase your insurance deductible, which can lower your insurance premium and increase your cash flow.

Caeli Ridge 36:43

Good point. You know, I hadn't even thought about that before. That is a new one on me that is actually brilliant. Yes.

Keith Weinhold 36:50

now we had a listener quite a while ago, Mark from Granite Bay, California, right in Mark's a great long time listener. When he found our show, he wanted to go back and re listen to all the old episodes. And he listens to several episodes multiple times. And Mark wrote in because he heard you on the show quite a while ago. And Mark says, I've been using the all in one loans, amazing mortgage balance deduction. But as a GRE listener, I know I can't be lured in by that alone. I also need to utilize its leverage. I just used my all in one loan Mark continues to say, probably, like a lot of others, to buy a duplex for mid south home buyers in all cash and then refinance that loan into a fanniefreda 30 year from my all in one loan simulations, and Caeli has an all in one loan simulation on her website that she'll tell you about. But to finish Mark's question, Mark says, I have gathered in these simulations that as long as properties are cash flowing, the best use of the all in one seems to be to keep repeating what we did on our first duplex purchase, use the all in one loan, to buy properties in all cash, and then later refi it into better debt or leverage, and then continue to repeat the process. Is that a valid way to use it? That's Mark's question.

Caeli Ridge 38:03

Absolutely. Mark, Well done, sir. And there's a few points here that I want to take a minute and peel back, Keith, so one of the first things that I would say that's really great about that philosophy or that strategy is going to be that on a cash out refinance of the property that was paid cash, using the all in one we get to use the appraised value. So under the circumstances, if you paid $100,000 for it, and perhaps it valued at 110, 151, 20, whatever it is, then we as the lender are going to refinance on a cash out refinance using that higher appraised value, so you have a little bit more leverage there, and potentially get more in that loan to value when you're comparing what you're getting back versus what you put in. The other thing, obviously, is that when you're dealing with a turnkey or a seller, an agent, whatever, everybody knows that when you can come to the table with cash, yeah, right, you become the more desirable buyer. There's that obvious piece, and then in terms of that strategy and that simulation. So please, yes, that is absolutely the first thing that I'm going to do with anybody that calls in is I'm going to get on the phone with them, a teams call, and we're going to do the simulator together. But I encourage everybody to get in there and play around with it. If you're not quite sure what data points it's asking for, let us know, or we'll do one together. But that simulator is going to allow you to compare the all in one to either an existing mortgage on a primary rental property or a new traditional mortgage. Let's say you're thinking about buying an investment property with a 30 year fixed and you want to compare that to the all in one, or maybe you want to refinance one of your existing properties, so you can compare it to existing versus new. And then within that simulation, it will allow you to forecast additional spending. That will allow you to say, I want to take out $50,000 in month 22 and it'll reformulate where the simulation of saved interest, payoff time, all of those things will be available to you within that simulator. It's very slick.

Keith Weinhold 40:00

And now that you, the investor, have the ability to pay all cash, not only can you close faster, but a lot of times, sellers are willing to give you a discount, since you can close faster and pay all cash, and then it's up to you down the road to go ahead and refinance that into a conventional product, or however else you want to do it. Caeli, what else should we know about the all in one loan?

Caeli Ridge 40:24

Couple things I would share. First of all, the qualification metric for the all in one is going to be a little bit more restrictive than a traditional 30 year fixed mortgage, so be prepared for a little extra brain damage. I know that getting qualified for mortgages is not everybody's favorite activity. I get it. There's a lot that goes on to it. It's not like the good old days where some remember you could fog a mirror and get a mortgage, but the all in one does take it to another level, even beyond what you're used to now. So debt to income ratio, I'll give you the specifics really quickly, so just be prepared. I like to set that expectation. Debt to income ratio caps at 43% on the all in one versus 50% that we would have from a traditional Fannie Freddie, 30 year fixed. The reserve requirement is calculated based on the line limit. It's dependent on the debt to income ratio. I'll just leave it there. It'll either be 10% or 15% of the line limit. So if the limit was 100 grand, 10,000 or 15,000 is the reserve requirement, and then the minimum credit score requirement. Owner Occupied is 700 non owner occupied is 720 so a little bit higher on the bar for qualification for the all in one.

Keith Weinhold 41:33

Who is this for? And who is it not for?

Caeli Ridge 41:36

It is for anyone generally that has at least 10% discretionary income at the end of the month. Typically, everybody's circumstances are different. I encourage you to play with the simulator. Get on my schedule. Let's do it together. But more often than not, we find that 10% left over at the end of the month is generally enough for it to work for the individual, and for those of you that got 2% interest rates during the pandemic, I just want you to know that I'm running the simulator against those loans day in and day out. And I would say, I'll give you a 65% of the time the all in one is beaten the, you know, what, out of a two and a half percent 30 year fixed mortgage

Keith Weinhold 42:12

that is really interesting. Well, there's a lot of opportunity and flexibility with the all in one loan. Is there any last thing that we should know about it.

Caeli Ridge 42:22

Start doing your due diligence. This does take a minute to unpack. Don't get overwhelmed by all the information. We've talked about some real tangible stuff here, but there's quite a bit that there would be to uncover. So take your time. Call us. We'll walk through it step by step

Keith Weinhold 42:36

and get started on that simulator and really see what it can do for you to make that actionable. Caeli, Where should one start?

Caeli Ridge 42:44

Head to our website, ridgelendinggroup.com you can email us [email protected] and obviously we're always a phone call away at 855, 74, Ridge

Keith Weinhold 42:54

and again, you can find that all in one loan simulator, where you can plug in some real numbers and see how it can benefit you. A friendly representative from Ridge can help you. Go ahead and do that there. So there's a lot of excitement about the all in one loan, especially, or an investor that has a GRE mindset philosophy and thinks about the opportunity of dead equity. But now that we've talked about that, tell us just quickly about some of the other products that you offer in there at ridge.

Caeli Ridge 43:23

So I think one of the real value adds for us is that we're not a one size fits all. We have an extremely diverse menu, as I like to call it, of loan programs. The all in one is at the top of a short list of my favorites. For some individuals, you got the fanniefriddies. You've got non QM, which includes DSCR, debt service, coverage ratio, bank statement loans, asset depletion loans. We have ground up construction for those that are interested in that. We have our short term bridge loans that I talked briefly about, where if you need fix and flip fix and hold, potentially, you need shorter term money, commercial loans for commercial products, commercial loans for residential in a cross collateralization way, if that is to your advantage. So as you can see, it's quite diverse.

Keith Weinhold 44:03

It's been valuable as always, and I definitely learned a few extra things that I did not know about the all in one loan myself. JAYLEE Reyes, it's been great having you back on the show, Keith. Thank you.

Now a mortgage company, of course, they have overhead and employees that they have to pay and so on. And you know, from talking with Chaley some more, I learned that they don't even make much profit from all in one loans. We wanted to discuss it together today for your benefit. However, though there are some real fees with the all in one loan, you pay points of three to 4% of the draw in closing costs only, but it's a one time fee, not every time you draw against it. She also let me know that it does not make your taxes substantially. More complicated, if you think that it can help you clear a few minutes, learn more and get hooked up with that all in one loan simulator, where they will help you through it. Big thanks to Caeli Ridge today, they really make themselves available. You can just call 855, 74, Ridge. Or if it's more your style, visit them at Ridge lending group.com Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 1 45:31

Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively.

Keith Weinhold 45:59

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
541: Will a Boomer Selloff Make Housing Prices Crash?, This Vice is Destroying Young Men
17 feb· Get Rich Education
Keith discusses the impact of baby boomers on the housing market, noting that contrary to popular belief, many boomers are choosing to age in place. He also addresses the negative effects of gambling, particularly sports gambling, on young men, including financial ruin and increased bankruptcies.

54% of baby boomers state that they will never sell their homes.

People aged 55+ own more than half of U.S. homes.

The overall population growth in the US has grown at its fastest rate since 2001, reaching over 340 million.

Millennials and Gen Z, the largest generations, are driving future housing demand.

Resources:

GRE Free Investment Coaching:GREmarketplace.com/Coach

Show Notes:

GetRichEducation.com/541

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: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host, Keith Weinhold. All the baby boomers are about to sell off their homes and downsize, unleashing a glut of supply onto the market, and housing prices crash. Is there cogency to that theory or not? I give you a definitive answer, the Trump bump, then later, a pernicious vice is destroying more people's lives today, especially young men and almost no one is talking about this. It's leading to lower credit scores, more bankruptcies and even more suicides today on get rich education

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

Corey Coates 1:25

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 1:41

Welcome to GRE from Hyannis, Massachusetts to Hiram, Utah and across 188 nations worldwide. I'm Keith Weinhold, and you are inside get rich education episode 541 just another slack jawed and snaggletoothed podcaster here now a popular, I suppose, media narrative that's been out there for a long time is this premise that US housing prices are going to crash hard because all the aging baby boomers are going to sell their homes, and Boomers are the biggest generation in all of American history. This is just going to magnify the price collapse. It means far more home sellers than buyers. So soon enough, sellers will have to keep cutting prices. Everyone's going to undercut everybody to compete with all of these for sale homes. So as a result, everybody's property values are going to collapse today. Let's look at how bad it will get. Should you get ahead of this and sell it all now and then? I'll even tell you when this popular narrative will supposedly happen with boomers selling en masse, or won't it happen at all. That's what we're looking at, the term silver tsunami. You've probably heard that thrown around in the real estate world. It actually refers to pent up housing stock that older homeowners will eventually choose to sell, which would have that effect of flooding the market with all this new inventory. All right. Now let's define what we're talking about here. Baby Boomers are the generation born just after World War Two, between 1946 and 64 that makes them between the ages of 61 and 79 this year. Okay, so basically, these people are in their 60s and 70s. That's their age. My parents are baby boomers. President Trump is at the upper age limit for a boomer, but they're not all as old as you think. I mean the youngest baby boomers include Michelle Obama, Sandra Bullock and Rob Lowe. So not all boomers are like super old, but see, it is a big generation of over 76 million people. So whatever they do really moves the economy. And maybe you've heard it been said, My gosh, what if we have more dyers than buyers? But now a more nascent trend is that you hear about more and more boomers and people older than boomers not selling their home instead wanting to age in place. And that just means they want to stay in their home and not go to a nursing home or assisted living. And that was recently quantified in a survey that Housing Wire reported on it found that 54% of baby boomers say that they'll never sell their homes, some of them passing homes along as inheritance and see often that's because their home is paid off and assisted living care costs are through. To the roof, more than half of boomers don't have any mortgage at all. All right, so we've established that boomers aren't as old as most people think, and then a lot of them aren't planning to sell. But still, let's look for trouble here, because boomers are a huge group, and some portion of them are going to sell is they age, even if a lot of them say that they won't. How about the almost half of boomers with a mortgage? You know what? Here's the thing, if they downsized, like older people have traditionally done. I mean, my grandparents downsized long ago. But do you know what would happen if boomers downsized? Today? For most, their monthly mortgage payment would actually go up if they downsized. That's because of today's higher mortgage rates and home prices. And see, that's a financial reality that keeps them in place. They're never going to downsize. All right, so a lot of boomers are just not going to sell. But still, this wave of selling boomers crashing the housing market, this has been a popular narrative for, I don't know, maybe more than a decade. Now there's been a lot of smoke, so then where is the fire. That's another way to think about this. So there's got to be more to this. And there is, in fact, people age 55 plus, own more than half of the homes in the US. Did you know that? All right? Well, if we pull back from boomers, and let's just take a look at all homeowners of every age, people are staying in their homes longer, whether they're age 30 or 50 or 80, Americans now stay in the same home about 12 years. That is twice as long as 2005 Well, what that means is that homes don't come onto the market and people cannot buy what's not for sale. And then, of course, you've got the well documented interest rate lock in effect. That's a contributor here to people of all ages with 4% mortgages, they are reluctant to sell. And now what we're talking about here are demographics. Remember that quote, demography is destiny, the three word quote from 1800s era French philosopher Auguste Comte, and that's because it's completely predictable. If you're 32 years old today, in 10 years, you'll be 42 totally predictable. All right, if demographics could possibly crash housing crisis, let's step back and see what's going on with overall US, population growth. You know what? It just grew at its fastest rate since 2001 about a full 1% growth last year, yeah, we broke the 340 million population mark for the first time ever. And now, what about the portion that our immigrants, and what if a substantial amount of them get deported? I mean, after Trump settled into the White House for his second term, deportations began almost immediately. Is there enough population growth to buy from the boomers that do sell their homes? Well, if mortgage rates come down into the low fives, then maybe more boomers will sell and bring some more resale inventory onto the market. See, you need a good chunk, though, of buyers to come in from somewhere in order to support future housing prices. Well, where are those buyers going to be? Well, some people still don't realize that the largest generation in American history is, in fact, not baby boomers, it's millennials. They became the biggest group more than five years ago. In fact, Statista tells us that Gen Z isn't far behind them either. Yeah, Gen Z is almost as big as millennials as a group coming right behind them. And of course, this varies a little bit. Demographers parse the generations somewhat differently, but here's what the rise of the biggest generation means, millennials. They're aged 29 to 44 now, and there are over 70 million of them, and then almost as big the next group right behind them, Gen Z. They're ages 13 to 28 they alone number about 70 million themselves, even if you just completely leave the surge in immigration out of the picture and all the additional housing demand that immigration brings. So we're mainly just looking at the domestic side alone here. So. What's happened is that there were 4 million plus births per year from 1990 to 2010 providing a tailwind for housing demand through 2035, 2045, or later. Yeah, we had more births during many of those years than we did in the peak of the baby boom, which was 1957 like I've mentioned on the show before, the average age of a first time homebuyer is now a record high of 38 years old, per the NAR it's really taken a long time for some people to stop playing the video games and moving out of their parents basement. Okay, well, the peak birth year for the US was 2007 I just told you it was elevated between 1990 and 2010 but 2007 was that peak, alright? So take that peak and add 38 years to it, and you know what? The first time homebuyer demand is just going to continue to build, build, build, and not even reach its peak. Then until 2045 or so, the peak birth year 2007 plus 38 years, that is where the crush of future demand is coming from because that person born in 2007 on average, they're not even going to buy their first home until well into the 2040s

In fact, the number of Americans turning 35 every single year is High, and it just keeps increasing. It's over 4 million now, already up 25% since 2011 and this number of Americans turning 35 is going to keep rising for another decade or two. In fact, this year, it's going to approach 5 million Americans turning 35 new record territory coming. And I keep bringing this up because 35 is a key age, because by that time, almost everyone has moved out of their parents home, and so that's the time where people either need to rent or own themselves, pushing up both rents and prices, and that's why this wave of demand and pent up demand is just gonna keep coming. And by the way, those stats that I gave you there, they're all sourced from the US Census Bureau. I mean, this is exactly where the housing demand just keeps coming from. It's a big factor about why prices keep going up. The demand just keeps piling on, even though affordability worsened, the demand just keeps coming. And it's just going to keep on coming well in to the 2040s now it could very well ebb substantially by, say, the middle of the 2050s but we'll see, and that is still three decades away. And remember, all of this doesn't even include the additional population growth from immigration and how many non deportees that is going to add to the housing demand on top of this, and then, if that's not enough, there is even more future housing demand expected to come from the declining number of occupants per household. Yes, the reduced household size that Stokes housing demand. I touched on this with you a little before on a prior show. But let me go deeper as we continue to corrode this more dyers than buyers. Theory, as we break this down, people have smaller families today. I think everybody knows that back in 1960 there were 3.3 occupants per household. Today, it's just two and a half. And to give you a simple example of how this itself keeps stoking the housing demand, just say that there's a village of 100 people with three occupants per household, they would need 33 and 1/3 homes over time, when that drops to two occupants per household, that's the direction we're going now that same village needs 50 homes just in order to accommodate the shift in household structure. Well, 50 homes is 50% more than 33 and a third, well, that means 50% more homes are needed, and that's even in a scenario where the population stays the same. Yet it's not staying the same, it's rising, and the population is really rising fast for that key household form. Population age range of 35 to 38 years old. Fewer Americans are living together. I expect the housing market to continue shifting toward smaller household counts. One person households will keep rising. I expect that to be one of the most impactful housing trends of this entire 21st century, and it's also really helping fuel a loneliness epidemic, which is another subject unto itself. Well, the three main drivers of this rise in single person households is that first people are delaying those major life events compared to previous generations. They're attending school longer. They're marrying later. They're buying homes later. They're having children later. And as these events are postponed, the time some young adults spend living alone or without children increases. They're playing video games longer as well. The second driver of these single person households is falling. Birth rates when people have children, many are having fewer than previous generations, reducing the average household size. That's pretty obvious. And then third the population composition is getting older. And older, people tend to live with fewer people. If life expectancy rises, this component of the trend would only intensify. Yes, the whole Brian Johnson thing, he is the health influencer that says we now have alive, the first generation that's going to live forever due to advances in longevity in technology. I mean, my gosh, if he is right, what would that do to housing demand? I mean, and it would also push up our average age even more. Gosh, yet, at the same time that all this demand keeps pushing up. America already has a well publicized overall housing shortage of several million housing units. You already know that story well, construction has picked up a little, but not enough to keep up with demand. In fact, American housing supply is still about 30% below pre pandemic levels. So suffice to say, let me give you a satisfying definitive answer here, when are selling boomers going to crash housing prices? It is highly unlikely that that can even happen at all. In fact, you see fewer stories about this than you used to. More people have come to realize that it is just not happening. And looking at us demographics over the next few cycles, a lot more people will need homes demand continuing to exceed supply. This is why home prices should just keep rising from here. In fact, I have been an active single family rental property investor here myself, single family is where perhaps the greatest shortage is and the greatest demand is at the same time I am owning something that people are definitely going to need more of. Remember, demography is destiny, and they're going to pay more and more for it. When mortgage rates fall, it's probably going to bring in even more buying activity, and now all of this continued upward, long term, future price momentum for housing, of course, that all existed before Donald John Trump step into the White House to start his second term last month. I think the Trump factor, or Trump bump, you know what often gets somewhat exaggerated for what it can do to the economy and housing prices, right? I mean, I've talked to you before, it's about the decisions that you make more so than decisions that a politician makes, but Trump is doing some things on a pretty seismic level these nascent immigrant deportations, that obviously can increase the cost of labor you're exporting away your low cost labor with immigrant deportations. I mean, that is inflation tariffs, though some tariffs have been negotiated away for the time being, that's more inflation. So deportations mean wage increases. That's more inflation. Increased wages mean increased rents. Trump talks lower taxes. Lower taxes can then mean higher rent payments. Proposals to eliminate. Made taxes on tips over time and Social Security, that means that Americans and retirees are gonna have more disposable income. More income means higher rent collections, fewer delinquencies, and potentially rising home prices as affordability improves. That's a lot of the good news. It's not all rosy news. You better look out for high tax states salt adjustments that state and local income tax and a deduction cap could harm their property values. We're talking about places like California, New York and New Jersey, the 2017 Trump tax cuts and Jobs Act that gave real estate investors some really juicy benefits, like 20% pass through deduction for LLCs and bonus depreciation on rental properties and lower corporate tax rates too. Combined this stuff, it all keeps more money in your pocket and allows for bigger deals with better cash flow.

We're talking about Trump bump factors on the real estate market here, other proposals on the table, other things like tax breaks for domestic production that could boost us construction, leading to more badly needed housing supply that could lower building costs and investment opportunities in niche in growth markets. Remember opportunity zones, and then what about targeting wealthy investors? We'll see what happens, but Trump's plan removes tax breaks for hedge funds and billionaire sports owners. But could real estate investors get hurt a little on that side too? Maybe look for changes to the 1031 or depreciation strategies. But you know, the 1031 exchange has been around for over 100 years. I would be surprised if it went away completely, and yes, though they have been postponed, if 25% tariffs on Mexico and Canada do go into place and the countries retaliate, as they've been shown to do, it would add point seven 6% to US inflation and subtract 410 of a percent from US GDP growth. Aren't those two projections Interesting? Yeah, those estimates were compiled by the Yale budget lab. So adding about three quarters of a percentage point to the overall inflation rate with these tariffs. I mean everything we're talking about the price of your housing or your car tires or your tomatoes and romaine lettuce. I mean, that effect could take money out of people's pockets. Yes, we know that Trump wants to bring down interest rates, but I don't know how he's going to do that. I mean, as you know, more inflation correlates with higher rates, not lower ones. See, you just can't get it all. You just can't have it all. And of course, mortgage rates are not historically high. They've simply been normalized after years of being artificially low. Rates are normal. So normalized is really a term that I like to use. So really, to help summarize what I've shared with you here in the first half of the show, a housing price crash induced by a boomer sell off is not a thing. In fact, almost Oppositely, demographics in this pent up demand should raise up future home prices, and to a lesser extent, a Trump bump can as well. Yes, gosh, Trump just has an insatiable fascination for tariffs. It is truly amazing, and it has more stick to itiveness than say, Mark Zuckerberg, recent fascination with masculine energy and gold chains, that's for sure.

Hey, before we get into the pernicious vice that's destroying more people's lives today, especially young men and almost no one is talking about this, it's leading to lower credit scores, more bankruptcies and even more suicides. First, I've got some cool things to tell you. About two weeks ago here on the show event, host Robert Helms of the real estate guys and I invited you to join us on the terrific Investor Summit at sea, that cruise on the Caribbean. Besides the two of us, there are a number of other great faculty members. Robert Kiyosaki recently announced that he's going to be joining us on the faculty as well. So you'll get to meet and learn from Robert Kiyosaki, and if you happen to be a new listener, he is the top selling personal finance author of all time the. Rich Dad, Poor Dad, author, and he's been our guest here on the GRE podcast four times. Now, I hope to meet you, the listener, in person on the summit at sea in the Caribbean this June, starting out of Miami. Gosh, what an outstanding time that is. It's not a low cost event, however, the minimum cabin in interior cabin is $5,900 and they are more expensive from there if you get nicer accommodations. But all the details are there on GRE podcast episode 539 two weeks ago. I really hope you'll join us and then I can meet you in person.

Earlier this month, Trump established a US sovereign wealth fund, and when he did, I congratulated our frequent contributor here, macro economist Richard Duncan, because Richard championed the establishment of that fund for years. He presented to Congress about it, and Richard was the first ever GRE guest with us back here in 2014 on the Panama coffee farm investing that we've discussed here on the show, Villanova University reached out to them, and they're now collaborating together. It's something I find kind of cool, as a Pennsylvania native and one of my tightest best friends is also a Villanova alum, as for future episodes coming up on the show. Here, imagine if you had a property loan, yet you didn't have to make any payments, and if you did make payments on your loan, then every penny of that payment goes to principal, not to interest. Wouldn't that be incredible? Well, such a thing does exist, and it's not new or experimental or avant garde. People just don't know about this vehicle. We're going to discuss that right here on next week's show, along with some other vital mortgage topics. There are three ways to connect with our education at GRE you're listening to one of them right now, our flagship podcast. Also check out our get rich education YouTube channel, because that is different content than this show. That's the second way, and that show is also on other video first, platforms like get rich education on rumble, and finally, you'll have it all, all three when you get our weekly Don't quit your Daydream newsletter if you don't already get it free now, while it's on your mind, simply text GRE 266, 86, more. Next. I'm Keith Weinhold. You're listening to get rich education.

Hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS 420056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties, they help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at Ridge lendinggroup.com that's Ridge lendinggroup.com

Oh geez, the initial average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I'd know, because I'm an investor in this myself, earn 10% like me and GRE listeners are. Text family to 66866, to learn about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866.

Robert Kiyosaki 29:31

this is our rich dad Poor Dad. Author Robert Kiyosaki, listen to get rich education with Keith Weinhold and Don't Quit Your Daydream.

Keith Weinhold 29:50

Welcome back to get rich Education. I'm your host. Keith Weinhold, every once in a while, there's an investing adjacent activity that becomes. Is pronounced or become such a trend that it just can't be ignored, and you need to know about it. I recently presented on how gambling is financially derailing so many people today, especially young men and sports gambling and what makes California and Texas special here, the two most populous states, by the way, you'll see, once they legalize this, it's gonna get worse. There are two states where it's not legal yet now investing in gambling. They are two distinctly different activities. Investing is different from gambling. When you invest, you're purchasing a stake in an asset that has value in an effort to generate profit. But gambling doesn't involve taking ownership of anything of value. Instead, betters are predicting the outcome of an event gambling. It's really not a side hustle. I mean, people are constantly losing their families and businesses over this. This will be all new material here on the show as usual, except for a short snippet that includes super CPA Tom Wheelwright. This is about 10 minutes in length. Shout out to the media team here at GRE on the production side. And then after this, I have more to tell you about real estate.

Speaker 1 31:30

America is in the midst of an historic surge in legalized gambling.

Keith Weinhold 31:37

This is the worst thing that people are now doing with their time and money today, it's not losing it to inflation, it's not playing video games. It's being a slack jawed gambling degenerate. We are in the midst of an historic surge in legalized gambling, and the devastation on gamblers, especially young men is a lot worse than you think. I've also got a giant ominous warning for you that seasoned gamblers don't even know about when I bring in my CPA for just a minute here today on the seriously punishing tax implications that should scare anybody out of gambling.

Hi, I'm Keith Weinhold, get rich education, founder, Forbes real estate council member, best selling, author, and long time real estate investor. Almost 60% of 18 to 24 year olds have placed at least one sports bet now that's per the NCAA, and that has surged so fast. I mean, just less than a decade ago, major pro sports leagues shunned gambling, disassociating with it because it was illegal in most places. The big turning point was 2018 that's when the Supreme Court ended a decades long ban on commercialized sports betting. 38 states and DC have now legalized it most with minimum age requirements set at 21 and the two biggest platforms are DraftKings and fam duel. They've got about 70% of the market. But look, you can do this if you're under 21 on platforms like prize picks and flip they offer betting like experiences. They operate under fantasy sports or sweepstakes, and having these apps on your phone that just brings the gambling right to you. It keeps it in your face and addictive. Now it's like you're sitting in a casino when you're on your living room so far, or in your bed or even in the bathroom, there is no escape. Two thirds of Americans live in a state where they can access it on their phones. And look how young some of these gamblers are, what they have to say. And then who's showing up in these gamblers Anonymous meetings

Speaker 1 33:56

today's world is the 16, 1718, year olds, 1921, year olds that get addicted years ago, before, unlike casinos, if we had a person coming in and they're 24 years old, it was rare. All right, now the norm, the real norm, it's kids coming in at 17 years old. That's the norm.

Keith Weinhold 34:16

Well, one big reason why it's such a problem is, look, you can't hide it, so that therefore others can't tell if you're gambling, because you're not, you know, shooting it into your veins, or you're not acting drunk, or you're not smoking anything. See, you can gamble without exhibiting a physical change, so therefore others don't know that you need help. And it is all over the place. I mean, gambling ads air on TV over 60,000 times a year. Celebrities endorse gambling. I mean, some teams put gambling ads right on the field. Brick and mortar sports books are even built inside some stadiums now, Caesars and bet MGM. There are two other big platforms that you might see out there, but I mean, in their commercials, yeah, they can put that one 800 gambler help number on screen and tell you things like, gamble within your limits. But look, here's the thing these platforms, they're not going to cut you off if you continue to lose and they profit. In fact, if you win disproportionately big time after time, and these platforms can kind of tell that you're too smart. You know what they do, like a casino that identifies a card shark in Vegas, they're either gonna curtail your activity or just totally cut you off, alright? So then, by definition, if you have an account in good standing at FanDuel or DraftKings, and you bet a lot, and they keep letting you play well, then you have just signaled to the entire world that you don't know what you're doing, and you are going to lose big, or you already have. I mean, that is baked into the cake. That's how the system works. So therefore these companies are basically mining America to find anyone stupid enough to keep placing these sports bets. Companies are profiting from this, and then states are too. I mean, they've collected billions in tax revenue and FanDuel and DraftKings, see, they're publicly traded companies, so this means that they have shareholders, and those shareholders, they want to see profit and growth. I recently asked decorated CPA and mega popular tax author Tom Wheelwright about tax rates on gambling for just a quick three minutes here. I mean, you won't believe how punishing This is.

Can you tell us about sports gambling taxes and how it's treated

Tom Wheelwright 36:43

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

Keith Weinhold 37:39

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

Tom Wheelwright 37:47

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

Keith Weinhold 38:18

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

Tom Wheelwright 38:25

Well, interesting. You went there.

Keith Weinhold 38:29

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

Tom Wheelwright 38:35

income tax rates. So gambling winnings are just ordinary income they're they're the same as your wages. They don't have social security taxes their income, just like any other kind of income, nothing special, okay?

Keith Weinhold 38:47

And this all applies to whether it's sports gambling or general gambling, like lotteries and sweepstakes.

Tom Wheelwright 38:53

Just remember, all incomes taxable unless the government says it isn't all income, okay? And then there's some types of income that are taxed at special rates, like capital gains, but gambling has no special rate, so it's just your ordinary income rates.

Keith Weinhold 39:09

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

Tom Wheelwright 39:30

No, but they will send you your 1090, 9g I guarantee that.

Keith Weinhold 39:34

So can you imagine tracking all that and then paying all that in tax, and this is even if you're on the winning side and then keeping a separate bank account as well. And note that Tom and I were talking federal. There. It gets even worse. Some state laws are punishing, like New York, which has a 51% tax rate on mobile sports wagering bank. Up 28% since states have legalized this and credit scores have dropped now, California and Texas are the two big states, and they still haven't legalized sports gambling. They're the two big ones, and when they do, that's when you'll see more bankruptcy and more people, especially young men in financial ruin. I mean gamblers, Anonymous meetings are filled with people hooked on betting and on stock options trading too, and you know, Worse still, among addiction disorders, gambling has a comparatively high suicide attempt rate. And you know, understand that, while both involve risk, investing in gambling are two different things. When you invest, you're purchasing a stake in an asset that has value in an effort to generate profit. But gambling doesn't involve taking ownership of anything with value. Instead, betters are predicting the outcome of an event. Now, I gambled as a teen on sports, and back then, it was just a friend and I, we would each lay a $20 bill on top of the television at the start of like a Mets versus Phillies baseball game, and then it sure made the game more interesting to watch. There wasn't any sort of app to make it easy, suck me in and make it a recurrent practice. I haven't gambled since. Now that you're aware of the gravity of the problem, the best thing you can do for yourself is to delete those apps off your phone. Because look, I mean every gambler that had their lies flipped over and turned catastrophic at one time, they told themselves, you know, I'm doing this, but it's under control. I mean, everybody once said that the best thing you can do is delete FanDuel DraftKings and any other apps like that off of your phone right now and vow to never do it again. I hope you like that. You know, it's sort of interesting and introspective to me that I would produce a piece of media like this because I am a sports fan. I watched more of the NFL this past season than I have in a while. You know, I'm in a phase of my life, or I'm a pretty productive person, doing research and interviewing guests and producing GRE media. But you know, I justified watching more sports lately because there's room for an entertainment bucket in everyone's life. That's how I feel. And you know, I don't really watch movies. Most movies I watch feel like a waste of my time when I'm done after two hours, because I'm usually disappointed in it. If I ever watch movies, I gotta watch movies on the plane, because even if it was lousy, I got somewhere in the process. So in any case, now, if gambling is controlled, well, then it might be debatable about whether or not it's a vice, like, say you go to Vegas and have your $250 spending limit or whatever.

But just remember, every gambling degenerate once told themselves and everybody that they know that they've got it under control, but yeah, often they didn't around here, we champion owning real estate directly yourself, that is something that is in your control. So we're not talking about REITs, Real Estate Investment Trusts. That's just a publicly owned company and a group of them. It's not real estate tokenization. That means owning digital fractional shares of a property or a real estate investment. I mean direct whole ownership also means it's not a syndication now that might be worth doing, though, that means that you're pooling other investors money. It's not direct whole investing. If you are investing in someone else's syndication, meaning that you're a limited partner and direct real estate investing, it means not being a flipper or a wholesaler. Again, those things might be worth doing, but they're really time consuming, and they're not tax advantaged either. But when you own rental real estate directly yourself, you don't even need to be a landlord. If you choose not to you, then will not be that point of contact for your tenants when others manage it. And yes, because of the five ways that you're paid, you can make the case that real estate has hegemony over other assets, and for the demographic reasons and the inflationary reasons, like the ones that I told you about earlier today, real estate appears poised to continue as the. Hegemon. In fact, recently, so many global hedge funds have dumped every stock that they have, except for the real estate stocks. I shared that article with you in our newsletter recently. That's largely a tariff response. Let me tell you about real properties on GRE marketplace right now that are ripe for owning directly. I mean direct ownership. That's also the easiest to understand. You are paid rent by a tenant that lives there, often through your property manager, and unlike the out of control sports gambler, this is very much in your control. A brand new build single family rental in Columbiana, Alabama, that's just south of Birmingham. Rent is $1,925 the price is $269,900 over 1600 square feet, four, bed, two bath. Now with the new build, expect low maintenance costs. Is currently vacant, get an interest rate of six and three quarters percent with a 25% down payment on this new build, single family rental in Alabama. Then another sample here. This is interesting. The rent on this old build Davenport Iowa duplex is $1,900 which is about the same rent as the Alabama single family rental I just described. But yet the price for this Davenport duplex is just $183,000 Davenport is part of America's Quad Cities with a combined population of about half a million with both duplex sides. It's a combined square footage of almost 2700 square feet, five, bed, two, bath. They're on Brown Street in Davenport, and now, as favorable as those $1,900 combined duplex rents are, since this property is vintage, in fact, it's over 100 years old, you better check closely on the renovations that were made to the property and have plenty set aside for any maintenance and repairs as well, with a 25% down payment, expect an interest rate of just six and one quarter percent. And there are more financing details there. And of course, rates are always changing. The last one I'll mention is this new build, another duplex, this one in Inverness, Florida. This is really interesting too. And now, what do you think when you think of Florida, real estate? Does climate change come to mind? For some people, it does. For some it doesn't, maybe even rising sea levels over the long term. Well, Inverness, Florida is 15 to 20 miles inland, and it's 50 feet above sea level. How about high insurance rates? Does that come to mind with Florida? Well, they're not so high on new build properties, since they're built to today's stringent hurricane standards. Is Florida temporarily over built, even though the nation, in aggregate is under built? Yes, some Florida markets are overbuilt, and that's how you could potentially snag a deal and get this with 25% down, you can get an interest rate as low as four and three quarter percent, yes, and that's showing with zero buyer paid discount points, the combined rent from both sides of this new build Inverness duplex is estimated at $2,830 of course, often you need to estimate a rent range or make an estimate on the projected rent for new builds, because often they're not occupied yet, since they were just built, sales price of just a touch under 420k on the Inverness duplex, and as just one of the five ways you're paid the cash on cash return is projected at 5% yes, your return goes up into the positive cash flow zone when your mortgage rate is as low as four and three quarters percent. I mean, that is really attractive. It also comes with a year of free property management. So there you go, a new build single family rental in Alabama, an old duplex in Davenport, Iowa, and a new build duplex with just killer incentives in Inverness, Florida, and that's just the sampling of real estate pays five ways type of properties. We either help you get started or continue on your path to financial freedom and help you do that. With our completely free investment coaching, we work with you to help you with these properties or others like them or none at all, if it's not in your best interest to invest now at GRE marketplace.com All you need to do to get started from GRE marketplace.com is click on the coaching area and you can get on the calendar for a free strategy session until next week, I'm your host, Keith Weinhold, don't quit your Daydream.

Speaker 2 50:35

Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively, Chris,

Keith Weinhold 51:03

The preceding program was brought to you by your home for wealth, building, getricheducation.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
540: Investor Insights: Amenities That Drive Big Rental Profits
10 feb· Get Rich Education
Keith shares the top amenities tenants want in rental units, based on a survey by GreyStar with over 90,000 responses. He’s joined by long-time friends of the show, Terry and Liz to discuss investment strategies, emphasizing the importance of buying properties in the "sweet spot" and the benefits of allowing pets, which can lead to longer tenant stays.

They also touch on:

Trade-offs Between Buying Multiple Cheap Properties vs. One Expensive Property

Quality of Properties and Tenant Demographics

Screening Tenants and Handling Pets

New Construction vs. Renovated Properties

Investor Life Cycle and Exit Strategies

Resources:

Visit MidSouthHomeBuyers.com and explore their investment opportunities.

Show Notes:

GetRichEducation.com/540

GRE Free Investment Coaching:GREmarketplace.com/Coach

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: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host, Keith Weinhold. What are the features that tenants want in their rental units today, and what amenities are most profitable for real estate investors? Bedroom, count, bathroom, count, cover, parking, pet policy and more, what matters what doesn't, and how do you optimize operations to maximize your profit? It's a conversation with me and two terrific real estate pro guests today on get rich education.

Speaker 1 0:31

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

Corey Coates 1:17

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 1:33

Welcome to GRE from Tacoma, Washington to the took pony Palmyra bridge spanning the Delaware out of Philadelphia and across 188 nations worldwide. I'm Keith Weinhold, and this is get rich education, the voice of real estate investing Since 2014 I'm grateful for your faithful listenership. If you're new around here, join in at GRE we do this one big headline show every week, never more, never fewer, and truly, every single week for more than 10 years now, let's talk about amenities that tenants want in apartments today, before we pivot to discussing properties in general and single family homes in our conversation coming shortly. Now, you might have heard of GrayStar before they are international real estate developers and managers, well, they received more than 90,000 survey responses from apartment tenants on their most preferred features and amenities. So we've got a good sample size here, and Gray star compiled the top 20. Let's just hit the top five. This is important, because your tenant is your customer, and when you serve them, you're not only making them happy, you yourself are positioned to be more profitable long term. Here we go. The number one preferred feature is, do you have any guess what tenants want? It's the walk in closet. 51% of apartment tenants said that they are interested in this feature, and 37% would not rent an apartment without it. On average, they're willing to pay a $75 a month premium, and the survey shows that this is particularly important in Dallas and Miami, where over half said that they would not rent without it. The second most important amenity to apartment tenants is large windows with abundant natural light. 56% that they're interested in this feature. 31% would not rent an apartment without it, and on average, they're willing to pay an $80 a month premium for the large windows. When you think about how more tenants work from home today than five years ago? Well, big windows make more sense. Third most important is fresh air ventilation. 69% said that they're interested in it, and on average, they're willing to pay a $79 per month premium. The highest demand for fresh air ventilation is in Seattle, San Francisco and San Jose. We're talking about the top five amenities that apartment tenants want today in order, the fourth most important one is covered parking or a garage. 52% said that they're interested in this feature. Fully a third would not rent an apartment without it, and on average, they're willing to pay a $75 a month premium, and this is most important in urban areas with a covered parking or garage, where 42% will not rent a unit without it, in those urban areas. And then the fifth one is high efficiency appliances, 71% said they're interested in this feature. On average, they're willing to pay a $79 a month premium, and this, this high efficiency appliance thing, is more important for the high income tenant segment. So there they are, the top five features and amenities that. Apartment tenants want today. So to review, in order, it's a walk in closet, big windows, fresh air, ventilation, covered parking or a garage, and finally, high efficiency appliances. And listen in as I'll have a robust discussion with two season real estate pros. We're going to go beyond apartments about the features that tenants and real estate investors alike want today, and at times, they will talk about their home markets of Memphis, Tennessee and Little Rock, Arkansas, which are some of the most investor advantaged markets anywhere. And you'll have to calibrate some of these numbers to your market, because in these places, the typical single family rental purchase is just 100 to 200k and rent is between$900 and 1600 and at other times, we will talk more nationally and globally.

Hey, well, I'd like to welcome in long time friends of the show, with the emphasis on long time since they were first here with us, more than 10 years ago on episode nine in 2014 those ever steady quality property providers from Memphis, Tennessee, mid south homebuyers, it's the return of their principal, Terry Kerr and investor relations lead, Liz Nalen, Terry and Liz, welcome back.

Terry Kerr 6:25

Thank you, Keith. It's great to be here. Thanks so much, Keith, great to be back.

Keith Weinhold 6:28

Yes, it's beginning to feel like a high school class reunion or something. I anticipate my high school class reunions just like I anticipate our discussion today. Let's talk about your individual takes on investment philosophy, common investor mistakes, and is some investor conventional wisdom true, or is it not? Because there's probably some of that that we have to debunk, I think a common one. And I know you get that question in there from investors and our listeners, you had that conversation it was it better to buy two cheap properties or one expensive property talk to us about some of those trade offs.

Liz Nowlin 7:07

It's such an interesting thing, and there's so many factors you can look at. I broke it down for myself personally. Probably 12 years ago, I was asking myself that question as an investor and I ran 2 $50,000 houses, I'm dating myself against $100,000 house, and even when I manipulated the appreciation for the $100,000 house at the higher rate. And actually, we've been talking about investor conventional wisdom, and that is actually a piece of conventional wisdom I've not seen hold true as much, but that a higher end neighborhood is going to appreciate a more rapid pace than a more blue collar neighborhood. So that, as a side note, is a piece of conventional wisdom that I've seen a bit debunked, but it really ramping up the appreciation on the $100,000 house. I think I put it at reselling at like 180 or 190 down the line, and I put my $50,000 houses at maybe 90. You know, not as aggressive for me. Two houses beat one, every kind of way that I shook it out. And of course, the 50,000s had lower individual cash flows, but still, I think matching or higher than the 100. And the one thing I'm not sure that I put in there is two water heaters versus one water heater, two furnaces versus one, but running the same maintenance in general for them. Terry, what do you think

Terry Kerr 8:32

I started out buying houses a little bit lower than I should and what I mean a little bit lower like and a little bit lower quality neighborhoods, and quickly learned that you can't buy too low, you know, you got to buy them, you know, in the sweet spot. So I bought in the A class areas. I bought in the areas that were a little too low, and then found the sweet spot. And then within the sweet spot, I've got a bunch of houses that are in the mid range where we typically operate, and personally, I've also got a bunch of duplexes. I like duplexes. So whether that's duplexes or a little bit upper or a little bit lower, personally, I like a mix of them. And I'm a buy and hold guy. So the stuff that I buy and hold I'm holding for the extra long time, initially, right out of the gate, you've got to look at things like cost segregation, closing costs and all that kind of deal. So really, everyone kind of needs to run their own numbers, because what might make sense for one person just might not make sense for someone else. And again, I'm kind of all over the board. You factor in how much you're going to spend in closing costs, how long do you intend to hold the property? What's it going to cost to sell the property in 1015, 20 years. But again, the cost segregation and just everyone needs to kind of run their own numbers. I think.

Speaker 2 9:47

closing costs times two versus times one is an interesting point. Paying to mow a yard is paying to mow a yard. But then you get into another rub that I think I put them I don't think I did a square footage variation, but I like smaller Homes. It's less on paint. It's less on vacant utilities. The lower your rent is to a degree, the more people can afford to rent it, and the more recession proof you are, in my opinion. And I wasn't running through that as well, but in my antique valuation from 2012 that $100,000 house is going to be bigger often than the littler guys for the rent. Not you know, you can have a play between neighborhood quality and size of house with rents, which is a determining price. But Keith, what do you think two or one?

Keith Weinhold 10:33

Yeah, the two thing versus one thing has a lot of trade offs. As an investor, I think about the advantages of where one is going to have less management, even though I use a property manager, but with respect to the size of the property, I think a lot of us know, and the new investor doesn't know, say, a 1500 square foot unit versus a 3000 square foot rental unit. Well, with the 3000 you often have twice the maintenance, but you only get a little more in rent income. So depending on the market you're in, typically something more like a 1500 square foot rental unit is going to work out better.

Terry Kerr 11:06

Yep, I agree. And then also, another one of the things that I found out is buying houses a little too far up market going to be renting to folks that are more apt to buy a house, right? And so you might have more turnover and a more expensive house just because it's in, you're renting in an area where folks may just not stay as long. And one of the things that that, of course, we like about Memphis is it's predominantly a rental market, so we're able to kind of have the best of both worlds there. But

Liz Nowlin 11:32

kind of, going back to investor conventional wisdom, I think a common mistake, or maybe a mistake isn't the right word, but I hear investors say that they would not buy a house that they would not live in, and I find that they tend to be very expansive times of their life. They often have young children are possibly planning to do it. And one of the best renters I ever had was a little old lady on Social Security, on a fixed income. She lived in my house for seven years. She paid on time like crazy. She added a garden that my home didn't have, and she would have never paid the extra $25 a month that a second bathroom would have called for from that property. And people forget that you'd people downsize as much as they upsize. There's divorce or just retirement, there's empty nesters. Families shift down as much as they shift up. Because investors are often they're talking to me from their four bedroom, two bath house, and they couldn't conceive of renting a smaller thing long term. They just kind of missed that aspect.

Keith Weinhold 12:38

Right for me, it's definitely not a criterion. Would I live in the property myself? And that makes it eligible to hold as a rental? No, it's just the opposite. Really. I don't think any of my rentals are ones that I would prefer to live in, because it wouldn't upgrade my lifestyle. Yet, it's still doing the clean, safe, affordable, functional housing thing. We're talking about the quality of properties here. Class A, properties are deemed the best class, D, the worst. What are your thoughts? Is B class better than C class? And is a really the best of all? I mean, for example, do you get better renters in a class, or are they finicky and then they have the means to move out and go buy their own place, if they have a 790 credit score and they're living in a class a unit, what are your thoughts here?

Terry Kerr 13:22

I think c plus to b minus is the sweet spot. You get into the a plus. Like you said, there's going to be more turnover, because folks are going to be buying houses, and then you've got expensive appliances that you're going to be responsible for fixing in and a lot of A plus neighborhoods, but the C minus, and I can only really truly speak to Memphis and Little Rock, but the C minus the B plus I feel is the sweet spot that's for the size of the property, as well as the typical length of rentership.

Liz Nowlin 13:52

I managed a class for about a decade before I came to work for Terry in 2009 and we ran a great ship, and we had a great, beautiful high rise, but a year was really the average stay a class renters are more litigious. I was operating a building next to a law school, and I had young lawyers and law students, but that's going to be true in any kind of a class area. When you're paying a rent of that amount you are going to call in a work order because the doorknob is slightly loose, a lot of it. And very interestingly, I think we still had some collection issues, even renting to nurses, lawyers, just a small percentage. It's the dark side of property management. But I saw alcoholism, divorce just in a small percentage. But it doesn't wipe it out the way that you would think it would. I've seen college students going to WashU and Ivy League level stuff leave apartments in terrible, terrible conditions. Think that's another kind of investor myth around that

Terry Kerr 14:52

the blue collar folks that we're renting to here in Memphis and Little Rock, they're not going to call us for the loose doorknob. They're just going to pull out the screwdriver. And fix it, just to kind of piggyback on that. It's another one of the benefits of operating in that space

Speaker 2 15:05

lawn care. It's a little thing, but everything adds up, right? Like our renters are going to mow their own lawns and they expect it, and it's how it was at their last place. You're not pulling that off at the high high end

Keith Weinhold 15:16

when you're screening tenants. Do you have the ability to tell when someone is going to look after the place better, and because a lot of the single family home rentals that you do, I mean the tenants, for example, are even responsible for taking care of their lawn, or are they going to be responsible enough to call in a leak, but not so annoying that they're going to call you to adjust the kitchen cabinet door that's a little bit loose. So how can you help screen tenants to learn some of those things before they even move in.

Speaker 2 15:43

Our typical renter is coming to us from another single family home, and so one of the kind of unique ways that we screen tenants is that you have to have immediate landlord history. It's like with a lot of places, if you go rent somewhere for a couple years, you leave in good standing, you come and live with your mom for a year, everybody else in town would accept that positive rental history from a prior place. But one thing that that I love about working here and then what we do is that being in business for 24 years, we've had a lot of chances to kind of do things the wrong way and figure out how to do it right. And they Terry instituted a system in the early years, where any time a renter fell off the rails, they would look back through that file, was there anything? Was there anything that could have predicted that? And sometimes the answer is no, and it's just the first time somebody's hit hard times. But one of the things they found is, well, hey, this guy hadn't paid rent in a year. He did have good rental history, but he hadn't paid rent in a year, and then that bill, he'd gotten used to not paying so much, and so that just helps.

Terry Kerr 16:47

Absolutely

Keith Weinhold 16:48

yes, getting that reference from their current or previous landlord can give you so much on what the expectations are going to be for the tenancy there in their place. And then, of course, there's a whole thing where, if you're talking to the current landlord and they're trying to move out, you're really trying to get to the bottom of the things and just find out if their current landlord wants them to move out because they can't get pay, or they're doing something nefarious. They're not paying rent, or something like that. That's sort of something that one needs to decipher as well. But of course, the history is going to help project the future better than anything else. And one thing we're talking about the operations of properties, and you sort of touched on it. Liz, where you had that tenant that started her own garden, she's someone that wouldn't care to pay more for a second bathroom. So why don't we talk about some of the pros and cons with the bathroom? Are two bathrooms always better than one, or is it just one more place to have maintenance and repair problems?

Speaker 2 17:40

real quick, just back on the other thing, for all the philosophies that you can bring, the guy that I worked for before, Terry never did any landlord verifications, because the worst renter he ever had was personally dropped off at the property by the prior landlord.

Keith Weinhold 17:56

Oh my gosh, making it easy for him. And he said, I'm done

Speaker 2 17:59

so anyway, but the bathrooms is such a hot spot, there's definitely the second bathroom rules crowd. And then I've seen a seasoned investor that says that's just one more toilet to clog.

Terry Kerr 18:14

Yeah, but I would say that right now, I'm pretty sure that the property that I have on Powell is the longest resident I've ever had. She moved in 11 years ago, is still there. It's the smallest house that I own. It's like 794 square feet. It's tiny, and it's got just one bathroom. But she's single, and when she moved in, she said they're gonna have to carry me out of here. And I hope that's not for a long, long time. But like Liz mentioned, there are a lot of folks that just want one bathroom because they're just going to be living in their solo or even married couple. That is downsizing. So we have a mix, and we like to be able to have something, you know, for everyone. So our two bedroom baths perform very well, just like the three twos

Keith Weinhold 18:58

I once owned three rental properties. They were all built the same way. There was one bathroom in each of them, which would have been okay for one or two people to live there, except the only bathroom in these two story places was on the second floor for all three of them, and that did prevent some people from renting it. They didn't like the fact that the only bathroom was upstairs. Yeah, that sounds terrible.

Speaker 2 19:20

Another analogy that's too great, or something I experienced when people think that two bedrooms must be inherently less desirable than three. Kind of connecting to one versus two bathrooms. When I managed that a class high rise, I had a waiting list for my studio apartments. It was the cheapest way that you could live in that neighborhood, period. And I had a three or four month waiting list for the studio apartments. I had a little more trouble renting the one bedrooms and the most trouble renting the penthouse, frankly. And my point with that is that if you price it right, it will always work. You know, if my studios were the same price as my one bedrooms, and of course. Course, I would not have had a waiting list for them. And you know, we have that super unusual lifetime occupancy guarantee mid south it's that, you know, if your property is ever vacant for more than 90 days, we start paying your rent on the 91st day. And I'm often explaining to people that's not us actually being an insurance policy, though it's real, it's in writing, we will pay you if that happens. But what I'm really telling you is that these rents are real. The rent price is meant to perform, and that that's the point. Anything rents well and stays well rented if you price the rent correctly.

Keith Weinhold 20:33

Well, that's an excellent point. We're talking about conventional investor wisdom and the operations of rental properties for investors, with Terry Kerr and Liz Nowlin from mid south homebuyers more than we come back, including is saying yes to pets worth it. This is Get Rich Education. I'm your host. Keith Weinhold

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

Oh geez, the national average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I'd know, because I'm an investor in this myself, earn 10% like me and GRE listeners are text FAMILY to 66866, to learn about freedom, family investments, liquidity fund, on your journey to financial freedom through passive income. Text FAMILY to 66866

John Lee Dumas 22:37

this is Entrepreneur on Fire, John Lee Dumas. Don't follow money. Make money. Follow you with get rich education.

Keith Weinhold 22:56

Welcome back to get rich education. We're talking about efficient operations for real estate investors and the properties that they choose to put into their portfolio, and some of those trade offs with mid south home buyers Terry Kerr and Liz Nowlin. And one thing that seems to be increasingly popular, it sure isn't waning in the past few decades, is the prevalence of pets and tenants that apply and have a pet on there. So there are a lot of pros and cons here. What are your thoughts about pets? Is it worth it or not?

Terry Kerr 23:28

It's worth it as long as you know what pet is going into the property and you charge a pet fee, amen.

Speaker 2 23:36

I'm a dog lover personally. So I was a renter. I was a good renter with a dog, but you do run into the people I experienced this, where they had the one horror story, and they're like, I never want a pet environmental property again at the end of the day. And that's where you go into what type of pet and a non refundable pet deposit. But what you lose by excluding such a huge percentage of the population from retain your home is going to outweigh the risk of the one off bad pet owner.

Terry Kerr 24:11

I agree.

Keith Weinhold 24:12

We also get into questions of what's legal here. If one does say yes to pets, you mentioned a non refundable pet deposit, why don't you talk to us about the amount of that deposit in relation to the rent, and then can you, or do you also charge more rent monthly in addition to the non refundable pet deposit

Terry Kerr 24:33

we charge a $250 non refundable pet fee, and that it tends to cover any issues with the pet but one of The things that I'll kind of piggyback on, what Liz said, is, not only are you excluding a large portion of the market, but we find that folks with pets, they just tend to stay in the property longer. I don't know why that is. I can look at my portfolio. I've not like examined all the houses that were managed. Thing, but I know that from with my portfolio, folks that get into the property with pets. I don't know why, but they just tend to stay longer.

Liz Nowlin 25:07

I may have just had luck, but I have not had any significant pet damages from any of my renters with pets and and kind of more stable, stable folks sometimes. So I think it's worth it. You always understand the person that had the kind of the one bad story, but I really think you could mitigate it.

Keith Weinhold 25:23

How about hiking up the rent amount for pets?

Terry Kerr 25:23

We have not done that. It's not something that we've ever done before. I guess it's kind of a if it ain't broke, don't fix it, you know. But we want to be able to provide as much value as we can to the resident to have the leases renew. And so everything that we do, from a rehab standpoint and a property management standpoint, is geared towards resident renewal. I'm not saying we couldn't get maybe an extra 25 bucks a month, but at some point you cause yourself a longer vacancy because you're trying to find someone who's wanted to pay more because they have a pet or may not renew the lease, because they can find some place to go where the rent is cheaper and they're not being charged pet rent, if you will.

Liz Nowlin 25:25

We charge pet rent at my a class high rise that I managed for a long time. You know, it's not 100% No, it's people complained bitterly about it. I think a pet deposit. Just they stomach it a little bit better. The theme of the show might be, there's a lot of different ways to skin the cat. I got more pushback about that rent charge working directly with the renties than kind of anything else. So I would say we should up the non refundable before we layer it onto the monthly personally

Keith Weinhold 26:37

yeah, if it's paid one time, it seems to be less of an annoyance over time and forgotten. When we talk about pets and think about the long term, after a tenant with a pet moves out, can the place really be adequately cleaned for the next tenant? We know a lot of people are sensitive with allergies today.

Terry Kerr 26:56

Well, fortunately, we bought our own carpet cleaning van. We know what we're doing in regards to, you know, cleaning carpets, and so absolutely you can clean them. I mean, don't get me wrong, there's always going to be like the one off every once in a blue moon, but definitely, you know, we're not throwing the baby out with the bath water there. And fortunately, we're able to mitigate that smells with the right chemicals and our own carpet cleaning van. It's rare that we have that issue.

Keith Weinhold 27:22

Well, the other thing is, is that you're a turnkey real estate investing company, and for listeners that don't know what that means is you basically fix and flip properties at scale and sell them to investors. So what you do in that case, then, is you're using those resilient finishes that can stand up to pets better than if maybe a person were just doing this small scale on their own accord.

Terry Kerr 27:45

That is true. So I can't really speak to what other property management companies experience or other individuals, but I do know that that's what we've done to mitigate the risk, and again, like I said, increase the likelihood of a lease renewal, that's the name of the game, right?

Keith Weinhold 28:02

Saying yes to pets sure does increase your chances. And Terry and Liz, the three of us, have all been active real estate investors ourselves for quite a long time. And when we became real estate investors, new build properties, especially in the turnkey space, really weren't much of a thing, but today they are. There are build to rent communities and more. And you yourself, there have been more involved in new builds, although renovated properties is sort of your bread and butter business, but now that you've done both for a while, what are your thoughts with how you advise investors? Is the premium on new construction worth it? Are you just paying really upfront for the maintenance that you'd have on an existing property? So what are your thoughts with new versus renovated property?

Liz Nowlin 28:46

I love that. So you know, if anybody goes to our website right now and looks at the available properties, you'll see some really gorgeous houses mixed in with our already pretty houses with a new construction label across the front of that exterior photo, and you're going to see beautifully updated kitchens. Our renovated kitchens are also super nice. But I get that question, you are going to pay a little bit more for a new build than a renovated property? And you know, Terry and I talked about it, there's a really cool, detailed 15 year pro forma that you can look at with every property. And we did turn up the appreciation for a new construction house. And of course, nobody has a crystal ball, but I really think that will hold true for our properties only. We actually didn't change the maintenance metrics solely because our renovated houses have all new roof, all new furnace, all new air condenser, all new water heater, and they're just as new on the renovated properties as the new construction for our renovations. We're replacing all the any galvanized plumbing, you know. We're doing so much new I think maybe we could change it by a half of a percent or something, you know, but we actually didn't change it because. Because of the depth of the renovation on our properties. Now I am planning to have my next purchase from mid south homebuyers be a new construction home. There's the premium on the front end for me, my thought, and again, this gets into individual investor strategies, but my son is three years old. I plan to leave my entire portfolio to him, and my simple thought about it is that, you know, I have wonderful performing properties, the oldest of which was built in 1927 actually, and a lot of my renovated. It's a gorgeous one, by the way, a beautiful neighborhood, and it's been a great property for me. A lot of my inventory was built in the 60s and 70s. But when I think about Rhett, my son, baby, selling a house in 30 years. I have a feeling that 2024, build is going to do him very well. What kind of buy and hold investor Are you? Are you a 15 year or you will leave them to your kids? That's an angle to think about for sure.

Keith Weinhold 30:55

Well, actually, that's a great next thing to talk about the investor life cycle in the life cycle of a property that's in your portfolio. Talk to us more about when the right time is to sell an investment property. I mean, should we just buy and hold forever and leave it to our children, or is there an ideal exit time? So from your perspective, why don't you talk to us some more about that timing?

Terry Kerr 31:18

And again, that's just going to be case by case, we've got folks that'll sell a house to put their kids through college. We have had folks to sell their houses when they need to move their parents into assisted living, folks that'll sell their houses when they're looking at retiring. It's typically, life happens and you've got that equity there, and when the time is right to tap it, it's nice to know it's there

Liz Nowlin 31:44

lot of different ways to look at it. I've actually toured with selling my 1927 house in the next year or two, before that magic 100 year mark. Yes, for people, you know, and is that gonna do things? But really it's been a great little performer for me. I talk to investors so frequently, and I've heard more than one seasoned investor tell me they wish they'd never sold a single house they ever sold. Just wish, they wish they could hit a button and own everything they'd ever owned. And I'm a die hard buying holder, but I don't think there's a magic time in the sense of, you know, a question I get, maybe some from sometimes a newer investor is, when will my house need another renovation like the one you just did? And the answer is never right. We're going to cosmetically bring it back up between every renter every time. And so you're really just left working with the individual lifespans of those big components, right? And those are relatively staggered out, with maybe a water heater at the shortest, at a roof at the longest. And I think for the most part, this might vary per market. And Terry, I'd like to know your thoughts, but I think genuinely, you'll probably get a higher price by spending the money to replace versus selling for less having not replaced that item. You know. Say, trying to say, Okay, I'm going to sell in my roof is 29 years old, is probably better just replace it.

Terry Kerr 33:04

Yep, I agree. Because you know, if I'm a buyer and I'm maybe not a flipper, but a buyer, and I'd rather buy a house and spend 100,000 bucks on a house that has a new roof, than buy a house for $94,000 with an old roof. Because I know that old roof, if it leaks, it can cause a lot more damage than just the cost of replacing the roof. So I agree.

And from an ROI perspective, if I'm a financed investor, which about 80% of our investors are, I'm financing that new roof when I buy it with a mortgage, and I'm a great point pay out of pocket the next year. So that's a rub. And then very specific, of course, to our clientele. Terry, how much does it cost us to put a new roof on 1000 square foot house? 4500 bucks. That's we're putting on 700 new roofs a year. The roofers are paid by us by the hour. We are buying the shingles in bulk. And on top of that, we don't mark up maintenance and materials for our investors. So for that one story, 1000 square foot house, that's what my investor cost for us to put a new roof on for them is going to be but a potential buyer is going to look at that home and think it's a $7,000 roof that was great

Keith Weinhold 34:17

to learn about how you renovate properties for investors between tenancies there, so that properties don't get excessively dated. And we've been talking about a lot of the physical things that go into a property with that investor deciding what their exit strategy is going to be. Another thing that informs me are the numbers. When I get to about 40% equity on a property, I know my leverage ratio has now been cut down to two and a half to one, and that's when I look to do something maybe a 1031, tax deferred exchange. Or alternately, if it's a property that I really like, do the cash out refinance, get a tax free windfall with the cash out refinance, and get to hold on to the property at the same time. So of course, that's another way to approach it From the number side, rather than so much the physical side. But there sure is a lot to consider there. And you brought up heirs as well. This has been a great chat about the operations of a property, and just how you advise investors in there. Is there maybe any other question that comes up from investors a lot of times with how they should approach a property and the pros and cons within

Liz Nowlin 35:22

we've seen a lot of great growth, but when we're newer into a neighborhood that we've just kind of started putting our foot in as we stay we meaning mid south home buyers renovating and escalating those properties. That's where we've seen some of the biggest rent jumps and some of the biggest depreciation jumps, but it was kind of one of the lesser, prettier neighborhoods when we first offered that home to that investor, just kind of wrapping your head around all the different nuances to account for

Terry Kerr 35:49

yep, buying the path of progress. And fortunately, we've been able to create some of that progress in the neighborhoods that we've worked in throughout the years.

Keith Weinhold 35:56

If you're not sure where the path of progress is, and you buy on the line. A lot of times, you are the one that is creating that path of progress, and you've got enough bandwidth and volume in there to have actually done that on a number of occasions. How about something actionable? So many of our listeners have become investors there with mid south homebuyers. I imagine it is over 100 by now. So tell us about what you're doing, where you're active, between Memphis and Little Rock, renovated, new build. Really, where's the opportunity for an investor today?

Liz Nowlin 36:31

I'm pretty proud of us. I'll admit we just closed out 2024 having sold 680 houses. Wow. To investors, many of your listeners, and we're very careful. We've always done a little bit more every year. We don't buy everything we could buy. I always say my acquisitions team is not out there thinking about me and my wait list. One of my favorite sayings of Terry's is, you know, pigs get fat, Hogs get slaughtered. And I love the slow, careful way that we do things, but it was still pretty cool to do 680 we're still about, I'd say 75% Memphis, Tennessee, 25% Little Rock.

Terry Kerr 37:09

Yes, that's about, right? I would say also probably about maybe 15% new construction on 85% rehabs, maybe 20% new construction now, yeah

Liz Nowlin 37:20

And our sweet spot is still, well, still, it's that 100,000 to 200,000 that that window has slowly moved up through the years, very much to the benefit of investors as their investment seasons with time. I think we were 46,000 to 86,000 when I started in 2009 so been awesome to see the growth Memphis and Little Rock has had and so yeah, we're still kind of cash flow first appreciation is the icing on the cupcake. There are cupcakes have had more icing than we ever anticipated. If you go to midsouthhomebuyers.com and click on those available properties, they are under contract to investors at the top of the wait list, but they are identical to the houses I will have for anyone that is listening. We're so formulaic, 365 days a year, the cheapest house I may ever have is on that website. The same for the most expensive. We have just kind of figured out what works, and we hit it hard. And you can see the running theme with the kitchens and everything else.

Keith Weinhold 38:22

Well, congratulations on the total volume that you did last year. That's almost two homes a day, including weekends and holidays and everything else. That's really terrific. Yes, I, for the listeners here, have often, over the years, made these examples using a 100k property, but inflation and appreciation has also made it such that I can't do that anymore, maybe, just maybe in Memphis and Little Rock, I still can for a decent rehabbed property in a pride of ownership neighborhood for as little as 100k and that's one reason why so many investors have made mid south home buyers the place that they go for their First ever Income Property across state lines. They really know how to serve that audience, and you've been doing that for our audience for more than a decade now, and you continue to have this really robust interaction with investors. Liz, you do a lot of phone calls with people. You're really proud about what you do there. So proud that you offer field trips,

Speaker 2 39:19

please. I hope folks come so many folks never do so. If for anyone that prefers to do it from your living room, you are in the 95% norm if you never come to town. But man, it pushes folks confidence through the roof. So many of my investors are from high cost of living areas where you cannot get a parking spot in a war zone for the price that we are selling fully renovated houses, we have a deposit taken for a renter from every house I ever offer that really is cash flow from day one, and folks will really see the neighborhoods and that. I can't stress that enough. In fact, one thing that happens so if folks come up, you can sign up for the tours right on the website. It's on the far right, says, come visit us. This, you'll see a drop down with all the dates we do, monthly tours in Memphis and quarterly tours in Little Rock the day before. So you can come out and hit both. You kind of do a Thursday, Friday tour. You'll tour facilities. You'll see the warehouse and all that kind of stuff that I'll find. You know, our vans, we pull it, throw everybody in vans. We're listening to Memphis music and talking the whole tour, and people will want to pour out of that van right into the house. And I actually back everybody back out. I back them back into the front yard. I want to talk to you there and say, look left, look right. This is $120,000 neighborhood. Y'all. I can send you photos of the inside of the house all day, and you're going to get the same great house whether you buy from your living room. But I love it when people get to see that. I'll go ahead and say we do give gift cards to the best barbecue in town at the end of the tour, in addition to a $500 closing cost credit, just as a thank you for coming out and yeah, I love the tours.

Keith Weinhold 40:53

I really appreciate the two of you. Here we are, the three of us, more than a decade after we started talking about the properties and what you offer investors here, and it's just rare to have continuity like that. You can learn more at midsouthhomebuyers.com Terry and Liz, it's been valuable as always.

Terry Kerr 41:13

Thanks so much, Keith. Always enjoy it

Keith Weinhold 41:15

when we talked about pets, did Liz say something about skinning the cat? That would have to be one of the worst pet policies that I have ever heard of. And yeah, I think that long term, you know, the three bed, two bath style that has been so popular in rentals. But today, there are fewer occupants per household than there was 10 years ago and 20 years ago. Okay, that has long been a national trend. So in a lot of instances, two bedrooms can be better than three and one bathroom can be better than two, especially in that case of a sole occupant. And do you know where your best feedback is gonna come from? From what would most improve your unit's appeal to the market? It is not an online resource at all. It is from a showing where your tenant prospect did not want your unit. They know they are in the market. In fact, they are more aware and in tune with the market than you are, because they might have looked at, say, five units in just the last two days, and they might have done that in person. So they will tell you why they did not want the unit, whether the rents too high, or they don't like the parking situation, or your place needs to be closer to the train station, or your only bathroom is upstairs, something that reduced appeal for some of my own properties in the past. But yeah, this, I'll call it an exit interview of your prospective tenant. I mean, that is valuable, or you can have your manager do it well, the one place that really knows what tenants and investors want is with Terry and Liz there. That's why they have been in business since 2002 with 1000s of investors like you. And it's also why when there is an investor wait list for their properties, and you get to the top of the wait list and close on your property, so many investors just get right back in line on the bottom of their list and work the way up again for their next property. They get lots of repeat business. You can do this too. Get started at midsouthhomebuyers.com Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 3 43:49

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 44:17

The preceding program was brought to you by your home for wealth, building, get rich, education.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
539: Short-Term Rentals, Mid-Term Rentals, and Hotel Investing with Robert Helms
3 feb· Get Rich Education
Professional real estate investor, author and host of “The Real Estate Guys” Radio Show, Robert Helms joins us to discuss the nuances of mid-term, short-term rentals, and hotel real estate investing.

They highlight the impact of interest rates on single-family home affordability and the role of institutional investors.

Mid-term rentals cater to travelers like traveling nurses and digital nomads, offering higher monthly rents. Short-term rentals face challenges due to oversupply, but can be profitable with strategic planning. Hotels offer consistent experiences, with key metrics like occupancy and ADR.

Resources:

Join Keith and other faculty experts at the Investor Summit at Sea, a unique networking and learning event for real estate investors. Let the event organizers know if you want to have dinner with Keith during the event.

Show Notes:

GetRichEducation.com/539

GRE Free Investment Coaching:GREmarketplace.com/Coach

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: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host, Keith Weinhold, surprising facts about the institutional ownership share of the rental market. Then learn from a great guest tonight about how the midterm and short term rental models work and hotel real estate investing. Then you are invited to join us both on the most special real estate event that I've ever been a part of, and I'm going to return to it today on get rich education.

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 the flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors, and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests 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 1:17

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 1:33

Welcome to GRE from London, UK to London, Ontario and across 188 nations worldwide. I'm Keith weinholden, you are inside this week's episode of Get rich education, where we aren't day trading, we are decade trading with gradual patient wealth accumulation through income properties, yet with a path that lets you live the good life of options and freedom when you're still young enough to enjoy it. Now, the shorter the period of time that your guest or your tenant stays at your place, the more that the word hospitality gets involved. Hospitality, that word has little to do with hospitals. It almost means the opposite. Hospitality means that you're now giving a warm reception to or entertaining guests or tenants. Well, that's something that you rarely do at a long term rental, but you do if you're a hotel real estate investor for sure, or maybe even a little in a short term rental, then you're in hospitality like valet parking, having a restaurant, a pool with a swim up bar, a gym, a concierge desk, or even having a lobby with travel desks of various tour companies. Right there. That's hospitality, and today as we discuss mid term rentals, then short term rentals, then hotel real estate investing, think about how the level of hospitality that you give increases as the duration of a guest or tenant stay decreases. Hospitality is one reason that long term rental rates for durations of, say, a year or more, well, they had the lowest daily rates and the least hospitality. And hotels with, say, a two night stay, have the highest daily rates and the most hospitality.

This week's show is presented by ridge lending group and freedom family investments. I mean Ridge is where I get all of my investment property loans, and where I do all of my refinancings. And perhaps you should, too, because they specialize in working with investor borrowers there, so they know just what you need and what you don't Ridge lending group.com, and then freedom family investments, that's where you can make a private money loan and get a higher yield than you can with a high yield savings account. That's where I invest a share of my own liquid funds for a passive 8% return, 10% return. And now this is new. They've got offerings at 12% or more. You can learn more by texting family to 66866, next, we discuss mid term rentals, short term rentals and hotel real estate investing.

This week, I'd like to welcome in a good long time real estate friend. He's been on the show here with you and I before. Besides being a deeply experienced real estate investor, he also hosts the terrific real estate guys radio show, which was a substantial influence on the launch of GRE more than 10 years ago. I mean, how many times have I suggested to you over the years that you give his show a listen? He also speaks with some of the best pipes in the industry. Hey, it's great to have back on the show this week, the incomparable Robert Helms.

Robert Helms 5:07

Hey, Keith, so good to see you. Thanks for having me back.

Keith Weinhold 5:11

Let me share with you. Robert is on a very short exclusive list of people that I credit for being where I am today, from how to host a professional show to being a Go Giver and Robert before we discuss mid and short term rentals in the long term rental world generally, just what's important to know in today's residential real estate market, you can take that anywhere you like.

Robert Helms 5:38

Well, I think the big picture has been all about the loans and the interest rates, right? We saw rates go up, not only a lot, but quickly, and then kind of come back down a bit. Now they're headed back up, and that just has a big effect on single family homes, primarily to folks who are living in the homes, because they'll make that decision based on the affordability of their mortgage payment and the rest of the costs investors Well, you know, we think a little differently. We're not limited by a specific interest rate will pay? If I can make 9% would I pay 6% sure, if I can make 9% would I pay 7% well, I might, and so on. So I think that that's something to watch this year. For sure. There's lots of reasons to expect that we're not going to see interest rates get back down into the twos and threes and fours like we wish they would stay. Probably shouldn't happen in the first place, but you and I took advantage of it, and lots of your listeners did as well. But I think that's kind of a big picture thing. And then the other part of it is, you know, the inventory. So when people have this locked in effect, which really doesn't have anything to do with their needs or wants, they have a new job or they have another child and they want to move to a couple of notches up in a neighborhood, they don't want to get rid of their 3.12% loan and have to buy another property with 7% so we see less people moving, therefore less inventory, total inventory now somewhere just around 700,000 or below, and that's lower than it's been for the average of the last 10 years. For sure, I think that has an effect, less people are moving because of the interest rates. But at the same time, you know, there are houses that trade every single day. People do have to move. They have life situations and so forth. And then real estate investors, of course, we just look for opportunity. If we can make a spread and we can be in a property long term where the tenant pays down our mortgage and not us, well, then we're interested at almost any interest rate.

Keith Weinhold 7:44

Yes, that interest rate lock in effect will persist another year. That continues to get diluted over time. Of course, though you and I both know that mortgage rates are still below their historic rate, but because of the recency bias, no one's really acting that way. By the way, the first ever rental property I bought had a six in three eights percent mortgage rate 20 years ago, and people were raving about what an incredibly low rate that was back then. But this constrains supply. And another thing that constrains available supply in today's market is more institutional players own rental property today we're talking about outfits like invitation homes and even the California State Teachers Retirement System. But one thing a lot of people don't seem to realize is that institutions like this own less than 1% of single family homes in the United States, and that's all institutions combined. And now if you just isolate that to single family rental properties, they still only own two to 3% so where we have this period of low supply and low affordability, you know, Robert, I think institutions, in a lot of these media headlines, they tend to get scapegoated or being a boogeyman. Oh, all these big players are buying up the homes, and that's why you can't buy one. But really, that's pretty overblown. So can you talk to us more about what the institutional entry into the real estate investing space has been like, which really picked up steam after the GFC about 15 years ago?

Robert Helms 9:16

Yeah, it sure did. I think that folks who were managing big sums of money, and the institutional money comes from all kinds of places, real estate, Investment Trusts, insurance, pensions, funds, and then just big old companies that decide to raise money to go do something, and that money saw opportunity said, hey, you know what? This is a short term anomaly, all these prices that went down after 2008 and 2009 and when a lot of mom and pop investors were very hesitant to touch the third rail of buying more property after what they had just been through, these institutions are like that. Institutional money is not very emotional, right? It's just looking at the numbers at the same time where the nuances of institutional funds is that they also didn't have a ton of real estate experience, and so it was quite common for a couple of years that an institution would come in, and they would typically work through local brokers, and those brokers would know the market a bit. But if you could generalize, you would say that a lot of institutions overpaid. But here's the thing, when you overpay in the moment, you don't really notice that in the long term real estate investment that these guys did, it's interesting. I've been to a couple of conferences I go to almost every year that 10 years ago was mom and pop investors. And today it's a lot of suits, not too many ties. They don't send. Tend to wear ties, but a lot of suits, a lot of folks working for various levels of these funds, and they're looking at real estate as an asset class. Now I'm going to argue their real estate's not an asset class like any other, because every share of stock, every ounce of gold, every barrel of oil that anybody buys, is discretionary. You never have to invest in the stock market, in the bond market and cryptocurrency, but you cannot sit out the real estate market. From an economic perspective, I don't have to own real estate, but I'm going to have to interact financially. And so it really doesn't operate like other quote, unquote, asset classes, but I think the big folks did figure out is that there is stability in real estate. There's not the efficiency they would like, and that's a good thing for us. We like inefficiencies in the real estate market, but more and more we are seeing funds being put together, even today, to acquire property. But to your point, and it's an excellent one, you see the headlines and you see the name calling of these big, faceless, nameless corporations. They're buying up all the inventory. They're not it is a drop in the bucket compared to what mom and pops own and will continue to own

Keith Weinhold 11:53

yes, and of course, I'm talking nationally. When I bring up those one two and 3% institutional share numbers, it's going to be lower in some areas, it tends to be a higher proportion of buying that the institutions do in Texas and also in a lot of southeastern markets, like Atlanta, Jacksonville, Charlotte and Tampa. Robert you have a good bit of knowledge and some involvement in the mid term rental market. We're talking about rentals of one to six months in duration. Here, can you talk to us about trends in the midterm rental market?

Robert Helms 12:25

Yeah, it's a fascinating area. You know, back in the day, these would be referred to as corporate rentals, so a corporation might lease an apartment and furnish it, and then they would have different people stay there over the years, so the corporation would be responsible for the lease. I had some tenants like this many, many years ago, and it wouldn't be up to me. It'd be up to them who had the keys at the time. And a tenant might stay six or seven months. A tenant might make four or five weeks their stay. And so the idea was they needed a place for these contractors who would come in and work for a period of time to stay. But hotels were a lot more expensive. Well today you see even the folks who got involved in short term rentals making a decision to invest in people like traveling nurses who come and stay for four to six weeks, or these clients who will come in and work for two months in this location, two months in this location, two months in another location. And so they will simply stay in a short term rental type of property for a longer term. And you know, the most expensive things when it comes to real estate or turnover in vacancy. So if we can get the tenant to stay longer and pay a bit of a premium, these are often furnished units, and they don't have to worry about much. And we've had a few opportunities where what started out as a three week rental turned into a six month rental, because sometimes when they bring these folks on these companies, don't know exactly how long they're going to stay, and it's been a great kind of marketplace. There's a few folks that specialize in it. But my experience is that a lot of the people that have gravitated towards midterm rentals used to be in the short term rental business, thinking they'd rent for one or two nights, and lo and behold, they get a client that would stay for a month, and they'd say, Hey, this is pretty cool.

Keith Weinhold 14:13

Some conversion rate there from short term rentals to these midterm rentals here, as Robert touched on, you do tend to get more monthly rent for a midterm rental than you do a conventional long term rental. You're going to have some experience for furnishing there. But Robert, you bring up a great point. You mentioned traveling nurses. And of course, here as real estate investors, we're often interested in who we're serving and what that demographic looks like. I also think of midterm rental clients or tenants as students in digital nomads, and oftentimes it's a person relocating where they just want to check out a place for a few months before they consider setting down roots in an area with a long term rental or buying their own place. So can you talk? More about the demographic that we're serving there, because oftentimes you want to follow their trends.

Robert Helms 15:04

Yeah, very much. So, you know, today, I think there's a lot of folks that can work from a variety of locations. They do need some things, they need quiet they need a good internet connection, but they will come and go for weeks at a time. And I also think that you see more and more employers looking to contract labor. They have a job to get done. They're not sure they want to bring on a full time employee with all the cost of benefits and onboarding and all that. So they find somebody in the niche that comes in for six or eight or 12 weeks at a time, and they're the perfect candidate for short term rental. But we also see folks that are between gigs. So I might have a six week gig, and three weeks later I have another six week gig, and the three weeks in the middle, I want to go somewhere that's kind of fun to hang out. And so you do see those kind of rentals as well.

Keith Weinhold 15:55

Are most long term property management companies open to managing midterm rentals?

Robert Helms 16:02

Yeah, good question. There are certainly those that are, but I think we're starting to see a specialty on the aggregator side, folks that are reaching out specifically to the kinds of people who are candidates for midterm rentals from the tenant side and looking to accumulate inventory. So that's been kind of a neat thing to watch. So the focus of most property managers, they're hired by the owner of the property. Well, these groups are really their their salary gets paid for by the tenant, and they're able to negotiate on the behalf of some of these groups, you know, a better rate, better terms. They may negotiate some flexibility and the time for these folks that don't know exactly how long they're going to stay, it's an interesting new area of management, for sure.

Keith Weinhold 16:52

Now, of course, we're concerned about a high occupancy rate in midterm rentals, just like we are any type of rental. What does one look for when it comes to advertising platforms. And this could be, you know, going beyond just a well known website. It might be, hey, if you have inroads with the local hospital system, oh, well, can you then funnel some of the traveling nurses, for example, into your midterm rental?

Robert Helms 17:15

Yeah, most definitely, it is a specialty niche, for sure, if you're after a robust rental solution. You know, many people in midterm rentals, like in short term rentals, the vast majority of short term rental owners are not making a killing. They are. They're liquidating some cost of what they consider their second home. So the average short term rental landlord has just one property, and that's a property they bought, probably not as a rental. They brought it as a second home, and they're discovering that when they're not there, they can lease it out, and that pays for some of the costs. But there are obviously a few folks who have cracked the code and figured out which markets and where the best opportunity is, and what size units it takes to maintain a really healthy occupancy, and it's the same for this midterm rental. It's a different kind of tenant. It's mostly not families, so it's not larger units with lots of bedrooms. It's also mostly not your higher end rentals with views of the water or up near ski resorts, it's in the bigger towns where there is employment, and that employment triggers most of the midterm rental business.

Keith Weinhold 18:29

You, as an investor owner, maybe your cash flow negative on your midterm rental or short term rental, however, you might be using it for a few weeks or months yourself and getting back more of the benefit that way you're listening to get rich education. We're talking with the host of the real estate guys radio show, Robert Helms, more when we come back, we discuss short term rentals, including, is there an air be in bust? I'm your host. Keith Weinhold,

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

Oh geez, the initial average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% in your bank account, the minimum investment is. 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 you know how I'd know, because I'm an investor in this myself, earn 10% like me and GRE listeners are text family to 66866, to learn about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866

Kristen Tate 20:39

this is author, Kristen Tate, listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 20:54

Welcome back to get rich education. We're talking about midterm short term rentals and hotels and hospitality with a long time friend of the show here, Robert Helms and Robert a few years ago, there seemed to be this word airbn bust that was beginning to be associated with Airbnbs. A lot of the difficulty in that market. So tell us, what was that all about, and where are we now with industry trends in the short term rental market?

Speaker 1 21:21

Yeah, great question, Keith. What I think happened is the allure of a short term rental, having a beautiful property that people would pay a premium on a nightly rate, sounded wonderful, and it was, and it worked for a lot of folks. But then what happened is, what happens people got the word, they got excited about it, and a lot of people started holding webinars, teaching classes, doing boot camps, and before you knew it, there was way more supply than there was demand. See, the hospitality industry is amazing. The hospitality industry employs 9% of all people in the world and accounts for nearly 9% of the GDP of our planet. Travel is a gigantic industry, and it's led by smart, big, storied institutions. So for folks to come and figure I'll just compete with them with my little apartment didn't necessarily turn out so well. So there was an airbn bust, and it is still lingering today. If you want to make a profit in short term rentals, you absolutely can, but you need to be super strategic. You need to think long and hard about where and what and why and how, because it's very specific. There are certain markets that short term rentals do very, very well, and there's a lot of markets, the majority of markets, where they don't. So as long as you're willing to study and take a look and be realistic and go kick the dirt a little bit, you certainly can get the upper hand. And the reason it's exciting is the average person who owns a short term rental is not professional in any way. They probably don't have too many other rental properties. It's not a big part of what they're paying attention to in their life. And they're simply trying to liquidate some of the costs of ownership. You know, I might rental here or rental there. And the way you can tell Home Away, VRBO, Airbnb, most of the hosts, the owners, make their calendars public, and so it's easy to tell how busy they are. It's amazing to me. I'll look at a marketplace and look at a property and see that month after month after month they're at a six to 8% occupancy, which I wouldn't be excited about myself, but for someone who's got a second home and they don't mind having people stay there for a few nights, they'll pay a premium for that. They legitimately can carve down a lot of their expenses just by renting six or eight or 10% of the time.

Keith Weinhold 23:58

Of course, the conventional guidance is before you buy a short term rental, you're really helping yourself out. If you have to fall back on turning that into a long term rental, it would cash flow. But of course, now you're really narrowing your criteria in what is going to work there. And Robert, when we talk about that demographic that we're serving, we touched on that in the midterm rentals. Who are we serving in short term rentals? I think conventionally, we think about vacationers and business travelers

Robert Helms 24:24

it's both of those things. I think that originally, people were certainly inspired by the vacation traveler who wanted to have a little more privacy, maybe their own kitchen, maybe a little more space for the dollar. And we still see that for a family, especially a family with small kids, staying at a hotel, ordering room service, eating in the restaurant, all that adds up. And if instead you can go to the grocery store and make breakfast at home, right, you can save the costs. And so there is definitely that clientele, but you also have people in short term rental that are visiting family. They're not really on vacation. In there, just going to an area for a short period of time. We see people that criss cross the country staying in short term rentals, two nights here, three nights there. And so it does have kind of a wide variety. A lot of the markets are very seasonal. Though. There are markets like Branson, Missouri that does really good at some parts of the year and not as well as other parts of the year. Then, of course, there's year round markets. So back to if I'm thinking about it with an investor's hat on, I want to be a little more specific, in particular about what and where I buy. But if I have single family house as my second home, maybe it's in a ski area, maybe it's in a beach area, and it's fairly expensive to maintain. Well, then considering renting it out on a short term basis might help the overall cost of maintaining that property.

Keith Weinhold 25:52

You know, my own personal experiences really started to get bad in short term rentals, when I would go stay in a place. And I think we've all seen those memes out there about, my gosh, I had to wash all the dishes and walk the owner's dog and still play some exorbitant cleaning fee. I think we've all kind of grappled with that at some point, but STRS are still a really viable investment for the majority of the operators. But yeah, Robert, most of my experiences in short term rentals recently, including showing up at a place where they had not done the turn. The cleaning person did not stop by. And, yeah, okay, they came over there properly. But it's like, you cannot unsee the mess that was left there before you were there. So I had a series of experiences lately that have actually steered me into staying in hotels more often. And hotels really fit my lifestyle pretty well. I like to work out at a gym. I like to have a gym on site. It's convenient to have a restaurant on site and so on. And you've been in the hospitality and hotel space serving that for a while. Why don't you talk to us about industry trends in hotels.

Robert Helms 27:03

Yeah. So travelers, to a great degree, love consistency. They want to be able to rely on cleanliness, on amenities, the very things you mentioned for sure. And so hospitality has a wide range, right? There's the lower end airport hotel where nobody stays more than a night, and it doesn't have a lot of amenities, and then there's the beautiful resort properties and everything in between. But what the hotel industry has done a good job of is providing a consistent experience, and that's what people crave more than anything else. You know, we would call a short term rental more of a unique or boutique or co chair kind of experience, and you don't know what you're going to get. You don't have that consistency. Some folks don't mind that, but for the majority, especially of business travelers, they want to know what they're getting. I can remember years ago, my sister wanted to take us on a family vacation to Maui. It sounded like a good idea. And then she was the one tasked with finding us a place, and decided we would stay at the Ritz Carlton and I looked at the Ritz Carlton website and said, Ah, you know, this is not exactly where I would probably stay in a she's a chiropractor. She says, in order for me to take a week off work, I'm losing $10,000 of the business. I'm not staying in some cheap hotel. I want to stay in a luxury hotel. And we did it, and it was fabulous, and I would stay again. So the point is, if you want to be able to work out, if you want to be able to have 24 hour room service, if you want grab and go that you don't have to walk outside in the cold or the heat, then hotels make a lot of sense, and it's not an either or. They're just both elements in hospitality. I would consider a short term rental property, a hospitality property, and I would consider a 1200 room, four and a half star hotel hospitality property as well.

Keith Weinhold 28:58

Sure. Of course, hotels aren't monolithic. There are so many different types. You might have a boutique hotel with a few dozen rooms to a large scale, something like you've been involved in. You've been in a large scale, ground up development for a hotel. And I don't know if you had a hope when you built your large hotel that a big chain like a Hilton or Marriott would buy it from you, or would brand it along with you. But that branding and that consistency of experience can be really important. That's something we especially associate with those larger hotels. So we have some of these things in mind. I mean, where does a new prospective hotel investor begin?

Robert Helms 29:40

Yeah, it's pretty difficult to get started, because the properties are big and expensive and risky upfront. So there's a terminology we use the hotel business, which is stabilization. And stabilization is when a hotel gets to the point where it's doing about the occupancy and rate that you would expect. Respect it too long term, and that might be anywhere from two to four years. Well, in the first year, boy, there's hardly anybody there. We have a 300 plus room hotel, and the first night we were open, we had two guests and 160 employees. So you don't have to be a rocket surgeon to figure out that that math doesn't work very well. Nor did it for the first month or the first year. Today, I'm happy to say it works a lot better, but you have to have patience. Now, there's a couple of ways you can get involved. Certainly, a smaller a boutique hotel. I stayed in a hotel a couple months ago that only had eight rooms. It was marvelous. And I thought, boy, you know, probably an individual owns this, but most of the hotel properties are owned by groups or syndications, and so that's another way to get exposure to hospitality. There's some things to love about hospitality, and to me, one of the same things I love about single families is you can find professional management, like folks that really know what they're doing, and create that guest experience that was perfectly possible for someone to buy a single family home as a rental. Maybe it's in their own town, and they want to manage it themselves. And you know, maybe at first that's a good idea, so you can figure out the game you've chosen, but ultimately, you want to hand that off to a professional, in my opinion. And in hospitality, like in multifamily, you have to, you have to have somebody come in with chops to be able to take care of it. And then there's the nuance of franchise which there are hotels that are just independently owned and operated. And then there's franchise hotels. And just like buying a franchise business, you pay a little more, but you get a lot. You get all the systems and the service and the training and the marks, and many cases, you get a big, dynamic engine that brings leads and fills your heads in your beds, which is what the metric we're interested in, in hospitality. And so when we started with thinking about it might make sense, the market we were in had no branded hotels, and we thought, Well, should we be the first? And after doing a bunch of research, I came to the conclusion that, well, it's going to cost something, and there's going to be a benefit, but I don't see it the benefit outweighing the cost. And we decided not to and then, lo and behold, through a strange set of circumstances, today, we are a branded hotel, and I'm thrilled about it. In hindsight, it was the right thing to do, but do understand that most real estate investors that I know are not going to qualify. It's pretty difficult to get a franchisee agreement with one of these hotel brands. You have to have some wherewithal, some experience. They're going to look at your assets and your balance sheet. They're going to look at more than you can imagine to make sure that you're worth betting on, that they'll put their story name on the outside of your hotel. But it does bring up another point in hospitality, which is there's just multiple streams of income in hospitality. I saw a study last year that showed that in the upper resort markets, the fancier hotels and markets you might go to that the average person whatever they spend on their nightly rate in the hotel, they spend 80 to 85% of that per day on all the other things associated with their stay. Now, some of those are going to be off campus, but the more that you can provide to the guests you've already brought onto the property, the more profitable it can be,

Keith Weinhold 33:25

from resort fees to valets and more. Yes, there certainly is plenty to add on there. Maybe the last thing in hotel investing is, if someone wants to get started, what should they even be looking at, as far as say, understanding some of the metrics, like rev Park. Can you give us a quick walk around that?

Robert Helms 33:45

Yeah, so if you're used to investing in apartment buildings or single family houses, you've probably seen the basic income formula. You know how to calculate for loss to lease and maybe vacancy and those things. Well, there's just a few more intricacies when it comes to hospitality, but it's not that difficult if you just think that you're renting every night instead of every month or every year, and instead of having my turnover be one tenant every two years, it's one tenant every four days. There's just a lot more to pay attention to. And so the most important metrics in the hospitality industry are obviously occupancy, how many nights our rooms are occupied? And then ADR, which is average daily rate, and that is the rate for a particular unit type on average over some period of time, typically a year. And if you were to multiply occupancy times average daily rate, that gives you a revenue per available room or RevPAR. RevPAR can be affected, and it's the primary metric that we drive to in the two ways, you can increase occupancy to increase your RevPAR, but in many cases, you don't need to increase occupancy if. The market will allow you to raise your average daily rent. We've just gone through in the last year that our occupancy is down about 2% for the year, and our average daily rate is up more than 16% so the math works that follow me on this with slightly less wear and tear on the units our owners are making more money. So it is a balance. It's not like I want maximum occupancy. Well, not necessarily. Hardest thing to manage for any hotel is a sold out night. Sounds like a good idea, but you have no wiggle room, whereas when you've got even 3% vacancy and something goes wrong in the middle of the night with somebody's unit, you can get them moved somewhere down the hall, not somewhere across town. So I would say there are some really great resources. If someone's interested in hospitality. There's a big company called the hotel valuation systems, HVs, and they have a lot of great tutorial information available if you're really interested. Go to a conference, a hotel conference, and you'll pick up the lingo pretty quick and meet some of the folks that are in the business. It is, historically, one of the highest return properties, but also a lot of high costs, and again, expect some negative cash flow at the beginning.

Keith Weinhold 36:18

Yeah. Well, it was great. And you brought up something that I had not thought about before, about how 100% occupancy could actually introduce problems in the hotel space. And of course, there are a number of other things to consider, surge pricing, high seasons, low seasons, an awful lot that we don't think about when we're renting out single family homes one year at a time. Well, Robert, that's been a great walk around talking about the institutional space, midterm rentals, short term rentals and hotels, and you and I have a great collaboration coming up together. Why don't you tell our audience about it?

Robert Helms 36:55

Oh my gosh. I am so thrilled that you'll be joining us again for our 23rd annual Investor Summit at sea. This event we do once a year, and by its name, you can probably tell that the majority of it happens on a cruise ship. We spend two days in beautiful Miami at a great hotel, then we jump on a luxury cruise ship for seven days. On the days that we're at sea, it's workshops and seminars and panel discussions and round table lunch discussions and all kinds of fun. And on the sea day, on the land days, we go have a good time together. It's extraordinary. You've been with us before, and I'm super excited to have you back with us on faculty, and excited that we're going to get to brainstorm a little bit with a couple other podcasters. So some of the OGS are going to be on this particular summit.

Keith Weinhold 37:43

Yes, it is June 20 to 29th this year, where we spend the first two days on land in Miami, and then we spend a week cruising to the Bahamas, St Thomas in St Martin. We're doing it on a beautiful ship, the celebrity beyond. So as one of the faculty members, you'll get to see me do a 50 to 60 minute presentation, a couple of lunch, round table discussions. I might be on a panel or two, and also host a table for dinner each night where participants like you rotate around at the tables, and that way you get to chat directly with most or all of the faculty members. That way. Yes, Robert, I was there in 2016 as an attendee. It's great to finally come back as a faculty member. I will be putting the second pepper on the necklace.

Robert Helms 38:29

All right. Well, it's gonna be a ton of fun. And the great thing about it is we have people from all over the world that come and you get in these awesome conversations. You know, you go to a one day or two days seminar, and you get to connect with some people, but boy, and this week, you're going to have a chance to meet all kinds of folks. And the faculty is amazing. Our mutual friend Ken McElroy will be back with us for his 12th year. Peter Schiff's going to be back with us again. We've got the George gammon coming. Brian London, who runs the New Orleans investment conference that you and I usually rub shoulders at, and ton more, just a really great time. And if you're serious about collapsing time frames, you can get more done in nine days on the Investor Summit that you can probably get of two years of just haphazardly going to conferences and watching webinars and listening to podcasts

Keith Weinhold 39:18

you will see what we mean if you attend, about putting a pepper on the necklace and what that is all about. I can tell you from attending in 2016 just one previous appearance there. It is the greatest real estate event that I have ever attended. It's really immersive. It's really fun. Of course, you get off on these ports, and there's a beach component to it as well. It's not a low cost event, but as I like to say, it's not cheap, but neither are you.

Robert Helms 39:50

It is an investment, that's for sure. I think it's important that you approach it that way, right? As investors, we demand a return. On our investment, and you should do that on the summit. Don't just show up and have a party time. That'll be great. It'll be fun. But be strategic about who you want to meet, who you want to hang out with, and who you want to learn from. The faculty is like no other. We'll have at least 15 faculty members. There's a couple more that we're working on, whose names you would know, but we are not ready to announce yet, but it's going to be so much fun. Oftentimes, the best people you meet, you meet at dinner, or you meet at the beach, or you meet out on deck. So we'd love to have you join us and tell you what, if someone is listening to your show, Keith, and they would love to have dinner with you. All they have to do is let us know that when they register say, you know, I want a chance to have meal with Keith, and I think we can make that happen.

Keith Weinhold 40:45

Oh, that's great. And, you know, Robert, it's rare. It's the type of event where, even though it's been nine years since I was there, you developed such a close kinship with the like minded attendees that, you know, I might see a some of it's a Facebook friend now, you know, Steve or Dave or something. And I'll always remember, oh yeah, I met Steve on real estate guys Investor Summit to see it's almost like a relationship you would have with, like, a long ago high school classmate, to be around each other for nine days and all these places. It just kind of brings this different element to it. You can learn more at Investorsummitatsea.com, and get registered there. You can see my smiling face in the faculty section along with the other faculty members. Remember, it's really about all the other people that you meet. You have any last thoughts about the terrific Investor Summit at Sea Robert?

Robert Helms 41:36

I would just say that in life, we tend to regret the things that we don't do a lot more than the things that we do. So get on board. You'll have an amazing time. No matter how great we say it is. It's better than that. It's like summer camp for the affluent, summer camp. As a kid, you didn't want to go, you weren't sure, and by the end, you were lifelong buddies. It's like that. It's investing on steroids. The photo ops are amazing, and you'll meet super cool people, plus you'll get the hangout with Keith and I. So I would say join us for the 23rd annual investors Summit.

Keith Weinhold 42:14

There's wisdom out there that says you should say no to more things in life, and in one tranche, that makes sense, and you also need to say yes to more things in life that fits the category. Here with the Great Investor Summit at Sea I really anticipated. It's one of my biggest events of the year. And Robert, it's been great having you back on the show.

Robert Helms 42:35

Thanks so much, Keith, and appreciate your listeners. Listening in today. Don't quit your Daydream

Keith Weinhold 42:42

Well, said.

Next week on the show, we talk about how to streamline the operations at your rental properties. Is it better to own rental property with, say, two bathrooms rather than one, or is that just another faucet that can leak and shower that can leak and toilet that can clog, and the pros and cons of allowing your tenant to have a pet in your rental unit, it's those sort of operational things and more that we help you improve next week right here on The GRE podcast, it's interesting about investing in a hotel to such a large scale that you can court major franchise branding, like with Hilton, Marriott Wyndham or Hyatt, which Robert has successfully done. And I have visited that property of his with him in person, and it's amazing what he's done there. And you know something, I have rarely met an American, or any global resident that is averse to staying at a branded hotel. I mean, that only seems to be an attractant. Now in the US, some people, they used to dislike franchise restaurants. I even remember people saying, Hey, we don't need another chain restaurant in my town. But I've never seen people scorn chain hotels and today, I mean, in the here and now, people seem to want both franchise restaurants and hotels. I mean today, you're more likely to hear something like hey. When is our town getting a Chick fil A? Why don't we have one yet? And of course, there is plenty of opportunities in these shorter term stay spaces without ever attracting a branding deal, major thanks to the terrific Robert helms today for his keen insight on shorter term rental real estate. This event, June's investor summon at sea is such a good time, and Robert really knows how to host it and make sure you have a good time. After doing it for more than 20 years, it is a rich, immersive experience with people, places, learning and. And relationship building. It's the type of experience that you just can't get from an Instagram reel. It does draw attendees worldwide, although most attendees were from the US when I was there that one previous time. When you register, if you want to make sure that you get dinner with me, let them know, and we'll make it happen, because we know that you haven't heard enough of my voice every single week for more than a decade now, right? In my opinion, it is the crown jewel of world real estate investing events start at Investorsummitatsea.com until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 45:46

Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively.

Keith Weinhold 46:14

The preceding program was brought to you by your home for wealth building. Get rich education.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
538: How to Begin in Real Estate, The Insane Canadian Housing Crisis
27 jan· Get Rich Education
Keith answers listener questions about getting started in real estate investing with limited funds and how to determine the true appreciation of a property against inflation. He also discusses:

The impact of the LA wildfires on housing needs and some landlords raising rents excessively.

Economic and housing challenges facing Canada, including high inflation and unaffordable home prices. And highlights the views of likely future Canadian Prime Minister Pierre Poilievre on addressing these issues.

GRE Free Investment Coaching:GREmarketplace.com/Coach

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Show Notes:

GetRichEducation.com/538

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, I answer three of your listener questions, then learn why LA area landlords got a bad name during this month's awful Southern California wildfires. Finally, why Canadians cannot buy houses anymore, and what lessons you can learn from Canada's real estate mistakes and the abject lunacy there today on get rich education.

Unknown Speaker 0:30

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 the flipper or landlord. Show Host Keith Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show guests and key top selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Unknown Speaker 1:16

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 1:32

Welcome to GRE from Gatlinburg, Tennessee to Pittsburgh, Pennsylvania and across 188 nations worldwide. I'm Keith Weinhold, and you are inside this week's installment of the program known as get rich education, I'm grateful that you're here, but you're not here for me. You are here for you. So let's talk about you and some of the listener questions that you wrote into the show about and as usual, whenever I have a batch of listener questions, I answer the beginner level questions first and then move on to more advanced questions. The first one comes from Jeanette in Seaford, Delaware. Jeanette asks, I only have a little money to invest in real estate. How do I get started with just a small amount of money. All right, Jeanette, well, first I would talk to a lender. You have to talk to a mortgage specialist or a loan officer to find out what you qualify for. You're basically getting them to punch holes into your financial picture. And then that way, Jeanette, you will know what holes to go, mend, so your loan officer is essentially giving you a free troubleshooting session. Now, our investment coaches here at GRE help you with some of that, but GRE doesn't originate loans, so you want to get with someone like a ridge lending group for help. And now, what are some of the holes that a mortgage lender might poke into your finances? Jeanette, well, getting your credit score up and they'll help you with that strategy. Or you simply need more dollars in savings, in what your mortgage loan underwriter calls reserves, or you might need to establish a two year job history, or you have to say, Pay off your car loan in order to get your debt to income ratio lower, or whatever it is. And since at GRE marketplace, the least expensive income property is probably about $120,000right now, a number that keeps going up with inflation. But what you would need is 23 to 25% of that between your down payment and closing costs, all right? Jeanette, so then about 28 to 30k that is the minimum lump of cash that you'll need to buy a property that is already fixed up and ready for a tenant, and that is a great way to start in real estate investing if you want to maintain your standard of living, okay, that is therefore the lowest entry point that you can do that. But if you're temporarily willing to let your quality of life slide for a couple years and maybe live communally. You can put as little as 3% down on a primary residence and then rent out the other rooms. Okay, that's the house hacking model, but depending on your setup, you know, maybe you're sharing a kitchen with roommates or suitemates, and therefore that temporary loss in quality of life. Maybe you can even Airbnb at a short term rental, in which case you will be buying the furniture. However, now with a 3% down payment on an owner occupied house, hack like that, you're probably going to have to pay a PMI premium, a private mortgage insurance premium of a few $100 per month. But still, this does get you in with very little money, since that's what you're asking about Jeanette. And finally, the third thing I'll bring up here is that you can get a combination of maintaining your standard of living and putting a small down payment on a property by using an FHA loan and three and a half percent down. And you can do that with a single family home, duplex, triplex or four Plex, living in one unit and renting out the others. So yes, you get both this way, but I will not go into the details on the FHA, because I have described that in detail on other episodes since it's how I started out myself. But there are a number of options right there for you to inquire about Jeanette, all starting with an investment centric mortgage lender like Ridgelendinggroup.com.

The next question comes from Jared in Pocatello, Idaho. Jared asks Keith, in the past year, my duplex in Pocatello went up in value 5% from 400k to 420k. How do I know how much of that 5% is true appreciation, and what portion of the 5% is from inflation? Oh, that is such a devastatingly cool question Jared, and that's exactly what I thought when I saw that question come in. Okay, so basically, Jared is asking, say, in this 5% price increase is 3% from inflation and 2% from appreciation, for example, or like, what is the breakout of those two components of the price change? And a lot of people don't understand the difference, and even know enough to ask a question this good. So props to you there. Jared. One thing you cannot do is just look at CPI inflation over the last year for the US, which is 2.9% and then say, Oh, well, then I guess the other 2.1% must be appreciation. Therefore, no, you can't really do that. There's more to it than that, for a lot of reasons. I mean consumer price inflation, like on a pound of ground beef at the supermarket, that is different from asset price inflation, and there are a lot of other reasons too. Appreciation is distinctly different from inflation, because the value of your property increasing 5% that has to do with the attractiveness of your property to the marketplace. Now there are attributes with appreciation, like proximity to high paying jobs, proximity to highways and shopping in desirable schools, which are basically those axiomatic Location, location, location qualities. Now I'm going to assume that you did not make an improvement or a renovation to the property Jared, because obviously that would hike up the value. Now other appreciation attributes that are distinctly different from inflation are things like population growth and wage growth in your area, what can really pump up appreciation is if the remaining availability of developable land starts shrinking and shriveling up in a desirable location. Contrary to popular belief, mortgage rates have little to do with appreciation. We can leave that out of this discussion. Now, how this is different from inflation is that inflation is not about the intrinsic value. Rather, inflation is the price of the home increasing because the currency is worth less. Now I hope that you find that explanation satisfying Jared, but what is dissatisfying is that it's actually hard to pin down a number and say, was this two and a half percent appreciation and two and a half percent inflation, or any other combination? And that's because inflation itself is practically impossible to accurately measure, and a lot of that has to do with an inflationary basket of goods that is just exceedingly difficult to adjust for attributes like quality and utility and substitution So Jerry did is likely that your duplexes 5% value increase is an amalgamation of both appreciation and inflation, that part I can confirm, but the exact breakdown for each is virtually incalculable, super insightful question there Jared.

The third and final of our three listener questions to get the show started today, and then I'll get into landlords in the LA wildfires and Canada versus us real estate. The final question today is from Jeter in Roseville, California. I know where Roseville is. It's just northeast of Sacramento, and I'm not sure if Jeter j, e t, e r is your first name or your last name, like former Yankees shortstop Derek Jeter, but only one name came in here. Jeter asks, Keith, I am a true believer in GRE principles. I'm looking to pounce on some property this year and get leverage and other people's money working for me, instead of only getting my money to work for me in my company's 401 k. Let me just interject here. You really get it. You really get it. Jeter, um, continuing on with your question, with mortgage rates around 7% I'd love to know where you think interest rates are headed next, and what is going to make rates move. Thanks, Jeter. Well, I've got to tell you, Jeter, not only do I avoid predicting future interest rates, but I don't know of anyone in the world that can predict interest rates with high reliability, especially over the medium to long term. James Grant, He's based in New York City. He puts out a publication called Grant's Interest Rate Observer that might just give you a better than 5050, shot of where they're headed next. He's a well regarded source. In fact, I saw James Grant speak in person a couple months ago, but I wouldn't put too much credence in any interest rate predictor out there. Now, just 11 days ago, I sent our newsletter subscribers a graphic of just how bad. I mean, really awful that recent interest rate predictions have been. I've never seen a chart like this. This chart looked like a centipede. Okay, the Bold Line was the actual federal funds rate that was like the centipedes body and all the hundreds of legs coming off this line were predictions that others had made, all deviating from the true line, the centipede body, which is what the rate really was. I mean, prominent experts rate predictions have a track record that's more abysmal than everyone saying we'd surely have a man on Mars, by now, terrible. Jeter. When you look at interest rate predictions, you're looking at a waste of your time. They're about as reliable as a weather app in a tornado a year ago, the collective brain trusts of all the economic wizards believed with devotion and alacrity that mortgage rates would be sub six now, instead, they are still about seven, which might correspond to a three or three and a half percent federal funds rate. They all thought the federal funds rate would be near three by now, but it's more like four and a half today. And what's hilarious is that, in more recent years, the Fed even tells us what they plan to do next. They even tell us it's little like having the answers to the test, and yet you still fail the test. You've got the cheat sheet and you still aren't doing any better? How can this possibly be? Well, the reason that I don't make interest rate predictions is because it is a surefire way to look foolish. Jeter, to answer the second part of your question, what moves interest rates around? The answer is, well, it's really broad economic forces and political forces, that is why it's tough, and this includes jobs reports, supply and demand of credit, inflation, a pandemic, a surprise new war in the Middle East, tariffs, GDP reports, surprise election outcomes, a massive change in tax policy and more. I mean, it is total entropy. Now, one thing we know is that persistently higher inflation will soon result in higher rates, just like we saw in 2022 I mean, rates rise in a bullish, robust and optimistic economy. And another thing that we do know is that sustained fear causes rates to fall. That's why, when you look at a chart, you see interest rates of all kinds plunge like a cliff diver during the 2001 dot com recession, the 2008 GFC and the 2020 COVID pandemic. The reason that rates fall during fearful times just like those, is because the economy needs the help and a little pro tip for you here, Jeter, when a recession begins, it's more likely than not that rates will fall. But see, it can be hard to predict a recession, as we've all found out recently, we just came off three fed interest rate cuts late last year, and that was a little weird, because the economy does not need the help that is sort of like offering Gatorade to someone that's not even sweating. Okay, and when rates scrape the ocean bottom floor at zero, from 2009 to 2016 and then again from 2020, to 2022,that's unhealthy. Natural market forces would mean that there's a cost to receive a service like borrowing money. Well, with zero rates, it feels like no one wants to save and everyone wants to borrow and spend. Zero rates, it is time to all out. Ball out. My two time GRE podcast guest here on the show, and super smart guy, Dr Chris Martinson, he thinks that rates are generally going to go higher from here. But you don't have to look far. You can find other wise guys that say they're going lower. At the last Fed meeting last year, they disappointed markets by signaling plans to only cut rates twice this year, instead of the four cuts that were previously expected. And now that's even changed since then, a lot of people question if those two cuts are even going to happen this year, given things like a hot jobs report that came flying in and still too high inflation. So this is kind of like expecting a decadent dessert of rate cuts, and instead you get, like, one Biscoff cookie, like they give you an economy on the plane. So Jeter, that's why I don't forecast rates. I don't think anyone can, but now, at least you have a couple resources, and you also know what factors move rates around.

Now if you want a fun, real time pulse on the market. Check out poly market. You might have heard of it by now. It's a site where you can place bets on various outcomes, a lot of non sports bets. You can see people put their money where their mouth is. You don't have to make a wager yourself. You can just see what people are wagering on. There are wagers on fed interest rate decisions. There at Poly market, you can even place a bet on if Jerome Powell says Good afternoon at his next press conference over there on Poly market, I'm not kidding right now, the odds of him saying Good afternoon at his next press conference are 96% so remember this, the market has always felt confident about where rates are headed, and the market has always been wrong. Interest rates don't drive property values. Their intrinsic worth is based on the timeless stuff, location, amenities, income, occupancy, size, density, business case, exit options and operating costs. Those are the things that drive property values. The bottom line with interest rates is that nobody knows the future interest rates direction is a pinball game of black swans and policy pivots. So instead, focus on the big things that you can control, like how many dollars you have, leveraging properties and keeping your operations on those properties efficient. So Jeter waiting to buy property generally harms an investor more than it helps them, because it's dollars on the sidelines that are paying the opportunity cost of not leveraging other people's money. Of course, if you buy your property at whatever interest rate today, and rates soon fall like a knife, well, then you can refinance at the lower rate, all while leverage keeps compounding and building your wealth. Thanks for the question, Jeter.

If you have a listener question or comment or feedback of any type for us, as always, you can visit us at get rich education.com/contactfor either written or voice communication there, like I said earlier, that amazingly interesting centipede like chart of just how dreadful interest rate predictions have really been that was in our recent newsletter. Now it's too late for you to get that issue, but to get more like them, you can get our don't Quit your Daydream. Newsletter, completely free, just text GRE to 66866 that's text GRE to 66866.

now, when it comes to this month's historically bad, devastating LA area wildfires, I heard from a friend in that area last week. She lives just south of LA and her house was spared, fortunately, but she's been busy helping friends in the LA area who have lost their homes and businesses. It is truly tragic. And you know, what she told me, is the biggest, most compelling need right now, and I put some credence in this, since it's an independent on the ground report. This is outside of major media, displaced residents. Number one need is not food, it's not water, it's not clothing, it's not heat, it's not even community with 1000s of families without homes, the urgent need is for housing. You might not find that surprising. That's what she shared with me. I mean, it is a need so dire that even a family of six would consider a small mobile home or an RV rental to help with temporary housing. And a lot of these displaced families were you know, you got to consider the fact that before the fire, they were living in above average homes, even luxury homes. Now, as far as LA area, landlords that have housing to rent out, a lot of those landlords have jacked up the rent price. California's anti price gouging. Laws make it illegal for landlords to raise rent by more than 10% in the first month to six months after a disaster is declared. Now the BBC reported that one resident who lost their home in the historic California wildfires found a rental property that was previously priced at $13,000 per month, they offered $20,000 per month, and the landlord countered with 23k that is a 75% price hike. And it's not the only example. A Bel Air home located in an evacuation warning zone was listed on Zillow recently at 29,500bucks a month. That is an 86% hike from its September of last year price. That's according to the outlet called La est, another realtor raised in Encino, California, listing from 9k per month at the beginning of this month to 11 and a half K after the fires started. That's according to the LA Times. The realtor then backpedaled to abide by the 10% rule, which she said that she did not know about. And for a little context there, yes, those rent prices sound high, and La rent was already high. It averaged $2,820 a month. That's compared to $1,983a month nationally. Those figures are per Zillow. Now I don't know what percentage of La landlords are engaging in. I guess what I'll call extortionate behavior, but even if it's the vast minority of landlords you know that gives them a bad name, to have the word landlord in headlines like this. And is this behavior extortionate? In some cases, it probably is, I suspect, just a guess here that some landlords might think they have a chance of insurance paying some or all of the higher rent for their tenant that was displaced from their original home. But let's keep things in perspective here. What this does to good landlords reputations. You know, that's not the story here. The story and the effort should be in helping the displaced people. And of course, there are so many angles to the devastating la wildfires. One of them is that many believe zoning laws pushed homes out into fire prone areas. I recently shared that reason.com article with you in our free newsletter. So again, to get our Don't quit your Daydream newsletter, completely free, which I write every word of myself. Text GRE to 6866 you can do it now, while it's on your mind, hit pause and text GRE to 66866 the abject lunacy in Canada's real estate market, in what US residents and others can learn from all this, that's next. I'm Keith Weinhold. You're listening to get rich education.

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

Oh geez, the national average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I know, because I'm an investor in this myself, earn 10% like me and GRE listeners are text family to 66866, to learn about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866

Naresh Vissa 26:41

this is GRE 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 26:57

Welcome back to get rich Education. I'm your host. Keith Weinhold, let's discuss the Canadian economy and Canadian real estate. Because even if you live in the US or Central America or Europe or one of the other 187 nations that were heard in outside the US, you know there are lessons here for you, and there are lessons here for me as well. There is some just jaw dropping material that I'm about to share with you, and I won't discuss the politics of it, because that's not GRE 's lane. Instead, it is the policy. Earlier this month, Canada's equivalent of the President, Prime Minister Justin Trudeau announced that he will be resigning soon. And Trudeau has been under a lot of criticism. At last check, his approval rating was a miserable 22% now, most people think that the next and future Prime Minister of Canada will be a man named Pierre Poilievre. In fact, the wagering site poly market has polyev with an over 80% chance of being Canada's next prime minister, and you will hear him speak shortly here. And yes, that is how an Anglophone pronounces his last name, polyev In a recent interview with Dr Jordan Peterson. You'll listen into here shortly. Polyev, Canada's likely next leader here, first, he describes some of the problems with Canada's economy, and then he'll get into their real estate market. Right now, the median home price in the United States is about 450k you might think that Canada's should be lower, because Canada has more land in the US and Canada has just about 1/9 of the US population. So a low population density. I mean, the US is population density is more than 10 times Canada's. But no, due to some of these policies, it's just the opposite, because Canada's average home is over 725k. yeah, that's just for a basic home. I've got to admit, I did not know who polyev was until just a couple months ago. I'm starting to like him the more that I listen to him. He's a clear thinker and a clear speaker. Here is a clip of Canada's likely next leader talking about Canada's problems. This is 10 and a half minutes long. I'm going to listen to this again with you right now, and then I will come back along with you to comment. This is why you can't buy a house in Trudeau, Canada.

Unknown Speaker 29:41

Our productivity is another major problem right now, and that's productivity. Sounds complicated. It's actually extremely simple. You just take the GDP and you divide it by the hours worked in the country. So American GDP is $80 so for every hour an American worker works, on average. He or she produces $80 of GDP in Canada, it 50. So that's every hour. So that means we have to work 60% more just to make the same amount and have the same level of income to buy food and housing. And so that's the Now that sounds like a bunch of wonk speak that should might seem like it only matters to someone staring at a spreadsheet or a graph or a chart, but in fact, that's reflected in the fact that our 2 million people are lined up at food banks because they can't afford food, and 80% of youth can't afford homes, and our quality of life is and the things we can afford to provide our kids have fallen back so much there's a real, real life, Stark and easily comprehensible statistic. And if you work and you produce $80 worth of goods and services in an hour, yeah, compared to working and producing 50, obviously, that's a substantial shortfall. Yeah. So, and is that, is there a starker indicator of the economic disparity between the US and Canada than that? Or do you think that's the primary statistic? I mean, I think housing costs are another one. I mean, right. There was a study out just 10 days ago that has Toronto and Vancouver now by far the most unaffordable housing markets in North America. And so you know, housing costs are 50% higher in Toronto than they are in Chicago, even though Chicago workers make 50% more money. The same is true between Vancouver and Seattle. Seattle workers make way more than Vancouver workers, but housing is 60 or 70% more expensive in Vancouver. So on, all the measures by a lot. Yes, a lot by a lot. Yeah, and we're and we're paying more, more by a lot, right? And most of that's transpired the last 10 years. Yes, and we're paying the difference by accumulating enormous quantities of debt. Our households are by far the most indebted in the g7. when you take you divide total household debt by GDP, we now have a bigger stock of household debt than our entire economy. We are more indebted as households than the Americans were right before the oh eight financial crisis. And so what we have as a model in Canada is we have artificial scarcity imposed by very heavy and restrictive state, confiscatory state, so that suppresses production. But in order to allow for consumption, we print money and borrow money and then flood the economy with that money. Okay, so that's another problem. So that's the inflationary problem. Yes. Now the problem with inflation just many problems with inflation, but one of them is that it particularly punishes people who are thrifty and who save? Yes, right, right? So inflation punishes the people who forego gratification to invest in the future. That's right, right? So that's a very bad idea. It's our inflation is the single most immoral tax for so many reasons. One, it takes from savers and people who are trying to be responsible, thus making it impossible to be responsible, because you will, if you, if you refuse to play the inflation game of borrowing money to buy things you can't afford, someone else inevitably will, and you won't be able to afford anything. So you ultimately have to actor responsibly. It's like Milton Friedman was asked, What would you do with your money in times of inflation? He said, spend it right like the first thing you want to do when inflation is out of control is to make sure you get rid of this thing that's losing its value. The second reason it's immoral is it takes from the poor, because the poorest people cannot put they do not have the ability to buy inflation proof assets like gold and real estate and fancy watches and art collections and wine fancy wines and things that go up with or even exceed inflation. So it's a very big wealth transfer from the have to the from the from the poor and the working class to the very, very wealthy, a very small group of people actually get richer. So the socialist policies that provide goods and services to Canadians, let's say, or denizens of other countries by printing money, actually punish the poor brutally. Oh, absolutely, and consequence of the inflation that they generate. Yes, I mean all the socialist policies in practice take redistribute from the working class to the super wealthy in practice, and I can prove that again and again and again in practice, yeah, in practice. In practice they with the all the redistribution that happens in the so called socialist countries ultimately goes from the working class to the super wealthy. That is the reality. Okay, so, but just one last thing on inflation. The final reason why it's so immoral is nobody votes on it. The basic principle of our parliamentary system is the government can't tax what parliament has not voted the people must no taxation without representation, right? But no one ever votes to have the money printing happen. And so the inflation is adopted secretly, and you blame the grocer because groceries are more expensive, or your local gas station because gas is more or your realtor because house, in fact, it was actually the government that bid up all of those things with money printing, and you didn't even know about it. So it is silent. It's a silent thief that takes from the poor and gives to the richest people and destroys the working class. And that's why I am I want to crush inflation. We need a policy that seeks to just to stop inflation at all, at all costs. Okay, so what would you do to to stop inflation? Well, we stopped the money printing. You know, we need a we need. And the money printing is just a means to fund deficit spending. Governments borrow to define the deficit, yeah, for people. So basically, the deficit is the difference between what the government spends and what it brings in. It's usually calculated on a yearly basis, that's right, yeah, and the debt, but the debt is just the accumulation of the deficits, right? So the deficit right now is $62 billion and I thought it had a ceiling of 41 billion. Yeah, right. Isn't that a ceiling? Yes, not a I guess not. And look, there are very real present day consequences for that. Deficits increase the money supply. Central banks effectively facilitate that increase in the money supply, and that causes inflation. And, you know, it's, it's why our, you know, I have a buddy who's whose family moved here from Italy back in 1973 His father worked paving roads and his mother made sandwiches in a senior's home, they were able to pay off their home 10 minutes from Parliament Hill in seven years. Right, their grandchildren wouldn't be able to save up a down payment for that home in 15 years, and they will be university educated with all the advantages of having been here two decades. That is the consequence of the money supply growing vastly quicker than the stuff that money buys. So we have to do is stop growing the money supply and start growing the stuff money buys. Right? Produce more energy, grow more food, build more homes. We have to unleash the free enterprise system to produce more stuff of value, and this is where we have to remove the artificial scarcity that the government is imposing on the population. Let's incentivize our municipalities to grant the fastest building permits in the world to build homes. You have a plan for that in principle, yes, I mean, I'm going to say to the municipal governments, they either, they either speed up permits, cut Development Charges and free up land, or they will lose their federal infrastructure money, so they will have a powerful carrot and stick incentive to speed up home building and the percentage of a new house price. That's a consequence of government, taxation and regulation. Well, in Vancouver, it's 60% 66 does that include the land and the house? Yes, that includes everything. So I'll tell you how they calculate it, CD, how took the cost of building a compare the cost of building a home to the cost of buying a home, yeah. And he said, what's the gap between those two things? So they added up land, labor, profit for the developer, materials, and they compared that to the sale price, and they found the gap was $1.2 million so that's $1.2 million of extra cost, above and beyond the materials, the labor, the land and the profit for the developer. So where's that going? Well? The answer is, development charges,sales taxes, land transfer taxes, the delays in getting the permit. Time is money, the consultants, lawyers, accountants, lobbyists that the developer has to hire in order to get the approval that so in other words, we're spending twice in Vancouver. We spend twice as much on bureaucrats than we do on all other things combined. To build a home, more money goes to bureaucrats than goes to the carpenters, electricians and plumbers who build the place. And to add insult to injury, those trades people who build homes can't afford to live in them, right? I mean, it is. So what we need to do is slash the bureaucracy. And I'm going to I'm going to say to the mayors, you're not getting federal infrastructure money until you slash your development charges, speed up your permits. I'm going to take. The Federal GST off new homes under a certain limit, and encourage the provinces to do the same. But we've got so much land. We should have the most affordable housing in the world. We have. It should be dirt cheap because we have the most dirt we just need to get the government out of the way.

Keith Weinhold 40:20

Yeah, again, that was Dr Jordan Peterson interviewing Canada's likely next leader, Pierre poilievre, just a few weeks ago now. Polyev, when discussing inflation and investing, you know, he also brought up points that I've surfaced here on the show over the past few years. He even articulates a few things the way I've described them. It's almost weird, like inflation means that it actually makes sense to strategically borrow and spend and not to save. It's almost like polyev is a GRE listener. I love how he said, stop growing the money supply and start growing the things that money buys. We're talking about things like homes and energy and food. That was eloquent. I mean, in Vancouver, the percentage of a new house cost for taxation and regulation is 60% of the cost of the home, fully 60 and then, if that's not surprising enough, due to all these layers of regulation, the cost of building a new home is $1.2 million more than the cost of buying an existing home. Just astounding. This might have even left you either flabbergasted or gobsmacked, which one?So some parallels to the US there in Canada, but back here in the US, the housing market is clearly more affordable and healthier. Polyev really pointed out a direction that the US does not want to fall into. In fact, we've got a pretty good Canadian listening contingent. So let me ask, Do you have a connection to Pierre poilievre, if you do, we would probably like to invite him here on to the show with us. If you do, or you even know someone that knows someone, let us know right into get rich education.com/contact or email us directly at info@get rich education.com and we'll make that happen now. What is happening at GRE marketplace right now is that our listeners are getting brand new build investment property in Florida and some other places at competitive prices and a fixed interest rate of just four and three quarters percent. So yes, that is sub Canadian prices, by far below Canadian prices, and a four and three quarter percent rate. And then on top of that, you get to pay an affordable insurance premium in Florida because it's new build, or similarly, it's that way in other states if you buy new build, but builders overbuilt in some pockets of Florida, like I've mentioned to you before. So at this time, on top of all that, they're offering a free full year of property management. And because when you own a new build property, it's not occupied with tenants on day one, and this means that you don't inherit unknown tenants. And builders are also offering you up to three months in a rent guarantee in case your single family home or duplex or four Plex is not occupied yet, the builder would pay the rent for you. Really amazing incentives, but probably none better than that four and three quarter percent mortgage rate. I mean, it's like you get to roll the clock back to when rates were artificially low, back in 2021, and 2022, and lock it in. Now, our GRE investment coaches connect you with the investment property that's right for you based on your needs and your goals, including those four and three quarter percent rates, if you so choose, it is all free at GRE marketplace. From GRE marketplace.com just click on the coaching area and you can book a time right there until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Unknown Speaker 44:23

nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively

Unknown Speaker 44:51

The preceding program was brought to you by your home for wealth building get rich education.com you.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
537: How to Increase Your Real Estate ROI with a Cost Segregation
20 jan· Get Rich Education
Cost segregation studies can significantly reduce taxable income by accelerating depreciation on rental properties. They reclassify certain property components, such as flooring and lighting, to shorter depreciation schedules (5, 7, or 15 years) instead of the standard 27.5 years for residential or 39 years for commercial properties.

This method can result in substantial tax savings. For example, a $510,000 duplex study yielded $131,000 in accelerated depreciation, potentially saving $40,000 in taxes at a 30% rate.

Although the percentage has been stepping down, it may be reinstated to 100% under the Trump administration.

Initiate a cost segregation study estimate here to determine the potential tax savings.

GRE Free Investment Coaching: GREmarketplace.com/Coach

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Show Notes:

GetRichEducation.com/537

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, when you reduce your taxable income, that's a zero risk return on your investment. You'll learn how to do that today with any rental real estate that you own through what's known as a cost segregation study, even those without a giant portfolio can save 10s or hundreds of 1000s of dollars. An expert guests and I break it down with real life examples, see just how it can help you today. On get rich education

Speaker 1 0:34

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

Corey Coates 1:19

You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.

Keith Weinhold 1:35

Welcome to GRE from Berlin, Pennsylvania to Berlin, Germany and across 188 nations worldwide. I'm Keith Weinhold. You're listening to get rich education. And one way that I like to be positioned in real estate is the sense that I own it directly, yet I use a property manager so that I'm shielded from the day to day responsibility. I care, but I can still live my life now you might favor direct ownership like I do, yet choose to self manage your property instead. That's a viable way to do it. Self management is how I started out, but however you handle the management when you own directly, you can alter your effective post tax rate of return on your investment, and that's what we're talking about doing today with a cost segregation what this effectively does is increase your tax depreciation benefit. Though depreciation sounds bad as a word in the real estate world, even without spending any of your own money, it's still classified by the tax code as an expense that you can deduct from your taxable income. You don't want to reduce your income, only the taxable income reducing the portion that the IRS can get a piece of. Now, unless it's a condo, your rental property probably includes both a structure called the improvement and also the land. Now your improvement has components that wear out, and even the IRS knows that the land does not wear out yet. There are items on the land that you can get this accelerated depreciation on through a cost segregation, like fencing and lighting and carports. A lot of people don't know that, so there is therefore a land improvement segregation often on a 15 year schedule, but it's even more lucrative to get cost segregations applied to things inside your building or home that wear out faster, like countertops or flooring, as we'll see today, on shorter schedules, like five or seven years. Said another way what you're doing is that you are shielding more of your taxable income. And I'm going to ask today's Cost Segregation expert guest for an example near the start of our conversation, so he'll give us some numbers. And you want to listen to that part closely, and you might find yourself skipping back to re listen to some parts today as we give real life examples on how a cost seg works. Now, today is a Presidential Inauguration Day, so it's appropriate that we cover this today, because Trump is widely expected to reset 100% bonus depreciation, which, as you'll see, factors into our discussion today. And frequent GRE guest Tom wheelwright thinks that this is going to happen too this 100% bonus depreciation. What that means that, for example, all those land improvements that I mentioned on a 15 year depreciation schedule, where you could front load it and get it all in year one of your ownership and those components indoors. On shorter depreciation schedules, like five to seven years, you can get all those write offs in year one without waiting five to seven years. So that's. The sweetener that 100% bonus depreciation is, if Trump indeed brings that back, and you might say, wait a second, this sounds a little too good to be true. I mean, getting these amounts, you'll see they can be over 100k in tax savings, even for a small investor, that you can reduce your taxable income by Well, you know, it is just a little too good to be true, because when you sell the property down the road, you have to pay back 25% of what you wrote off this way in what's known as a depreciation recapture tax. So it's still worth doing. In a lot of cases, you would keep 75% of your benefit then, unless you do a tax deferred exchange on your sale, and then you could defer that 25% depreciation recapture tax. So yes, today's episode is deeper than most. And you know, being a Presidential Inauguration Day, and knowing that I like to drop a little levity here before we delve into deep topics, what does the outgoing presidential administration have to say about cost? Segregations get hot.

Speaker 2 6:13

I got Lana. I got hairy legs that turn that turnblonde in the sun, and the kids used to come up and reach in the pool and rub my leg down so it was trained, and then watch the hair come back up again.

Keith Weinhold 6:32

I don't know what just happened there. Let me just give him another chance to clear things up. I mean, you really can do a cost segregation,

Speaker 2 6:41

we have this notion that somehow, if you're poor, you cannot do it. Poor kids are just as bright and just as tall as white kids.

Keith Weinhold 6:51

Gosh, oh dear, I don't I don't know where to go with that. And hey, if you're a new listener, you know, over time, we poke a little fun at every president. We do with Trump as well. We do with Jerome Powell. No one is immune around here. Some people, hey, they might find it funny that a former real estate investor President like Trump wants to expand America's real estate portfolio by taking Canada and Greenland in the Panama Canal back too. Politics matter, but this is not a politically partisan platform in any way. What's politically partisan? It's saying that the economy is like absolutely awful, but then as soon as your guy gets sworn in, one hour later, you're willing to call that same economy. Now suddenly, a great economy. No, a national economy does not change in one hour. So free thinking and thinking for yourself beats polarizing political partisanship. That's a way it's been around here from day one. Yeah, a little levity, a good knee slapper now and then knee slapper coming up in future weeks on the show here, the real estate guys radio show host and a friend, Robert Helms, will be here to update us on what's happening in the short term rental market, mid term rental market and more. We'll also announce a big collaboration that he and I are going to do together this year, and you'll be invited to join us today, let's discuss cost segregation.

You can take your tax burden and put a huge dent in it by accelerating your real estate depreciation deduction with a cost segregation This could save you 1000s of dollars every year or more depending on the size of your real estate portfolio. We're talking about how to specifically do this with a cost seg expert. He's been a real estate investor for over 20 years. He builds new rentals to hold, and he and his son do that together. In fact, you're currently building a 24 unit complex now. But the reason he's here is because he started a specific cost segregation company in 2012 and he completes over 100 cost seg studies every year. So he's really the guy to talk to. Steve, welcome on to the show. Thanks for having me. I appreciate it. It's great to have an expert like you here and Steve, I think a lot of real estate investors, they're familiar with tax depreciation. That's where for rental property, with residential, there's a 27 and a half year schedule. And commercial has a 39 year schedule. We take the reciprocal of those numbers, and that means that, for example, in residential, you can write off about 3.6% of the improved property value every year. That's pretty nice on a 500k property that right there is 18k that can be sheltered from taxes annually. But most investors stop right there. So in a lot of cases, they aren't maximizing their tax benefit. You can write off substantially more than that, potentially. With a cost segregation. So tell us about it.

Steve Trussell 10:04

Cost Segregation. As you just mentioned, you have your regular depreciation, which most do take. Believe it or not, I've come across a few people that own property for a few years, and they're not taking it at all, which is, I don't understand that maybe they're doing on accounting, but we get them on track with that. But as you said, 27 and a half and 39 year depreciation, whether it's residential, 27 a half commercial, 39 that's all well and good, but there's a lot of money left on the table, because when you look at the the piece of real estate, there's a probably 22 to 32% of the asset itself, the depreciable asset that's shorter life, for example, cabinets, flooring, light fixtures, uh, outside the landscaping, retaining walls, things like that that are shorter life. So what we do in a cost segregation study, we go in and we rebuild the property through an engineered study, we pull out the five and the 15 year property and reclassified. And so usually you're going to wind up with about 70, 75% of it will stay on the schedule. It was on whether it be 27 and a half or 39 but then that 20 to 30% that we're going to bring forward is a huge number. So for example, I just recently did one. It was a duplex, $510,000 was the purchase 433, was the basis, after land, the depreciable basis. It was kicking out about 16,000 a year in regular depreciation. For the investor, which covered, you know, their cash flow and so forth, so forth. Most people know how that works. We were able to go back and accelerate it and get 131,000 or about 31% of it in 515, year property. So they had $131,000 depreciation amount sitting there. Then they still were able to write off the 302, that was left at 11,000 a year. So they're still getting their normal depreciation, a smaller number, but that 131,000 if they can use it with bonus depreciation, is $131,000 of money sitting there. They could offset $131,000 of income. That's a huge number. If they're not doing that now, they're leaving money on the table.

Keith Weinhold 12:01

Gosh, $131,000 of potential tax sheltering, which is, yeah, a huge number on a 500k duplex, like you described.

Steve Trussell 12:11

It's a substantial number. And if you're not doing cost segregation, then you're leaving a lot of money on the table, like I said. So then it comes down to it. It's a, I guess, cost versus benefits. So the first thing we do is, I get the data from your purchase of your piece of real estate or server, whatever it is, we put together an estimate of benefit to give you an idea of what that would look like for you, like in this example, that's what we produced. Was what we thought we could bring forward for this investor. And then at that point, once we determine that you look at 131,000 the cost of our study is $1,830 so 131 versus 1830 is a pretty good bargain. I believe. I mean, I know I'm selling my product, but that's a pretty good bargain. Yeah. And then the third part of it is, so we've established that it's probably makes sense. But then can you use it? If you're a real estate professional, if you're familiar with what that means, you can write that off against your active and passive income. If you're not, you're a w2 and you're not quite there. Yet it may be that you don't do it now. You do it in a couple of years, but either way, the process is there when you can use it. Probably 80% of my investors are able to use it the year we do it. And if you don't use all of it, you carry it forward. So it's makes sense, typically, to do a cost segregation study, but that's what we help you establish by one, the estimate, and two, discussing with you or with your CPA, does this fit you? Is this something you can use as from a tax standpoint?

Keith Weinhold 13:37

Yes, it was just a few episodes ago. I describe more about what real estate professional status is. The main thing is, typically, real estate needs to be you, the investor's principal activity. So it's not very likely that you're going to be a real estate professional if you still have a full time day job.

Steve Trussell 13:56

There are doctors and lawyers and people like that that have a full time job, and they just could not justify spending the amount of time and being a real estate professional. But sometimes their wife would be the candidate to be that. So their wife becomes or this, or the husband. If the wife is there's the breadwinner, becomes the real estate professional, and then they can take that and write it off against their active income. And I don't want to jump into the CPA side of this. That's more of a CPA question, but that's how I understand it works. And I've seen that happen before, where someone who has a full time job is able to bring their spouse in as their real estate professional, and they're able to use utilize it that way.

Keith Weinhold 14:34

Well, to talk more about this benefit of $131,000 on the duplex example that you gave, if all that is able to be deducted at a 30% income tax rate, that is 40k of savings. 40k is about 30% of this $131,000 number. So that's the money the increase in net income in your pocket.

Steve Trussell 15:00

yeah, which is substantial, and that's where you look at your individual tax break. I'm gonna save 40,000 in taxes, and I'm gonna spend $1,800 for the study. Makes sense to me to do that. It's pretty good return on your money, but it comes down to being able to use it. And so that's the things that we explore when I'm talking to a client.

Keith Weinhold 15:19

Now, Steve, I know in the past, I have talked to cost segregation engineers and their firms on the phone, where they've looked at some properties that I had, and I don't remember whether they charged me for this or not, but what I learned is it wouldn't be worth going ahead with a cost segregation study on and I'm thinking that they didn't charge me anything to tell me that, but really what I'm getting at is, can you tell us more about when it makes sense to do a cost seg on properties, and when it does not?

Steve Trussell 15:46

Well, there's okay if you're going to sell it the next few years, it does because you're going to recapture so you don't want to spend money for a study only to get the benefit for a year and then sell it and have to recapture it. Now, in my personal situation, I have done that because I bought more property and I was able to use the cost segregation to offset my gains versus a 1031 So by and large, it doesn't make sense. If you're going to sell it, that's number one. You may have owned it for eight or nine years, 10 years, maybe you've used a lot of your depreciation already. So that delta between the accelerated depreciation and which you've already taken may not be enough to make sense. It may be a property that's, you know, $80,000 probably doesn't make a lot of sense to spend the money. The mass just doesn't typically work there. I've done some as low as that because they wanted the tax benefit, and I'll do whatever the client wants me to do. But those are the three things that I would say probably would determine whether it makes sense or not. But that's where the estimate comes in. I mean, you bring me a property, and if it's $40,000 I'll tell you before I do anything, probably not worth messing with it. It's you're not gonna get much benefit. But if you bring me a property and it's $125,000 asset, we'll take a look at it. I'll do a quick estimate for you, no charge, and it'll either apply and make sense for you, or it won't. And I'll be the first to tell you, if it doesn't you know your individual tax situation, I'm just talking about the dollars that we create for you versus the cost. If it doesn't make sense, I'll tell you. I don't want you to waste your money doing a cost segregation study if you don't need it or can't use it.

Keith Weinhold 17:14

Okay, So there are a number of factors here, which could include how long the investors own the property, how soon they plan to sell the property. It sounds like there's generally a correlation here, with the larger the property, the more likely it is that it makes sense to do the study as well.

Steve Trussell 17:29

It does. I have a client that I'm working on right now. He has six properties, and I think they were 2021, acquisition. So that was it four years ago, and they're not on a depreciation schedule, he hasn't taken anything. So in this case, it's, you certainly would want to do a cost segregation study, and that you need to have your properties on a depreciation schedule anyway, for whatever reason they weren't there. So in this case, if you came across a client that had a property for 10 years or for some reason it was never on a depreciation schedule, which that's, I don't know how that would happen, but let's assume it did. In that case, you would make sense to do because you're going to catch up all that depreciation from back, from 10 years ago all the way through today, which would even be a larger number. So that happens occasionally, rarely it happens, but it does happen where someone has never depreciated a property.

Keith Weinhold 18:17

We're talking with a man that can greatly reduce your tax burden. I think for one thing, first, he's gonna check to make sure that you're taking the basic tax depreciation. But beyond that, as you can see here, there's a potential to do a lot more with a cost segregation. You're listening to get rich education more when we come back on cost seg studies, 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 CaeliRidge personally. Start now while it's on your mind at Ridge lendinggroup.com that's Ridge lendinggroup.com.

Oh geez, the initial average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I'd know, because I'm an investor in this myself. Earn. And 10% like me and GRE listeners are. Text family to 66866, to learn about freedom, family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866

Robert Helms 20:17

Hey everybody. It's Robert helms with the real estate guys radio program. So glad you found Keith whitehold and get rich education. Don't quit your Daydream.

Keith Weinhold 20:32

Welcome back to get rich education. I love talking about tax savings vehicles, because it's like a no risk instant ROI to you, that's what we're doing today, when we're talking about accelerating your depreciation and reducing your tax burden through a cost segregation. And Steve, in my experience, I know that you can't just ask anyone to go do this study, like your Slack John, uncle with a tape measure and sending him out there. It takes a person with a certain credential in a Cost Segregation engineering analysis. So can you tell us more about what physically needs to take place to have a cost seg done?

Steve Trussell 21:09

Yeah, you're right. People. You could try to do this yourself, but it probably wouldn't pass muster with the IRS if you were to, if they were to question the study. One thing that we do, and most firms like mine would do also, we do back up the study, and we do guarantee that we will defend the study on your behalf. If there's a question, very rarely does it come up, but if there's a question from the IRS, we step in in your place and defend the study and justify how we arrived at these and that's only through a call to an engineered study. So if you have your your uncle, as you mentioned, doing it, it doesn't follow the audit technique guide. Doesn't follow the guides that are required for cost segregation study. You're probably going to find it getting kicked out and wind up owing taxes and penalties. So you want to make sure you're someone who's qualified and they do an engineer study, same thing as a CPA. CPAs aren't qualified to do a cost segregation study because it is an engineered study. We're breaking down the entire property and rebuilding it with our software on commercial buildings. You'd mentioned. What do we do? Commercial building? We do a physical site visit. We actually go to the property. Those are more expensive because we're there at the property and travel time and so forth. That to do that with engineers on residential we have a unique program. We do a virtual site visit where I can do this or my desktop, and that's why I'm able to keep the cost down. But we still do a site visit, because there's so many tools available today to be able to do a virtual site visit, I mean, for anywhere in the United States. So we can do this anywhere in the United States, and I take the tools that we have, the data I get from the client, we can do a virtual site visit and create the study from that

Keith Weinhold 22:43

really what the IRS is doing, whether this probably isn't reality, but you're saying your property wears out completely in 27 and a half years. That means that you can take some portion of that and depreciate it each year, but with some of these components that you mentioned, like the flooring and like the bushes. I think even the landscaping is one of the components that you can do a cost seg on. Basically they're saying that wears out faster.

Steve Trussell 23:11

Correct. Pretty much everything outside the building is 15 year life, sometimes even shorter than that. But that's how it classes 15 year life. Like your driveway, your like I said earlier, your retaining walls, grass, landscaping, fences, things like that, outdoor lighting, stuff like that. The inside the building is the five year property, which is your countertops, your flooring, fixtures. Think of things. I mean, floor is going to wear out before 27 half years, you're going to be replaced. You do it in your own home. Typically, you know? Well, I would never keep it for 27 and a half years. I would I wouldn't thank him in my house, but because they do wear out sooner. Tile is a little different animal. There's some debate about that, but for the most part, it's components like that that we're able to reclass in a five year classification.

Keith Weinhold 23:54

That's pretty generous. Grass wears out in 15 years.

Steve Trussell 23:58

Well, it's a 15 year. Yeah, it dies. You know, things change landscape, things like that. So yeah, you do. Those can be classed at 15 years.

Keith Weinhold 24:08

All right, we've talked about the cost in terms of dollars a bit for what a cost segregation study might cost. How much time does it take from the time one is initiated?

Steve Trussell 24:16

It depends. We could typically work with your schedule. I get a lot of last minute folks that get with me in September and they need their October 15, or even this September 15 depends on what kind of entry Do you have it in. And so we can turn these as quickly as you need it, typically, if I have all the data and all the information, especially if it's a residential where I'm not having to travel, but by and large, I can turn these in less than 30 days back to you, and if you need it sooner, we'll burn the midnight oil and get it done for you. That's during crutch time for between January 1 and April 15. If you file early or on time, if you file in October and you extend your taxes and the automatic extension in April, you've got to have the study done before you file. Your taxes. So if you wanted it for 2024 you need to have a study completed by April 15 of 2025 if you're going to file it April 15, if you're gonna file in October, the automatic extension, you need to have it completed by then. So our busy season is January through April 15, and then probably starting July, August time frame through October 15. That's our busy season. So the point of it, if you're going to do a study and use it for your current tax year, it must be completed no matter when you purchased it, but it must be completed prior to you filing your taxes, so you can use it on that tax return.

Keith Weinhold 25:35

All right, so we're just getting into Steve's busy season. So if you think this can benefit you. You want to initiate that sooner rather than later. But Steve, when we talk more about the benefits, we've had a change in presidential administration. So tell us more about the bonus depreciation benefit.

Steve Trussell 25:53

Your bonus appreciation came out in the previous administration before this last one, Trump's first administration that came out of that. So the anything where you reclass is five, seven and 15, your property, but it's 100% bonus. In other words, if you go back to the 131,000 I mentioned on the duplex, all of that in between September 2017 through December 31 to 2022 you get 100% of that. It's starting in January of 2023 through the end of december 23 it went to 80% and the next year, 60, and in 2025 it's going to be 40. But there's been an extension that was passed last in 2024 in the house to go back to the 100% installed in the Senate. And we think with the new administration, we'll probably in the new tax cuts, we'll probably see this reinstated and go back to the 100% which is substantial. If you're getting, you know, 60% of the 131, what is that? 78,000 bucks, roughly, something like that. And if you're getting 100% that's a big difference. So we're hopeful that we'll see that sometime in the first quarter. And so even if you file your taxes in April and it hasn't passed yet and you've only gotten four, you only get 40% bonus depreciation. You'll get that extra 60 the next year. What's happening now, though, before it, if it without being stated, you're still getting a bigger benefit. Because, as I mentioned before, the 131 comes forward, and you get the percentage of that the 302 is left over. In that example I used earlier, you've got your regular 27 net fear depreciation, but that 131 is still five and 15 year property, so you're depreciating that much faster than you would on a 27 after your schedule. So you're still getting a benefit, just not as good as when you get 100% bonus depreciation.

Keith Weinhold 27:34

Okay. And again, when you're talking about five, seven and 15 year property, you're talking about those component lifespans, correct, where we reclass that bonus depreciation benefit started out at 100% a few years ago. It's been stepping down 20% each year, and that is set to most likely refresh here sometime this year, back to the full 100% bonus depreciation. And if that does indeed happening you the listener. You're going to be hearing about that from your real estate investor friends and your social media feed and everything else, and you're going to maybe be feeling left out of that unless you get on top of it and take part of this. That's exactly what we're talking about doing right now. Steve, why don't you talk to us about some of those other components that are included or excluded from a cost segregation study, whether that's lighting fixtures or parking lot asphalt, tell us more.

Steve Trussell 28:27

Exterior is the 15 year life we talked about, the parking lots, the big residential the driveways, the landscaping, the fencing, retaining walls, bushes, the things that are gonna be outside. Okay, everything outside is 15 years pretty much, yes. And then when you go inside, look at the things that you would typically change out. You're not gonna change your plumbing. It's in your foundation and your walls, unless it breaks. You're not gonna change your roof. Is also, even though you change it out, it's also a permanent part of the structure. The roof is but the inside the house you have your or even outside, you've got your brick on the outside of your siding, that's 27 half for your property inside the cabinets, your countertops, flooring, your decorative light fixtures, the your plumbing fixtures, things like that, glass mirrors, things like that, that are going to be naturally shorter life. And it's pretty easy to look at a piece of property and see what's permanent again, like I use the example, the foundation, the studs in the wall, the brick, the she rock on the wall, those things are permanent fixtures. It's the things that are movable parts, typically, that you could look at, and that makes up 22 to 32% I've had to go higher, but 22 to 32 is a good range of the asset from five year and 15 year.

Keith Weinhold 29:42

All right, so really, the dividing line for Cost Segregation is stated as what is a permanent fixture and what is not permanent.

Steve Trussell 29:50

Yeah, probably in the general sense, yeah, I would say that. Well, are there any

Keith Weinhold 29:53

other things that one should know about a cost segregation study, whether that's myths or misunderstandings that need. To be cleared up, or just anything else at all. One needs to know about a cost segregation study. A couple

Speaker 3 30:05

things. One, the myth is that a lot of people think that it triggers audits that you're changing your accounting or you're getting this big bonus depreciation that's in the tax law, and so you're just taking advantage of the same zero to depreciation. Putting depreciation on your schedule, on your tax return, doesn't trigger audits. I mean, that's just buying property and you're putting it on the return. Accelerated depreciation doesn't either, because you do an engineered study. So part of the myth people think that they're going to call it, it's going to trigger an audit. It doesn't. It's a standard practice that accepted by the IRS and the study. The only thing that might, that might trigger isn't the agent. If they're doing an audit of your taxes, they might look at the study and say, Why did you classify this as this but this amount? Well, we go back through our data and our study through our software, and we could prove out how we came up with that value, and that's what they would ask. Is something like that, but it doesn't trigger an audit necessarily, just because you do a study. Second thing I've said this, I'll save all my clients. I said a couple times here, it's important that you can use it, that you can use the benefit. It does not do any good to go spend money for a study and get $131,000 appreciation, like I mentioned earlier, and it just sits there your w2 income, and you can't use it towards that that's far exceeds what you're making on your property. There's still a point in doing that until you can use it. There are other companies out there. They won't discuss that with you. They'll just tell you, you know, let's do a cost segregation study, because you get all these great benefits, but it doesn't do any good if you can't use it. Like I said that 131 be sitting on your depreciation schedule. That's bonus depreciation, but you're not able to do anything with it. If you're a high earner and you're not a real estate professional, you can't use it. So just be aware of that. If anybody brings a cost segregation study to you, and they don't discuss with you how it benefits you, I just be aware of that it's got to benefit you. What's the point if it doesn't

Keith Weinhold 31:57

that's a really great reminder you want to have this done the right way with someone that knows it can benefit you and more than offset the cost of the study. Maybe I should just bring up one example here of maybe a common turnkey property that a listener might buy that's not very high cost. Say that someone buys a fully rehabilitated, just $180,000 rental single family home built in the 1970s two bed, one bath. I'm sure there are some. It depends factors, but in general, would that be a candidate for a Cost Segregation if that were a new purchase for an investor?

Steve Trussell 32:35

I do it all the time, because it doesn't matter how old the property is. What matters is when you purchases. That's when your start date hits and or when you sell it to start date for the next person as well. So yeah, in that case, you're going to take roughly 15% for land. We go to the county website and see what they're using for land, and if they're using 6% that's what we'll use. But 15% is acceptable by the IRS. So in that case, 15% is what $27,000 so your 147 I think, would be your depreciable amount in it, 25% of that is 25 and almost $40,000 of depreciation versus an $1,800 study. And so if you're in a third step bracket, you're gonna save 12,000 in taxes and spend 1800 to save it. I mean, I would swap 1800 for 12,000 Gosh, any time. So, yeah, it would work. But then that comes down to, you know, you individually. What do you do for a living? What's your income? Like it would what level of income you're at. But can you use the 40,000 and celebrate depreciation? And that can be determined between a conversation with me, you and probably your CPA, so they know your tax situation the best, and then I really like the CPA to be involved. It's up to the client, but I'd prefer them to be involved so they know exactly what we're doing. Some CPAs aren't that familiar with it, so we can help them with getting this on the tax schedule. If they need us to on depreciation schedule, they really want the CPA to be involved if the client is comfortable with it because they know your tax situation the best. I can create the benefit for you. They can help you determine if you can use it.

Keith Weinhold 34:08

That's a good point. I would imagine that there are some tax preparers that have never seen this on one of their clients returns before, so that's a great help. And that was an awesome breakdown of just how things might actually look for someone. It just kind of has that most basic, low cost, 180k turnkey property. Steve, before I ask you if you have any last thoughts or anything else that the listeners should know if you want to connect with Steve, do that in the same way that you learn about our properties and our providers at GRE marketplace.com, click in the coaching area, your investment coach is going to help connect you with Steve all of his resources and adjacent resources that are helpful with you. Steve, is there any last thing that someone ought to know?

Speaker 3 34:50

I just think if you own property at all, it makes sense to get an estimate for cost segregation. It doesn't cost you anything. And then we could decide to. Together Again, like I said, along with your CPA, here's my benefit. Can I use it? And they cost you nothing to do that. Your CPA may charge you some time, I'm not sure, but working with me to get through the estimate phase up to the benefit, what's gonna look like for you that we do that for free, and so if you own any property, it makes sense to take a look at it or just have a phone conversation, because if you call me, you tell me, I make $300,000 a year. I'm a engineer, doctor, whatever it happens to be, and I work full time. My wife works full time. I'm probably gonna tell you, you know, you're probably not a candidate right now, because, like, we'd be a great benefit, but you can't use this great benefit right now. Let's revisit it when maybe you can. So it's just worth a phone conversation and you get me the data that I need, which is pretty simple stuff. I could put together an estimate before you turn it around and you decide, what if it makes sense for you?

Keith Weinhold 35:48

Yeah, if you have that conversation with Steve and worst case scenario, you can't use it, you better believe you're going to come off being pretty well informed in knowing the next time that you can use it, perhaps on your next purchase. Well, this has been supremely helpful, Steve. A lot of people are going to benefit from it. It's been great having you here on the show to talk about cost segregation.

Steve Trussell 36:09

I appreciate you having me. Thank you very much.

Keith Weinhold 36:17

Like Steve said, it's about 22 to 32% of the depreciable assets value, which is that house or building, not the land, can be deducted at an accelerated depreciation rate, faster than the 27 and a half year residential or 39 year Commercial depreciation rate. And Steve told me that before some investors even buy property, they will ask him how it would look with a cost segregation and hold on the numbers, and that way you can use it for your pro forma ROI calculation. Yeah, before you've even purchased a property, like I said, you can't have your Slack John uncle do a cost seg study. Plus your uncle is in slack jawed. Anyway. In fact, I'm the only slack jaw you've ever known. Now, I personally plan to send Steve a copy of my depreciation schedule so he can tell me how things would look for my properties. He can do this for you just the same. There is no charge. It's best to submit everything by mid March at the latest, if you file your taxes in mid April. So we are now in their busy season at GRE marketplace, that's where you do more than connect with our investment coaches and properties. There are also service providers, including Steve. Our coaches are there to help you optimize your ROI. This is a type of thing where if you think it's a good idea, you know you're probably not going to pick this up later if you don't move at the speed of instruction now. So if you think that it can benefit you from GRE marketplace.com, click in the coaching area. Get that set up, and we'll connect you to Steve and help you with anything else that you might need in your real estate portfolio. Until next week, I'm your host, Keith Weinhold, don't quit your Daydream.

Speaker 4 38:13

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 38:41

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
536: Why the Housing Crisis is Pushing Homelessness to Catastrophic Heights
13 jan· Get Rich Education
Discover the latest global real estate trends and untapped investment opportunities. Keith uncovers high-yield new build rental properties that can deliver impressive returns, even in today's challenging market. Don't miss your chance to build lasting wealth through strategic real estate investing. Tune in now to get the insider insights you need to get ahead.

The podcast dives into dramatic global real estate trends, with home prices skyrocketing over 10% in countries like Colombia and the Netherlands.

It also examines the alarming rise in U.S. homelessness, driven by factors like housing shortages and inflation.

To counter these challenges, the show spotlights compelling new-build rental properties that could offer attractive returns for passive investors.

GRE Free Investment Coaching: GREmarketplace.com/Coach

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Show Notes:

GetRichEducation.com/536

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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 0:02

Welcome to GRE. I'm your host. Keith Weinhold, we look at global home price change, the asset class rundown, then the homelessness crisis is mega bad. It just reached new, unprecedented levels, and real estate and inflation has a lot to do with the homelessness surge today on get rich education.

Speaker 1 0:28

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 Weinhold writes for both Forbes and Rich Dad advisors, who delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show. Guess who? Top Selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Corey Coates 1:13

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 1:29

Welcome to GRE from Kent Washington to Tashkent, Uzbekistan and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to get rich education. One reason for a not just national, but global, rise in real estate prices is that you can't fake it. Real property is not a derivative, yeah, you can't fake it. So this really emphasizes the word real in real estate. It's not a crypto within infinite supply. It's not an NFT. You can't fake construction. You can't fake real materials put into property, from concrete to kitchen cabinets. So in the year recently ended, as we catch up to global home prices and select nations, per Fitch Ratings. Let's do that because it was not just a US centric thing. In the Netherlands, the home price change last year was 13% you had that much appreciation in the Netherlands. Colombia, 10% Mexico up 9.3% Brazil had 8% home price appreciation. Australia, 5.2% Australia has just seen year over year home price appreciation for such a long time. The UK had 5% appreciation. Spain, 5% as well. The USA, 4% just like I predicted at the end of 2023 for 2024 It did indeed come in at 4% Canada also had exactly 4% home price appreciation last year, just like the USA did. Denmark 3% Italy and Japan each at two and a half percent. Germany home prices were up just one and a half percent. And France had home prices that fell 3% China had home prices that fell 7.8% that supply versus demand thing in China, where they massively overbuilt, that's why home prices are down there. And as I unveil the depths of the USS homelessness crisis later here on the show, you will see that, yeah, those appreciated real estate prices, like I just mentioned, they have a lot to do with it. Now you might think of the youngest generation, the generation after Gen Z, as generation alpha, and that is true. However, they are no longer the youngest generation, because the babies born on New Year's Day of this year not only got to be featured in feel good local news stories. You know what? They are, also the first members of generation, beta, yeah, which will include children born from 2025 through 2039 so that is the future and the future demographic that's going to demand housing. But first of all, let's look at a year that was yes for years here on the show, we have our asset class rundown shortly after most quarters end, and certainly after a year ends. And today is no different, and this is because at times you've got to compare real estate with the other investment options that are out there. We now have music to play for our asset class rundown feature each time for today and. Future shows. And I know the GRE sound engineer has got to like this. He's also a DJ dropit, Vedrand. Here is GRE 's asset class rundown for the 12 months of last year, residential real estate values were up 4% per the NARS. Single Family existing home price, like I said earlier, single family rents up about 2% per core logic, apartment rents pretty flat, down six tenths of 1% for the year per apartment list, office buildings were down in value 9% the 30 year fixed rate mortgage. It started last year at 6.6% everyone, I mean, everyone, thought that they would go lower, but nope, they ended at 6.9% a little higher. That's per Freddie Mac survey. The s5&p 100 index was up over 23% topping out at 6100 last year. That is the first time the s&p has been up 20% plus in back to back years since 1998 and the s&p is meant to represent 500 companies, but it has become so concentrated due to the rise of the Magnificent Seven stocks that its effective diversification is less than 60 stocks. Morgan Stanley just announced that they expect the SP500, 100 returns to be flat for the next decade due to lofty valuations. Do you know that since 2000 gold has outperformed the s&p last year, gold shot up from about $2,000 peaked near $2,800 and then ended up about 30% for last year, the yield on the 10 year T note was up 63 basis points last year, basically rising from four up to 4.6% by year end. What that means is that that signals higher inflation expectations. Bitcoin up an astounding 111% to end last year around 95k and it topped out at an all time high of 108k oil up just 2% to 72 bucks and a wild card for you. Through October, Bible sales were up 22% compared to the same period versus the previous year. That is GRE 's asset class rundown. It was.

This is get rich education. Let's drop back and do some learning before I update you on housing and the homelessness crisis. Now, a lot of Americans don't really know history that well, and not very many have a good financial education either. But you know, it is quite possible that even the next person you spot in a Trader Joe's aisle has heard of Adam Smith in his landmark 1776 book The Wealth of Nations. Did you know that Adam Smith is the one credited with actually inventing the very concept of supply and demand? Yeah, Adam Smith, a Scotsman is credited with that. He is known as the father of modern economics. You might have already known that. Well, of course, supply versus demand seems to be a more relevant concept than usual. Here with the housing shortage crisis, Adam Smith, he proposed the idea of what he called an invisible hand, that is the tendency of free markets to regulate themselves using competition, supply and demand and self interest, a Darwinian sort of struggle. Really, did you know that he also created the concept of gross domestic product? Yeah, prior to Adam Smith's work, most people considered a nation's wealth based on the amount of gold and silver reserves that they had stored. But Adam Smith said no, it's more about productivity quantified in this GDP in a lot of his work. It also discusses the evolution of human society from a hunter stage with no property rights and no fixed residences, to nomadic agriculture with shifting residences. And then the next stage after that is a feudal society, where laws and property rights are established to protect privileged classes. And finally, that modern society is characterized by laissez faire or free markets, so a good chunk of Adam Smith's work revolved around real estate. Now, the history of economics like that is a phrase that sounds boring. Maybe it is to some people, but as an investor, the least that you should know about Adam Smith's landmark book The Wealth of Nations from the year 1776 is that to review, he invented the supply demand concept. He created the GDP concept, and he championed free markets. That's something you're going to appreciate knowing in your investor life. And also supply demand, as I discussed that in the homelessness problem shortly.

we are a real estate show, and, you know, I just don't hear other real estate shows talk about, well, the unfortunate, I guess, absence of real estate in an increasing number of people's lives now, even if you have a home, learn about how homelessness is gonna make your life worse, too. In fact, it already has. I'm not sure if you've noticed, I will get into that as well. First listen to these two spots, freedom, family investments for an eight to 10% return on your liquid capital and Ridge lending group, they specialize in income property loans. They can really help you, and I would know, because I use them both my self. I'm Keith Weinhold. This is get rich education. Here you go.

Oh, geez, the national average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I'd know, because I'm an investor in this myself earn 10% like me and GRE listeners are. Text family to66866, to learn about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866

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

Ken McElroy 12:41

this is Rich Dad advisor, Ken McElroy. Listen to get rich education with Keith Weinhold, and don't quit your Daydream.

Keith Weinhold 12:57

Welcome back. You're listening to get rich education Episode 536, I'm your host. Keith Weinhold, it is bad. America just hit a record high homelessness number, and it is up double digits, over 18% in just one year. It is even worse when we look at family homelessness and the rise in that and gosh, get this unaccompanied youth homeless, meaning like a 15 year old kid homeless and drifting by themselves. And this is all in the most powerful nation in the world. And even if you have a home. Homelessness is gonna make your life worse, too. We'll also look at how Trump wants to address this. It is major. And finally, are there any solutions to the homelessness crisis in America today? Well, there are now over 771,000 homeless in America, that's up from 653k just last year. And yes, the homeless can be hard to count, but as long as the methodology stays the same, I mean, there you go with the 18% increase. And here's the thing from all the years, from 2007 to 2023, all 16 of those years, we only saw a total increase of 19% during that entire span, and now 18% in just one year this latest year. I mean, talk about exponential and accelerating homelessness growth. And before I tell you about why this is happening, let's get a better idea of the gravity of this sad situation here, and this is all from HUD's newly released annual homelessness assessment report to Congress among subgroups families with children saw the biggest increase as. At 39% year over year. You think that's sad, but consider how sad this is. Unaccompanied homeless children, they're up 10% in just a year, and that was only up 3.4% all of the previous 16 years combined. Veterans are the only group to see a decrease, and the number of homeless people over 65 so we're talking seniors here that is expected to almost triple by 2030 that is just five years away, and it is just widespread too. I mean, nearly no US geography is immune from this spike in homelessness, from Florida to Maine to California to Alaska. Now, even if you have a home, the shoes of that are pretty good, if you're listening to me, you know, why does this even make your life worse? Well, of course, first of all, homelessness can make your city blighted. But beyond that, just think about how many ways it's just changing your week in and week out routine. I mean, have you noticed, like, just take, for example, when you or I walk into some grocery stores anymore. I mean, I notice how different things are than they were just say, five years ago. I mean, you've got to notice some of these things now, more often than there was just a few years ago, there's an armed guard when you walk into a store near the entrance. Well, someone is paying for that security, whether it's the store passing the price along to you, or whether it's a government or municipality paying that, well, that's where your tax money goes. And what about when you're shopping the aisles of a supermarket, or, say, CVS? Well, now even kind of moderately priced items like bottles of moisturizer, they are under lock and key behind a Plexiglas case. That's inconvenient while you're shopping if you need to use the bathroom, oh, now you need to go get a key or learn the door code to access the bathrooms. That's inconvenient when you're done and as you walk out of the store now, they are more likely to have an attendant that checks your receipts on the way out, and this is just one example at the supermarket. I mean, so many of your patterns are changing due to poor people getting poorer, and the homelessness crisis, if you're in a rural area, it probably affects you less. But just take a look around and notice the change. We're not talking about the change from your parents era, but just in your own life over the past, say, three to five years, homelessness is not good for an area's crime rate either. I mean, it is not good to have desperate people, hungry people, these people have nothing to lose if you're homeless and you commit a crime and go to jail. Hey, that might be an upgrade for some people now you've got a warm, clean place to stay in jail. So now that you and I understand more about why this even affects you and I let's talk about why is homelessness growing at this alarming rate, well, higher prices for real estate, which really accelerated in 2021 and they are not going to relent. As I've said elsewhere, home prices are not going to go down in a meaningful way anytime soon as just three weeks ago. Here on our forecast episode, I forecast another 5% of national home price appreciation this year. And it's not just higher prices, it's higher rents. Rents really started taking off in 2021 as well. Well. Higher rents, that means more evictions, and an eviction is the start of homelessness for a lot of people. And a third reason for this surge in homelessness is just that overall lack of housing. I have covered that extensively elsewhere. Yes, the housing supply crisis, and as I'm known for saying, the housing crash already occurred. Did you miss it? It was a supply crash that occurred about five years ago, and a lot of agencies think we're under supplied by 3.7 million housing units. Now, when you look at the new HUD supplied map of homelessness by state, you can very much see that it is about housing, because those regions with the highest home prices generally have the most homelessness. We're talking about the Northeast, the West Coast and Hawaii. And the fourth reason for the homelessness surge is that, of course, inflation started accelerating about four years ago, and people just cannot make ends meet anymore. CPI inflation peaked at 9.1% back. In June of 2022 and year over year, prices are still going up 3% today. Prices are not going down. They're just rising at a slower rate. And of course, inflation hurts the poor and actually helps the wealthy, exacerbating the inequality Canyon the wealthy have assets. Those assets float up in value with inflation and the prices at the grocery store are just a tiny part of a wealthy person spending. But the poor don't own assets that float up with the inflation and higher grocery prices and things like electric bills, well, they comprise a big part of a poor person's income. And fifthly, the massive arrival of immigrants pushed up homeless numbers these past, oh, three or so years. And it remains to be seen how many of those people really get deported. And you know, a sixth reason for homelessness. It's not something new, it's what I'll call all of these background reasons that have been there for decades and are not going away, like how a medical emergency can even drain a middle class person's savings and things like ongoing substance abuse. I mean, drug users often cannot stay employed. So there you have it. What was that? Six big reasons that I've identified for surging homelessness now let's see what Donald Trump has to say and understand that, due to last June Supreme Court decision, Trump now has got more power to clear out encampments and make life for the homeless more difficult, opening the door now to be criminally charged for trespassing and illegal camping. I mean, you really don't want to be homeless today as part of what Trump calls his agenda 47 his plan to tackle homelessness. Here is his preamble.

Donald Trump 21:57

Our once great cities have become unlivable, unsanitary nightmares surrendered to the homeless, the drug addicted and the violent and dangerously deranged. We're making many suffer for the whims of a deeply unwell few, and they are unwell. Indeed, the homeless have no right to turn every park and sidewalk into a place for them to squat and do drugs. Americans should not have to step over piles of needles and waste as they walk down a street in a beautiful city, or at least once beautiful city, because they've changed so much over the last 10 years.

Keith Weinhold 22:40

So that's the problem. Here's the solution. I'll boil down the meat of the Trump agenda, 47 homeless statement to just the most salient 40 seconds for you here. Just listen to this, and as you listen in closely, note that this is not a housing first plan for the homeless. Instead, it's treatment first.

Donald Trump 23:03

Under my strategy, working with states, we will ban urban camping wherever possible. Violators of these bans will be arrested, but they will be given the option to accept treatment and services if they're willing to be rehabilitated. Many of them don't want that, but we'll give them the option. We will then open up large parcels of inexpensive land, bring in doctors, psychiatrists, social workers and drug rehab specialists, and create tent cities where the homeless can be relocated and their problems identified. But we'll open up our cities again, make them livable and make them beautiful.

Keith Weinhold 23:43

Okay, it's not housing first, because, see, he wants to ban urban camping, something that parallels the Supreme Court decision. What this is not is that it is not giving the homeless hotels in the city, like some cities have recently done, converting their hotels into homeless shelters. Instead, this is designating large parcels of cheap land for tent cities, but outside the urban core, like in a big grassy lot, and then bringing in social workers and rehab specialists for them, and that way, his solution is that this city is free of homeless people, and really that is the crux of Trump's plan. But what are some other solutions here? And these are now my insights, not Trump's, that is, build more housing. That's really simple. I mean, this will naturally slow down, accelerating home prices and spiking rents, and we've got to relax regulation and zoning. We had a zoning expert, Nolan gray on the show here last year. Some scholars believe that we should just eliminate zoning in America completely. And one. One way to relax regulation is to Gosh, revisit some of these over the top safety concerns. I mean, look, it increases the cost of the most basic entry level housing when every home needs to have all these thick, fire rated doors and smoke detectors all over the place, and carbon monoxide detectors everywhere, and GFCI electrical outlets all over the place. I mean, hey, it sounds kind of funny to say out loud, but all this stuff contributes to making affordable housing impossible. And another solution is that you've got to kill nimbyism in a lot of cases, yes, that not in my backyard. Ism, you know, a person can act like they're all pro development, and like they're all free market, and they want to have their home built just how they want it, where they want it, but you know what, as soon as their home was built, they don't want others moving near them, yeah, somehow the free market's not so great anymore, okay? And they sure don't want apartment buildings nearby. Well, that is what we need, allowing taller structures to be built. That is called up zoning. It doesn't have to be a gigantic apartment building either. We need more, mmm, properties, multi families, missing middle. That means building more two, three and four unit structures in single family neighborhoods, duplexes, triplexes, fourplexes, because a lot of those can be built so that they look like single family homes. But yet it's something affordable and it helps with density. Another solution to deal with homelessness is to, of course, bring down inflation. The government needs to stop printing, say, $1 trillion to pay for a program, whether that's sending aid to foreign nations or whatever that program is. When more dollars are created like that, it debases the currency everyone else is holding on to, including your dollars, and it makes everyone from landlords to grocers have to raise their prices. And you know, here's the funny thing in the last election for president that we had last year, well, that administration got voted out of office, and many say that the number one reason was due to high inflation, but yet, look at what they voted for with the incoming administration. Everyone expects higher inflation. So there's a real paradox there.

On our YouTube channel, you can watch videos of me going out outdoors and interviewing the homeless. In fact, I'm surprised at how many homeless let me into their tents, and they wanted to show me their makeshift shelters and tell me about their life. I mean, that's kind of the good news. They were open. They were friendly people. I think they really wanted that to get exposed, because they were hoping that people would see that to come do something for them. I think that's why they've been so open with me. So that was good on the flip side, oh gosh. One thing that they have in common is that they all seemingly want to blame somebody else for the condition that they're in other than themselves, like the government or including telling me that landlords are greedy. But it really is fascinating to see from our get rich education YouTube channel, which is different content from this show. Just search the word homeless there on the get rich education YouTube channel and you can see it.

Hey, I want to ask you something. What is your on ramp to real estate investing? Like, how did you approach it? Or how did you get into it? I mean, mine was as a disgruntled employee. That's it. I didn't come from a complimentary professional place. I mean, that's how I became an investor, and there was nothing wrong with my job position. Specifically, I worked with good people and everything. In fact, I had an easy and safe job, and it paid a little bit well. But, you know, safe is not the place to be. Safety is the opposite of freedom. As an employee, you know, I could see that 401 K type plans. They were designed so that you don't get income from them until you're old. It's a salary reduction plan all those working years as well. Well, no wonder that your employer encourages participation in them. That way they're going to keep you working as an employee until retirement, because that's when they're designed to generate income. But see my point here, really is that I did not have a complimentary skill set to real estate investing, and if you do, it can be to your advantage. So you know what I mean. Let's take a couple of friends of. The show here, Robert Helms, host of the terrific real estate guys radio show. He came from a real estate agent family. His dad was an agent. Well, that can help you find deals. How about Ken McElroy, another frequent guest on the show here, very successful real estate investor. Well, he was a property manager before he became a real estate investor, totally complementary skill set. And by the way, two months ago in New Orleans, I was invited to participate in a collective inner circle mastermind group session that Robert and Ken help run. That was cool, but getting back to complementary skill sets, Michael Becker, a former guest here on the show, he was a lender, so he got to see the paperwork of all these successful investors. So he became one himself. I mean, as a lender, you keep seeing savvy investors leverage themselves with debt and then do cash out refinances, a tax free windfall event, all while they keep the asset too well. He wanted to get in on some of that. And I also know real estate investors that started out as handymen, okay, a hands on trade that can totally help when you're starting out as a real estate investor. So do you have a complimentary skill set that can help make you a successful real estate investor. If you don't, then don't despair, because you know what? I don't have one myself. I was just a former employee that wanted something else. I don't have a complimentary skill set to real estate investing. No transferable professional skill. Instead of that, I just became a reader, but not a massive reader. Of course, I was a learner before I was a teacher. I enjoyed learning this stuff, and I also got a good grasp on the numbers and how that works. But importantly, my advantage was I take action, I just keep adding property to my portfolio. You just got to keep doing that, regardless of what's happening in the larger economy or what prices are or what interest rates are.

And as you know, last week, I discussed the advantages of owning and building with brand new build rental property today, and you know, new build and these build to rent properties, those are things that that really wasn't even available when I started out investing. Well, it wasn't. I mean, with new build, oh, your maintenance repair costs are going to be low. You tend to attract a high quality tenant that also tends to stay for a while. Insurance costs tend to be lower on new build. And there's a bigger advantage than all of that in the market cycle right now that I'll get into shortly. Well, historically, the long run average. Do you have any idea what proportion of homes for sale are new build homes? Any guess, like, what share of those homes are new? It's only about one in eight. Yeah, the Census Bureau and the NAR tell us that it's 13% historically. Okay, well, what do you think it is today? Well, today, that number is up. Existing homeowners, they're not selling those homes aren't getting on the market as often due to the lock in effect, and we have to add supply. So in order to do that, we are building more new there's just no other way to bring it to market. Well, today, the proportion of new build homes for sale among all homes for sale is fully double that, at 26% although we're still undersupplied of homes in the US by about 30% you know there are pockets where they've overbuilt with new builds, including in Florida and Texas. So the time could really be right to expand your income property portfolio in one of those places, because builders that we work with at GRE marketplace are really willing to give you a deal now you've got them right where you want them if you're looking for a deal. How does a four and three quarter percent interest rate sound? Yes. Rates on non owner occupied property are about eight right now. They're about seven on owner occupied property, but we've got builders willing to buy your rate down to 4.75% and they're also offering one year of free property management and three months of rent guarantee protection in case your property is not occupied right away. The first one is a brand new build duplex in Inverness, Florida, two beds, two baths, each side, price of 420k projected rent from both sides at $2,830 and the size is 2100 square feet. I mean the. That sounds like it could make your cash flow thin, until you consider that 4.75% fixed mortgage rate the property tax is about one and a half percent and insurance get this projected at just $1,155 a year for an entire new build duplex, and now you might ask, what could the rate of return be on this Florida duplex new build? Well, I projected 5% appreciation for this year. New builds tend to appreciate better than existing property, but let's just use 5% if you have a 25% down payment, that's four to one leverage. So you've got a 20% return on your money. And let's just keep it conservative. When we look at monthly cash flow, that results in a 5% cash on cash return. Add that to your 20% leverage appreciation, you're up to a 25% ROI already. Add in the fact that your tenant is paying down your principal for you by $405 every month. That's 4860 annually, divided by your 105k down payment. That means you've got another four and a half percent return here. Let's just call it four. You're up to a 29% total ROI we haven't even added in yet, your tax depreciation benefit, and now you're up to a return in the mid 30s. Finally, your inflation profiting benefit on your fixed amortizing debt, and you are well into the 40s for a percent return on an annual basis. And of course, most of these are only projections. It could disappoint you at 30 or less, still a nice return, or it could over perform at 50% or more. I mean, this right here is how wealth is built. I mean, this is how you do something that disrupts your entire family tree that was the new build duplex. Then I'll share one other one with you. Here from GRE marketplace. Is a single family rental. This one is in Locust Grove, Georgia. Gosh, it looks really good in the photo here with a two car garage and some brick facing, its price is 339k rent is 2350 The size is 2164 square feet, so only a little bigger than the duplex here in this new build, Georgia, single family rental, four beds, two baths, beautiful looking new construction on the inside, open floor plan, stainless steel appliances, I can't tell whether the floor is LVP or wood laminate, but it's got a flooring type that's resilient, that tenants like, and your rate of return is going to be similar to the duplex ROI that I laid out, though probably not quite as high as the duplex. I mean, with these interest rate buy downs, these could very well be the property types where, in just five years time, maybe even as little as two or three years time after owning them, you look back and you consider how opportunistic you work in this part of the market cycle where there are now more new builds that you can choose from, and a builder was willing To make you a deal to keep their product moving, because they build a little too much in some pockets of Florida, for example. So yes, these and more like them are available, and there are more in Florida, Georgia, Alabama and a number of other states. And you know, something I don't think I shared with you earlier, it's convenient. You can get a spot with one of our GRE investment coaches right on their calendars, you can look at their calendar and pick a date and time that's convenient for you. For a free coaching session, they will learn about you. They'll let you know where the real deals are, if they're right for you at all, all you've got to do is visit GRE marketplace.com, and click on the free investment coaching area. There you are with some real opportunities and an actionable resource. Until next week, I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 39:17

Nothing on this show should be considered specific, personal or professional advice, please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get rich Education LLC, exclusively you

Keith Weinhold 39:45

The preceding program was brought to you by your home for wealth, building, get rich, education.com
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
535: Single-Family Rentals vs. Apartment Buildings
6 jan· Get Rich Education
Keith discusses the pros and cons of investing in single-family rentals versus apartment buildings.

He highlights that less than 10% of U.S. building materials are imported, reducing the impact of tariffs.

Single-family rentals offer better tenant quality, lower vacancy rates, and higher appreciation potential. They also have lower financing costs and are more divisible.

Conversely, apartment buildings offer economies of scale and lower per-unit maintenance costs.

He emphasizes the importance of owning more property, especially new-builds, which offer lower insurance premiums and attractive financing options

Work with expert investment coaches to find the best off-market deals and maximize your returns.

GRE Free Investment Coaching: GREmarketplace.com/Coach

For access to properties or free help with a

GRE Investment Coach, start here:

GREmarketplace.com

Show Notes:

GetRichEducation.com/535

Get mortgage loans for investment property:

RidgeLendingGroup.com or call 855-74-RIDGE

or e-mail: [email protected]

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”

For advertising inquiries, visit:

GetRichEducation.com/ad

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'm your host. Keith Weinhold, talking about how most home building materials are US sourced and not affected by tariffs, the little understood pros and cons of investing in apartment buildings versus single family rental homes, then what really makes sense to invest in in this particular era and more today on Get Rich Education.

Speaker 1 0:28

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 Weinhold writes for both Forbes and Rich Dad advisors and delivers a new show every week since 2014 there's been millions of listener downloads of 188 world nations. He has a list show, guess who? Top Selling personal finance author Robert Kiyosaki, get rich education can be heard on every podcast platform, plus it has its own dedicated Apple and Android listener phone apps build wealth on the go with the get rich education podcast. Sign up now for the get rich education podcast or visit get rich education.com

Corey Coates 1:13

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 1:29

Welcome GRE from Tallahassee, Florida to Waxahachie, Texas and across 188 nations worldwide. I'm Keith Weinhold, and you are inside, G, R, E, we are here for you every Monday, without fail, 52 weeks a year, and we have never replayed an old episode either, always original content. Thanks for being here, but you're not here for me. You are here for you as another year dawns before we get into the meaty real estate content of today's show, including single family rentals versus apartments. Take a moment to check in with your own goals. Maybe you think about that is just buying your first investment property, or maybe you own 83 rental units, and you're looking to get to 100 this year. But no matter really real estate is just the fuel for your goal. It's probably not the end goal itself is your goal to have the time freedom to watch all of your kids basketball games this year. What about beyond this year? Are you really dreaming big enough you've got to question yourself on that sometimes, for example, forget flying first class. What if you want to own your own private jet, like Taylor Swift's luxurious Dassault 7x jet for $54 million? how about real estate fueling a dream that's even bigger than that? Yet, last month, the Philadelphia Eagles received the NFL approval for the sale of an 8% interest of the team to two different family investors. Okay, do you find say that interesting owning part of a major pro sports team. And by the way, what would something like that look like for you? I mean, do you even have the headspace to conceive of such a thing? It's good to ask yourself questions like this. Sometimes that sale was based on a valuation of the team of up to $8.3 billion and yet, after all that, the Eagles owner Jeffrey Lurie, he still maintains complete control of the team. Okay, so if each of the two family investors got a 4% interest at this valuation, that is up to a $332 million investment for each family. Maybe that could be a Weinhold the family goal. We'll see about that one. And you know, when it comes to making yourself a bigger you and dreaming a bigger dream, I like to listen to what the doers say. I found it so interesting in a Jeff Bezos interview at the deal book Summit, Bezos said it's human nature to overestimate risk and underestimate opportunity. Bezos also said entrepreneurs would be well advised to try and bias against that piece of human nature, the risks are probably not as big as you perceive, and the opportunities may be bigger than you perceive. That's the end of what bezel said. I really think that that's spot on stuff. now two weeks ago, when I gave GREs national home price appreciation forecast for this year. You might remember that I said that potential Trump tariffs just don't matter as much as people think when it comes to real estate. And understanding more about why I say this, it can help you understand real estate materials and sourcing and home building in the United States, America's overwhelming majority of sourced building materials are not imported, so therefore something like a supply chain bottleneck that's more worth watching, really. It's a huge misunderstanding of the home building market to assume that most building materials come from overseas. They do not, not even 10% of residential construction building materials are imported. The National Association of Home Builders will tell you so. And really, the majority of those few imports that do come from elsewhere, they come from, Canada in the form of timber. You might have heard about that before. Now, there are some things like finishes and fixtures that get sourced from, oh, various other countries, but yeah, the biggest potential tariff expense impacting home builders would come from enacting a cost on Canadian lumber. But I and a lot of economists as well, they're pretty skeptical that the administration would really enact a tariff on a close ally like that, on Canada's raw materials. In fact, Chief Economist Lawrence Yoon of the NAR he conceded that even potential lumber tariffs, they might be given a phasing in period, and that would encourage American timber mills to fill in any production gap. It's also important to you know, remember that doors, windows, cabinets that builders utilize, they are typically produced within us, borders. Windows, doors, cabinets made domestically, unless it's something that relies on raw materials that are imported, they ought to be little affected by tariffs. One example is that kitchen sinks now they largely went from being sourced in China, then Malaysia, then Indonesia, and one main customer is now talking about sourcing them out of Mexico or the Dominican Republic. So there are a few things that less than 10% that's imported. Another imported item is flooring, which moved away from China, went to India for a while, went a little bit back to Brazil, and now more is being sourced by Ecuador. But the important thing to remember is that these are outlier components. Not even 10% of residential construction building materials are imported. That's what you want to remember, concrete, us, rebar, us. So you know, as a real estate investor, you can feel good that as your portfolio grows, each one of your properties was chiefly built with us, labor that you already knew, but it is also built predominantly with us, materials as well. How likely are single family rental investors to say that they want to buy more investment property this year. Well, year ago, 60% of them said that. Today it is up to 76% yes, that many say that they are either likely or very likely to buy single family rental property in the next 12 months, and that same group that was surveyed is also unlikely to sell their property, and they also said that they are more likely to raise the single family rent this year. And all this is according to a joint lending one resi club survey. However, most fall in the range of raising the rent between just 1% and 6% this year, so pretty modest rent increases. In fact, in every region of the US, the majority of single family rental investors describe their rental market as either strong or very strong. But can you guess the weakest region? Okay, this region is the one that still has a majority of landlords that say that their market is strong, but yet the weakest of them all is the South West, and that is largely due to over building and in the survey, what expense increased the most the past 12 months? Well, number one is that 37% of respondents these landlords said it is still insurance premiums. Second place was that 23% say property taxes are increasing the most. And then third was. And 21% say that maintenance and repair costs have increased the most for them. So the top three expenses cited expense increases that is in order, are insurance, property tax, and then maintenance and repairs. And a few weeks ago, I discussed with you, you might remember about how upgrading or remodeling a unit that helps you in at least five different ways simultaneously. Let me talk about this, since I touched on raising the rent and a little comprehension test here. Do you remember what those five ways are? the five ways your help by upgrading or remodeling a unit. And no, these are not the famed real estate pays five ways when you upgrade a vacant unit for rent, or at times, you can even actually upgrade a unit while the tenant is still occupying the property, if it's not a disruptive upgrade type. Okay, I mean, sometimes that tenant can be appreciative that they're getting an upgrade while they live there, but the five ways that upgrading a unit helps you are, first, well, obviously it helps you be able to get more rent in cash flow. Secondly, you tend to attract a higher quality tenant. And then in a five plus unit apartment building, it also increases your noi, therefore a greater overall property value. Fourth is pride of ownership. And then fifth is that higher rents help you offset those erstwhile higher operating expenses.

And here's the thing, when you get free help from one of our GRE investment coaches, like you can do at GRE marketplace.com those properties are either already extensively renovated or they are completely brand new build. So because of that fact, this means that from day one, your rent income is already optimized. You already have the best chance of landing a quality tenant, and you get some sense of having a pride of ownership. And all of those things, they're already optimized for you. You don't have to tinker with anything else, because those GRE marketplace properties, more than 95% of them are either renovated or new build. I would say, using properties conducive to the BRRRR method, they would be the few exceptions there and on GRE marketplace, you can find lower cost renovated single family homes, up to million dollar apartment buildings, either new or renovated. And another pro tip here to help you with something actionable in a premium place to source your growing income property portfolio. You've heard me mention them before, is mid south home buyers, but I'll tell you more about what's going on with them. Yeah, they're an especially good place to add your portfolio if you either haven't invested outside of your home market before, or you don't have as much liquidity right now, because their prices are just 100 to 180k they are still in that range. And yes, that 100 to 180k that is indeed the entire capital price for the asset. So that means down payment and closing costs being about 25% therefore it's just 25k to 45k Yes, you can still get started for that little with a wonderfully renovated property in either Memphis or Little Rock. Those are the two markets where mid south home buyers operates, and they are some of the most investor advantage markets in the entire nation. And then the US is one of the most investor advantage markets in the world. And last month, I met and spoke with a 19 year old guy that lives in Dallas, and he just bought his first ever investment property from mid south home buyers in Memphis. And in fact, it was his goal to have his first income producing property at age 18, and he bought it the day before he turned 19, so he barely met that goal. But yeah, they are total pros at mid south they've been doing it for over two decades. They say that they are the nation's highest rated turnkey property provider. They might even be the first provider in the nation, if you like. They also manage the property for you, and their property managers are really aware that their investors, like you, seek a return on investment, so they often have a line a waiting list. To get their properties. Last I checked the line at mid south had shortened globally attractive cash flows an A plus rating with a better business bureau, and they've now renovated over 5000 houses. And over there, they do a lot of things with their management that you just wish every provider would do, there is zero markup on maintenance. Their average occupancy rate is almost 99% average renter stays more than three and a half years. And you know that three and a half years, that duration of tenancy that could be poised to go even higher now, with the affordability crisis for these want to be first time homebuyers now, most of what mid south has are single family rentals, quite a few duplexes too. Every home has brand new components, a full one year warranty, bumper to bumper, new 30 year roofs. And then the really important part expect a high quality renter that they screen and find in place for you. So let me give you an example of two real properties. And now, if these two aren't under contract already, they probably soon will be, since I'm mentioning them. And of course, duplexes cost more than single family rentals. This duplex is in Jacksonville, Arkansas. It's just northeast of Little Rock. It is 913 and 915 Ruth Ann drive, the combined rent from both sides is $1,775 the all in cost is about 210k 2099, in total, it's 1600 square feet. So 800 square feet each side, it's two bed, one bath each side. The Property taxes are really low, $1,300 a year, really nicely renovated with good quality materials. I mean, I love owning properties like this all day. So that's a duplex in the Little Rock market. Another one from mid south is this, Memphis single family rental. The address is 400 Bonita drive. It is $1,200 rent on a $148,100 purchase price. Gosh, those numbers work. This single family rental is three bed one and a half bath, 1164 square feet. Gosh. Again, low property tax in these regions, just $1,120 annually. All right, so that property tax rate is just three quarters of 1% of the purchase price. So really low on a national basis, a big backyard, eat in kitchen, separate laundry room, walking distance to schools. I mean, this is the type of property a tenant family could live in for five or 10 years, beautifully renovated. And I'm bringing these up because these are all at prices that Metro New Yorkers or coastal Californians can barely believe. So each property has hundreds of dollars of projected positive monthly cash flow. Each one increases your income 2000 to $5,000 per year. And I have personally toured mid south home buyers office in Memphis and their properties in person in Memphis. And I've seen their properties in each stage. I walked a tear down that they were doing, and I saw all the debris in the backyard. And I have seen their hardwood floors shine inside newly renovated property that I walked with both Terry and Liz from over there at Mid South. She is a pretty popular and extremely knowledgeable woman there. Liz, you can ask for her or one of her team members about getting on the list over there. Yes, these are 100k to 180k already renovated. Yes, that's truly the all in price, and they are in decent, working class pride of ownership neighborhoods in Memphis, Tennessee and Little Rock, Arkansas. And a lot of people get their start in investing there, I suspect it's now in the hundreds, with the number of GRE listeners that have bought from them. But even veteran investors, with dozens of units, they scoop up properties from them due to the low prices, some even pay gasp, all cash, yes, no leverage for them. And mid south homebuyers has investor tours monthly, where they load everyone on a bus, and you can check out the properties, because they are really proud of what they offer there coming up next, I'm comparing single family rental investments to apartments. But yeah, right there. That was a pro tip that really ought to help you out. Expect cash flow from day one. A 19 year old is doing it. You can start yourself at mid south homebuyers.com. More next. I'm Keith Weinhold. You're listening to get rich education.

Oh geez, the national average bank account pays less than 1% on your savings, so your bank is getting rich off of you. You've got to earn way more, or else 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 a 10% return and compounds year in and year out. Instead of earning less than 1% 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 you know how I'd know because I'm an investor in this myself, earn 10% like me and GRE listeners are. Text family to 66866, to learn about freedom. Family investments, liquidity fund on your journey to financial freedom through passive income. Text family to 66866.

Hey, you can get your mortgage loans at the same place where I get mine, at Ridge lending group NMLS, 420056, they provided our listeners with more loans than any provider in the entire nation because they specialize in income properties. They help you build a long term plan for growing your real estate empire with leverage. You can start your pre qualification and chat with President Caeli Ridge personally. Start Now while it's on your mind at Ridge lendinggroup.com that's Ridge lendinggroup.com

Kathy Fettke 21:55

you this is the real wealth network's Kathy Fettke, and you are listening to The always valuable get rich education with Keith Weinhold.

Keith Weinhold 22:12

Keith, welcome back for the 535th week in a row you are listening to get rich Education. I'm your host, Keith Weinhold, and I'm really grateful to have you here if you self manage your properties. One software that can really simplify your life is called Hemlane, H, E, M, as in Mary, l, a, n, e, Hemlane. You might have heard about it before. I now know quite a few people that use it. It's been getting some really good reviews. You can manage your properties from anywhere, even through your phone. And Hemlane has got some really good integrations, and now it's more than just investors like you that are using it. Agents and property managers are using Hemlane too, from advertising to tenant screening to maintenance and repair and accounting, and I just learned that they recently got all of the state specific lease agreements integrated on their platform as well. That's why it was on top of mind. If you prefer to self manage and you want to make it easier, what you can do is book a free demo and they show you how it works. Over there, it's just hemlane.com where you can do that if you like. Let them know that I told you about it.

Before I share something else actionable with you, let's do some learning and talk about apartment buildings and single family rental properties, and compare the two, some pros and cons of each. And perhaps the most obvious advantage of apartment buildings is their economies of scale. A 12 unit apartment only has one roof to maintain and one insurance policy to maintain. Another efficiency is that shared common areas and plumbing and HVAC systems that can lower your individual maintenance costs on a per unit basis as well in those apartments. And right now, at this time in the mid 2020s, decade, another advantage of apartments is that this time in the cycle is where values are just about bottoming out. Apartment buildings in a lot of national regions have fallen 20% fallen, 25% or even fallen 30% or more from their highs that were seen two to three years ago, and that's due to those higher interest rates. And the reason that this is an advantage for apartments is that you might be able to buy low, buy the dip, apartment cap rate. Have settled in the mid five range. Now, well located Class A has dropped back into the fours. Long time investors already know about some of the advantages, but you know, even some long time investors, they often overlook some of the advantages that single family rental properties have over apartments. So let me share some of those with you. Now, as you know, I started off with my first two investment properties, both being four Plex buildings, and then after that, I added larger apartment buildings and single family rental properties, and I still do buy and own single family rentals. So let me tell you about why I love them. They might have the best risk adjusted return anywhere even after 2008 great recession. Those that bought single families for cash flow persevered with single families. You get a better quality of tenant than you do in apartments. They take care of the premises. They tend to be in a better neighborhood. Single families tend to appreciate better over time, and are also more likely to be in a better school district. Single families have a retention advantage. Tenants stay longer, and that creates less vacancy and expense, and the reason that they do stay longer are those aforementioned neighborhood and school district characteristics, common areas. You know, single family rentals, they don't have any common areas that you have to clean and maintain. I think I pointed that out to you before, because that's like an overlooked profit drag that I missed when I bought my first larger apartment building. Yeah, apartments have hallways and stairs and laundry rooms and commonal door grounds that a custodian has got to service. Single families have an advantage when it comes to utility payments, because tenants often pay all of the utilities and they even care for the lawn. The larger the apartment building is, the more likely that you are going to be the one paying the utility costs. Then there's divisibility. What if you've got a property that's underperforming out there and it just isn't meeting your expectations? Well, if you had, say, 10 single family rental homes, you can sell off the one or the two that aren't performing, but yet, with a 10 unit apartment building, you've either got to keep them all or sell them all. It is not divisible. What about fire and pestilence, something a lot of people don't talk about? I mean fire and pests. They are more easily controlled in single family rentals, even if you're adequately insured, these conditions often affect multiple units and families. They can spread in an apartment building. Financing is a huge one income single family homes, they have both lower mortgage interest rates than apartments and typically lower down payment requirements than apartments. I think you already know you can secure 10 single family rental loans, single 20 if you're married at the best rates and terms through Fannie Mae and Freddie Mac with just 20% down payments, you can even go less than 20% on non owner occupied in some cases, but apartments rarely, if ever, have 30 year fixed rate terms like single family rentals do, and this right here in particular, that really started bringing down a lot of apartment investors, beginning in 2022 and 2023 when their interest rates reset much higher, doubling, or even more than doubling. How about vacancy rate? It is true that if your single family is vacant, then your vacancy rates 100% if your say four Plex has one vacancy, well then your vacancy rates only 25% but yeah, the same is true if you own four single family rentals and one is vacant. How about management? If you hire professional management, your manager would likely rather deal with higher quality, single family residence. And if you're self managing, this is a demographic of people that you would likely rather handle yourself. Then there's supply and demand, there just absolutely still are not enough low cost, single families that make the best rentals nationally, demand still exceeds supply. That's the opposite condition for apartments, and this is something that's going to continue in the short and the medium term market risk that is an overlooked criterion. You've got to keep your properties filled with rent paying tenants that have jobs. If you think you'll be able to buy 10 rental units in the near future, well, your 10 unit apartment building that's only going to be in one location, and that's going to leave you exposed to just one geography's economic fortunes. But if you have 10 single families, you could have four of them in Central Florida, three of them in Fort Worth Texas, and three of them in Memphis. And you got to think about exit strategy. A lot of people don't think about this. Think about the exit before you even get in, because years down the road, when it's time to sell your income property, hopefully, after you've had years of handsome profits, and real estate pays five ways and all of that, you know what? Down the road, there is going to be a greater buyer pool for your single family rental than your apartment building. In almost every case, more buyers can afford the lower price, and unlike apartments, you even have access to a pool of buyers that might want to occupy the single family rental themselves. It might even be your current tenant that buys it, but the market and the numbers have to make sense for someone to want to buy an apartment building, but if an owner occupant buys it from you, that family doesn't have to have any numbers that make sense. So your single family rental is more liquid on your exit and professional management, that's another reason that single families can make sense. Because see single family rentals, they can be spread all over a metro area diffusely, and if you self manage, that is a lot of little trips that can get to be a hassle. But if you use a pro manager, well, they're the ones that have to manage the scattered sites. And a lot of times, managers don't charge you much more to handle your single families than they do your apartment buildings. So right now, there were a ton of advantages, a good 15 or 20 advantages there that single family rentals have over apartment buildings. And it's important I discuss them, because there are a lot of investors that don't factor all of those in. Even veteran investors tend to overlook some of those things. Again, I really like apartment buildings as well. They could very well be my second favorite investment to single family rentals, and I would like to now, with that understanding, really say something that I probably don't say quite often enough if you want to benefit from all these wealth building forces here that I've talked to on the show for for more than 10 years. You need to own more property, or get started with your first property.

Now I've already given you one great resource for that. And yes, what do they say? The turtle never got ahead until he stuck his neck out. Now the uncertainty, I mean uncertainty. That's just that condition that never completely abates. But in a sense, I think you can say today that the future is already here because we've got substantially more economic certainty and political certainty than we have had in recent years. The presidency was decided peacefully. Recession fears have abated. The Fed after screwing up with high inflation a few years ago, they have now engineered a soft landing, meaning lower inflation with still high employment. So now is a good time. What about real estate prices? I'll tell you something about that all of my investor life, every single property that I've ever bought, without exception, it felt aggressively priced at the time, and then, typically, it always happens when as little as one year or two years goes by, it already looked like a good decision. And I'd like to encourage you to do something else in this era, if you can swing it, buy new build property. That's something that wasn't always true. They do cost more. It's probably going to be 300k plus for a new build rental, single family home, but either way, be sure to own more property, existing or new benefit from what we talk about now. In some parts of the nation, including Florida, builders built a few too many properties, and they are willing to give you a discount for that. They might even cut the price a little and give you a rate discount, buying down discount points for you so that you can get a mortgage loan interest rate in the fives or even in the fours on new build income property right now in a volatile insurance market, new builds also have some super low insurance premiums because the property is built to today's more stringent codes. I mean, a. Just put an example out here. If you say, buy 10 rental, single family homes for $3 million total, 10 properties, 300k each. Okay, it's just 5% appreciation, which is what I projected for this year in our home price appreciation forecast. Two weeks ago, on $3 million worth of property, that's 150k per year, every year growing that you can pull out of the properties completely tax free. But to get that 150k per year tax free, you would have only had to make a 750k down payment and closing costs 25% on this that's not even counting the cash flow that the properties generate, plus your loan, of course, is simultaneously being paid down by tenants. And on top of that, inflation would just relentlessly debase your two and a quarter million dollars of fixed rate debt. Yes, all while the appreciation and the cash flow occurs, inflation debases your debt by another $67,500 every single year, and your tenant pays down some more principal on top of that. And then there are the other tax benefits too. And this is where you are massively getting ahead. All right, that was a $3 million portfolio, but if you can only do 1/10 of that own, just say one more new build, 300k single family rental, then you get 1/10 of those benefits that I mentioned, and either way, a total return on investment of 30% or more annually that is achievable. It's actually even conservative. I mean, just with the 5% appreciation, with four to one leverage, that's a 20% return just on the appreciation component alone.

And our GRE investment coaches can make this real for you. They can talk to you about these properties and others, including those mortgage rate buy downs into the fives and the fours properties in investor advantage markets in Ohio, Indiana, Illinois, Pennsylvania, Georgia, Oklahoma, Texas, Florida, Alabama, Mississippi, Tennessee, Arkansas and some others. In fact, let me give you two examples of what our investment coaches can help you with right now. This is pretty fun, actually, as I talk about these properties, because you might even end up owning the ones that I discuss right here on the show. The first of two is a brand new build, single family in Palma Coast, Florida. Gosh, it's a ranch home. Really good looking. Two car garage, is what I'm looking at here. It's 1200 square feet, three, bed, two, bath. It's called the Bing model, and it's got the type of layout that tenants really want today. I mean, your resident could stay there for a long time. $2,100, in rent for a purchase price of $289,900 I mean those numbers, along with the mortgage rate buy down to four and a half percent, plus new build insurance premiums that are going to be low. That really works today. That is really attractive there in Palm Coast, Florida. And the last one I'll mention is an older single family rental in Canton, Ohio. Yes, that's the home of the Pro Football Hall of Fame. The address is 2422 6th Street, Northwest in Canton. Rent of 1225, and a purchase price of just $135,000 The size is 1036 square feet, and it is four beds, one and a half baths. The renovations really look quite good. As you recall, those benefits of buying property that's already renovated, like I discussed earlier, all for 135k in today's market. So these properties and so many more like them, that's what our investment coaches can help you with. Their service is always completely free, but first what they do is they learn a little about you, and they can then put together an entire investment real estate portfolio for you, if you like. So they'll assess and evaluate what you've got, where you want to go, what property types are conducive to aligning with your strategy, and are there any best geographies for you? And more. So it's really important to stay in touch with your coach. I mean, we might find out, for example, tomorrow, that a home builder that we work with decided to offer some massive mortgage rate buy down incentives for you because, say, they built too much. So I really encourage you to set up that touch point for the first time, or to stay in touch and see what's happening, free coaching off market opportunities, and it's easy to set up a short meeting over the phone or on zoom with an investment coach. You can do that at GRE marketplace. It really can be quite a life changing venture for you from GRE marketplace.com just click on the coaching area until next week. I'm your host. Keith Weinhold, don't quit your Daydream.

Speaker 2 40:49

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 41:09

The preceding program was brought to you by your home for wealth, building, getricheducation.com.
- Luisteren Nogmaals beluisteren Doorgaan Wordt afgespeeld...
- Later beluisteren Later beluisteren
Laat meer zien

Afleveringen

554: How to Borrow Tax-Free Like a Billionaire

553: "Tariffs Will Create Empty Shelves and Economic Disaster" -Father of Reaganomics, David Stockman Joins Us

552: Terrible—Home Sales Now Worst Since 2009

551: Is Florida Real Estate Doomed?

550: Real Estate Pays 5 Ways: Your Audio Masterclass to Financial Freedom

549: Who You Are vs. Who You Could Be with Loral Langemeier

548: A 7-Figure Income is the New 6-Figures, Car Loans, Pros and Cons of Turnkey Real Estate

547: Is Hyperinflation Ahead? People are Frightened About a Coming Depression

546: What the Bible Says About Money

545: Eliminating the Property Tax, DC Real Estate Crash, Future Inflation and Interest Rates

544: Stunningly High Returns with this Niche Real Estate Strategy

543: The Danger of Losing Your Job, How to Use AI for Real Estate

542: A Home Loan Where No Monthly Payments are Required

541: Will a Boomer Selloff Make Housing Prices Crash?, This Vice is Destroying Young Men

540: Investor Insights: Amenities That Drive Big Rental Profits

539: Short-Term Rentals, Mid-Term Rentals, and Hotel Investing with Robert Helms

538: How to Begin in Real Estate, The Insane Canadian Housing Crisis

537: How to Increase Your Real Estate ROI with a Cost Segregation

536: Why the Housing Crisis is Pushing Homelessness to Catastrophic Heights

535: Single-Family Rentals vs. Apartment Buildings