Get Rich Education

#179: Money is an abundant resource. I tell you why. When you’re looking to move accumulated equity, should you do a: 1) Straight sale. 2) 1031 Tax-Deferred Exchange. 3) Cash-out refinance. Avoid lazy money. My personal internet bill is $145, cable $126, phone around $100. Who cares? You learn how much I like to spend on a hotel. Uber and Lyft are killing the parking business. Learn how to estimate rental property operating expenses. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 00:52  Wealthy people’s money either starts in RE or ends up in RE. 02:03  Listener question about 1031 Exchange vs. Cash-Out Refinance. 13:20  Lazy money. 15:04  Other podcasts. 16:09  Free book. 19:11  More on Dave Ramsey. 20:26  Why money is an abundant resource. 24:36  “Uber Really Is Killing The Parking Business”. 29:18  Residential real estate is here to stay. 30:07  “Return On Life” and passivity. 32:47  Don’t underestimate rental property expenses. Resources Mentioned: Article: Uber Is Killing The Parking Business GRE Video: Operating Expenses GRE Book: 7 Money Myths Podcast: The Real Estate Guys Podcast: Cashflow Ninja Podcast: The Real Estate Way Mortgage Loans: RidgeLendingGroup.com Cash Flow Banking: ValhallaWealth.com Find Properties: GREturnkey.com Education: GetRichEducation.com Welcome to GRE, Episode 179. I’m your host, Keith Weinhold. From Saratoga, Australia to Saratoga Springs, New York and across 188 nations world wide. This is Get Rich Education and we are cultivating a Real Estate Of Mind here. That is because wealthy people either start out in RE, or wealthy people’s money ends up in real estate. It’s either one or the other. ...and you know, the most important piece of real estate may very well be - that real estate right between your two ears - your mind We come from an abundantly-minded place here at GRE. If you want to learn about combining vinegar and water in a bottle because it’s cheaper than Windex. Well, you’re not going to learn about that here. If you’ve been wearing the same pair of monthly contact lenses for the last two years...then, well, you didn’t learn to do that here either here. In fact, money itself is an abundant resource, not a scarce one. We’re going to talk more about that today. We’re going to talk about passive income and define what exactly that means. We’re also going to talk about how to best increase your velocity of money. Is it by doing a 1031 Tax-Deferred Exchange or a Cash-Out Refinance - with your income property. Let’s go to the listener question about this. Listener Jacob Ayers asks: To move equity, should I do a 1031 Tax-Deferred Exchange or a Cash-Out Refinance? Thank you for that rather eloquently-stated question there, Jacob - and it is a germane time to discuss this. There’s a lot of equity out there that is ripe for harvest because most markets have appreciated a good 7-8 years in a row here. Really, this is a question about moving equity to keep it working for you. What is the best vehicle for increasing your velocity of money? Since the return from property equity is always zero, ideally you want to take a big chunk of it and splinter it off into a bunch of little pieces and that way you can leverage more property. Let’s back up. There are actually three ways for you to move equity should you so choose that it’s right for you. The first way is to... Sell Your Property - That way, you can get all of your equity out. Now, Jacob, you’re a savvy investor so that’s why you probably didn’t even bring that up as one of the ways that you can move equity. Because, of course, the big problem with this is that when you sell an income property. You could sell your current equity-heavy property and buy another. But the problem with selling is that you'd probably have to pay capital gains tax, which would reduce the equity you have available to re-invest. You’re also going to have to pay depreciation recapture. Yep, that is all of the depreciation that you wrote off against your taxes every year that you owned the income property will be recaptured off that first income tax return you file after the building sale. So you might have a nice gain but the tax hit is harsh. That is, of course, unless you move your equity in the second of three ways and you perform a 1031 Tax-Deferred Exchange. If you meet the rules of the 1031 Exchange, you can avoid all of the nasty bite of the capital gains tax and all of the depreciation capture. Yes, it can be 100% avoided. In fact, the Exchange is the best way to move your equity. If you follow the rules and do the exchange properly, you can move 100% of your net equity, tax-free. Sometimes people point out that exchanging is really tax-deferred, not tax-free.  But, c'mon, the exchange itself, if done correctly, is tax-free.  The capital gain is carried to the next property without being taxed.  Therefore, in real estate, capital gains is a voluntary tax.   What I mean by that is the gain is not taxed unless the you, the owner, volunteers … by selling the property outright.   Instead of selling, savvy investors continue to exchange until they die and then your cumulative gains over your entire lifetime - they are forgiven upon your death - and that’s because of the stepped-up basis rules.   Be sure to ask your good tax manager about the details of the stepped-up basis rules. I’m not going to get into that here. But that’s why it’s effectively tax-free But whether you call it tax-deferred or tax-free, exchanging is one of the most powerful things in the entire tax code, but it’s very much misunderstood by many accountants, attorneys and real estate agents. Actually, during my first-ever 1031 Exchange I soon learned that my income property agent had never gone through this before. Now I devoted an entire episode to the 1031 Exchange here for you a few months ago, so I’m not going to get into all the details and rules again here. The most important thing that I can tell you, to pull off a 1031 Exchange, is to enlist a 1031 Exchange Qualified intermediary early on - before you even sell the property that you want to sell. From the time that you sell the equity-heavy property that you want to get rid of, you have 45 days to identify a qualified replacement property, and 180 days to close on that identified replacement property. ...and there are all kinds of rules and limits around how to identify property. But it must be specific. You can’t say that your replacement property is going to be a green duplex in Kansas City. You’ve got to give a specific legal address. The episode that I completely devoted to he 1031 Exchange topic a few months ago where I discuss the rules and the critical mistakes to avoid, and the deadlines and everything else for you, that is Get Rich Education podcast Episode #143. So the first way to access equity in a property is to sell it outright, the second way is through the exchange, and the third way that you mentioned, Jacob, is with the cash out refinance. The problem with the cash-out refinance is that you typically cannot access all of the equity in a property because you are not selling it like you are with the other two methods. So if you’ve got 50% equity in a property that you want to get rid of, you can get all 50% out with the straight sale or the exchange. But you might only be able to access 30% of the property value with a cash-out refinance because you might only be able to get an 80% loan-to-value loan. A bank is going to make you keep 20% equity in there as your skin in the game. The advantage of the cash-out refinance is that you shouldn’t have to pay tax on the equity that you extract because the IRS classifies this as debt. There’s no tax on debt that you’ve originated. One advantage of the cash-out refi over the 1031 is that the cash-out refi is faster & less stressful. You can move at your own pace. With a 1031, you’re selling at least one property and buying at least one property, so now you have all these steps - inspection, appraisal, you’ll incur make-ready expenses, and you’ll often be paying an agent commission too. With a cash-out refi., you typically just have an appraisal - no inspection, no make-ready, and no agent commission. But a 1031 is typically the best vehicle for moving equity from a “dollars” perspective. A 1031 is also a better move if you want to sell a “dog” of a property that you can’t seem to keep rented to decent tenants or something, but yet you’ve built equity in the property. If you own a property that’s been good to you but it’s become too equity heavy, you might be tempted to do a cash-out refi instead of a 1031, but yet if you can replace your nice cash-flowing property with one that cash flows even better, look at the 1031. When it comes to the cash-out refi, if you think that’s a better choice, remember - and this is especially true if you’re looking to do a cash-out refi of your own home - your primary residence, you can often take out a second mortgage and keep the first mortgage in-place, untouched. That might be a good option if you still like your first mortgage’s low interest rate or it’s advanced amortization schedule. A cash-out refi doesn’t mean that you have to restructure every part of the debt on one property. You can keep a first mortgage in-place and see if you qualify for a second. Just a word of caution on the second mortgage cash-out refi - if your second is a HELOC - home equity line of credit, those HELOC interest rates are not fixed. They float in lockstep with the Federal Funds rate which is expected to increase. To be safe, you want the CCR from your new purchase to equal or exceed that of the mortgage interest rate on the property that you just took cash out of. Although I like the 1031 more than the cash-out refi overall, I can think of a couple other disadvantages of the 1031. With the 1031 Tax-Deferred Exchange, you might experience a degree of stress, much of it having to do with the timing of meeting those 45 and 180 day milestones that I mentioned earlier. You don’t really want to be on a 3-week vacation to Peru and Ecuador during a 1031. On the properties that you identified as replacements for moving your equity into them tax-free, something might get slowed down in your ability to buy them that’s out of control, or if you’re looking to 1031 your equity into new construction property and the new construction is going too slowly, that can create some stress. With the cash-out refi., you’re on your own deadlines, not the 1031 deadlines that the IRS sets for you. You know another thing - another small disadvantage with the 1031 Exchange that people never think about - and everyone overlooks this. I didn’t really see it coming until I had the ball rolling with my first-ever 1031. It’s that during that time - those three months or so after you’ve sold your relinquished property and before you’ve closed on your replacement property, you’ve lost cash flow… ...because there’s that gap there - that delayed exchange gap where you don’t own some property for a period of a few months. I’ve done a 1031 with a substantial chunk of my portfolio, and I had about three months where a major piece of my cash flow was cut off until I closed on the replacements.   1031s & cash-out refis have definitely been good for me. I’ve made some mistakes in real estate investing for sure, but having an early awareness of the fact that dead equity isn’t serving me and then actually doing something about it really helped me get me to where I am today. If you’ve got a lot of equity in a property or a property paid off, you’ve got to realize that your money just got lazy. Not only is it not working for you, you’re paying the opportunity cost of not using it to also leverage other people’s money work for you. Don’t let your money get lazy. So when I’ve built up around 35% equity in an income property, that’s when I’m looking forward to moving it. It’s that 35% mark. With a primary residence, it would be less than 35% because I can pull more out - I can pull out equity up to a higher loan-to-value ratio. Just think about property that you have 50% equity in. Your leverage ratio is been slashed to 2:1. If you reposition it with 20% down payments on multiple properties, now your leverage ratio is 5:1. That is just huge, and it’s great as long as you’ve safeguarded controlling your cash flow… ...and we love cash flow - but what has created more wealth for real estate investors is really leveraged appreciation so consider keeping your leverage ratio up there by maintaining small equity positions in a bunch of properties. You know what else? The more that you learn about the economy, pulling $ out of property and transferring it into another property actually expands credit, that very act expands the money supply, and it stokes inflation… ...and as you know from listening to this show, inflation is actually our friend. Great question from Jacob - asking about the pros and cons of a 1031 Exchange vs. a cash-out refinance. By the way, that “Jacob” was “Jacob Ayers” - he is the host of “The Real Estate Way To Wealth And Freedom” podcast. That’s another show that you can listen to. You know what’s funny - some podcasters don’t want to talk about other podcasts similar to theirs or they’re afraid that they’re going to lose listeners to that other show that they talk about. Well, I just don’t feel that way - and well, maybe that’s part of my abundance mentality. Of course, I value my listeners and anyone wants more listeners just like an artist would want more people to see what they’ve spend weeks working on - on canvas. You can check out The Real Estate Guys Radio Show with Robert Helms and Russell Gray. That’s a really good one. Sheesh, I’ve even got a commercial on my show that tells you about someone else’s podcast - the Cashflow Ninja hosted by my friend M.C. Laubscher. That’s another good show that you can check out. He’s had some great guests on that show like Ron Paul, Robert Kiyosaki, and Jim Rogers. Once again, Jacob Ayers’ show is called “The Real Estate Way To Wealth And Freedom”. Uber and autonomous cars are killing the parking lot and that’s going to change real estate. I’m going to discuss that in a bit. I’ve also got some Dave Ramsey fallout from our episode from two weeks ago. You know, if you want to learn more about the misconceptions around debt and equity - which have been woven into this discussion so far - and how to use debt and equity to your advantage - and in the way that affluent people use them… ...and why getting your money to work for you won’t create wealth and how to get other people’s ethically working for you to create wealth for yourself and a lot more... I wrote a book less than 9 months ago about how you can do that. You can get the e-version of my book completely free. Not just a free chapter or something but the complete e-book free... ...Robert Syslo is going to tell you how easy it is to do that now. Go. ________________ Welcome back to Get Rich Education. I’m your host, Keith Weinhold. We got more great feedback on our episode from two weeks ago when we were talking about the largely - really - antiquated Dave Ramsey ‘debt-free’ School Of Thought. We’re talking about a School Of Thought that has - in the past - suggested that people eat things like cheap processed Ramen noodles - and beans and rice - so that they’ll have more money in their pocket so that they can pay off a car loan or a mortgage loan. When you pay down debt that’s lower than the rate of inflation, you’ve actually diminished your prosperity now. So now you’ve diminished your prosperity and you’ve eaten Granola bars and Cup O’ Noodles so now you’ve sacrificed your health - just to diminish your prosperity - plus...you took your time to learn about how to live like that!? That is just so absurd, scarcity-minded, and that is not serving people. Ugggh. I’m not going to go on, I don’t want to dip into hyperbole, but hearing about that stuff is just really dispiriting. If I’m going to use my time to learn about something, I want to learn about how to produce, not reduce. I think part of that is realizing that money is actually an abundant resource. Yes, money is an abundant resource. How much currency does the Treasury Department print every day? During Fiscal Year 2014, the Bureau of Engraving and Printing delivered approximately 6.6 billion notes to the Federal Reserve. They produced approximately 24.8 million notes every day with a face value of approximately $560 million. Those numbers are so large, some people can’t even fathom it. Those stats right there can actually be picked apart all day. Most dollars aren’t even printed, of course, they’re digital and they’re created out of thin air when dollars are borrowed into creation - but it just gives you some idea of how abundant money is. Look, my monthly internet bill is $145 and my Cable TV bill is $126 - yes, I have cable because it’s just a nice option and money is an abundant resource. I just learned this because I just saw the bills come in. You know, I’m just really barely aware of my consumer bills. I’m into expanding my upside instead. I don’t even know how much my monthly phone bill is. Maybe $100. So for internet, cable and phone combined, that’s...what three hundred seventy-some dollars a month? Is that a lot? It just doesn’t matter that much. I’m focused on what matters. Expanding the upside. Money is an abundant resource. How much do you like to spend on a hotel? To me, it seems like $300 a night is a common number to spend at a good hotel. What about a $79 hotel? I wouldn’t even want to stay there. I might not even want to stay there for free. But you know what, everyone has learned how to tap into abundance at a different level. Everyone’s got their price. OK, what about a $2,500 hotel. What if I were staying there? I might think that that price is pretty steep. I’ve got to admit, I would be asking myself a question like “Now why am I staying at a $2,500 hotel? Is this my honeymoon or something?” Maybe I would soon move to another hotel. Well, didn’t I just say that money was an abundant resource, so what’s my problem? Maybe the Amazon Founder, Jeff Bezos - he wouldn’t want to stay in a $300 hotel like I’m more used to and I just think of as standard. He might live in the $2,500 hotel year-round if he had to because it doesn’t matter to him. See Jeff Bezos and Amazon.com have figured out how to provide more value to more people than you have - and than I have. Money is an abundant resource. But just because something is abundant, doesn’t mean that it has no value. Look, the air that you breathe is pretty abundant all around us but it’s also really valuable. We would die without air just like we would financially die without money. But yet they’re both abundant. Right now I’m not too far - and maybe you’re not too far - from a parking lot with hundreds of cars in it. So cars look pretty abundant but each one still has value and utility just like dollars. So the point is that a scarcity mindset and an abundant mindset are relative in a sense. But really, if you’re looking to produce before you reduce, it’s an abundant mind. Money is an abundant resource, and the amount of the world’s abundant supply of money that will be allocated to you on this earth is directly proportional to how much value you create for others… ...how much sound housing you can create for others. Money is an abundant resource. Well, way back in Episode 13 of Get Rich Education, more than three years ago, I did an episode called “Autonomous Cars Will Soon Disrupt Your Life and Investments”...and I talked about how this will have implications for real estate investing. Well, we’re already seeing the world go that direction. In fact, ride-sharing services are accelerating this effect. Fortune magazine just reported this in the last couple weeks here, in an article titled “Uber Really Is Killing The Parking Business”. In the article, it outlined how Ride-hailing services like Uber and Lyft are having a negative impact on the demand for parking. The picture, at least for those trying to rent you a parking spot, is bleak. In the email, unearthed from a company report by the San Diego Union-Tribune, Ace Parking CEO John Baumgardner says that demand for parking at hotels in San Diego has dropped by 5 to 10%, while restaurant valet demand is down 25%. The biggest drop, unsurprisingly, has been at nightclubs, where demand for valet parking has dropped a whopping 50%. The numbers appear to be estimates, and Baumgardner doesn’t describe a timeframe for the declines. The assessment, written last September (6 months ago now), is also limited to San Diego, though an Ace Parking executive told the Union-Tribune that it has seen “similar” declines at its 750 parking operations around the United States. The company is focused on using technology, including better parking scheduling and booking options, to try to remain healthy. But much more is at stake than the revenues of the parking business – cities stand to benefit immensely as demand for parking drops. Parking spaces and lots generate relatively little tax revenue or economic activity relative to commercial operations, and increasing sprawl may actually harm the economy of cities like Los Angeles. Even back in 2015, cities were already relaxing zoning requirements that set minimum parking allotments, and there are now even more signs that city planners are thinking differently about parking. [Now get this] - Perhaps most dramatically, a new Major League Soccer stadium being planned for David Beckham’s Miami expansion team may include no new parking at all – but will have designated pickup zones for Uber and Lyft. The decline of parking will only be accelerated if and when autonomous vehicles become widespread. That sea-change which will make it easier to locate parking at a distance from urban destinations, and could further reduce car ownership. That will be bad news for the Ace Parkings of the world – but everyone else should welcome the decline of the urban parking lot. ...and that’s “it” for the article. I told you back in Episode 13 that this will spell a dramatic shift in the character and makeup of inner-cities and suburbs alike. Right now, many U.S. cities have central agglomerations where the surface area is 40 to 60% parking spaces. When you hire a ride-share car, you didn’t need to drive your own car to work and you didn’t have to park your car. Soon autonomous cars are expected to be all over the road and they’ll just always stay in motion. You know what else this means for homes in the suburbs - homes with garages could become less desirable over time. Now, they’ll probably just repurpose the garages, but… In any case, so many trends are changing the way humans interact with real estate and the economy… The internet diminished the need for office space as that almost completely wiped out the need for things like travel agencies. The internet reduced the number of all kinds of other business like the number of bank branches. Of course, Amazon keeps killing off traditional retail consumer good purchases. Ride-share services and autonomous cars are diminishing the parking business - this one is now happening in front of our eyes - it is happening now - there’s no more “someday” on that one. ...And despite all these trends, the residential real estate space is hardly impacted. That’s why we focus on the residential space here - not only is it easier to understand because you interact with residential space every day of your life, but residential is here to stay. Well, because we’re around residential real estate every day it’s kind of paradoxical that it’s so misunderstood by so many people. When you tell a lot of people that you’re a real estate investor, oftentimes they think that you’re a house flipper, and then if they hear that you’ve got rental property, the next thing that they think about is that you must be the landlord. If you’re either of those things - especially the landlord - you’re not getting a very good ROL - Return On Life. So let’s talk about passivity. You have the ability to make real estate investing passive - and at the beginning of this show - it says that you’ve created more passive income from this show than nearly any other show in the world. Well, even if you’re “hands-off” and you’re not the landlord, it still doesn’t feel so passive if you’ve got a week where your rental property’s roof blew off and you’re looking at contractor quotes that your manager has pulled together for you and managing an insurance claim that you had to put in. Aren’t you working for your passive income a little bit then? ...and I would say that, yes, you are at that time. Your property might operate 24 hours a day, 7 days a week for many weeks in a row or even months in a row without your involvement at all. It probably operates for you passively 98 or 99% of the time or more...passively. That’s why it’s called passive income. For you, it’s hands off. You’re not fixing leaky faucets and you’re not collecting rent checks. When the problem that you have 1% of the time blows over, you’re right back to passive again. Alright, compare that to your work-a-day job. What happens when you have a problem at work? You handle it, and what happens when that problem is handled and goes away - you go right back to active income. At work whether you have a problem or whether things are going fine, it takes your involvement. ...and that’s really my point here for you. It’s NEVER passive - unless you’ve got some vacation time. Then maybe you can say your active job is just 5 or 10% passive. In real estate investing with the way we do it, passivity is the norm, not the exception. So, just keep that in mind if - not if - but when - you have to be resilient during some bumps in your “almost-always” passive real estate investment portfolio. You know, there is so much that I want to talk to you about every week that I just can barely fit it in. That’s why I do these monologue shows with no guest once in a while. I haven’t even told you about my recent RE field trips to Florida or Belize yet, though I’m really looking forward to telling you more about those here. You are really out there taking action so before you go, let me just help you with one other thing while you’re out there looking at properties. Don’t underestimate the expenses that you project that your property will have. Of course, your mortgage and all of your other expenses are 100% outsourced to your tenant in a cash-flowing property! It’s easy for you to remember that you have a mortgage payment (principal plus interest) because that’s your largest expense. You know that I’ve mentioned that an easy way to remember your other recurring expenses - which are really all of the operating expenses - because mortgage principal and interest are not an operating expenses… ...is with the acronym “VIMTUM” - and I mentioned VIMTUM last week when Clayton Morris interviewed me, but let’s hit each one of these: Vacancy – This depends on your property type, the local job market, and more. 8% of the gross rent amount is often a good number, equating to about one month per year of vacancy. If you’re in a strong job market, 4-5% might work. You’re guessing here. Insurance – Your lienholder requires you to have property insurance. Having a policy reduces your risk too. You can get quoted an exact number here. Maintenance – Now here is where a lot people underestimate this number, which can be 3% to 15%+ of the gross rent amount. This is where you must make your best guess based on the property age, history and other factors. Taxes – You have a property tax obligation, often 1 to 3% of the property value annually, depending on the area. This is an exact number that’s easy to find in county or municipal records. Utilities – In a single-family income property, your tenant typically pays utilities. The more units in a property, the more likely you’ll be paying the heat, electric, refuse, water, etc. Utility companies have historical records so you can make a close expense determination. Management – If you don’t have a Property Manager then your income isn’t passive. If you self-manage, then you must factor in your time expense. Management fees are typically 3% to 10% of the gross monthly rent amount. The more units in a building, the lower the management expense. People like easy ways to remember things. That’s why I like VIMTUM. I also made a video for you about these income property expenses where I’m talking directly to you. I’ll put that video link in the Show Notes for you. So when you connect with an income property provider at GREturnkey.com - if they haven’t - then run your own numbers on an income property using that VIMTUM acronym. Those providers are at GREturnkey.com - download a market report and get their contact information, and see what they have for inventory. It sure is thin in most markets these days. I appreciate the time that you spent with me today, but you weren’t here for me you were here for you. Until next week, I’m your host Keith Weinhold. Don’t quit your day dream! ____________________________  

#178: The media - a FOX News Anchor - asks me about Get Rich Education wealth-building principles. Rather than asking questions, I’m the one being interviewed here. I tell the interviewer why getting your money to work for you will NOT create wealth. In real estate, I tell you why your ROI typically goes down after Year One. How to calculate a real estate rate of return; the differences between poor, middle class, and wealthy; being bold; increasing income, and more is discussed. The interviewer, Clayton Morris, is an experienced real estate investor himself. If you want to buy income property: 1) Start at RidgeLendingGroup.com to see how much property you qualify for. 2) Find reputable turnkey property providers at GREturnkey.com. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 03:48  Interview with longtime Fox News Anchor, Clayton Morris begins. 05:00  Be bold. 07:26  Increase income. This is available to anybody - no certification or degree needed. 11:56  My first four-plex, bought for $295,000 in 2002. 14:25  Self management vs. professional management. 16:30  Leverage. 19:01  Why it’s a good time to be a RE investor. 20:39  Lower middle class neighborhoods. 26:42  How RE investors actually get paid five ways simultaneously.   39:32  Why your ROI typically goes down after Year One. Resources Mentioned: RidgeLendingGroup.com ValhallaWealth.com ClaytonMorris.com GREturnkey.com GetRichEducation.com

#177: Are you serving the 40-year-to-life sentence? Today’s guest, Jerry Fetta, is a former Dave Ramsey-endorsed local provider. Jerry learned a better way and changed his life and the lives of others. There’s a more abundant way. You just can’t afford to forgo the benefits of leverage and arbitrage. Jerry is an expert at uncovering how the mutual fund industry manipulates reporting the ROI to their advantage and your detriment. Questions that put your financial advisor on the hot seat are revealed today. We discuss why “tax deferral” is a scam. I simply don’t have time to do 1-on-1 coaching. Jerry is a good friend, lives in my hometown, and he’s offering GRE listeners a free consultation. See if you’re a good fit: GetRichEducation.com/Coaching. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 00:41  Mortgage interest rates are rising. Take action. 04:10  I used to be a debt-free, save-in-a-401(k), 15-year mortgage guy myself. 06:45  Jerry Fetta interview begins. 08:42  Jerry is a former Dave Ramsey-endorsed local provider. 11:14  Some things aren’t worth owning. 13:49  Affirmation vs. Information. 15:43  Jerry’s turning point: scarcity to abundance. 19:30  Stocks don’t produce wealth, but few make that correlation. 21:55  How mutual fund rates of return are reported: CAGR vs. AAR. 26:35  Questions to ask your financial advisor. 30:07  Tax deferral is a scam. 34:15  Case study: How Jerry helps a typical client. 39:03  The “passive income epiphany”. 43:24  Maybe someday? Come on. Integrity. 47:08  Engage with Jerry for 1-on-1 coaching free at GetRichEducation.com/Coaching. Resources Mentioned: GetRichEducation.com/Coaching RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com

#176: Stock investors are not getting ahead, but they think that they are. 10% return, minus 5% inflation, minus 2% fees, minus taxes, minus volatility, minus more. Most methods of valuing an income property are lousy. I tell you the good and the bad methods: price per square foot, price per unit, RV ratio, Gross Rent Multiplier, Cap Rate, Cash-On-Cash Return. I tell you how to avoid overpaying for property by making your offer contingent on seeing the seller’s “Schedule E”. The bustling Charlotte, North Carolina real estate market is discussed. It is growing at an enormously fast rate. Learn about using IRAs and 401(k)s for buying real estate, and leverage vs. paying all-cash for property. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:06  Why stock investors aren’t getting ahead. 04:17  Real estate performs. 06:27  Mortgage interest rates are up, Fed Chair change. 07:26  How to avoid overpaying for property. 09:50  Income, expense, and financing gears. 10:03  Price per square foot, price per unit, RV ratio, Gross Rent Multiplier. 11:49  Cap Rate vs. Cash-On-Cash Return. 17:35  Avoid overpaying with Schedule E. 22:45  Charlotte, North Carolina’s rapid growth. 25:12  More appreciation, less cash flow. 29:11  Typical property is an SFHs, $100K-$120K rents $1,000+. 31:02  Using IRAs and 401(k)s to buy real estate. 35:08  Leverage vs. paying all-cash. Resources Mentioned: GetRichEducation.com/Charlotte RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com  

#175: The next twenty years will be nothing like the last twenty years. Chris Martenson of PeakProsperity.com tells you where wealth originates. It’s called primary wealth, consisting of things like trees, soil, a fishery, or a rich ore vein. The further you invest from primary wealth, the less real wealth you have. You learn about your 8 Forms Of Capital: Financial, Social, Material, Living, Emotional, Knowledge, Cultural, Time. You also learn about the future of energy. Wind and solar energy are not replacements for oil. I bring you today’s show from Anchorage, Alaska. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 00:58  The textbook definition of wealth. 04:05  Primary, secondary, and tertiary wealth. 07:39  Chris tells us why stocks aren’t real wealth. 09:33  Why economies can’t grow to infinity. 12:35  Energy growth limits. Oil vs. renewables like wind and solar. 22:42  The 8 Forms Of Capital: Financial, Social, Material, Living, Emotional, Knowledge, Cultural, Time. 30:10  How to get more Social Capital. 37:40  Holistic wealth. Happiness levels. Resources Mentioned: PeakProsperity.com Chris Martenson’s book “Prosper” RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com  

#174: You actually want to increase your personal expenses over the long-term. What kind of financial blasphemy is this? I explain. You are worth more than you think. I tell you why. If you’re 30 and you live until age 90, you only have 60 more autumns in your life. You only have 7% of your time left with your own parents. Your quality time is valuable and fleeting. Some people have an overinflated sense about the importance of taxes. Rate of return matters more. Returns are like a pie, and taxes are only a piece of the larger pie. If your portfolio is small, do you really need an LLC for your income property? There’s a discussion of appreciation vs. cash flow. I bring you today’s show from the Dominican Republic, where I'm vacationing. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:16  Over the long-term, you actually want to increase your expenses. 07:19  Why you are worth more than you think. 09:05  Measuring your life in terms of events and relationships. 20:37  If mortgage interest rates go up, rents go up next. 22:15  Rate of return is more important than tax rate. 24:16  Why do you think you need an LLC? 28:07  Real estate appreciation vs. cash flow. Resources Mentioned: Article about expenses WaitButWhy.com RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com

#173: Don’t move to a low-tax state; let your tenant do it. Quit investing only for the long-term. I explain both. Alabama is the #1 state for per capita foreign direct investment. We discuss turnkey real estate investing in Birmingham, Alabama. A revival is taking place in Birmingham amidst economically diverse business sectors. Long-term tenant retention occurs in Birmingham submarkets due to: 2-year leases, tenant-owned appliances, more. When you purchase a turnkey property, you’re also “purchasing” a tenant and their income stream. We discuss. It takes about $24K-$25K to “get into” this market with down payment and closing costs on a turnkey single-family home. We also discuss how a real estate investor gets started: lender pre-approval, writing an offer, inspection, appraisal, etc. Learn more and find Birmingham property at GetRichEducation.com/Birmingham. I bring you today’s show from Orlando, Florida. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:14  Don’t move to a low-tax state. Quit investing only for the long-term. 06:14  Thriving Alabama and the revitalization of Birmingham. 10:00  Downtown Birmingham. 16:05  Primary market drivers in Birmingham: medical, automotive, Amazon sortation, education. 18:46  Neighborhood selection. 21:10  B-Class properties $80K to $125K. $1,000 rent on $104K property. 22:22  Tenant retention. 26:12  Property upgrades. 30:20  Tenant qualification. 32:38  Same rehabilitation company and management company. 36:00  City inspectors. 38:26  How you get started: lender pre-approval, writing an offer, inspection, appraisal, etc. Resources Mentioned: GetRichEducation.com/Birmingham RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com  

#172: Your market choice is more important than your property choice. One of the most prominent real estate developers in the United States, Victor Menasce, tells us how he selects a real estate market. Investing in larger metro areas is generally safer than investing in smaller metro areas because geographies are better diversified. Being invested in only one investment market is a mistake. You’re undiversified. Should you pay more or less than the construction cost of a property? Victor tells us the difference between price and value, and why that matters to you. Four factors drive price/value: 1) Construction cost. 2) Availability of money. 3) Inflation. 4) Supply and Demand. Victor is an expert at selecting markets, developing, and raising capital for deals. If you’re developing or making a large real estate investment, think about how consulting Victor could be a great investment. Connect with him at VictorJM.com. I join you from north Florida today because I’m out looking at, yes, real estate markets! Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:45  Investing in only one geographic market is a mistake. 02:30  Recency bias. 08:00  Investors should start with economics and the market, not the property. 11:48  People are moving south. 13:10  Primary drivers. Oil & gas. 14:25  Real estate use type: senior housing, residential, shopping malls, office, medical. 20:25  Solving problems and meeting needs. Get out from behind your desk. 23:40  Buy on the line; move the line. 25:18  Formulas and numeric rules of thumb. 27:20  Jetsons vs. Flintstones. 29:55  Relationship-based deals. 32:24  Price vs. value. 37:43  Your turnkey provider has local knowledge. Resources Mentioned: VictorJM.com GetRichEducation.com/Jax GetRichEducation.com/Orlando RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com  

#171: Your tenant is your customer. I discuss how to attract and retain great tenants. You must think about how your tenant thinks. The quality of the asset you buy affects the quality of the tenant that you will attract. Six qualities tenants want are: 1) safety 2) move-in-ready condition 3) short commute distance 4) upgrades 5) neighborhood amenities 6) rent amount. It’s not about what you would want in a rental unit, it’s about what your tenant wants. Next, I tell you how to profit from inflation. Debt has a bad name. It shouldn’t. I tell you why you want to consider borrowing massively to profit from inflation. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:56  The definition of great tenants. 03:11  Avoid “A” and “D” class areas. 04:16  Six ways to attract great tenants.  13:23  How to retain the great tenants you’ve attracted. 20:55  How you can profit from inflation. 21:57  Inflation defined. 24:34  Why make extra mortgage principal payments? 27:28  Robert Kiyosaki. 31:05  The power of smart debt. How you get a “phantom” $40,000 gain per year on $1M debt. Resources Mentioned: How To Profit From Inflation - My Forbes article RidgeLendingGroup.com ValhallaWealth.com GREturnkey.com GetRichEducation.com   Hey, welcome to GRE. This is Get Rich Education, Episode 171. I’m your host and my name is Keith Weinhold and today we’re talking about how you attract and retain great tenants for your income properties - some of which is just sort of common sense. Then after that we’re going to discuss a topic that’s definitely not common sense which is where real estate investing intersects with the economy that you live in everyday. This is really fundamental stuff. Your tenant is your customer. You’ve got to be able to supply a product that they demand and then keep them there. As any real estate investor knows, your #1 cash flow killer is vacancy and turnover. So let’s dig into the heart of how to reduce that for you here. So the success or failure of your real estate investments depends on your ability to consistently attract and then retain great tenants. In the end, it doesn’t matter how great of a deal you got on the property or how strong your projected cash flow and return on investment are. Without great tenants that pay rent on time and take care of your property, the cash flow and returns all just evaporate into thin air. Great tenants by definition - have a job, clean, pay rent on time, and that they’re law-abiding. And yes, I do mean that they have a job. Here at GRE we talk about “Don’t Follow Money, Make Money Follow You”, well your tenant doesn’t think that way. By and large, they move to where the job is. They make a central part of their life following money around rather than following their heart or following their passion or chasing their dream. They follow a job. As I’ve often said, you want to think about how your tenant is thinking. Your tenant is just not as aspirational as you - the GRE listener is - and that’s OK - I’m glad that they’re there for us and that there’s a steady supply of soul sellers - yes, people selling their soul. So the question that naturally follows is: How do you find great tenants for your investment property? The answer is so simple, yet so impactful. The quality of the asset you buy determines the quality of the tenant you are likely to get. You can’t change a property’s location. Now, understand that you don’t want actually want an amazing A-class location. Those high-end properties aren’t profitable for long-term rentals, anyway. OK, you’re not looking for a single-family rental home with great, sweeping panoramic views of a pristine, sparkling lake that’s stocked with trout or a home with a 3-car heated garage with a painted floor. That’s A-class stuff: the best properties. I’d also advise staying away from the bottom: D-class properties - the worst. The ol’ collecting the rent at knifepoint stuff. That’s not where you want to be either. If you want to find excellent tenants for your investment-grade property, you should first purchase an investment property with the qualities that attract excellent tenants. So, really a great question to ponder - if you want to find good tenants - is: then what do good tenants look for in an rental property? 1. Safety Safety is our most basic human need and a powerful motivator for excellent tenants. One of the main reasons why your prospective tenant decided to spend more to lease a home (as opposed to an apartment) is to provide a safe environment for themselves and their family. Purchase properties in safe neighborhoods - again, avoiding D-class areas. Good turnkey providers know this & practice this. They have a company reputation to protect. Turnkey providers want referrals from satisfied investors. 2. Move-In Ready Condition The condition of the property—and more specifically the ability to move right in—is very important to excellent tenants. You could rent out a property that’s not quite move-in ready (requires paint, flooring, cleaning, etc.), but I assure you it won’t be to an excellent tenant. Your target tenant plans to take care of your property and has high standards of cleanliness and maintenance. If you provide a move-in ready home, you are communicating that you share those same standards. You know what, the first property manager that I ever hired - I only employed them for a year or a year in a half before I had to get rid of them - is because when I had a vacancy, they just didn’t get the property fresh and clean for the next tenant. So therefore, the unit still had knicks in the walls and faded paint and half-busted window blinds - and they considered that ready - they showed that to prospective new tenants. Well, what a waste. I wouldn’t even want to accept the type of tenant that would accept living in those conditions themselves. Because that type of tenant probably wouldn’t respect the unit either. So, what you can ask your manager to do - between your first few tenancies - is have them send you a 30 to 60 second walk-through video to verify that it’s acceptable to you. If it’s acceptable to you, then it’s probably going to be acceptable to a quality tenant - and this is just a good way for you to get an update on how your property is looking across the country anyway. Any good manager will do that for you. 3. Proximity to Employment Let’s face it, very few people like to commute! So proximity to employment centers is very important to good tenants. You can have a great, move-in ready home zoned to great schools, but it won’t matter if your tenant has to drive an hour to work each day. As you look at potential properties, think about where your target tenants are likely to work and how close the property is to that area. Proximity to things that everyone needs - like proximity to a good grocery store or a Walgreens or other drug store - that’s helpful too. We’re talking about the fundamentals of what your tenant wants today. That’s your customer. The last time Rich Dad Advisor Ken McElroy was here, we discussed what the newer amenities are that tenants want today that they weren’t so much asking for 10-15 years ago like good wifi. Today we’re just talking more fundamental. 4. Upgrades Some inexperienced investors subscribe to the myth that your investment property needs to be good enough for you to want to live in it yourself. I’m telling you - depending upon your standards, that’s flawed. You’re really limiting yourself if you think that way. I’m telling you, every rental property that I own - I can’t think of an exception to this right now - if I lived there, it would be a substantial downgrade to my quality of life. Now, on the other side, you might think that that your unit just needs to be “good enough for a rental.” Therefore, you purchase starter homes with cheap finishes and maybe vinyl flooring that’s thin and peeling them at the edges and then you rent them to marginal tenants and get limited results. That can almost work in some markets but this is likely going to hurt you with tenant retention. When that tenant starts doing just a little better financially, they’re going to move out. So don’t do that; instead, purchase homes that have strategic upgrades that move the needle with the better calibre of tenants that you want: vinyl plank flooring, even granite countertop in some markets, black or stainless appliances - not so much white ones, covered patios, things like that. You know how I talk about how it’s not about what you want, it’s about what your tenant wants. It’s about putting your desires aside. For example - and I know that I’m different here - I’ve never understood people’s desire for hardwood laminate flooring or vinyl plank flooring. To me personally, carpeting is just so much more comfortable. On top of that, when people move into a place that has the laminate flooring that they desire, what’s the first thing they do? The first thing they do is find a big area rug to put on top of their laminate or vinyl flooring. Ugggh - I just don’t get it. And then the area rug doesn’t have any padding underneath it so it still isn’t nice & soft. People say that laminate flooring is easier to clean - not really - not when you’ve put a big area rug in the middle of it - now you’ve got that rug to clean plus you need to use the Swiffer dry on the perimeter where the fake wood is - it just doesn’t make sense to me. Plus in cold climates, the laminate feels cold on your feet. I’ve just never understood Americans’ desire for these cold, hard surfaces. But this is where I have to put aside what I want. Most people - tenants included want cold, hard surfaces for whatever reason. I just don’t get it, but I don’t have to - you need to understand what the customer wants and give it to them. ...and I’m happy to give their cold, hard, vinyl plank to them because it’s more efficient for investors in the long run - it rarely has to be replaced. -We’re talking about how to find and retain great tenants today. 5. Neighborhood Quality Now, neighborhood quality is kind of different from safety. Neighborhood quality determines the quality of your tenants’ life. Think about the community you live in—the neighborhood amenities probably played a major part in your decision to live there. Your lifestyle is different in a neighborhood with running and bike trails, community pools, tennis courts, a gym, etc.? Quality tenants care about neighborhood quality. A community doesn’t have to have ALL those amenities, but if it’s got a few, that’s better. Access to Transport & Basics Access to modes of transportation and basic necessities like grocery stores, restaurants and shopping is very important because it affects other important factors such as commute to work and lifestyle quality. When you’re looking at investment properties think about: How easy is it to get to the main highway/park and ride/public transportation? Are there basic services within easy reach? 6. Rent and Price Last but not least, your investment is ultimately a business decision for you as well as your prospective tenant. Your tenant will be concerned with the rent, and you will be concerned with the relationship between the rent and the price you pay for the property. Make sure the projected rent isn’t so high that it limits your tenant pool and so low that it lowers the quality. good tenants pay their rent on time. That’s a baseline. Great tenants go well beyond on-time payments. They treat the property with respect, seeing it as a home versus a rental, and they treat you as the owner and provider of that home with respect also. So, there I’ve discussed six items that attract excellent tenants to your property. Retention You know what, if your tenant wants to paint the inside of their property, I say let them. It makes it like home to them, and when it makes it like home to them, you’re going to  retain them. They’re also more likely to a pay rent increase. They’ve invested their time in painting the place, plus it feels like home. Conversely, what if they ask to paint the place and you tell them “no”? How long do you think they’ll feel like staying? It can be written into the lease that they have to paint it back or whatever. So let them paint it. Let them make it feel like it’s theirs, and they’ll probably take better care of other parts of your property too. Another way to retain excellent tenants if that you should ask for tenant referrals. Birds of the same feather flock together. You are the average of the five people that you spend the most time with. If you ask your excellent tenant who their friends are and offer them a $100 gift card or even $200 gift card - that is so worth it for another excellent tenant. Something else that helps with retention - and this is where the power of hiring out professional management really helps you - is that your manager should respond to maintenance requests promptly. A good tenant will get sick of dealing with that leaky faucet, with that pilot light that keeps going out in the water heater. If you’re a full-time job worker, it’s a lot easier to defer - to put off - handling that maintenance request if you’re your own manager. Again, think about how you would want to be treated. Think how your tenant is thinking. If their bathroom door hasn’t closed properly for three weeks after they’ve first told you about it, #1, they won’t be happy and #2, they sure aren’t going to refer their friends. When it comes to maintenance requests, a 24-hour answering service for your tenants makes them feel better even if your manager doesn’t get to it right way. Ultimately, what you want are happy tenants. When you have happy tenants, you’re probably meeting that ideal that we talk about here where you’re providing housing that’s - you’ve heard me say it many times - clean, safe, affordable, and functional. I’m coming right back with more. We’re going to talk about perhaps the most stealth way that real estate investing makes you wealthy. Something that definitely does not qualify as “common sense” at all. First - and I didn’t know whether I wanted to mention this earlier or not, but, while I’m talking to you my heart is rather heavy today because my Grandma Weinhold - my father’s mother passed away. I actually tried to do the show here earlier and I wasn’t quite ready, but you know, I found some more strength when I realized that Grandma would have wanted me to do it. You know that I’ve sort of affectionately referred to my Grandma Weinhold as Grandma Yellen on the show before for her loose physical resemblance to Federal Reserve Chairwoman Janet Yellen...so, I thought you just deserved to know. She was also my last surviving grandparent so from my perspective, I’ve lost an entire generation of my family today. You know, at best, when something like this happens, I like to think “Don’t be sorry that it’s over. Be glad that it happened.” Especially when she was 95 years old - just weeks from 96, she still lived in her own home by herself, and I just two days ago I talked to her on the phone as she was in her Lancaster County, Pennsylvania home and, you know, I could talk to her just like I’m talking to you - I never had to slow down my talking or raise my voice. She had a great mind. Always incredibly loving & welcoming to others, she still hosted the entire extended family at her own Fivepointville, Pennsylvania house this past Christmas. It was her last Christmas. I’ll be right back. I will always love you and your spirit, Grandma Weinhold. _____________________ I’m Keith Weinhold. Welcome back to Get Rich Education. Before you purchase that clean, safe, affordable, functional property, you’re going to be miles farther ahead if you have a mortgage lender that specializes specifically in income property loans. In fact, ideally, you’ll start there before you select a property. A company that knows what non-owner-occupant investors need can get you closed faster - and even help ensure that you get closed at all. The company that’s helped more real estate investors realize their dreams of financial freedom than any other mortgage lender in the entire nation - can help you too. That’s Ridge Lending Group. They’re based in Portland, Oregon but that hardly matters because they specifically focus on originating income property loans and they do it in almost every U.S. state. You can check them out at RidgeLendingGroup.com Ridge Lending Group’s CEO Caeli Ridge has generously been here on the show with us three times to give you the inside scoop on how to best financially position yourself and about all the changing lending guidelines. She was most recently here on Episode 154. So when you get ahold of them at RidgeLendingGroup.com, tell them thanks for coming onto GRE and helping you with your strategy. You know, with what I’ve discussed on how to attract and retain great tenants in your property, I think that a lot of that is common sense, yet they’re the type of things you might tend to forget about if you aren’t reminded once in a while. Something that’s not so common sense-ish is how you can profit from inflation - and my first-ever article that I wrote recently for Forbes Magazine covered that topic. Not just reading the article to you here, but also injecting some more commentary into it for you...this is stealth stuff, so here we go... As a 15-year real estate investor, author, Rich Dad Advisors writer and long-time real estate investing podcast host, I've found that homeowners and investors alike still champion the largely antiquated ideal of a "paid off" property. Inflation is just one of many reasons to consider maintaining a mortgage. ...and, by the way, leverage and tax benefits are some other big reasons for holding a mortgage - leverage is probably the biggest one - but we’re talking about inflation’s importance in why you should keep your mortgage loan balance high here. First, What Is Inflation? Inflation is the rate at which price levels rise. It results in the diminished purchasing power of your dollar, which keeps getting “watered down” over time. It is why your $8 Chipotle burrito will soon cost $9. It is why in 1913, a pack of Wrigley’s gum costing you 4 cents will cost you one dollar today. You don’t think about inflation as much as you should Do you know why you don’t think about inflation as much as you should? because you’ve never seen an “inflation bill” alongside your electric bill, internet bill, credit card bill or Netflix bill. Inflation is insidious — an invisible tax, a stealthy thief. Your inevitable dollar debasement is precisely why you wouldn’t keep a million dollars in the bank for three decades. In 30 years, a 4% inflation rate would whittle your million bucks down to just $308,000 of purchasing power. From Ancient Romans crudely clipping the edge of denarius coins to the U.S. Federal Reserve’s Quantitative Easing in the 2000s, governments and central banks feed their inflationary mandate. Well Now How Exactly Does Inflation Benefit Mortgage Holders? In 30 years, a 4% inflation rate would whittle your million dollar mortgage down to just $308,000 of inflation-adjusted debt burden. Yes, so just like inflation harms the saver, it benefits the borrower. Real estate investors have the ability to borrow with long-term fixed-interest-rate mortgages tethered to an income property — at scale. When you borrow this way, your monthly principal and interest payments are completely outsourced to tenants. Why rush to pay down your loan when both tenants and inflation erode your debt for you? When you're the beneficiary of this situation, you have to ask why you would make extra mortgage principal payments. When you do, here's what you're saying: "Hey, Mr. Banker, here's an extra $100! Don't pay me any interest on it. If I need it back, I'll pay you fees once again, plus I'll prove to you that I qualify again." That’s kind of along the lines of my whole “Financially-Free Beats Debt-Free” mantra there. Rather than using an extra $100 to pay down your mortgage, what if you used it toward investing in more real estate? If you believe that real estate creates wealth, then you want to control more property, not less. You can't shrink your way to wealth. Take out a million-dollar loan and factor in, say, 10% inflation over a couple years, and you will end up only having to pay it back in nominal (in name only) terms. Your lender is not requiring you to repay in inflation-adjusted dollars. So with that 10% inflation, it becomes just $900,000 that you need to pay back in real terms. As time passes, an inflating currency supply means that wages escalate, consumer prices climb higher and your properties will command higher rents. This is why it becomes ever-easier to pay back your debt. Inflation-profiting is your quietest wealth center as a real estate investor. It is your “friendly phantom." If you have, for example, a $1,250 fixed-rate amortizing mortgage payment on a property you lease to others, that won’t rise with inflation either. But your rental income will. This is why your cash flow grows faster than inflation over time. It’s because your biggest expense - your loan repayment amount - is typically fixed. No loan means no inflation-profiting benefits. Inflation transfers wealth from lenders to borrowers. Lenders are paid back with diluted dollars. Real estate investors are optimally positioned to take advantage of this. Remember, if inflation transfers wealth from lenders to borrowers, how many mortgage notes do you really want to hold onto? I know we’ve got some mortgage note investors out there. I want to mostly get on the debt side instead. When I’m a debtor, now I’ve got inflation helping me, not working against me like it does for mortgage note holders when that person is making a loan to others. Again, inflation transfers wealth from lenders to borrowers. What did Robert Kiyosaki say about debt the last time that he was on the show here with us? So, this Robert Kiyosaki, the author of the book “Rich Dad, Poor Dad” and the greatest personal finance author of all-time, when asked about real estate, debt was the first thing that he brought up! By the way, he was last with us here in Episode 126 if you want to listen back, so... The rise of globalization and technology might slow inflation’s creep, but I don’t believe that it can reverse it. To create wealth, you need to both think and act differently than the crowd. Importantly, each debt origination is smartly anchored to an income-producing asset — a property — that’s worth more than the amount of that debt. If your asset value temporarily drops like many experienced in 2007-2010, would you really be concerned if it still produces income for you? Risk still exists. You must carefully select this cash-flowing asset in a metro area that projects job and population growth so that you have a reasonable expectation that the property will stay occupied with a rent-paying tenant. Why Does Debt Get A Bad Name? Debt triggers negative feelings because your first experience with debt likely was when it was tied to something that didn’t produce income. You worked overtime on the weekend in order to make your Honda Civic payment. You made sacrifices to pay credit card finance charges on a Morton’s Steakhouse dinner that you splurged on six months earlier. You paid for your Honda Civic -- your Honda Civic never paid you. But if you use smart debt tied to an income-producing single-family home or eight-plex, now you’re on top of debt — not trapped beneath it. What’s Your Bottom Line? You borrow — massively. That’s how you profit from inflation. If you have substantial equity in only a few properties, make equity transfers via cash-out refinances and 1031 tax-deferred exchanges. This creates smaller equity positions in more properties. First, this means you'll have more smart debt. Secondly, realize that your equity is not lost -- it is only transferred in order to create greater leverage. Thirdly, you can better diversify into different geographies, hedging market risk. Fourthly, with greater projected cash flows, you've taken steps away from debt freedom and toward financial freedom. Finally, you're quietly profiting from inflation. Your currency will keep losing value. Rather than this causing frustration, now you know how to make inflation profitable. In fact, I’m an inflation cheerleader. Some people have so much bad debt that they can’t sleep. If I didn’t have enough smart debt, I couldn’t sleep. So, this is why I’m interested in debt. Just think, for every million dollars in real estate debt that you have, if inflation is 4% - and it’s easy to believe that the real rate of inflation could be higher than 4% - and certainly higher than what the government reports… ...but at just a 4% inflation rate, your million dollars of debt that’s outsourced to others means that you’re being enriched an extra $40,000 every year. $40,000 for you every year - and this is a way that real estate makes you wealthy that most people just never even consider… ...and how many people hold onto $1M of debt for as little as a year. Almost nobody, so over just five years, that’s an extra $200,000 transferred to you. Actually with compounding - it’s more - maybe $220,000 over five years - again, on something that most people don’t even notice. So, it’s no wonder why real estate investing has made more ordinary people wealthy than anything else. Gosh, if you’re newer to studying the economy, just read more on Investopedia on what economists think the true rate of inflation is. We’re just been talking about 4% inflation on your $1M of cash-flowing real estate debt. What if you’ve got 6% inflation - again, a totally realistic number - 6% on $2M worth of debt? That’s a $120,000 gain that you’re receiving each year. You’re holding properties more than one year. So over five years, that’s a $600,000 gain for you - maybe $630,000 or something like that with compounding - and this is something going on in the background that most people don’t even consider - with all the other ways that real estate is paying you. Just astounding! I’ve linked that Forbes article for you in the Show Notes in case you care to read that to help reinforce what you’ve just listened to. I also discuss the inflation-hedging benefit and the four other ways that real estate investing pays you - yes, you’re paid five ways simultaneously as longtime listeners know. I discuss all this in my quick-read 80-page book and I’m giving away the e-version of that book “7 Money Myths That Are Killing Your Wealth Potential” completely free. I’m not sure how much longer I’m going to to that. Not just a teaser chapter or two giveaway, but I’m giving away the entire book free at GetRichEducation.com That ought to give you plenty to think about until next week. I am enthusiastically dedicated to helping you build durable wealth for yourself. That’s why I’ll be back for you next week. Until then, Don’t Quit Your Day Dream!

#170: You can live a rich life and leave a rich legacy at the same time. Guest Rachel Jensen and I discuss how. Timber is a hard asset that physically grows in size, and often grows in value at the same time. Your real estate, gold, or stock share might increase in value - but it doesn’t increase in size at the same time like timber does. Among timber varieties, you’ve probably heard of teak wood but might not know much about it. It has great value due to its durability. Teak’s natural oils make it resistant to fire, pests, and the elements. That’s why teak is so popular for boats, decking, furniture, and more. Teak was even used on The Titanic! The world continues to have more humans and less arable land. Teak products have been used for over 300 years. This makes teak supply vs. demand fundamentals sound for investors. Traditionally, most timber investing was done by ultra-wealthy people, and prestigious Ivy League endowment funds like Harvard and Yale (they both still invest in timber). Today you’ll learn about how everyday investors can invest in teak parcels: Land titled to you that can appreciate in value. Divided 1/4-acre parcels where you get income from the teak harvest. Low cost of entry. Available inventory at this time. Turnkey-managed. Light taxation. Use with cash or IRA funds. Optional qualification for a residency program. Ability to gain both shorter-term income for yourself, and a legacy for others. You’ll learn that our provider offers Get Rich Education followers like you a discount per parcel for a limited time. Want more wealth? 1)    Grab my free E-book and Newsletter at: GetRichEducation.com/Book 2)    Actionable turnkey real estate investing opportunity: GREturnkey.com 3)    Read my new, best-selling paperback: getbook.at/7moneymyths Listen to this week’s show and learn: 01:51  Timber vs. gold. 03:17  One particular timber type - teak wood - is particularly valuable. 06:42  Teak properties and uses. 10:30  Supply vs. demand for teak. 15:15  Historically, only the wealthy invested directly in timber. 18:47  Surveying small parcels of teak hardwood for “average investors”. 22:17  Teak parcels can be titled to you. You also own the trees on the land. 23:47  Light taxation. Panama stability. 26:47  Parcel size and cost. 27:45  Turnkey management. 30:23  Reforesting your parcel can qualify you for Panama residency (optional). 35:10  Learn more with a special report at GetRichEducation.com/Teak. 37:45  The provider made 4-6 months financing is available for you as a GRE listener. Resources Mentioned: GetRichEducation.com/Teak Wayfair.com RidgeLendingGroup.comValhallaWealth.com GREturnkey.com GetRichEducation.com