Returns and the 1% Rule

#674: Welcome to Greatest Hits Week – five days, five episodes from our vault, spelling out F-I-I-R-E.

Today's letter R stands for Real Estate. This episode originally aired in May 2022, but the insights on long-distance investing remain just as relevant for anyone feeling priced out of their local market.

We tackle the five biggest challenges of investing far from home – from fear of the unknown to managing contractors remotely – and reveal four compelling benefits that make it worth the effort, especially when you're competing in markets where million-dollar properties are the norm.

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Remember when inflation was high and rates were rising?

What were people saying about real estate back then?

And with the benefit of hindsight, how much of what we thought at the time proved to be correct?

If you feel unsettled, join the club. At this present moment – December 2025 – interest rates are falling, but not enough. Inflation is mostly under control, but not enough.

The noise makes everything feel new.

When you only see the present moment, everything looks obvious. When you remember the past, patterns start to show.

That's why we’re rewinding the clock back to May 2022 – when interest rates were rising and inflation was near its peak.

So what was on our mind three years ago?

We start with the basics.

Why the Federal Reserve raises rates. What higher borrowing costs do to spending. Why falling stock prices often reflect fear – not proof that housing prices must fall next.

We explain the difference between recession and deflation, and why the two are often confused.

We walk through what made the housing market in 2022 different from 2008. Inventory was tight. Builders had not overbuilt. Many homeowners held fixed-rate mortgages and record levels of equity.

Those conditions mattered then. They still matter now.

That equity becomes the next focus. We talk about cash-out refinances, HELOCs, and reverse mortgages – and what happens when homeowners borrow against rising values.

You hear how higher rates can slow borrowing, why that matters for inflation, and what risks appear if some borrowers struggle to repay.

From there, we outline four ways investors might encounter properties if foreclosures rise: bank-owned homes, short sales, “subject to” deals, and wraparound mortgages.

The episode then shifts to long-distance real estate investing. You hear the real challenges. Fear of the unknown. Managing people you cannot see. Contractors who disappear. Agents who stop returning calls.

You also hear what makes distance workable: education, relationships, local investor networks.

We walk through how investors think when conditions feel unstable — and why looking backward sharpens how you see what comes next.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Trade-offs and priorities

(07:41) Fed hikes rates

(09:16) Inflation drivers explained

(11:26) Recession vs housing

(13:21) Home equity surge

(15:21) Borrowing against equity

(17:11) Foreclosures and options

(18:26) Subject-to and wraps

(21:11) Shift to distance investing

(25:31) Education and networks

(31:36) Choosing markets

(36:11) Accountability challenges

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