Get Rich Education

After discussing the direction of rents, learn about an ominous new tax that’s proposed. SCOTUS and Congress are considering a tax on unrealized gains.  For example, if your gold or furniture appreciates from $5K to $8K, would you have to pay a tax on the $3K gain, even if you keep owning the gold or furniture? Tom Wheelwright from WealthAbility joins us to discuss this. Though this is considered a “wealth tax”, the middle class would have to pay it. The tax case being heard is called “Moore vs. United States”. We expect it to be decided this year.  Tom & I discuss how few people understand marginal income tax rates’ progressivity. The last dollar that you earn is taxed at your highest rate. The first dollar that you earn is taxed at your lowest rate. Timestamps: Factors Driving Rent Growth (00:02:45) Inflation, lack of inventory, expired rent freezes, shifting workforce, demand for single-family homes, high employment, barriers to homeownership. Promising Development in Multifamily Construction (00:05:33) Multifamily construction reaching a 15-year high, new supply likely to slow down apartment rent growth, inclusionary housing requirements for new construction. Current Rent Trends (00:08:04) Single-family rents up 5%, apartment rent growth at 3%, highest rent price growth in the northeastern quadrant of the US. Supreme Court Case: Moore v. United States (00:11:47) Overview of the case, implications of taxing unrealized gains, arguments for and against the taxation of unrealized income, potential impact on everyday investors and citizens. Challenges of a Wealth Tax (00:18:07) Discussion on the problematic nature of a wealth tax, potential impact on individuals and assets, comparison to estate tax, and potential implications of a wealth tax on various assets. The tax on unrealized gains (00:22:43) Discussion on the potential impact of a proposed wealth tax on unrealized gains and the complexities of taxing assets while they are still held. The regressive nature of wealth taxation (00:24:38) Exploration of the regressive nature of wealth taxation and the challenges in implementing and managing taxes on wealth. Tax laws and equal protection (00:27:19) Insights into how tax laws apply equally to everyone and how billionaires benefit from better advisors to minimize tax payments. Tax rate misconceptions (00:30:15) Clarification of misconceptions about tax rates, including the progressive nature of tax tables and the impact of earning more income. Tax strategies and investment decisions (00:32:17) Exploration of tax benefits related to investment strategies, including the impact of deductions and the suitability of IRAs for different investment types. Updates on tax laws and book release (00:34:57) Announcement of the third edition of the book "Tax-Free Wealth" and the incorporation of major tax law changes into the updated edition. Wealthy's tax contributions and future episode preview (00:36:03) Discussion on the tax contributions of the wealthy and a preview of a future episode topic on the feasibility of abolishing property tax. Conclusion and show updates (00:37:13) Closing remarks on upcoming content, including the landmark episode 500, and a call to subscribe to the show for valuable insights. Resources mentioned: Show Notes: GetRichEducation.com/482 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold, and it's a new year. We talk about what drives the growth of rents. Then a gigantic new tax is being proposed that could fundamentally change virtually every current investment you own and future investment you make today on Get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text GRE to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth.   Keith Weinhold (00:01:18) - Make sure you read it. Text grey to 66866. Text GRE to 66866.   Speaker 2 (00:01:30) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Keith Weinhold (00:01:46) - What could go from Beckley, West Virginia, to Boise, Idaho, and across 188 nations worldwide. You're listening. To get rich education, I'm your host, Keith Weinhold. What about this new proposed wealth tax? Should there be one? How big is it? As you're gonna find out, you would probably even have to pay this huge new proposed tax. If you're in the middle class. That's all. If it gets legislated, that's coming up shortly. But first, last week I told you about the future direction of home prices. As I revealed our 2024 National Home Price Appreciation Forecast this week, let's talk about the direction of rents in America, higher prices for everything that could make tenants feel tapped out. Although we have now had a few months of wage growth picking up before we get into the rent trend, this is get rich education.   Keith Weinhold (00:02:45) - So focusing on the education part as we often do, what are the factors that drive rent anyway? What drives rent growth and how did rent get to feel so expensive for a lot of people? Well, the fast growth of rent costs since 2020 that derives really from a number of factors, including inflation and also including a lack of inventory. There is a shortage of vacant rental properties in general and of affordable ones in particular. You've also got those expired rent freezes and expired discounts. I mean, landlords are making up for pandemic era rent freezes and steep discounts in urban areas. And by doing that, what they've done now is hiked up prices on new units and on lease renewals. Another factor that drives rent growth is what's happening with the workforce. And we've had a shifting workforce. As the pandemic increased, the popularity of remote work, you had deep pocketed renters that sought out larger homes, often single family homes, in areas that had previously been pretty low cost. So this migration then it increased the rents in suburban and outlying areas more than it lowered them in urban ones.   Keith Weinhold (00:04:06) - And see that trend overall that yielded a net increase in rents. And then another factor is that you have more demand for people to live alone. Prospective renters are increasingly looking for studio in one bedroom apartments, driving up demand for available housing, and that drives demand for space and therefore rent growth, because living alone, that means that rather than two people demanding to live in one unit, two people demand two places to live. And of course, high employment like we've had. That's another factor that drives rent growth over time. And the last factor that I'll share with you as a rent growth driver are barriers to homeownership. Yeah. Prospective homeowners, they remain renters for longer because they face high demand and low inventory on those existing homes. Like I've talked about before, higher mortgage rates. And you had those supply chain disruptions that really began a few years ago. Most of those are alleviated now, but that made it more expensive and more difficult to construct new homes. And then as mortgage rates rose starting back in early 2021, housing prices, they cooled off faster than rents, and rents are finally rising at a slower pace now then they did in the past two plus years.   Keith Weinhold (00:05:33) - And so those are the factors that drive rent growth. Now. Back in 2022, a promising development began, promising for those that are looking to pay less for housing in the future anyway. From their perspective, and that is the fact that multifamily construction reached a 15 year high nationwide, and that new supply is what's likely to slow down apartment rent growth. And since many cities require really this inclusionary housing, that means that a portion of new housing needs to be affordable. Well, therefore, new construction also means new affordable housing. Again, that's predominantly on the apartment side. But see, many families, they want a single family home. They want that privacy. They want that separation. They want to live in something that feels like their own, but they can't afford a single family home to buy. So they rent one. And, you know, I thought Zillow recently pointed it out really well when they said that single family rentals are the new. Their homes. They appeal to those that are priced out of buying.   Keith Weinhold (00:06:49) - And now you can see this reflected in rent growth. So now that we talked about some of the longer term drivers of growth, let's talk more about the current period of time. We don't have Q4 numbers in yet, but through Q3 we can see that the growth of single family rents is 5%. All right. That sounds healthy. And it is. And that's per John Burns research and Consulting. But that 5% increase is down from two years ago when it had its recent peak of between 9 and 10%. So again, right there, we're just talking about the annual growth rate in single family rents. It's about 5% through the latest quarter that we have stats for now. Compare that 5% to apartment rent growth, which is about 3% today. Even in an economic slowdown, rents rarely fall. And by the way, if rents ever do fall, I call it falling rents. Or perhaps I use the phrase declining reds for some reason. If price is contracting anything, some economists and analysts and others, they refer to this as negative growth.   Keith Weinhold (00:08:04) - I don't tend to use the term negative growth. That's confusing. I just call it a decline. Okay. Negative growth. That makes you wonder if someone means slowing growth rates or do they mean an outright decline. So negative growth is an oxymoron like jumbo shrimp or black light or friendly fire, or telling someone to act natural, or perhaps a working vacation? Okay, that's what negative growth means to me anyway. Now rents, whether it's single family rentals or apartments, when you blend those together regionally, you're seeing the highest rent price growth in the northeastern quadrant of the United States, which oddly contains a good chunk of the Midwest. So you just look at the northeastern quadrant of the United States. So leaders in red growth we're talking about here Providence, Rhode Island, Hartford, Connecticut, Cincinnati, Columbus, Saint Louis, Milwaukee and Chicago, they are all on that list. The highest rent growth blended together, single family rentals and apartments. By the way, two months ago I was in Hartford, Connecticut for the first time in a while.   Keith Weinhold (00:09:18) - Nice skyline there. Yeah, Hartford. You have an impressively urban feel for a city that's not among America's largest. Now. You're seeing slight rent price declines this past year in a lot of their really big, swaggering, broad shouldered gateway cities New York City, San Diego, San Francisco, San Jose, and also in Raleigh, North Carolina. I'm not sure what's going on in Raleigh, North Carolina, with their sluggish rent growth, but here, as testimony to the fact that rents don't often fall far, all of those bigger cities that I just mentioned, these big losers, they're only down between one half of 1% and 1% for year over year rents. So to review nationally in the last year, single family rents are up 5% and apartment rent growth is up 3%. But both have slowed from a couple years ago. Can the federal government tax your unrealized gains, also known as a wealth tax? We're going to talk about what that means. But how far could this go? If your home appreciates a 30 K in a year, but you want to keep living in it, might you have to pay tax on that gain even though you don't sell it, you just want to keep living there.   Keith Weinhold (00:10:41) - Could that even apply to you? If you own furniture that goes up in value, but you kind of like dining at that nice mahogany table of yours, could you get taxed on that every year? If the value of that goes up? And then you would have to ask the question, where are you supposed to get the money from in order to pay the tax? Might you have to sell that asset in order to pay the tax on it? So let's discuss a wealth tax that is tax on your unrealized gains. A renowned tax and wealth expert is back on the show with us today. He's also a CPA and the CEO of a terrific tax firm called Wealth Ability. He's the best selling author of the Mega-popular book Tax Free Wealth, which I have on my bookshelf. And a third edition is about to come out. He's going to tell us more about that. Hey, welcome back to Dr. Tom Wheelwright. Thanks, Keith. Always good to be with you. It's good to be with you, too.   Keith Weinhold (00:11:47) - And I think it's going to be especially informative and maybe disturbing this time, Tom, because really, it's been called the quadrillion dollar question. This is where Supreme Court justices decide whether the federal government can tax certain unrealized gains. And what this means is that these are assets that you own, but yet you haven't sold yet. So, Tom, tell us about this Supreme Court case hearing it known as more Maori versus the United States. Yeah. So this is a couple that invested in a company in India. They owned, I think, 12 or 13% of the company. And when the 2017 Tax Act was passed, what we commonly think of as the Trump Tax Act, one of the provisions was that in order to go to a taxation where you couldn't just put off bringing back the money all the time, they said, well, look, we're going to have a one time tax, we're going to have a tax on repatriated earnings. Some of you have heard that term repatriated earnings as if they came back.   Keith Weinhold (00:12:56) - Okay. So whether or not they came back as if they came back. And if you're a shareholder of 10% or more, then you have to pay that tax in certain situations. And so the laws actually had to pay the tax. This was the tax on the income of their corporation. So the corporation could have its own tax. But this is actually a tax on the shareholder. So that's actually where this is interesting because is similarly frankly we have taxes on partners and partnerships. Right. If you're a partner in a partnership you're taxed on that income. Whether or not you get the money in a corporation, typically you're not taxed on the income unless you get the money. That's a dividend. If you don't get the money, the corporation's taxed, but you aren't taxed. This was a situation where it's a corporation, but the shareholders were taxed. The Moores are arguing, well, this is equivalent to a wealth tax. And it's actually why I think the Supreme Court took this up, because it's not a case that you would normally think the Supreme Court would agree to hear.   Keith Weinhold (00:13:57) - Well, I think where this concerns people is, could this open up things so that the everyday person and the everyday investor could have to pay these unrealized gains on assets that they own, that have not sold? I mean, even their primary residence, if that appreciates from 500 K to 550 K, are they going to owe tax on that 50 K even if they plan to continue to stay there and hold on to it because they want to live their. That's what certain members of Congress would like. Liz Warren would absolutely like that to happen. Bernie Sanders absolutely like that to happen. I actually think that's why the Supreme Court took up the case, is because I don't think the Supreme Court believes that that should happen. I think it's going to come out. They're going to narrow what a wealth tax can and can't be, because I think they need to because they need to say, look. So we've had oral arguments already. So we expect a decision out sometime this year. But basically the arguments by the IRS were we do this all the time.   Keith Weinhold (00:14:56) - We have taxes, unrealized income. We have mark to market on stock trading. So that's a tax on unrealized income. We have a tax on partnerships. That's a tax on realized by undistributed income. The reality is this tax the Moores are are arguing against is a tax on realized but undistributed income. I think that's where the Supreme Court would come down. I'm actually willing to make a prediction on this because I think the Supreme Court say, well, this isn't a wealth tax, and a wealth tax would be prohibited under the Constitution because that would have to be based on population. A property tax, for example, is a wealth tax. Then the US that's reserved to the locales. We can't do a federal tax. We couldn't have a federal property tax. And that's, I think, what the Supreme Court is going to say. You can't have a federal property tax that's prohibited by the Constitution. You now have local property taxes because the locals can do whatever they want. But unless you have it apportion among the states based on population, you'd literally have to have a poll tax, which is a tax per person, as opposed to a tax on the value of what a person owns.   Keith Weinhold (00:16:07) - That's the difference. So there's a lot of complications. That's a direct tax versus indirect tax, all that kind of stuff. I think the important thing is to understand that there are realized, but undistributed income, that's like a partnership, right? You can be a partner in a partnership. The partnership really uses the income. They get the money, but they don't distribute it. As a partner, you're taxed on your share of that income. It has been realized you just haven't gotten it yet. This is, by the way, very similar to the Moore situation. That money, that income was earned that just hasn't been distributed yet. And the question is the fact that they haven't distributed, does that mean they can't tax it? The odd thing is, is I think the Moores are going to lose the case. Moores will lose the battle and win the war. This is a small amount of money, right. So this is obviously the Moore is not trying to save money. There's way more money being spent on legal counsel than the tax.   Keith Weinhold (00:17:03) - So the Moores aren't doing this. This is people behind saying this is a good test case. We need to put a stop to the wealth tax conversation of Liz Warren and Bernie Sanders and Wade. And this is a case to do that. That's really what kind of the background is. That's all the background of this court case is what's really going on and what's really going on is the Ninth Circuit made it sound like any taxes find. And the Supreme Court said, well, we're going to take this up because I think a majority thinks we don't think any tax is fine because clearly under the Constitution, not any taxes. Fine. We're going to help define that. And so I think we're going to get some better clarity on what kind of taxes Congress can enact. Ultimately, I think the Morse will lose their case. Yes, the more clarity is good. I mean, the Supreme Court knows that this is a contentious issue, and I sure want any discussion to get shut down. It might lead to everyday investors and citizens paying tax unrealized gains.   Keith Weinhold (00:18:07) - I mean, with that example that I gave you of, say, a couple that owns a 500 K home and they want to keep living in it, but it just happened to go up to 550 K. I mean, where would they get the tax to pay on that. Well yeah. Well that's another problem. You can talk to any fixed income retiree and they'd have the same complaint about property tax. Sure. Yeah I don't know where this could go. I mean, what if you own rare furniture in your home? Okay. This furniture is worth more at the end of the year than it is at the beginning of the year. But yet you didn't sell it. You just continue to use your furniture. I mean, could that get taxed? It's a terrible slippery slope. And, you know, they talk about, well, don't give me I'm billionaires. I'm going okay. But let's face it, the income tax was only supposed to be on billionaires, okay. The equivalent of billionaires.   Keith Weinhold (00:18:51) - You had to make a lot of money to be subject to income tax in 1913. Yeah okay. So we know it's going to come down. It always does the tax law. You know politicians never like to give up any tax money. They always are trying to apply to more and more people more and more income. So it is problematic. You know, the idea of a wealth tax is very problematic. You know, several European countries have tried it and they've all failed. France tried it. And people like Gerard Depardieu, um, the actor, he just left France, you know, people leave now, what Bernie Sanders wants to do, this is fascinating. He wants to put an exit tax. So if you do leave, you still have to pay the tax. You actually have to pay a tax to leave. So basically what Trump is, he wants the Berlin Wall, but he wants an economic Berlin Wall. Right. That's what he wants. He wants an economic wall. He's going to complain about the wall bordering Mexico, but he's going to put an economic wall around everybody and not allow you to leave.   Keith Weinhold (00:19:50) - It'd be like somebody, California, putting a wall literal wall up and saying, you can't leave California, right. That's kind of the idea that. And if you do leave California now, California, in fact, they talked about it in 2023. And actually, interestingly, the governor defeated it. They talked about imposing an exit tax. So if you leave California, you have to pay a tax for leaving. And fortunately he defeated that. He crushed that. I mean, not sure why he did that, but he did understand the states have more power to tax than the federal government does. Federal government is limited in its taxing power, and it's really limited by the 16th amendment that allowed a pure income tax. The question and this is the argument that Sanders and Warren are making, is that it is income. And the reality is we do have billionaires who pay no tax. And the reason they pay no tax is because their stocks, which are public, go up in value. They're not required to sell them.   Keith Weinhold (00:20:51) - They can borrow against them and they never pay tax. So the argument is, well, wait a minute, that's not fair. That's a decent argument. Honestly. The challenge is yeah, if you could really say we're going to limit it to billionaires and we're going to limit it to publicly traded stock, you're fine. Not a big deal. But it never gets limited. And that's the problem. It never ever gets limited. Once the camel gets its nose under the tent it just right going on taxation all over the tent piling on and not get pulled away. They don't remove layers of taxation. It seems once the president is sent somewhere, it just seems like it continues to spread. Tom, if I could just give one last example on this. If this ever goes to where unrealized gains get taxed and how absurd this all is, just say you. Oh, gold and gold goes from $2000 to $5000. You don't sell it, you just keep holding on to it. And then you'd have to find the income to go ahead and pay the tax.   Keith Weinhold (00:21:48) - Well, you'd have to sell gold. And that's actually what they want. They actually want you to have to sell the gold. Oh, they would want gold to be sold to sell the gold. I want you to sell the stock. So the goal behind the wealth tax is to force you to sell these assets and pay the tax. Okay. Now we have a wealth tax. It's called an estate tax. That is a wealth tax. And there are businesses. There are families who have to sell their family home. They have to sell their family business. They have to sell their family farm because of the estate tax. And so this is another argument that the proponents of wealth tax are making is, wait a minute, we have a wealth tax already. It's called an estate tax. If we can have an estate tax, why can't we have a tax currently? Why do we have to wait until somebody dies to impose that tax? It's an interesting argument. I'm not a policy guy. I'm not one to make policy.   Keith Weinhold (00:22:43) - I want to explain policy. It is a question. If I can have a tax on wealth when you die, why can't I have a tax on wealth while you're alive? Sure. And I thought through the scenario as well. If the river is a tax on unrealized gains, whether that's your house going up in value or furniture or gold after you would pay this unrealized tax, then in the end, when you do want to sell it, what if you sold it for less than you thought it was worth? And then how the heck do you go back and adjust that for the tax that you are now in it? And it actually gets worse than that. Keith. Let's say we have a boom market this year and next year we have a recession. Are we going to get the money back? Exactly. And that's the hardest part because the answer is clearly, no, we're not. I mean, because think of it right now, we have a provision in the law that taxes capital gains.   Keith Weinhold (00:23:35) - There's an argument capital gains should never be taxed because especially at least if there are a capital gain because of inflation, they should never be taxed. If you actually went up in value, yes, they should be taxed. But if they're just inflated in value, why are you paying a tax on something that's not worth anymore than it was five years ago that got the same value? It's just got a different price. But we have a capital gains tax. But think about this. Let's say you have a year and you sell stocks and you have this big game. And the next year you have a loss because you sell stocks because everything went down well. You don't get to use those losses to offset your income. You have to carry those losses forward forever until you have gains again, you don't get go backwards with those losses and recapture the gains that you paid, you know, last year. So we already have this problem built into the system. And now all you'd be doing is exacerbating it. The other problem with, by the way, is that it's very regressive in that you're talking about people taxing their wealth.   Keith Weinhold (00:24:38) - Now, you can put limits, right, which is what you would have to do. And you say, well, look, your personal residence, we're not going to tax, you know, we're only going to tax the excess, which is, by the way, what income tax originally was. It was only excess investment income. You were never taxed on wages. When the 16th amendment was passed there was no tax on wages. We didn't get a tax on wages until 1944. You go, well, we'll exempt all these today. What about tomorrow? And that's always the issue. I'll tell you, the taxes just keep piling and piling on. We're going to talk more about taxation with Tom. We're right when we come back you're listening to University Kitchen. I'm your host Keith Reinhold. I render this a specific expert with income property you need. Ridge lending Group Nmls 42056. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four Plex's.   Keith Weinhold (00:25:39) - Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate and that kind of love. How the tax benefit of doing this can offset capital gains and your W-2 jobs income. And they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.   Tom Wheelwright (00:27:02) - Anybody? It's Robert Elms or the Real Estate Guys radio program. So glad you found Keith Reinhold and get rich education. Don't quit your day dream.   Keith Weinhold (00:27:19) - Welcome back to cash. We're talking with Tom Wheelwright, the author of the Mega-popular book Tax Free Wealth. He runs the terrific tax firm called Wealth Ability. Tom, you often like to talk about how really, in a lot of cases, tax laws can apply to everyone, but do business operate really under the same tax laws as a middle class or us in the middle class? Really take a page out of what billionaires are doing. How can we best do that? So we have a wonderful aspect of the Constitution, a clause called the Equal Protection Clause. And what it says is taxes have to be applied equally to everybody in the same situation. So what we're billionaires are different is they have better advisers. That's where they're different. So their advisors know all the rules of the tax law. They pay them hundreds of thousands, millions of dollars a year to make sure that they're paying the least amount of tax possible.   Keith Weinhold (00:28:14) - Presumably, all they're doing is following the law. Those same laws apply to you and me. So that's why, for example, somebody who owns a single family home that they rent out to an unrelated person is entitled to the same tax benefits as somebody who owns a 200 unit apartment complex or somebody who owns Trump Tower, as an example. Okay. You get the same tax benefits in the same situation. The challenge that, you know, the average person has is not enough access to those advisers and a misunderstanding of how the tax law works, because this whole idea will the billionaires get different tax than the average person is just false. That's just a falsehood that is propagated by a certain part of the public in a certain part of the administration that wants to add another tax to billionaires. The reality is we all get the same tax. The difference is, is that if you're a billionaire, let's say you made $1 billion a year and you paid $400 million in tax. You still have $600 million left over, which is more than 99.999999% of people have in a lifetime.   Keith Weinhold (00:29:25) - So it doesn't really hurt you. It doesn't change your lifestyle. Whereas if you put a 40% tax on somebody who makes $200,000 a year, now they're going from 200 to 120, and that has a major impact. And you're really just explain one reason why in the United States, we have tax tables set up that are what we would call progressive, where the more you make, the more you pay. But yeah, you're right, Tom. There are just there's such a knowledge gap out there. I have something happen to me. I bet it still happens to you a lot. Or I will talk to people and they say something like, well, I don't want to earn too much money this year. I'll go from the 24% tax bracket to the 30% tax bracket, and they act like all of their income is then going to be taxed at 30%. So they don't want to earn too much. So I'll tell you a funny story. Yeah. So I used to teach a class every month we'd have anywhere from 30 to 100 people in the class.   Keith Weinhold (00:30:15) - And I'd always do an example and I'd say, okay, let's say that you earn X amount of dollars and you get a $5,000 bonus. What's the cost of that $5,000 bonus from a tax standpoint? And I would say a good 40% of the class would come up with about $8,000. Was the cost of the $5,000 bonus, because just like you say, well, that puts me in a new bracket there for all my income is being taxed in the new bracket. No, it is progressive, meaning the last dollar you earn is taxed at the highest rate, but the first dollar you earn is taxed at the lowest rate. And that's important distinction because we're never taxed on more than right now. It's actually 40% because we have net investment income tax. So you're never taxed on more than 40% of your income by the federal government. You just can't be. So you can make whether you make a, you know, $1 million a year, $1 billion a year, $10 billion a year, your maximum tax rate is 40%.   Keith Weinhold (00:31:14) - That's an epiphany to some people to learn that tax rates are progressive, like you just explained with that $5,000 bonus example, why don't you tell us about another tactic or another example like that? We have a lot of savvy listeners. A lot of Marty realize that marginal example. Can you give us another one about how there's something relatively simple that can really elevate one's and lower their tax rate? Yeah. Let's go to the flip side of that. If the last dollar you earn is taxed at your highest rate, the first dollar you deduct is deducted at your highest rate. Great point. This is why, by the way, and if you read my book, The Windmill Strategy, I talk about this in chapter eight. I used to say for a long time that you never got a permanent tax benefit from putting your money in an IRA for one K and I ran the numbers and win win. And I was wrong. That's not true. And the reason is because let's say you put in $10,000 a year for 30 years, that deduction that you get for that $10,000 you put into your IRA for one K, you get a deduction at the highest tax bracket.   Keith Weinhold (00:32:17) - When you start pulling the money out, you're going to pull it out and you get all the tax brackets. So you put the money in, you get a deduction of the highest, you pull the money out, you get basically the combination of the different tax brackets. So you are actually better off. So for example, if somebody says I want all I investment to go on in the stock market, I would say you need A41K. That is the answer because self-directed would be best. Absolutely. Because you get a deduction now at your highest tax rate bracket. But down the road you're going to pull it out. Basically, even if you have the same income you can pull out a lower rate. Now that only applies if you're going to put the money in the stock market. If you're going to put the money into real estate for one, K is a terrible idea because real estate is a tax shelter and you lose all the tax benefits of a tax shelter. If you put it in an IRA, you actually take a tax shelter and make it a tax expense by putting it into an IRA for one K.   Keith Weinhold (00:33:14) - So there are certain things you would never do in an IRA. A reformed K real estate is one of those. Energy is one of those businesses. One agriculture. You'd never do those in an IRA or for one K, it's a terrible idea. But if you want to invest in the stock market, the bond market, things like that, IRAs make all the sense in the world. So really, that's why people ask me, well, should I do it for one K I'm going. I have no idea. What's your investment strategy? What's your wealth strategy? Where are you putting your money? People all the time. I have some imitators and they'll ask this question, well, how do you make your money? We can reduce your taxes. I'm going. That's the first question you have to ask. But I'm more interested in what are you going to do with your money? Because what you're going to do with your money has a much bigger impact on how we set things up from a tax side, how much money you're going to make, what kind of investments you're going to do, all that is impact by what you can do with your money.   Keith Weinhold (00:34:06) - That question about, you know, how do I make my money is a simple question that, frankly, I can do that kind of a tax strategy on stage in ten minutes. Well stated. That is a good point. Well, Tom, this has been great. You mentioned your latest book, the Win win. Well, strategy, but in one of your very well-known books, Tax Free Wealth, you've got another edition coming out. Tell us about that. Yeah, we have the third edition. So for the second edition we did that. When the Trump Tax Law 2017 was enacted, we needed to put in fact, we did a kind of in a rush. So we just added in things. Since 2017, we've had six major tax law changes, six major tax law changes during Covid. And so what we felt we want to do is let's roll it all in to a third edition will take the Trump tax law. Changes will roll those in. We'll take all the new tax law.   Keith Weinhold (00:34:57) - Changes will roll those in. So now tax free wealth is up to date. I think it's a better book. When I went through it of course I spent hours and hours and hours going through it. This is the best version of tax free wealth we've ever released. There are so many critical updates there. Again, the name of his book is Tax Free Wealth. I recommend checking that out. Tom. We're right. It's been informative. As always. Thanks so much for coming back out to the show. Thanks, Keith. Yeah. Sharp insights from Tom. As always, you can keep following along with the more versus United States case this year. Now, sometimes the wealthy, they will point something out that you've got to consider. It's got to give you a little pause. And that is actually should the wealthy get a tax rebate yet not get taxed more heavily because in the US see the top 1% pay about 42% of federal income taxes, and you might say, okay, well, that's the top 1%.   Keith Weinhold (00:36:03) - Why don't we bring in some of the middle class and revisit this? Well, the top 25% pay nearly 90% of the taxes. And that's all from a recent year per the Tax Foundation. Should the wealthy then get a tax rebate? Because you could say that they pay more than their fair share. Whatever fair share really means. Well, that is a valid question. Ask at the least. Well, today is the first time that we've had the marvelous, successful author, Tom. We're right on the show here in more than a year and a half. That's just a little unusual because he is the most recurrent guest here in history. And so therefore, for some more catch up coming down the road, Tom is going to return here to discuss a big question that I have for him. And in that future episode, Tom and I are going to discuss, should there even be such thing as a property tax, does it make more sense to say, abolish the property tax and then the government can get their revenue from somewhere else, as well as where that proposal might not be feasible? That should be super interesting.   Keith Weinhold (00:37:13) - Asking the question should there even be a property tax? In the meantime, check out Tom's third edition of his book Tax Free Wealth. It is a good read as far as tax reading goes. You're listening to episode 482 of the get Rich educational podcast. We have got a big year in store with plenty of original, groundbreaking content planned, including a memorable landmark episode 500 Coming Up, which will release on May 6th of this year. If you haven't already, I encourage you to subscribe to or follow the show here on your favorite podcasting device, or tell a friend about the show. I think they'll find it really valuable. Until next week, I'm your host, Keith Reinhold. Don't quit your day dream.   Speaker 4 (00:38:05) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.   Speaker 5 (00:38:33) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

Explore whether US residential real estate is underpriced or overpriced, the impact of inflation on different homeowner groups, and strategies for successful real estate investing. Learn about the correlation between home prices and gold ratios, global house prices, and the trend of sports complexes affecting urban real estate dynamics.

Most people float through life without direction. You must get clarity of focus before you can even begin setting goals. Robert Helms of The Real Estate Guys, a professional real estate investor, reveals a framework for goal-setting.  Goals should be SMART—Specific, Measurable, Attainable, Relevant, and Time-Based. I provide examples of two athletic goals that I failed to achieve this year. It’s vital to surround yourself with the right people. Goals should be written down. It helps to set intermediate benchmarks within the goal. It’s difficult to stretch more than 50% from year-to-year. Keep the goal achievable. Is your life destined or is your life made? Our recent Instagram Poll result is that 75% chose “destined”, 25% “made”. You can attend the highly-rated Goals Retreat, hosted by Robert Helms, January 12th to 14th in Dallas, Texas. You’ll learn how to get clear on who you really are and really want to be, then set goals. Timestamps: Setting Goals and Achieving Growth (00:02:40) Keith Weinhold discusses the importance of setting clear goals and the need to step out of one's comfort zone for personal growth. The Influence of Others on Goal Setting (00:08:01) Robert Helms emphasizes the impact of surrounding oneself with the right people and being strategic about the influences in one's life. The SMART Goal Framework (00:09:44) Keith Weinhold mentions the SMART goal framework as a well-known framework for setting goals and achieving success. Setting SMART Goals (00:10:03) The speaker discusses the SMART goal framework and how it helps in setting specific, measurable, attainable, relevant, and time-based goals. The Importance of Specific and Measurable Goals (00:11:08) The speaker emphasizes that goals need to be specific and measurable in order to track progress and determine success. Breaking Down Outcome Goals into Activity Goals (00:13:56) The speaker explains the importance of breaking down outcome goals into specific steps or activity goals to make them more achievable and actionable. Discover Your Destiny (00:19:40) Discussion on the belief in destiny and the importance of clarity in goal setting. Success Stories (00:21:14) Examples of individuals who have achieved success and life satisfaction through goal setting and clarity. The Importance of Clarity (00:26:30) The significance of clarity in goal setting and the initial steps to take before setting goals. The assessment of personal skills (00:28:38) Discussion on the importance of assessing one's skills and areas for improvement in personal development. The goals retreat (00:30:12) Information about an in-person event called the goals retreat, where participants can focus on setting and achieving their goals. The structure of the goals retreat (00:30:59) Details about the schedule and activities of the goals retreat, including journaling, answering questions, and turning goals into action plans. Resources mentioned: Show Notes: GetRichEducation.com/480 Attend the Jan. 12th-14th Goals Retreat: GoalsRetreat.com For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Complete episode transcript:   Keith Weinhold (00:00:01) - Welcome to GRE. I'm your host, Keith Weinhold. Today's episode is rated PG for personal growth. Most people just float through life with hopes and wishes that are never realized, because they never turned those ambitions into concrete goals. How do you get clarity of mission, vision, and values before you set the right goals for yourself? It's a transformative episode today with a terrific guest on get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers are. At no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple. Text grey to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free.   Keith Weinhold (00:01:18) - It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it. Text grey to 66866. Text grey 266866.   Corey Coates (00:01:36) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Keith Weinhold (00:01:52) - Welcome to GRE! From Toms River, New Jersey, to Hood River, Oregon, and across 188 nations worldwide. I'm Keith Weinhold and you are tuned in to get rich education. Now, why do you live the almost same routine that you live day in and day out? How are you spending your highest order in finite resource of your time? Maybe you're intentional, and maybe you don't really enjoy shoveling your snow or mowing your lawn all that much, but you do it just because it's the way that you've always done things, but at the cost of what higher order activities could you instead fill with that time? And that's exactly what a lot of people have never explored. I know that today's guest and I both admire the Robert Heinlein quote.   Keith Weinhold (00:02:40) - In the absence of clearly defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it. One other axiom that I find so frustratingly inconvenient, because it's simultaneously true, is that your growth happens outside of your comfort zone. So then you've got to get comfortable being uncomfortable. And once you do enough of that, you'll become so enamored of growth that you'll soon find yourself being uncomfortable when you get comfortable. The best version of you. It means constantly disrupting yourself. Well that's disruptive. Now, within real estate, I've had various goals, and you might too. If you work at a dissatisfying day job, you might have a passive cash flow goal through real estate so that you can replace your job income. That's a pretty common one. Now, when I made my first ever property, that first fourplex, I didn't have much of a financial goal then. I just knew that I was effectively living for free, supplemented by the other three rent incomes. And when I first bought that building, I didn't even know what cashflow meant.   Keith Weinhold (00:03:57) - But once I did snowballing my cash flows became a goal until I could use that to replace my day job. Once that was achieved, the goal became how many doors can I control? Because that's a measure of service and influence. And today, one strong real estate goal is reaching more people like you with this very show right here today, we're talking to an expert at setting goals and helping you live the life that you were meant to live. He has had a deep influence on me and my growth. In fact, if it weren't for him, Jerry might not even exist and you would not have even heard of me. That's how much. Let's talk about setting and achieving goals to get the outcome that you want for your life. Today's guest is a professional real estate investor with experience in nine states and six nations, and I have toured some of that property with him in person internationally. He is also taught real estate practices and appraisal at the college level, but you might know him as the host of the nationally syndicated radio show The Real Estate Guys, now in its 27th year of broadcast.   Keith Weinhold (00:05:10) - You know that I've recommended that show to you, the listener, today. It's great to give a warm welcome back to Robert Helms.   Robert Helms (00:05:19) - Hey, Keith. So good to see you.   Keith Weinhold (00:05:21) - Robert. It's good to see you too. But we're not here today to talk so much about real estate, because a lot of people use real estate to fuel their other goals in life outside the real estate world, you brought a keen awareness to the fact that most people just kind of go floating through life without any real direction. And I think we're all aware, Robert, that there is a gap between who we are and the most that we can be. So can you talk to us about how finding our trajectory can perhaps be an exercise in connecting these dots that we call goals?   Robert Helms (00:05:58) - Yeah, I love this topic, as you know, because if we're left to our own devices, human nature is we're just going to bounce from thing to thing, like a boat without a rudder. And we get excited about something and it's a shiny object and we go off and pursue that.   Robert Helms (00:06:11) - And maybe real estate is that thing for you. And then, you know, you've got all the rest of your life to contend with. And whether you're a full time real estate investor or a part time real estate investor, I've found that one of the great keys to be able to discipline yourself, to do the things necessary to get the results you want in your life, is to set goals. And goal setting is pretty simple, but at the same time, it's almost alarmingly simple because if it seems too easy, people don't do it right. And the crux of goal setting is to figure out what you want, and then put that down in a way that you can be driven towards the things you have to do to make those things happen.   Keith Weinhold (00:06:52) - Maybe before we talk more about ourselves and what each of us really wants, maybe we can talk about what we don't want. And so many of us, me included, are influenced in life by the people that we surround ourselves with. You and I are both familiar with the quote from the late business philosopher Jim Rohn.   Keith Weinhold (00:07:11) - You are the average of the five people that you spend the most time with. A lot of people probably wouldn't like to admit it, but the statistics are kind of alarming with how much time one spends around their co-workers versus how much time spends around their family and friends, and with influences from co-workers. And that temptation to maybe just go with the flow. You know, it's pretty interesting because your coworkers are not chosen by you. They're chosen by your employer. Now, maybe that's good because it opens you up to a new set of ideas and a new context for your life, and that might adjust the goals you set. But then on the other side, if you don't have that and you don't have those coworkers, maybe those coworkers can help keep you out of one think silo and just thinking all the same way. So you talk to us about the influences of other people in one's lives. As you think about the life that you want to create for yourself.   Robert Helms (00:08:01) - This is such an important topic. I'm glad you bring it up at the beginning here because it is subtle, right? We don't get shoved off course.   Robert Helms (00:08:10) - We get nudged off course little by little by little. One of those five people you spend the most time with says, hey, let's go out drinking Friday night. And you were thinking, well, I was going to work on a podcast or a chapter on my book, or I was going to, okay, I'll just go out drinking and before you know it, like, that's not a bad decision. You get to spend time hanging out and there's some time in your life you want to be able to hang out with friends. But I think it's important that you become very strategic about your time. Time is a zero sum game, and it's also the most interesting resource because once this minute is gone, it's never coming back. What we do with this minute, we get a chance to do once, whether that's an hour, a day, a week. But at the same time, what happens after this minute? Well, another one and another month and another week. And so time can get away from you.   Robert Helms (00:08:58) - And if you're strategic about it, this is the key to success. Just spending time with people that have you going places, having you looking at your future, excited about what's happening now, you know, you mentioned your coworkers and you don't get to pick them. And that's true. But that's true about your family too. So you don't want to just write off your family. But let's face it, we probably all have negative people in our lives, whether it's friends, lifelong friends, people from college, but sometimes people in our family. So it's not that you don't spend any time with those people. It's your strategic about how and where you spend time with those folks. And the influences in our life probably have more impact on how well we do in life than any other factor.   Keith Weinhold (00:09:44) - We talk about being strategic and intentional with goal setting. There isn't a have you here today is because you're an expert in helping people set goals and help define a mission for their life, so I'm sure a lot of people, Robert, have come to you with a pretty well known framework for setting goals, called the Smart Goal Framework.   Keith Weinhold (00:10:03) - That's an acronym that stands for the fact that goals should be specific, measurable, attainable, relevant, and time based. So now I do think about the Smart goal framework before I set a goal, but I'm sure not to muddy up goals with a mission and all personalizes for a moment to give a good example for the audience. Robert, you can let me know what you think about this. And this is something outside of real estate investing. But when it comes to physical training, I have this mission of longevity and lean musculature. But to me, that's only a mission because it's kind of fuzzy and hazy. And then I have goals within that. For example, I had a couple goals within that. This year. I failed at them both. By the way. One was to be under £180 by June 1st, and the other was to run uphill up this trail in under 40 minutes by the end of the season. To me, those two things were goals, the body weight in the running, both of which I failed at within this broader mission of longevity and lean musculature.   Keith Weinhold (00:11:02) - So what are your thoughts about the Smart Goal Framework? Does that help people set goals and get them where they want to be?   Robert Helms (00:11:08) - Yeah, 100%, because just wanting something like, I want to be healthier or I want to be richer, those are great sentiments, but those aren't goals. What makes it a goal is the things you mentioned in the Smart framework works great. There's kind of the 101, which is if you've never set goals before, there's three things to focus on. The first is that a goal has to be specific and measurable. If you can't measure it, you don't know whether or not you hit it. So when you talk about something like your health and being lean, well, there's a couple of metrics in there. Percentage of body fat is a number and it's measurable how much weight you want to gain or lose is a number. And it's measurable. So that will help you instead of just I want to be lean. It's how lean do I want to be. And of course you might seek some counsel in that regard, either from a trainer or a doctor or someone to say, what's a good, healthy weight for me and so on.   Robert Helms (00:12:00) - So that's the specific part, which is also measurable. I kind of put that in as one thing, and the second is having a time deadline, a time limit or a deadline. So the best way to think of those two things is how much buy win, and your example of being able to do a specific amount of time metric by a certain date. That's exactly right, specific and measurable and with a time limit. And then the third thing is that to be effective, goals have to be written down. If you don't write down your goals, they're worth the paper they're written on. And it's not just so you won't forget. It's that something magical happens when we take pen to paper and writing it down. Using your computer, keyboard or voice to text is not the same as getting a good old fashioned pen or pencil and writing out your goals. Now that's the 101 write to take it. Beyond that, there are some few things in the smart model. It's either attainable or achievable for the A, and what that means is it has to be somewhat realistic.   Robert Helms (00:13:03) - You don't want to put limits on yourself, but if you say, well, you know, Robert, I made $50,000 this year and next year I'm going to make 5 million. Okay, well that's possible. People do that. There are people that go from 50,000 to 5 million. It's just not very likely. So unless you have some information that would show why that would happen, a much better way to think about it is how much can I stretch and still make the goal? If you made $50,000 a year for the last three years, Zig Ziglar says you can stretch to about 50% $75,000. That's a stretch, but it's realistic. So that's the attainable part, and it is a great framework. Now the other part, which is awesome when you're talking about how do I affect what I'm going to do. This is the crux of golf setting. There are two types of goals. If we were to narrow it down, there are outcome goals. That's how it's going to be at the end.   Robert Helms (00:13:56) - And then an even more important there are activity goals. So let's say you're in real estate sales and you want to sell 20 houses in 2024. That's a great goal. That's an outcome goal. At the end of 2024, I want to have listed and sold 20 houses. Okay, so January 2nd, when you get back, you know from your celebrating January 1st, what do you do? It's nebulous to say, well, gosh, to get to 20 houses by the end of the year. So what you do is you break down those 20 houses, that outcome goal into the specific steps necessary, and it would be different depending on every goal, right? It would be different for health than it was for relationships, than it was for your income. But to use this example, you might say, well, in order to sell 20 houses. Maybe I have to list 30 houses. Okay. To list 30 houses, I have to talk to 60 people. Okay, well, to talk to 60 people, I got to get 200 people on my list and so on and so forth.   Robert Helms (00:14:56) - Until you break it down to the actual activity, you can do January 2nd. So it might look like this. On January 2nd, I have to talk to four new people. I have to send out emails or letters or postcards to ten new people. And if I do that, if I do those two things, following the numbers all the way to the end of the year, that should result in my 20 houses. Now, how do you know what those numbers are? That's from your practice. You've done this before. If you're brand new in the business, you would get counsel from folks that are already doing that. Back to the five people you spend the most time with, right? Surround yourself with folks that have already done what you want to do, and then break down the outcome goal into the activities necessary to achieve the goal.   Keith Weinhold (00:15:40) - Oh, this is great step by step guidance. After I knew I failed at those two goals I shared with you, Artemis tried to reassure myself and tell myself that, well, you know, a lot of people don't even set concrete goals, so I ought to be okay about it because I've definitely ended up more fit.   Keith Weinhold (00:15:54) - But then at the same time, I don't always want to be comparing myself to normalcy or that's just a recipe for mediocrity. But maybe just here, as the introductory beginner goal setter that I am, I would have been more successful had I written them down, and had I made more intermediate steps in order to reach those two goals that I told you about? So I learned a little something there. I'm your host, Keith Weinhold, with Robert Helms of the Real Estate Guys. More on goals when we come back. You're listening to get Rich education. Render this a specific expert with income property, you need Ridge Lending Group and MLS for 256. In gray history, from beginners to veterans, they provided our listeners with more mortgages than anyone. It's where I get my own loans for single family rentals up to four plex's. Start your pre-qualification and chat with President Charlie Ridge. Personally, though, even customized plan tailored to you for growing your portfolio. Start at Ridge Lending group.com. Ridge lending group.com. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.   Keith Weinhold (00:17:22) - Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains and your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.   Robert Kiyosaki (00:18:09) - This is our rich dad. Poor dad. Author Robert Kiyosaki. Listen to get Rich education with Keith whine old Dot Prichard, Adrienne.   Keith Weinhold (00:18:27) - Welcome back to get Rich education. We're talking with Robert Helms of the Real Estate Guys about goals or not talking so much about real estate today because many people use real estate in order to fuel their other goals in life.   Keith Weinhold (00:18:40) - So many people just go floating through life without many goals. I could do a better job with my goal framework myself, as I think you just learned there, Robert. I think some people, they might be dismissive of goals because some people have the mindset where they're thinking, well, I'm just ordained to live a life like this, or I'm just destined to live a life like this. I don't know that our audience necessarily thinks that way, but I'd like to get your input on this. We recently had an Instagram poll over on our Instagram page, and the poll was simple are you destined or are you made? And 75% of respondents chose that they are made rather than that they are destined. So what are your thoughts with regard to that as we set goals for this trajectory in our life?   Robert Helms (00:19:28) - That is a world class question. We always say, if you want great answers, you have to ask great questions. And that's a great question and something people don't think about. There are folks that believe that they are completely self-made and that it's up to them.   Robert Helms (00:19:40) - If it's to be, it's up to me and I completely respect that. And then there are folks that believe that no something is written on my heart. Something tugs towards me. I have a destiny. I have a life work that I need to pursue, and I respect that as well. So we for years have done an annual goal setting retreat that we call Create Your Future. But people wrestle with this, and I kind of witnessed the same thing. About three quarters of the people resonate with Create Your Future. But the very first evening of the event, I also submit to the attendees that if you feel called, if you feel like I have a destiny, but I'm not clear about it, then I just suggest that they reframe the entire event by the original title we use, which was Discover Your Destiny. So whether you believe that there is a destiny, a calling for you, or you've got to figure it out, this process of thinking about your goals, breaking them down to action steps, making sure they're in alignment with your vision, having that mission that you talked about, right.   Robert Helms (00:20:45) - All those things will serve you kind of either way.   Keith Weinhold (00:20:49) - Yeah, that's a rather deep existential question that I think some people need to figure out, I would imagine, before they develop their goals. So now that we've talked about mission and goals somewhat, Robert, can you tell us about some of your more successful people and some real success cases you've seen with people that have actually achieved goals and gotten this life satisfaction about becoming the most that they can be?   Robert Helms (00:21:14) - I love that the reason I keep doing this part of my life is because of the results people get. It's absolutely astounding. We've watched people go from modest means to incredible success, and not just monetarily, although that certainly happened. One of my favorites is a young gentleman who was dragged along to this, the goal setting event we do every year by his dad. His dad had been through a four years, brought his son and his son was kind of lackadaisical, had a job that paid okay, but he was living in a home. He was £50 overweight, just kind of plodding through life.   Robert Helms (00:21:51) - After three years. This guy was a brand new guy and he has completely changed his life. He's fit as can be. He found the woman of his dreams, which was something he thought might never happen. He's no longer working at a job that he just deals with. He loves his career like everything has changed and he gives credit to that, to finding this clarity. So here's the essence of goal setting. Your two best friends are clarity and focus. You have to get clear on exactly specifically what you want and the steps to get there. Most people are not clear. They're vague, they're nebulous. They kind of know what they want to do, but they aren't sure. And so you need a process to help you uncover and get that clarity. And then once you have that clarity, focus, right? Tracy says. And this is a deep one. All of life is the study of attention. What you think about comes about, said Earl Nightingale. And so the point is, what if we focus on something? Think about in your life, you've had some experience that's been successful.   Robert Helms (00:22:59) - It's probably because you put a lot of focus into that, a lot of attention. Sure. I remember all those years ago when we were talking about, hey, you said, I'm thinking about starting a podcast, and I'm like, awesome, right? And I was encouraging of it. I was thrilled you'd thought you'd already recorded a couple episodes. Yeah. And so many guys or gals come up and say they want to start a podcast, and most never do. But because you had the passion for it and you were committed to it and you did all the hard work, right? Those first several episodes where you got six or 7 or 10 listeners, you can't get to the first million until you get to the first ten. And this is what life is. It's focusing on the things that you want in your life. Instead of spending our focused time on distractions, things that the advertisers in our life want us to do, things that those friends that maybe like us but don't necessarily have our best interests at heart.   Robert Helms (00:23:54) - They want us to come to you. So there's a lot to figuring out who you want to be when you grow up. But if you'll take the time to figure that out and then work towards it, it's extraordinary what can happen now as far as success stories, I'll tell one more story because this is a reality check. It's not all happy high notes four years ago. At the end of the Create Your Future Goals retreat, I had a gentleman come up to me, pretty well-known guy, and so I won't mention who it is. But he said, Robert, you don't know this about me, but you saved my marriage this weekend. He said, I came with my wife. She was really reluctant to come. We were on the verge of divorce and we spent our time to separate parts of the room. But as you recommended, we came together Saturday night for dinner and we just connected like we haven't in years. And I saw this guy a couple weeks ago thrilled with his marriage, with everything that's like, awesome.   Robert Helms (00:24:49) - Now, I have to tell you, the other part of the story, which is that same evening, I talked to another gentleman who came up to me and he said, I'd like to talk to you about something. My wife and I came to this event and we both played full out, and we took all the notes and we really got clear on on what we want to have and be and do in our lives. And we've made the decision that we're going to get a divorce. I'm like, wow. So here's my point. If that was in their trajectory, if the best thing for them really was to separate, like, how soon would you want to know that versus the other couple that for all those reasons, they have strife and challenges in their marriage, but when they really looked at who they were and who they were becoming, they figured out they were much stronger together. So all that to say that when you get into the tough stuff, right, that squishy part of your heart and your soul, that stuff will come up for you.   Robert Helms (00:25:42) - You know, at the event, we put Kleenex out everywhere and people are like, what is a cold going around? Like, no, you. May need this. You may not. But I will tell you most people, if to get it done right, you have to be emotional because emotion is what will create motion, and that motion in your life will change your life.   Keith Weinhold (00:26:01) - Well, you talked about how clarity is an early step and wow, that's astounding for a couple to get the clarity that they want, amend things or a couple to get the clarity that they should end things. So we talked about goals kind of the back end and everyone knows what goals are. But kind of on that front end in the clarity, in winnowing down toward your goals. Can you speak to us more about that clarity piece? Because really, I think that's what a lot of people lack, because it probably takes some real vision.   Robert Helms (00:26:30) - Boy sure does. And it's the part I think, that people don't teach.   Robert Helms (00:26:33) - So the simple part of goal setting, you know, the Smart goals that works, but it it assumes you already know what you want. And so at our workshop the first day, we don't spend a minute on goal setting. And people are like, isn't this a goal setting workshop? Yeah, there's a whole bunch of stuff you have to do before you can set goals, right? And so I'll give the listeners some nuggets. The first is to get clear on who you are. Now, that sounds too vague and too big of a question, but specifically your principles and values that govern your life. And I've discovered that most people have about a half a dozen. There's about a half a dozen things that you value that really, really matter to you. And I don't even want to prime the pump. I don't even want to put words out. So people jump into that. Oh yeah, that sounds good. Instead, you have to spend some time alone or with some awesome music, or how whatever's best for you to get in that state, and then really delve deep on to the things that matter in your life.   Robert Helms (00:27:36) - What principles guide your life? What's super important to you? If you could only have 2 or 3 things in your life, what would they be? And then you start to get clear on really what matters. Because most of us are busy. We're busy doing all kinds of different things. And busy is not necessarily the path to success. Sometimes you have to take things off your plate in order to do more. As we like to say, you have to say no to the good in order to say yes to the great right. And most busy people really need to do some changes in that regard. First, the things that maybe you've been doing but you really aren't suited to or you don't enjoy doing, you offload those things. You learn how to delegate some of that. And then if you can spend time thinking through what matters to you as a person independent of real estate or your career, or even your family life, just the values and principles that guide you now you start to open up to that clarity, and then we take you through a whole bunch of exercises to imagine what life would be.   Robert Helms (00:28:38) - And, you know, pay attention to things that you are good at. Most people don't give themselves enough credit for their skill sets, and there's two schools of thought in personal development getting better as a person. One is I'm going to do an assessment and this is really important, do an assessment of where you're at. And as Jim Collins said in his book, Good to Great, confront the Brutal facts. If you're messing up somewhere, admit it. This is just between you and yourself, right? So admit where things aren't going. So are where maybe you're not as skilled as you like to be, or you don't have the experience that you want. And then you take an assessment of the places that you're pretty good at. You know, we don't like to pat ourselves on the back publicly, but in the privacy of your own mind, figure out, hey, there are some things that I'm skilled at. Either I have learned and developed the skill. I'm naturally drawn towards a behavior that's positive, whatever that might be for you, and then school of thought number one is I'm going to look at all the things I'm not very good at and try to get better at them.   Robert Helms (00:29:37) - And if I do that, that'll make me a better person. And that's true. The second school of thought is I'm going to do the same exact assessment, except I'm going to look at the things that I'm really good at and I'm going to design my life. So that's what I spend my time doing and the things I'm not good at. I find out how to have somebody else do those things. You can probably tell from my energy that's the school of thought I subscribe to, but both will work. But if you will focus on your unique talents and gifts and those things you are destined to be, then that's how you become the next best version of you.   Keith Weinhold (00:30:12) - Oh, these are key pieces in finding the clarity that you need to go ahead and set goals. We all become victims of weapons of mass destruction. Robert. Oftentimes I joke about how I can't believe how much stuff I get done when my iPhone is over on the charger because I can't be on the iPhone at all. So every year you host the Goals Retreat, an in-person event so a person doesn't have weapons of mass destruction, and they can really be focused.   Keith Weinhold (00:30:40) - And it's important that this is done in person. It's a hands on workshop in a focused environment. You've got a lot of great testimonials about it, and even people that repeat and show up year after year, people that become teary eyed for what you brought out of them, people that say that their lives have been changed forever. So tell us about how one can attend your goals retreat.   Robert Helms (00:30:59) - What's coming up the second weekend of the new year. It's a great time to be thinking about your future as we're at the beginning of the year when 2024 is a blank canvas and it happens in Dallas, Texas, we picked a hotel that is really conducive to having little nooks and crannies and places that you could go because there is instruction, but there's also times where you're going to go journal and answer questions and think and be alone. And it's a beautiful place. So you get some inspiration in that regard. It takes two and a half days. So we started about 5:00 in the afternoon on Friday and go till 10 or 1030 that night.   Robert Helms (00:31:33) - A lot of people are traveling in a day, so that's about as much as we can get people to pay attention before they start to nod off. But then the next day, Saturday, it's all day from, you know, 730 breakfast till 1030 at night. And then Sunday kind of 8:00 in the morning for breakfast until 6:00 at night. And then we have our afterglow reception. And, you know, I used to do this, Keith, in three hours and in three hours I could teach a lot about how to set goals and how to ask those questions. But then I'd have to send you home to do it. And a few people would, and most people wouldn't. So now in the two and a half days, you will get a ton done. Your missions, your values, your purpose. You'll answer more than 250 questions, and you'll do it in writing and you'll get some great, great stuff. Some of it you'll go, yeah, of course. And other times you'll be absolutely surprised at what happened when you put pen to paper.   Robert Helms (00:32:27) - And then on Sunday, it's really a workshop to turn those goals into action plan. So you leave not confused, not vague, but crystal clear. You obviously can't get every single thing done on every goal. In two and a half days. There's some homework, but you're going to have enough done that you'll have that momentum. So if people are interested in that, that sounds interesting to you. All you have to do is go to Goals retreat.com goals retreat.com and you can learn all about the Create Your Future 2024 goals. Retreat.   Keith Weinhold (00:32:58) - Invest in future. You. You're worth it Robert. It's been valuable. Thanks so much for coming out to the show.   Robert Helms (00:33:05) - Great to see you, Keith. Thanks for having me. I wish everybody out there a wonderful 2024.   Keith Weinhold (00:33:16) - Oh yeah, great stuff from Robert Helms. As usual to review Smart goals are specific, measurable, attainable, relevant, and time based. Even if it's your personal goal and you know that you won't forget that goal, it has been shown to increase your success.   Keith Weinhold (00:33:33) - If you write down your goals old school style with a pen and paper, let's review a few other things that you learned there. When you set a goal, set intermediate benchmarks within it. That's something that I need to work on personally. But before you even set goals, you'd have to know that they are the right goals. And that means that you need to get clarity of vision first. That comes with understanding your principles and values, and then you can spend your life being in the lane that you enjoy because you've helped figure out what that was in our discussion about. Are you destined versus are you made? Earlier in my life, I believed I was destined and now I believe I am made. Back when my high school classmates voted me as the most quiet and shy student, and then later I'd go on to host basically a talk show here. Well, that was my pivot point. To know that you make yourself, if you're still wrestling with the you are destined versus you are made conundrum, perhaps you can adopt the belief that you were destined to make yourself the best you that you can be, and there you've got both in one, the real estate guys host a number of world class, in-person events.   Keith Weinhold (00:34:50) - I would know because I've attended a number of them myself, from a real estate syndication event to a summit cruise to real estate field trips. But among them, all their goals retreat is their highest rated event, and it's only held annually. If it sounds interesting to you again. Goals retreat.com major thanks to Robert Helms today. Next week here on gray. It's real estate investing content that you've probably never heard before when we do How the Rent Stole Christmas. And I'm also going to deliver Gre's big home price appreciation forecast for next year and more on top of that. That's all next week. Until then, I'm your host, Keith Reinhold. Happy holidays. Don't quit your daydream.   Speaker 5 (00:35:40) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.   Speaker 6 (00:36:08) - The preceding program was brought to you by your home for wealth building. Get rich education.com.

A crying, sniffling mother reveals how inflation is ravaging her family. Despite a two-parent income, she tells us that they're trending toward poverty due to wages that struggle to cover inflated prices. For home prices to fall, many homeowners need to walk away. But if they tried that today, they’d have to pay more in rent than they would on their low mortgage payment. It’s absurd to only have one source of income. 401(k)s are considered a scam by some. I explain. Plan participants buy an income stream “probably later”. Real assets that cash flow provide income “surely now”. There’s no such thing as: rent inflation, food inflation, or energy inflation. Inflation comes from the central bank. One dollar in 1776 has the purchasing power of $35.36 today. The worst consequence of inflation is that one parent could work to be middle class in the 1950s. It became two by the 1990s. After the 2020s inflation wave, two parents might not be enough anymore. I explain why the Fed should keep interest rates the same for at least one year. But I doubt that they will. Resources mentioned: Show Notes: GetRichEducation.com/479 Terrific inflation resource, charts: https://www.officialdata.org/us/inflation/1776 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold

If you own a real estate entity (like an LLC), the new Corporate Transparency Act (CTA) must be complied with soon. I have my own attorneys on the show to discuss this today, Garrett and Ted Sutton. You must report ownership information to the federal government. It must only be done one-time, not annually. The penalties for non-compliance with the CTA can be as high as $10,000 in fines or up to 2 years in jail. Those penalties would be for the most egregious acts. The intent behind the CTA is to prevent money laundering and terrorist financing. If you don’t own real estate in an LLC, you probably won’t need to comply. There are pros and cons of using LLCs, which I discuss. For help complying with the CTA, you can contact Corporate Direct at CorporateDirect.com or (800) 600-1760. Resources mentioned: Show Notes: GetRichEducation.com/478 Corporate Direct: CorporateDirect.com 1-800-600-1760 Video platform with kids’ FinEd: SunnStream.com/fivetricks For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold

Today's topics: Conventional financial advice is God-awful; tertiary real estate markets; I’ve got a solution to guilt tipping; whether or not the world is uncertain and unsafe. Conventional financial advice is so bad. I attack the practices of setting budget alerts and paying off your smallest debts first.  Don’t roll a debt snowball; roll a cash flow snowball. In the past five years, tertiary markets are beginning to exhibit the rent stability of larger markets. Guilt tipping is out of control. Learn my elegant solution. You’ll never pay a guilt tip again. It seems like the world is increasingly uncertain and unsafe. It isn’t. I talk about why it only seems this way. Timestamps: The limitations of budgeting (00:02:43) Discussion on the drawbacks of using budgeting platforms and how they reinforce scarcity thinking. The debt snowball concept (00:05:09) Explanation of the debt snowball method of debt paydown and why it is not aligned with an abundance mindset. Investing in tertiary real estate markets (00:09:43) Exploration of the emerging bullish case for investing in smaller, tertiary real estate markets and their stability compared to larger markets. Tertiary Real Estate Markets (00:10:56) Discussion of the advantages and objections to investing in smaller tertiary real estate markets. Increasing Investor Appetite in Smaller Markets (00:12:02) Exploration of the growing interest and sales volumes in tertiary real estate markets. Guilt Tipping and a Solution (00:20:16) Explanation of guilt tipping and a proposed solution to avoid feeling pressured to leave a tip when making digital payments. Guilt Tipping and the Increasing Expectations (00:21:20) Discussion on the rise of tipping expectations and the use of digital payment prompts to ask for tips. The Problem with Guilt Tipping and the Inconvenience of Undoing Tips (00:23:45) Exploration of the annoyance of guilt tipping and the difficulty of undoing tips after poor service. The Solution: Paying Cash to Avoid Guilt Tipping (00:31:18) Suggestion to pay with cash as an elegant solution to circumvent guilt tipping and ignore electronic payment terminals. The Uncertainty of the World (00:32:25) Discusses how uncertainty has always existed and how waiting for complete clarity can hinder investment decisions. Disasters and Uncertainty (00:33:47) Lists various disasters and events that have occurred in the US, highlighting the constant presence of uncertainty and the relative sense of certainty and safety today. The Ultra Safety of American Society (00:36:13) Examines how society has become ultra safe, discussing the term "safetyism" and providing examples of excessive safety measures. Resources mentioned: Show Notes: GetRichEducation.com/477 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Complete Episode Transcript:   Keith Weinhold (00:00:01) - Welcome to I'm your host, Keith Weinhold, with a rant on how conventional financial advice is so terribly god awful an outlook for tertiary real estate markets, then? Are you getting worn down from guilt tipping? I've got a proven solution on how you'll never pay a guilt trip to a business again. And finally, how do you arrange your investing in personal finances in a world that's uncertain and unsafe? All today on get Rich education? When you want the best real estate and finance info, the modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers. Oh, at no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text to six, 6866.   Keith Weinhold (00:01:15) - And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth. Make sure you read it, text GRE to 66866. Text  GRE to 66866.   Speaker 2 (00:01:40) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Keith Weinhold (00:01:56) - Welcome from Los Angeles, California, to Las Cruces, New Mexico, and across 188 nations worldwide. I'm Keith Wayne holding. This is get rich education. When you pay for a low level service item like a Chipotle burrito, and another human is looking at you to see if you leave a 20% tip on a digital payment terminal, does that make you feel uncomfortable? Well, now you're being asked to. Guilt tip I've got a foolproof way on how to never get put in that situation again. That I'll share with you later here. You know, sometimes you just hear something that triggers a rant. I recently heard an ad for a digital platform that helps you manage your finances.   Keith Weinhold (00:02:43) - And what an awful, in scarcity minded way of thinking this reinforces. But this is actually what mainstream financial guidance looks like. All right, it was an ad for a digital platform trying to attract you there. And here's basically how it works. You set up your account. Then based on your income and expenses, you set up your budget. And as you know, that is a bad word around here, a budget. It's not how you want to live long term. All right. Then, when you're close to hitting your spending budget for the month or whatever, this platform triggers a budget alert. Are you kidding me? You get emailed a budget alert. How convenient. Oh, geez. So much for living an aspirational life by design. What a dreadful idea. Like someone that really wants more out of life would actually take effort to set up something like that. You would be building an architecture to establish life patterns that completely say, I think that money is a scarce resource. Now, in the short term, you've got to do what you've got to do, which might mean living below your means for a little while.   Keith Weinhold (00:03:55) - But in a world of abundance, delayed gratification should be a short term notion for you. I think that this type of platform that centered around stupid budget alerts is so limiting. Gosh, you've got to feel cheap just saying that out loud a budget alert. But anyway, that sounds conducive to this concept of scarcity based finance called a debt snowball that you can read about the debt snowball on Investopedia. But the debt snowball, that's basically how you pay off your debt with the smallest balance first, not the highest interest rate, but yes, the smallest principal balance it would have basically says is in the first step, what you're supposed to do is list your debts from smallest to largest, and that's regardless of interest rate, just smallest to largest based on the amount. And then the next step is that you make minimum payments on all of your debts except the smallest one, because you pay as much as possible on your smallest debt. And then the last step is you're supposed to just go ahead and repeat that until each debt is paid in full.   Keith Weinhold (00:05:09) - That's the debt snowball. So according to that, why do they say to disregard the interest rate, which is your cost of capital? Because they say that when you pay off the smallest debt super quick, that you're going to be jumping up and down with excitement, and that is going to motivate you to keep working hard to get debt free. They say that hope is more important than math. That's the school of thought. And along the way you should lower your expenses, cut spending, work hard and add a side hustle where you can. Oh my gosh, that is all congruent with this debt snowball concept that we sure do not endorse here at. I mean, that is 100% orthogonal to the world of abundance that we believe in. So often on your high interest rate debt. What you would do then is you'd make the minimum payments with this debt snowball, and then you focus it all on your smallest debt amount, regardless of interest rate. You've heard that right? And it even advocates that you stop investing and just focus on that smallest debt amount, even if it's a low interest rate.   Keith Weinhold (00:06:22) - That makes no sense. If you've decided that debt paydown is the best allocation of your first expendable dollar. All right, even if that were a yes, then in most cases you'd want to pay down the highest interest rate independent of the total principal balance on each of your debts. I mean, that's arbitrage, but they even bigger question for you, almost existential in nature is why is the best way to allocate your first expendable dollar on debt? Paydown. And. Any way it's or that. First, because one of the first places to look is how you can leverage that dollar 4 to 1 or 5 to 1 as long as you've controlled cash flows. Now, sometimes there are instances where you'd want to pay down debt before investing, certainly like a 20% Apr credit card debt, that could be one such place. So could retiring a debt to help your DTI, your debt to income ratio so that you can originate a new business loan or a new real estate loan first? All right, you might do thatrillionegardless of the interest rate on a loan.   Keith Weinhold (00:07:30) - But my gosh, if we want to stick with the snowball analogy, since we're a few days from December here, instead of trying to push a debt snowball up a hill to start rolling a cash flow snowball down a hill, when you buy an asset that pays you a monthly income stream to own it, that is constructive. Compounding your cash flows beats compounding your debt paid out. Instead of trying to push a debt snowball up a hill because you're cutting your one and only quality of life down. Instead, start rolling a cash flow snowball down a hill, and now you've got gravity working with you in the right way. That is the end of my rent. Hey, maybe I just feel like complaining a bit. My Jim was playing Phil Collins and Elton John all weekend, so maybe that's a kind of what in the world kind of mood that had generated in me, I don't know. And hey, nothing wrong with Phil Collins and Elton John. I mean, those guys are truly talented singers, 100%.   Keith Weinhold (00:08:28) - I just don't want to be working out to those guys. Michael Bolton, George Michael that's not motivating me to hit 20 burpees. Okay. Hey, well, I hope that you were set up for a great week. Be sure that part of it is that you are signed up for our live event tonight for 5.75% mortgage rates on Florida Income property@webinars.com. Now, whether you're looking at investment property in Florida or most any of the other 49 US states, there's a really nascent and interesting development that's been taking place for at least five years now. And that is what's happening in tertiary markets, smaller markets. I'll define tertiary a bit more shortly, but we're talking about metro statistical areas, MSAs that are probably not under 100,000 population, not that small. From a rent growth perspective. What's happened is that over the last five years, tertiary markets have had similar patterns to bigger markets. And historically, these smaller markets have been more erratic. But in rent growth terms, tertiary markets have stabilized. Now, a primary market is something like New York City or Chicago, a secondary market.   Keith Weinhold (00:09:43) - You might think of that as a little Rock, Arkansas, where it's under a million in size, and then a tertiary market that's going to be somewhat discretionary. But we're talking about a population of 100 K up to, say, 300 K. And what's noteworthy is that there are now more analysts and investors that are bullish on vibrant tertiary markets. So let's talk about why this is happening. I think there's an emerging bull case for overcoming some of the historical roadblocks to tertiary market investments in a diversified multifamily or single family rental portfolio. And one classical objection is that tertiary real estate markets are too volatile. Historically, we perceive smaller markets as more volatile. Yes, and some surely are. But over these last five years, markets outside the top 50 in size were regularly more consistent. Okay. They avoided rent cuts in 2020. They recorded sizable but less lawfully rent hikes in 2021 and 2022. And now they remain moderately positive in 2023, even as larger markets have kind of flattened out in the rent growth.   Keith Weinhold (00:10:56) - And of course, we're talking about a composite group of tertiary markets here. Some are more stable than others. You got to watch those local trends as always, of course. And you know, classically a second objection with these smaller markets is that, well, it's too easy to add a lot of supply. And yes, that is sometimes true and sometimes it's not. Indeed, there are a handful of small markets that are building like crazy, like Sioux Falls, South Dakota in Huntsville, Alabama. But as a group, the construction rate in what that is is the total units under construction divided by the total existing market, that is 5% in large markets versus the construction rate of just 4% in small markets. See, it can be harder to build in certain small markets due to NIMBYism or a lack of debt availability, especially if local banks aren't interested in the check size needed for construction loans. It can also be harder to build in certain small markets due to a lack. Of equity because it's a tougher sell to ask investors in a syndication to bet on a market that they don't have a lot of knowledge of.   Keith Weinhold (00:12:02) - Another objection to these tertiary markets is that small markets are not liquid. Since 2019, sales volumes in dollars going into tertiary markets has doubled. Investor appetite has definitely increased in smaller markets. And that's particularly true among these traditional regional investors that are looking for better yield as the larger cities got pricier. So good small markets, you know, a lot of them really are not secrets anymore. And there's only one more objection to these tertiary real estate markets and that it is harder to scale operations. And yes, there is always benefit in efficiency of scale. But, you know, it's certainly been getting easier with better technology today. Investors can always work with top local property managers. And for investment property owners or managers, they often target small markets adjacent to larger markets where they have a bigger presence. So some other considerations before you as an investor go deep in one of these smaller tertiary markets is you want to be choosy in your market and in your site selection. Look for small markets that have multiple drivers.   Keith Weinhold (00:13:13) - You don't just want these one trick ponies. You know, I've discussed with you before about how markets that are heavily focused on commodities or heavily focused on military, they are not favorable because those two sectors, for example, commodities and military, are just pretty volatile. Look for growth or steady markets, lots of small markets. They continue to grow at a pretty healthy clip. And you want to look for markets with an absence of new product. Now why don't I name a few tertiary markets so that you can get a better idea of this. So about 100 K to 300 K in population size. Not that these next ones are necessarily good or bad markets. It's just for size comparison. I'm thinking about Ocala, Florida and Shreveport, Louisiana. You know those two. They're almost getting too big. They're almost secondary markets Wilmington, North Carolina at 300 K. That's a tertiary market. So are Akron and Canton, Ohio Dayton. That's pretty tertiary, but it's also close to Cincinnati. So you got a little more safety in Dayton.   Keith Weinhold (00:14:20) - Toledo is secondary. Burlington, Vermont is tertiary. Bellingham, Washington is tertiary. Yuma and Flagstaff, Arizona are both tertiary. Yes. We're talking about the stability in rents in tertiary real estate markets. Conventionally. You know, in the past, I've said that MSAs of 500 K population or more, that's pretty much where you want to be. But anymore, with the rise of remote work after 2019, it's really making some of these smaller tertiary markets more palatable to real estate investors and something that you probably want to consider. So really, that's the takeaway for you here and say this is the kind of stuff that really plays into my interests as a geography guy. See, I'm a real estate guy, but I might be the most geography interested real estate guy out there. Geography is something that I really love, though I could I don't share too much geography here on a real estate show. Sometimes it's relevant because both geography and real estate are location, location, location, but sometimes it's less relevant.   Keith Weinhold (00:15:25) - For example, North America's longest river is not the Mississippi, it's the Missouri River. The New York City metro area is so populated that more than one in every 18 Americans live there. That's almost 6% of the entire American population. See, some of this is more trivial or of general interest than it is relevant to real estate. Although you could learn some geography from me. Do you know the closest US state to Africa? If you draw a straight line, the closest state to Africa is not Florida or North Carolina. It is Maine. Look on a globe. Part of the reason that Maine is the closest state is that Africa is primarily in the Northern Hemisphere, not the southern, contrary to popular belief, and to look at a different continent. The entirety of South America is east of Jacksonville, Florida. Here's one more piece of geography. Canada's beautiful and mountainous Yukon Territory is larger than California, yet California has more than 900 times the population of the entire Yukon. Yes, the giant Yukon has less than 45,000 people.   Keith Weinhold (00:16:39) - It is the practice of guilt tipping out of control. And how do you respond to our world that seems to be increasingly unsafe and uncertain. That's coming up next. They say, if you give a man a fish you have fed him for. Or a day. But if you teach them to fish, you have fed him for a lifetime. Well, here at gray, we do both. I'm not talking about both in terms of men and women, but we teach you how to fish and give you a fish. Get rich. Education is where we teach you how to fish. With this show, with our blog and newsletter and videos, we also give you a fish. That's it. Gray marketplace. It's one of the few places you'll find affordable, available properties that are good quality there at marketplace. They're all conducive to our strategy of real estate pays five ways I'm Keith Wild. You're listening to get Rich education. Jerry listeners can't stop talking about their service from Rich lending group and MLS. For 256.   Keith Weinhold (00:17:45) - They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your pre-qualification and you can chat with President Charlie Ridge. Personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income, and they've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.   Keith Weinhold (00:18:55) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to 66866.   Speaker 3 (00:19:16) - This is real estate investment coach Naresh Vissa. Don't live below your means. Grow your needs. Listen to get rich education with Keith Weinhold.   Keith Weinhold (00:19:34) - Welcome back. I'm your host, Keith Weinhold. There will only ever be one great podcast. Episode 477. And you're listening to it perhaps on one third of our episodes. Throughout the show's history, there is no guest. It's 100% me, a slack jawed monologue like it is today, and lots of great Jerry episodes coming up in the future, including Robert Helms other real estate guys here soon as he runs alongside me for an episode as we discuss goals. If you get value from and you don't want to miss any future episodes, be sure to hit subscribe or follow on your favorite podcast platform so that you're sure to hear from me again after today.   Keith Weinhold (00:20:16) - Is guilt tipping out of control? We have all felt it now. Does this happen to you today when you're about to pay the Starbucks barista or for the subway sandwich and they spin the digital payment terminal around toward you and say, it's just going to ask you a question before you pay. And then they stand there and they look at you in the face and they watch what you choose. All right. Does that right there give you a tinge of anxiety or even stress you out? Well, if you give in to that, that is called guilt tipping. And you know what? I've got a solution to guilt tipping. A simple and elegant way that I'm going to share with you so that you never have to see a payment terminal like this in your face again, that asks you for a tip when you're out shopping or dining and paying for something. Yes, I've got a proven solution for how you'll never even be asked to leave a guilt tip again because I tested it and mastered it. It works.   Keith Weinhold (00:21:20) - We even have an unverified report on Reddit of a self-serve digital kiosk now even asking you for a tip. What? I mean, how far will this go? Yes, like a self-checkout for your own groceries at a supermarket like Giant or Safeway? First, let's get some context about why this is so important to you in the first place and how bad it's getting. It might even be worse than what you're thinking here. All right, a new study from Pew Research. It found that 72% of people said that the long standing practice of tipping is now expected in more places than it was five years ago. My reaction to that stat is what? How is it not 100% of people saying that it's happening all over the place, and consumers like you and I are increasingly getting tired of it? The way it works is that today's digital payment prompts, they allow businesses to preset suggested tip levels, so it's easier than ever for them to ask for tips and companies that have not done so in the past. They are definitely doing it now rather than giving employees a raise.   Keith Weinhold (00:22:35) - Instead, they're asking you to supplement the employee wage by asking you for tips where they didn't before. Must you fight back like David Horowitz, if you're uninitiated on that? I learned about a popular show that apparently ran on prime time network television in the 1980s. The show was called Fight Back with David Horowitz, and it advocated for how consumers can fight back against unscrupulous business practices. In fact, let's listen into the cornball intro of this show, which your parents might remember. It's something about fight back. Don't let businesses push you around.   Speaker UU (00:23:20) - But don't let anyone push you around. Fine, but stand up and hold your ground. I got. Someone tries to you in. Five spot. Just.   Speaker 4 (00:23:44) - Oh, jeez. Yeah.   Keith Weinhold (00:23:45) - Fight back against guilt tipping, I suppose. See, a few years back, the reason that you began getting asked to leave a tip in places you hadn't before. That's because it was a way for you to provide a gratuity for service workers. Because you were supposed to have appreciated that they showed up during the health crisis when a lot of workers did not want to show up.   Keith Weinhold (00:24:09) - But now that the crisis appears largely over with, the tip requests have not gone away. They've gotten worse because by now companies see what they can get away with. Now, look, people don't want to feel like a jerk or a cheapskate. You don't. I don't, but businesses are taking advantage of that fact by making bigger than usual tips. The default option on these payment terminals. It really that's the crux of the annoyance. Say that you're given choices of 20, 25, or 30% on a payment terminal just for someone handing you a pre-made sandwich that's already wrapped in cellophane. I've had it happen to me, and then hoping that you will just go ahead and pay the extra amount, rather than hassling with clicking custom tip and entering a smaller number like 10% or zero. Understand something here. The business call it a sandwich shop. They're not the ones that always decide what tip options you're presented with. Did you know that because the companies that own the payment systems, they can earn a cut of your money from each transaction? Those payment system companies, they also have an incentive to increase those amounts as much as possible, not just the sandwich shop, but they are both complicit in this scheme together.   Keith Weinhold (00:25:37) - But now sometimes you get asked to leave a tip beforehand before you're even delivered any good or service. And see, that's getting awkward too. And see the fear of that you and I should have. Now is that in this case, as the customer, as the client, you are going to get punished if you leave a low tip before they deliver the service to you. See, that's another big problem here with guilt tipping. Now, traditionally, tips were thought of as a way to reward good service after you already received what you paid for, right? That's how it works. You pay your server after a meal, you pay your valet. After they bring you your car. You pay the tour guide after your volcano hike or snorkel tour. If you thought that they did a good job. Now, just the other day at a chain fast casual Mexican restaurant that you've certainly heard of, I was being rung up about $35 for two double steak burritos, and there's a lower service level there than a full sit down restaurant.   Keith Weinhold (00:26:44) - But I left a 10% tip at the counter on that day. I thought they put lots of steak on them. And then I walked my burritos to the tables and the tables were messy. I could not find a clean table anywhere, but I had already left the tip. It was too late, so I left the tip and then only later did I discover the poor service, the messy tables. Oh gosh, I wasn't going to go back and try to undo the tip, huh? Before I tell you about my elegant solution so that you can forever avoid guilt tipping. So let's understand just where are Americans tipping today? The situations when people add a gratuity. You know, this really offers some insight into the new tipping landscape. And again, this is according to Pew Research for dining at sit down restaurants, 92% of people are tipping there. And of note, a majority said that they would tip 15% or less for an average sit down meal. That kind of surprised me, because etiquette experts say the tipping 20% at a full service restaurant is standard now, and that's what I do.   Keith Weinhold (00:27:48) - Okay, getting a haircut 78% of people tip today. Having food delivered 76% for those using a taxi or rideshare service like Uber, 61% of people said that they would tip. I tip for all those things. Buying coffee. Only 25% of people leave tips and eating at fast casual restaurants only 12%. So look, people are upset because we've had years of high consumer price inflation and service inflation on top of that. And then a tip on top of that. Yeah. So it's tip relation on top of inflation. And then there is this preponderance of restaurants especially. It suggests that you tip the post-tax amount. Have you noticed that that means that you're also paying a tip on the tax that you pay? So just pay attention to that next time you're at a sit down, full service restaurant, or really most any other place that suggests a tip amount. And yeah, that's annoying. And I really doubt that that business sends that extra revenue to the IRS where you're paying a tip to the tax amount.   Keith Weinhold (00:29:00) - Gosh. But it all comes back to tip and the influx of automatic prompts at businesses like coffee shops, it gives you more chances to tip, and it'll just wear you down and then wear you out, creating this sense of exhaustion thinking what is all this for? It is just wild. If supermarkets are asking you to leave a tip for self checkout, your supermarket wants to outsource their checkout duties from clerks and cashiers to you, asking you to scan your own groceries. By the way, that is an example of service inflation. And then they ask you for a tip. On top of this food inflation and service inflation, you're doing it all yourself. What is next? You're going to have to unload the store's delivery of food from the 18 Wheeler truck in the back, onto a forklift, and onto the shelves yourself. I kind of doubt that. But if grocery stores are convenience stores, self-serve kiosks, if they're requesting tips, then it's more likely that soon enough, your human checkout clerk is going to start requesting tips.   Keith Weinhold (00:30:09) - When you're checking out at Whole Foods or Publix or Wegmans or Safeway, that human checkout clerk that's going to appear as some sort of small luxury comparatively. I mean, I would expect that to come to your town next. Expect to see it if you haven't already. There used to be this general understanding of what different tip amounts convey to servers and workers. Now, decades ago, it used to be a 10% tip meant, all right, well, hey, it wasn't horrible, but it wasn't great either. A 15% tip was normal and 20%. That meant that person did an excellent job. But now those amounts have all become expected and they've all been bumped up 5% or more. All right, well, here's my solution to avoid guilt tipping the way to no longer see a digital payment terminal spun around put in your face. Putting you on the spot to make a nice tip is just this two word solution pay cash. Yes, when you pay cash, you don't have to see an electronic payment terminal at all.   Keith Weinhold (00:31:18) - And it's far easier for you to ignore a physical tip jar that's sitting on the counter over to the side of you. The elegant and simple solution to guilt tipping is to pay cash. Now go ahead and leave a tip for good service if you want to. I'm not here to suggest that you stop all tipping. It's about how you can make an elegant circumvention of guilt tipping. If you have an eight second long exchange where you ask for a cup of coffee and they turn around and pour it from a spout and hand it to you. And that's all they did. Well, that tips discretionary. The bottom line is that you don't have to tip every time you're prompted. And now go ahead and hit up that ATM with cash. You will be armed and you can avoid guilt tipping completely. And hey, can we say that you will be fighting back like David Horowitz? Tipping is fine, but guilt tipping is out of control. And hey, if you want to see more on guilt tipping, I really brought it to life on a video recently where I really broke it down.   Keith Weinhold (00:32:25) - That is on our YouTube channel. We are consistently branded as they say. Our YouTube channel is called get Rich education. So you can watch me talk about guilt tipping and show you more over there. Do you feel like the world that you're living in is increasingly uncertain and unsafe? And is that adversely affecting your investment decisions? That happens to some people and you can't make gains when you stay on the sidelines. I think some people make too much of uncertainty, even though it has always existed. Just look at the last about four years. You know, someone could have said, I am just paralyzed with inaction because of the pandemic. Oh, that's uncertain then the recession fears uncertain, then rising interest rates where they rose fast, uncertain. And today it might be wars uncertain. And you know, the same people that get paralyzed with uncertainty. They will soon say something next year like, well, it's a presidential election year. So. I think uncertainty is going to sideline me again. If you wait for uncertainty to abate, such as you have complete clarity or even great clarity, you're going to be waiting your entire life.   Keith Weinhold (00:33:47) - Uncertainty and an absence of complete safety that's existed in the world every single day since the day that you and I were born and before you and I were born. And it will exist after we're gone, too. I mean, really, just look at some of these disasters that have taken place just this century, and we're still in the first quarter of this century. And let's look here at some just in the US, not foreign crises. I'm thinking about the Y2K bug, the September 11th terrorist attacks on the World Trade Towers in the Pentagon, the Iraq war, the invasion into Afghanistan, Hurricane Katrina, where 1800 people were killed, the GREAtrillionECESSION, the Arab Spring, the surprise of Donald Trump becoming our president in 2016. Remember, that was a real upset over Hillary Clinton. How about the jarring events of January 6th of the Capitol less than three years ago, the eviction moratorium, the slow creep of climate change, the riots and civil unrest with the George Floyd protests, the wildflowers from California to Maui.   Keith Weinhold (00:35:00) - I mean, I could go on and on about how winners just keep thriving despite a world that's constantly uncertain and unsafe. And I'm only talking about things that involve the United States here, and I'm keeping it confined to this century just a little more than two decades. I mean, before that, we had World wars. We had the Dust Bowl, Cuba's Bay of pigs invasion in the Cuban Missile Crisis that could have led to a nuclear apocalypse that completely destroyed the entire world. There is relative clarity today compared to all that. How about an assassination attempt of our President Reagan? I mean, things are substantially more certain today in a lot of ways. And today, American employment is strong, GDP is growing. Our currency is fairly stable despite our problems, which will always exist. Today, the US economy is outperforming everybody in the world. And in a world that some feel is uncertain and unsafe, just consider the relative sense of certainty and safety you have today. Well, we discuss wars today. As bad as they are when they do happen, they're never on US soil.   Keith Weinhold (00:36:13) - Can you imagine an attack on American soil? How would that sound? Like? The enemy has destroyed and taken control of Charleston in Savannah. And next they're moving inland to take down Atlanta. I mean, that's so unlikely that your mind isn't even conditioned to think that way. But the reason that it seems, seems like your world is getting less certain and less safe is because of media. Media is more fractured than it's ever been. It wants your attention. So with more competition with everything from YouTube videos to TikTok clips now competing with legacy media, you get introduced to more fear in order to get your attention. My gosh. I mean, is American life safer than ever? You can make the case that it's become too safe even. I've talked to you before about how things could very well be in safety overboard mode in real estate. Now here we talk about providing clean, safe, affordable and functional housing. But she should need GFCI outlets all over the place in your property, and carbon monoxide detectors and fire rated doors, even when their improvement to your safety is negligible.   Keith Weinhold (00:37:32) - American society at large is so ultra safe and in fact, there's even a term for this now it's called safety ism. Yeah, look it up. It's how excessive safety is becoming harmful to society. When you are on your last passenger plane flight at night and you just wanted to take a nice nap, or you wanted to get some sleep, did the pilot come on to the intercom system and wake you up, telling you to sit down and put your seatbelt on every time? Just a small amount of turbulence was being felt. Oh, there are endless instances like that where society's gotten so safe that it's just annoying. The last time that I was shopping at Lowe's, the home improvement store, a forklift driver was slowly driving the aisles really carefully. And besides just the forklift driver sitting on the seat, there was a second man, a flagger, that was out in front of him, walking, holding two little flags. So the shopping customers knew that a forklift. This coming. Like, that's such a wild hazard to human safety.   Keith Weinhold (00:38:37) - I mean, gosh, the gross inefficiency of that just to improve safety ever so slightly. Construction workers that have to wear hard hats outdoors in an open field. I mean, our society has become Uber safe. Now, don't get me wrong, some measure of safety is definitely a good thing, but I'm underscoring the fact that historically, this world that you're living in is ultra safe and ultra certain. And then within our investing world, take a look around what can be said to be certain and uncertain. Apple. They're the world's largest company by market cap at about $3 trillion. And their risk is that eventually they might fail to keep innovating. How about Bitcoin? Bitcoin could have government crackdowns or some other lack of certainties, their money in the bank and owning Treasury bonds. All right. That's fairly safe and certain. But you aren't getting any real yield there. And in a world that feels more uncertain and unsafe than it really is, bring it back to the positive attributes of being a real estate investor here.   Keith Weinhold (00:39:46) - You know, monetary inflation is a near certainty, and so is the fact that people will pay you rent if you put a roof over their heads. Certainty. It helps to be mindful that safety is the opposite of freedom, and that having security is the opposite of having opportunity. Hey, well, speaking of opportunity, join our investment coach Norris for Grizz Live event that is to night. You can join from the comfort of your own home. You get to select from one of the two options for Florida Income property. You can select either a 5.75% mortgage rate or the 224 program, which means two years of free property management. 2% of the purchase price. In closing cost credit to you and a generous $4,000 lease up fee credit. Sign up. It's free. It's our live event tonight, the 27th at 8:30 p.m. eastern, 530 Pacific. If you're a few days late, be sure to watch the replay soon. register@webinars.com to have a chance at putting some new Build Florida Income property in your portfolio.   Keith Weinhold (00:41:00) - Until next week, I'm your host, Keith Winfield. Don't quit your day dream.   Speaker 5 (00:41:08) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.   Keith Weinhold (00:41:36) - The preceding program was brought to you by your home for wealth building. Get rich education.

Join our free Florida income properties webinar on Monday, November 27th for 5.75% mortgage rates at: GREwebinars.com Home prices are up 4.5% annually through Q3. It’s the fastest growth rate in months. Three out of ten renters are now age 55+, the most ever. Older renters are good for you: lower turnover, more quiet, more savings & income, and lower regulation compared to assisted living.  Overall US population growth is slowing, from 1.2% a generation ago to 0.5% today. It’s expected to grow until 2080. I discuss the DOJ crackdown on the NAR and real estate commissions. 1.6 million real estate agents could lose their jobs. Apartment building rate caps have become super-expensive. One of our real estate Investment Coaches, Naresh, joins us from Florida.  Naresh tells us how to get 5.75% mortgage rates on new-build Florida income property at GREwebinars.com Resources mentioned: Show Notes: GetRichEducation.com/476 Join our Florida properties webinar, free,  Nov. 27th at 8:30 PM ET at: www.GREwebinars.com For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text FAMILY to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Timestamps:   The housing market stats (00:02:52) Discussion about the current state of the housing market, including the 45% increase in home prices and the reasons for continued home price support.   Home price appreciation forecasts (00:05:28) Talks about the predictions for future home price appreciation, with both CoreLogic and NAR expecting a 26% rise in home prices next year.   The impact of older renters (00:10:08) Explains why older renters are desirable for property owners and landlords, highlighting their lower turnover rate and stability.   The Aging Population and Older Renters (00:11:15) Discusses the benefits of older renters, such as lower mobility, more savings and income, and low regulation.   US Population Projection and Immigration (00:12:30) Examines the projected population decline in the US by 2100 and the importance of immigration for continued growth.   Housing Demand and Household Size (00:17:12) Explores the trend of fewer people living in each household and its impact on housing demand.   The timestamp's title (00:22:05) Rising Costs of Rate Caps for Apartment Buildings Discussion on how the cost of rate caps for larger apartment buildings has become prohibitively expensive.   The timestamp's title (00:25:23) Real Estate Market Trends and Slowdown Insights on the current state of the real estate market, including a slowdown in November and leveling off of home values and rents.   The timestamp's title (00:28:28) Opportunity in Real Estate Market in 2024 Predictions for the real estate market in 2024, including a potential bottoming out of the market and a decrease in mortgage rates.   The decline in home values and the health of the economy (00:32:58) Discussion on the decline in home values and the health of the economy, with reference to the 2008 financial crisis and current housing supply.   Short-term rentals and the potential for a decline (00:34:14) Exploration of the decline in short-term rentals due to a decrease in travel and corporate expenses.   The impact of mortgage interest rates on home prices (00:35:19) Analysis of the relationship between mortgage interest rates, economic slowdowns, and home prices, with a focus on potential rate cuts and their effects on the housing market.   The Florida In-Migration Stat (00:43:53) Florida's astounding population growth and becoming the second most valuable property market in the US.   The Rate Buy Down Courtesy of the Builders (00:44:23) Explaining the options of a 5.75% rate or the 2-2-4 program for property buyers in Florida.   Disclaimer and Closing (00:46:02) A disclaimer about the show and a mention of the sponsor, Get Rich Education.   Complete Episode Transcript:   Speaker 1 (00:00:01) - Welcome to I'm your host Keith Weinhold told how price appreciation is up 4.5%, but there are signs that it is slowing down. Finally, learn more about our upcoming live event that you can join from the comfort of your own home today on get Rich education. When you want the best real estate and finance info. The modern internet experience limits your free articles access, and it's replete with paywalls. And you've got pop ups and push notifications and cookies. Disclaimers. Oh, at no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of hours myself. It's got a dash of humor and it's to the point to get the letter. It couldn't be more simple text to 66866. And when you start the free newsletter, you'll also get my one hour fast real estate course completely free. It's called the Don't Quit Your Day dream letter and it wires your mind for wealth.   Speaker 1 (00:01:17) - Make sure you read it text to 66866. Text 266866.   Speaker 2 (00:01:29) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Speaker 1 (00:01:45) - We're going to go from Roxbury, Connecticut to Roxbury, Wisconsin, and across 188 nations worldwide. This is get rich education. I'm Keith Weinhold, GRE founder host of this very show since 2014, longtime real estate investor and Forbes Real Estate Council member. In fact, check out my latest article in Forbes for my work in research on the housing market. What we do here is by investment property with the bank's money, pay the debt with the tenants money, and then well, that's about it. In a sense. We enjoy life mostly. There will be some bumps along the way. The devil is in the details. Yeah, all those sus vibes that you got from the housing price apocalypse, doomsday, YouTubers. All of those vibes you had are validated by now. Just in time for a sweater weather. Respected research firm CoreLogic released their report with end of quarter housing stats nationwide.   Speaker 1 (00:02:52) - Home prices still haven't fallen. There was a healthy 4.5% in September of this year compared to September of last year. Yes, these real estate numbers always run behind a little bit. Well, that 4.5% increase that even includes distressed sales. And that is the fastest growth rate in quite a few months. And again, this is primarily due to a robust job market spiked inflation and housing inventory lows that just keep scraping along the sea bottom floor. So these fundamental reasons for continued home price support, I mean, it's the same stuff I've emphasized for over two years, even as I stated prominently back on television in November of 2021. And although that was avant garde at the time, it's really not in my personality to get smug until the incessant rumors today I told you so or anything like that. Well, the highest price gains this past year. They were concentrated in places that had, I suppose, the best autumn foliage this year, that is, most northeastern states. They are the big gainers now. There were some price declines in a few places.   Speaker 1 (00:04:08) - They were felt in just four western states and D.C. the four western states were Utah, Idaho, Montana and Wyoming. Now, see, in the pandemic, those states prices, they stretched broader than basketball star Victor Wembanyama. And today they are mildly correcting. But back to the base case here. The 46 of 50 states which experienced appreciation oven mitts are needed to handle the three hottest states led by Maine 10%, Connecticut also at 10%, and new Jersey, with a 9% gain. And when you break that down in the metro area, it was Miami that led with soaring 8.5% appreciation. And it's interesting are core investment areas of the Midwest in southeast, which I call the stable markets. They lived up to that moniker again, they appreciated moderately during the pandemic and still appreciating moderately today. And as we approach winter, expect home price depreciation to have its seasonal slowdown. That's what tends to happen each year. In fact, there's a slowdown in sales of volume two. There are just so few homes on the market, but it has gotten really slow lately.   Speaker 1 (00:05:28) - Now, I do like CoreLogic, the supplier of this information. They contribute their single family rent index to our industry. And that's so valuable because most rent data that you find out there is about apartments. CoreLogic predicts further home price appreciation over the next year of 2.6%. And similarly, the Nar. They expect home prices to rise 2.6% next year. Now, next month, you will hear me. Release gives home price appreciation forecasts right here on the show, and you're also going to learn how accurate my forecast was for this year that I made last year. Now, just last month, I made an in-person field trip to Cash Flow Country, the Midwestern United States. You've got some income property providers there that are still steadily sourcing properties to investors like you. But, you know, there are a few now where they're not even doing that lately because some providers are having trouble making the numbers work for you, the investor. Like, for example, on a single family rental that was built in the 1960s.   Speaker 1 (00:06:40) - Right. A somewhat older property. Where it is commanding, say 1650 rent. And this is a real example of rehab property that I visited in the Midwest, 1650 REM. Well, these property providers can get, say, $230,000 for that property if they sell it to an owner occupant instead of an investor like you. Well, with higher interest rates on an older property, you know, 1650 rent on a 230 K purchase price. And it doesn't work so great for you as an investor, although it might on a newbuild property. So that's why a provider like that is selling to owner occupants instead of investors like you, an owner occupant, they'll pay 230 K because they don't have to make it cash flow. It's their home. So instead of selling it to an investor like you were, say 190 K is the most that it would make sense for you to pay. Well, then sure, that provider is going to get 230 K from an owner occupant, so it makes more sense for that provider to sell it to the owner occupant as well.   Speaker 1 (00:07:44) - Now, one income property company that has in-house management and all that. I mean, this is a company that then is set up to serve investors. What they've done though is currently they're selling about 80% to retail homeowners, owner occupants in just 20% to turnkey real estate investors. For just that reason, owner occupants can pay more for it because of what's going on in the cycle. So in that particular Midwestern market, either mortgage interest rates must come down or rents must rise in order for it to make sense to you as an investor again. Now, later in the show today, you'll soon see that we've effectively found a way to make interest rates go back in time a couple of years when they were low, and how you can apply them to new Build income property. Today you'll learn exactly what that rate is, and this is fairly exciting. But yes, everyone wants to know where are mortgage rates going to go. And no one I mean absolutely no one knows where rates will go. Not your mortgage loan officer, not Janet Yellen, not your property provider.   Speaker 1 (00:08:55) - They don't know where mortgage rates are going to go, not the president of the United States, not Charlie Ridge, not a real estate agent, not Ron DeSantis and not me. No one knows where rates are going, of course. But we did learn something just about ten days ago. Fed Chair Jerome Powell said he's not confident. Those were his words in quotes, not confident that policymakers have done enough to curb inflation. Well, that right there. That is what is known as a hawkish comment in fed vernacular. If they haven't done enough to curb inflation, then that is what has renewed fears of more interest rate increases. Now your investment properties next tenant might be a grandparent with a flip phone. Roughly three out of ten renter households are now headed by people age 55 plus. After bottoming out in 2004, older renters have become a major share of the tenant population today, and I share this with you recently. If you're a reader of Art, Don't Quit Your Day Dream letter. And by the way, welcome to all of our new letter readers.   Speaker 1 (00:10:08) - We recently had a few thousand new Don't Quit Your Adrian Letter subscribers, our weekly email newsletter. Welcome here to the podcast. Now as I'll explain why in a moment you should like and embrace older renters. Now, first things first. Understand that as a property owner or landlord, you cannot age discriminate in your advertising or in your tenant screening. But all right, once you're done poking fun at their jitterbug or their track phone, understand that older renters, they are desirable. And by the way, our jitter, bugs and track phones still made us think that at least one of those two phone models is still made. At least one of them is a flip phone. Not completely sure, but anyway, yes, now that we know that there are more older renters here, about 3 in 10 American renters now age 55 plus, okay, older renters, hey, they really are desirable for a bunch of reasons. You're going to have lower turnover. Okay? Older people tend to stay put. There's a low transient rate.   Speaker 1 (00:11:15) - They have a low mobility rate. That's another way to say it. Also all the renters, they tend to be more quiet. They're less likely to throw three keg ragers no beer pong, no headbutt dents in the drywall. And when it comes to savings and income, they have more of it and expect low regulation. Unlike something like assisted living, there is no special government permitting or any specialized staff that's needed. So. There are some big reasons why this growing group of older renters that is good for you as an income property owner. So to review what you've learned, that's due to lower mobility. They're more quiet, they have more savings in income and there's low regulation. And I'm going to say that personally, I've come to appreciate my older friends more as time goes on. And I recently realized that I have some of my best conversations with them. But they won't talk me into the jitterbug. They can't talk me into giving up my life without Instagram on an iPhone. Many older adults, they don't want the hassle of homeownership and others they are just feeling the weight of dreadful homebuyer affordability, just like everyone else.   Speaker 1 (00:12:30) - And one major reason for why there are more older renters. If you're trying to find a reason why it's not due to some seismic behavioral shift, it's just the simple fact that the American population keeps getting older overall. Overall, we have an aging population. And by the way, is 55 that old? I mean, the 55 plus age group, that can mean a lot of things. And 85 year old and 55 year old lived very different lives with different activity levels, of course. But is 55 that old? I don't know, I know that you only need to be age 50 to be an AARP member. I guess 55 sounds old, because you can say that you're pretty likely to be in the second half of your life, but maybe if you divide life up into thirds, you could say then that 55 is in the middle third, and then therefore 55 could be seen as middle aged and not old, I suppose. And for some reason, it's systemic in American culture that people don't seem to want to be called old for whatever reason.   Speaker 1 (00:13:35) - It has a mildly pejorative connotation, but it is a group of people with their own separate habits, and these people are more likely to be using trekking poles when they go hiking, I guess. And I don't agree that age is just a number. I mean, come on, age means something in 85 year old men. They are not going to qualify to play in the NBA All-Star game. They're not going to be the most agile defensive back on an NFL field. So that takeaway here is that more renters are older. Embrace it. It's good if you're a listener but still don't have our valuable don't quit your day dream letter, which wires your mind for wealth, and it updates you on real estate trends. You can get it for free right now. Just text message group to 66866. That's green to 66866. We've been talking about the aging population here on get Rich education episode 476. All right. But how about the overall US population trend. This is something that you might have seen elsewhere since it transcends real estate.   Speaker 1 (00:14:46) - But I'll give you my real estate take on it too. All right. So the latest Census Bureau figures, they show that the US population is projected to contract to shrink by the year 2100, which would be only the second decline in the nation's history. And the other decline occurred in the 1918 Spanish flu and World War one. For those reasons, annual population growth rates, they have dropped from about 1.2% a generation ago to just one half of 1% today, and the culprits are declining birth rates and that aforementioned aging population. All right. The US has the world's third biggest population, and it could be demoted to fourth or fifth by Pakistan or Nigeria as soon as the middle of this century. So this anticipated population contraction, that means that immigration could become vital for any hopes of continued growth. And yet understand the US is still growing faster than a lot of other high income nations like Japan and Italy, that are already losing population. All right, so the US population is projected to shrink by 2100.   Speaker 1 (00:16:02) - The more important thing for you to remember as a real estate investor that's going to need a population to drive demand, is that our population is still expected to grow every year until about the year 2080 by most every model out there. So still 50 to 60 years of population growth. And then it isn't until later 2100 that is expected to decline. And of course, birth rates and immigration rates are bigger unknowns than the death rate out there in the future. Just estimating how soon our population is going to peak, but it's going to be a. While many decades. And then, of course, even in 50, 60 years, if the overall American population stops growing. All right, well, it'll probably still grow in some regions. And, you know, I wonder if Florida will still be growing late this century. It seems like it never stops there with population growth. And also it's not just about overall population growth when it comes to housing demand. It's how people choose to live within a certain population growth rate.   Speaker 1 (00:17:12) - Okay, with a population of 100, if there are two people per household, well, they can be housed with 50 homes, but if there is just one person per household, well then it's going to take 100 homes to house those same 100 people, no longer 50 homes. All right. And one trend that's made for surging American housing demand is that you have fewer people living in each household. That's how people choose to live today. So keep that in mind. You see a small half of 1% annual growth rate in more recent years, but there are a lot of numbers behind the numbers. Now, you might wonder what I think about the federal jury that recently found the National Association of Realtors and large brokerages, and how they conspire to keep commissions artificially high. What's that really mean? Well, what it means is more flexibility for buyers. I mean, under the current system, sellers pay their own agents commission of roughly 5 to 6%, and then that 5 to 6% that's shared with the buyer's agent.   Speaker 1 (00:18:18) - Well, if sellers now get billion from paying buyer's agents, well, then buyers would have to start to pay their own agent if they choose to use one. And a buyer could do that at either a flat rate or an hourly rate. But first time homebuyers, they could really feel the crunch, or that could become a bigger issue for those wannabe first time homebuyers that are having a hard time amassing the savings to pay for an agent on top of their down payment and their closing costs. Just another whammy for those wannabe first time homebuyers. They keep getting beaten down, and that's what could put some upward pressure on rents. But I don't think it would really be much as a result of that alone. And another consequence of this is that there would be less commission paid by sellers. I mean, the way it works is that in order to advertise a listing on the database, the MLS, the Multiple Listing Service, are that MLS that populates real estate websites like Zillow and Redfin? Well, in order for that to happen, sellers in most markets they have to agree to pay the buyer's agent's commission as well as their own sellers agents commission.   Speaker 1 (00:19:31) - Well, that's the practice that could be scrapped and that could spell trouble for real estate agents. A lot of people have estimated that $30 billion could potentially leave the industry, and some estimate that 1.6 million agents could lose their jobs. See, the way that the system had worked in the past is that one reason that the seller pays the entire 5 to 6% commission for both sides is because it's usually easy for them to do that, since sellers are the ones that have the equity in their property and the buyers often don't. So this could make homeownership even more difficult to qualify for. I mean, if first time homebuyers already had to jump over a four foot hurdle, now it's perhaps a five foot hurdle if this all happens. But there are still legal battles ongoing there in the real estate agent commissions case. Now, as I've talked about before, with this American housing shortage, it's the affordable housing segment that has high demand and is so drastically undersupplied. Now just get this understand that from 2019 until today, the price of a new car rose 22%, the price of a median home rose 42%.   Speaker 1 (00:20:54) - And the mobile home price, which is about the most affordable option for housing that rose by a giant 58%. I mean, wow, that is a testament to the major housing shortage at the affordable price points. That really, really spells it out. And if you're confident that the long term play is to provide good, affordable housing like we are here at, you know, there are more reasons to look at loading up on properties like duplexes and triplexes. And for plex's where you can get fixed rates now. And if you wanted to, you could refinance to long term fixed rates later. Now to buy a rate cap for a larger apartment building. That has just balloon in expense for you? Yes, a rate cap buying the what's basically like insurance you buy that puts a ceiling on how high your interest rate can go on larger apartment buildings. You don't have to do that with 1 to 4 unit property. You can just get fixed rate certainty. Now, a couple years ago, rate caps for large apartment buildings, they were pretty affordable.   Speaker 1 (00:22:05) - They were inexpensive. It took 40 K, 50 or 100 K to ensure that your rate wouldn't adjust too high. And then once it did, of course the rate cap insurance would kick in. But that same rate cap this year could be nearly $1 million. Yeah. See, a couple years ago, the $10 million loan, you could have bought a 2% rate cap for 60 to 75 K in three years coverage. Well, if you'd want to extend that this year, just a one year renewal, you could probably spend 350 K. Well, that has become prohibitively expensive for a lot of larger apartment buildings. And coming up, one of our in-house investment coaches in the race is going to be joining us from Florida, where they're building new construction duplexes and for plex's affordably. And they're selling them to investors like us at just a 5.75% interest rate. That's straight ahead. I'm Keith Winfield, you're listening to get Rich education. Jerry, listeners can't stop talking about their service from Ridge Lending Group and MLS.   Speaker 1 (00:23:18) - 42056. They've provided our tribe with more loans than anyone. They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Charlie Ridge. Personally, though, even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate. And I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love.   Speaker 1 (00:24:29) - For a little insider tip, I've invested in their power fund to get going on that text family to 66866. Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six. This is Rich dad advisor Tom Wheelwright. Listen to get Rich education with Keith Reinhold and don't quit your daydream. It's always valuable for you, the listener and me as well. To have a market discussion with one of our in-house investment coaches were doing that today. Naresh, welcome back onto the show.   Speaker 3 (00:25:23) - Is Keith looking forward to talking?   Speaker 1 (00:25:26) - Let us know what's happening from your view. I mean, give us your perspective on the real estate market today and any drivers or trends.   Speaker 3 (00:25:35) - Look, Keith, I've been working as a real estate investment coach for about four and a half years now. I've been a real estate investor for about six and a half years. I've been working with for two years now, and it's great because it's almost like I'm a leading indicator on what's going on with inflation, what's going on with the housing market, because I see it in front of my eyes in real time.   Speaker 3 (00:26:02) - I have it on my spreadsheets that are in front of me. Of all the different properties that were sold or inquiries that we get from clients right now, I am actually seeing a slowdown this month of November compared to the first ten days or the first 20 days of the previous month. There's definitely somewhat of a slowdown. We're getting more complaints or nagging from clients saying, oh, I'm not able to rent out my property for as much as I thought I'd be able to, or my property's been vacant for longer than usual. What this is telling me key is, at least in my state, look, home values vary based on geography. We know that home values are like the weather. The weather is not the same everywhere. For the most part, I think you're going to see that national home values peaked a month or two ago. Rents certainly peaked about two months ago. What I mean by that is we saw rents go up precipitous just going up, up, up since January 2021 nonstop. And they finally peaked.   Speaker 3 (00:27:17) - And when I say peak home values, peak rents don't mean that they've crashed. I don't mean that they've gone down. They've just peaked and leveled off. So I haven't seen a decline in rents. I haven't seen a decline in home values from two months ago. I'm just saying they've leveled off. And so I actually expect this inflation or I expect inflation CPI moving forward to go back down. I know that we did see a blip up for a few months, but I think we're going to start seeing things go back down as the fed old rate study appears. They're done raising for good, and they're just going to ride it out with how it is currently. And then once unemployment crosses, probably 4.5%, if at all, that does cross 4.5%, that's when they're going to start cutting. If unemployment crosses 4%, then they're probably just going to wait it out until inflation hits that 2% target. And so what does this all mean for real estate. What does this mean for interest rates. Low interest rates I've talked about peaks.   Speaker 3 (00:28:28) - We saw peak mortgage rates. Also it looks like mortgage rates peaked. And they've slowly crept back down not significantly to a point where as an investor you're like, oh let me jump in. No. But think we saw mortgage rates as well. So again, what does this all mean. This means 2024. We're almost a month away from 2024. I think it's going to be a great opportunity to jump in, because you'll be able to catch the real estate market that's going to hit some type of bottom in 2024. You're going to see mortgage rates go back down in 2024. That also means today because remember, Keith, I've come on your show before talking about incentives that providers who we work with, partners who we know personally and who we've worked with for many, many years, we've been offering incentives that make up for this high inflation, that make up for the higher interest rates. And those incentives are very likely going to be gone in 2024 as mortgage rates go back down, as the home values maybe decline slightly.   Speaker 1 (00:29:39) - We want to talk about some of those incentives later, about how providers are buying down the interest rate for you on rental property, but rates, I think perhaps the most interesting thing you said, the thing that I didn't expect is that you're talking to some investors out there where they're telling you about how they have more or longer vacancies than they had expected. I didn't think that I would hear that from you. Is that a pretty small sample size, or is that passed by apartments versus single family homes or entry level versus luxury or anything else?   Speaker 3 (00:30:13) - I'm talking about single homes, so can't speak for apartments. I'm talking about cookie cutter, entry level, single family homes. This is in multiple different markets. So not just in one city. This is in multiple cities states. We're seeing vacancies. We're seeing, like I said, the rent growth rate that was previously being used six months ago, eight months ago, the property managers have had to use a lower rate because there's been a decline. So it's not surprising.   Speaker 3 (00:30:44) - There's just no way that the country would would have been able to survive with rents going up the way they were going up with home values going up the way that we're going up. So there was bound to be a stoppage. And so we've seen that stoppage in home values, we've seen that stoppage in rents. And when I say stoppage again, not a decline in rents, not a significant decline in home values. But they leveled off from their peaks. And that's just how the business cycle works. Every 30 years or so when we see super high inflation, it's not surprising that I'm seeing this. But this is what's going on in the market right now, from Florida to Tennessee and Alabama to Ohio, in Missouri, Kansas City.   Speaker 1 (00:31:31) - For about five months in a row now, we have seen wages be higher than inflation. But of course that's just stated CPI inflation. And then there is quite a lag effect there too. If wages do exceed inflation, when will that eventually catch up to higher rents? We don't really know.   Speaker 1 (00:31:50) - But one thing we do know over the long term is rents are historically very, very stable, even more stable than home prices. It was so unusual when rents were up about 15% year over year, a year or two ago. You don't typically see that rents tend to stay stable, and they sure are stabilizing lately. What do you have any other thoughts as you look around the market and race? Because you often talk to our followers in there, they get a hold of you for you to help lead them through contracts and connect them with the right properties and providers that can meet their goals. So what are our followers asking about?   Speaker 3 (00:32:27) - Our followers right now are fearful, which is very common. Fear always rules people's minds and they're fearful of a crash. And look, there are certain real estate asset classes, commercial real estate, which you've talked about for a while, is going through a decline right now and could be going through a major crash as many of these commercial real estate owners default on their mortgages or their loans, their commercial loans, there is a concern that there could be a crash in the housing market.   Speaker 3 (00:32:58) - Meredith Whitney, who really famous real estate banker, I believe the only woman to call the 2008 financial crisis. She called it back in seven. Meredith Whitney came out a couple of weeks ago and said, there's going to be a decline in home values, and I'm here to tell you that there has been a classic line on values. And will that continue? It could continue where there's a, again, a slight decline. So don't see a crash coming. The reason is because I feel like the economy, the banks are much healthier today than they were. And let's say at 2007, the people who have been laid off, we're going to see unemployment continue to go up. It's not the 10% plus that we saw during the pandemic or the really we reached close to that 2008, 2009 or so. I just don't see something systemic to where there's going to be a housing market crash. And it's all about supply. Housing supply is still very low. So until the supply catches up to the demand, think the real estate market is going to stay healthy.   Speaker 3 (00:34:14) - And if you're looking to buy an old over a 30 year period, if you're looking to buy and rent for cashflow, it's still a great time. Right now, there's just certain asset classes. Like I said, commercial real estate. Maybe wait for the crash. They're short term rentals. The worst time to get into short term rentals would have been a year or one and a half years ago, 18 to 20 months ago. That space has declined because there has been a decline in travel, leisure, airfare, corporate expenses, the corporate trips. There has been a decline. So we don't promote those often. They're available. What? We don't promote them often, but that's another asset class that could be ripe for, I want to say, a crash, but a big decline when it comes to cookie cutter, entry level Single-Family homes. I just don't see this huge crash that people have been waiting for over the last 15 years.   Speaker 1 (00:35:13) - Right. As you know, I've talked extensively about how it's virtually impossible for that to happen.   Speaker 1 (00:35:19) - And yes, everyone wants to know what's coming. It surely has been a consensus among analysts and others that mortgage interest rates have peaked and or the fed funds rate is done increasing in this cycle. Many seem to think that next year, if rates come down, that that is really going to push home prices through the roof. I don't know if that's necessarily true, because typically a cutting of rates coincides with an economic slowdown or a recession. So I think a cutting of rates next year that could result in a moderate price increase. But of course, we have to remember that some of that supply is going to come once rates go down, you will have a few more people motivated to sell. You also have a lot more people motivated to buy and that can qualify as well. But the rates think a lot of people really in this cycle lately, when they've seen higher mortgage interest rates maybe than some people have seen in their entire investment life, you know, they feel like they kind of want to get some sort of break, but they sort of want to wait and see what happens with the market.   Speaker 1 (00:36:20) - But we actually have something to talk about here where they can get a break. They don't have to wait and see with what's going on in the market. And that's with what is taking place in Florida.   Speaker 3 (00:36:33) - That's exactly what's taking place in Florida. We work with a provider who is going to be on with us. We're hosting a webinar with them about a special 5.75% interest rate. The lowest interest rate that we see across the board with any provider we work with from Alabama to Texas, etcetera. So they're coming on our webinar. They're going to promote and discuss that 5.75% program that they have, as well as a 2 to 4 program. That's two years of free property management, 2% closing cost credit into $4,000 release fee. You might say, well, why do I need a $4,000 release a credit? Because their best properties or highest cash flowing properties. Highest returning properties are quads and duplexes. So these are huge breaks that will reduce the amount of money you need to bring to close and look. If you're a high net worth or if you're a high income earner sucking it up and paying the 9% interest rate today.   Speaker 3 (00:37:37) - If that's what you decide to opt for with the 224 program, 9% interest rate, or 8% interest rate today, it'll save you on your taxes, the mortgage interest tax deductible, and in 5 or 6 years, you can just refinance, most likely at an ultra low rate, maybe even sooner than that. So still, there are some really good deals. If you work through us, then we can help you find some really, really good programs and incentives so that it's like going back to 2020 or 2021, when interest rates were super low, or when there was less cash that you had for bringing to the same level. So we have that definitely recommend that people check out this webinar. It's great webinars. Com you can register for it over there. webinars.com. I'm going to be on it's Monday November 27th. That's Monday, November 27th at 8:30 p.m. Eastern Time. So people on the West Coast can finish up work, attend the event. People on the East Coast can finish up dinner, put their kids to sleep and attend the event.   Speaker 3 (00:38:43) - So I look forward to seeing everybody there. It's a special, special webinar, special deals, special promotions only through the average education.   Speaker 1 (00:38:54) - So the 5.75% rate, if I remember from previously narration, it's a ten year fixed rate and a 30 year amortization at those terms. And then is one choosing between the 5.75 rate and the 224 plan that you described. Is it one or the other? Can you get.   Speaker 3 (00:39:12) - One or the other? It's one or the other. Because to get that 5.75% rate, yeah, the builder is paying the lender a lot of money. And to lower those points, they're buying points to to get you the investor that rate. So it's one or the other. And by the way, that 224 program the purchase price is negotiable. So that's also why I like that 2 to 4 program. Because you can go back and forth and I can help you out negotiate the price, maybe shape 10 to 15 maybe $20,000 if it's a high ticket item off the purchase price. So makes the numbers look even better.   Speaker 3 (00:39:54) - That's my favorite program, the 5.75% program. That might be right for some other people, so that's fair to.   Speaker 1 (00:40:02) - Else about the property prices and types.   Speaker 3 (00:40:06) - So this provider we work with has single families, duplexes, four plex quads all available. The price points are anywhere from $250,000 to $800,000. Everything is new construction. That's also in flux, as in the single family is just cash flowing much. So I would say go for a duplex or a quad. Duplexes are around $400,000, give or take 20,000 over under, and quads are somewhere between 650 to $800,000.   Speaker 1 (00:40:45) - Okay, so these are brand new build properties in Florida. So yeah we're talking about entry level rental homes here. The asset type that seems to have the greatest dearth of supply in housing, entry level single family homes. You just have such a good chance to own an in-demand asset that everyone is going to want over time here. Do you have any last thoughts about this webinar trace, which you're going to help put on for people? That way the participants can ask you questions.   Speaker 1 (00:41:16) - They can ask the provider questions, any question they want to, things about the physical property, things about just how they bought down your rate to 5.75% for you, or how they can do the 224 program for you. Those are some of the benefits of attending. You can have your question answered in real time there with narration. Do you have any last thoughts about this event that's taking place on Monday? The 27?   Speaker 3 (00:41:39) - Well, you definitely want to register at Jerry webinars. Jerry webinars. We already have more than 50 people registered and now this episode is out. I'm sure we're going to get another 100 or so. Like you said, people can come on and ask some questions, actually talk to us, interact with us. Last time they wanted to these webinars, it went like 2.5 hours. People were having such a great time. We went into the wee hours of the night just talking to all sorts of folks, answering questions. It's super interactive, really educational. The best part is completely free and you get goodies and perks and incentives back in return for ten.   Speaker 1 (00:42:17) - Now, look, I know that some of these incentives have got to sound terrific to you, the listener and viewer here. I just want to pull back and take a look at things. More fundamentally. This is truly investing. This is not speculating. You own a piece of Florida land in a house constructed of commodities. On top of that land, from wood to steel to concrete. You already know about Florida's In-migration. We've talked about that at nauseam on the show here, and it's not speculative because you're purchasing something for rent production, not a speculative endeavor. Over the long term, people will pay you in order to live in a property that you provide to them. I mean, this is the sort of thing where you could even if say, you have a spouse or a mother that has nothing to do with real estate knowledge, they don't know anything about it. You can explain this to your spouse or your mother and they would understand. So it's easy to understand where your income comes from.   Speaker 1 (00:43:12) - It's really fundamental. I don't know how long the 5.75% rates are going to last, because this same provider had a lower rate a few months ago. I told you then I didn't know how long it was going to last and it didn't last. Now it's 5.75%, which is still a great rate. I really encourage you. Sign up. It's free. It's our live event next Monday night, the 27th at 8:30 p.m. eastern, 530 Pacific. Again, you can register@webinars.com. What a great update in race. Thanks so much for coming back into the show.   Speaker 3 (00:43:46) - Thanks, skeet.   Speaker 1 (00:43:53) - If you're unsure about making it on the live event on the 27th, but it interests you, sign up and we might be able to get you access to the replay, but you want to watch it soon because the properties available are limited. And again, I don't know how long the 5.75% rate will last. You think you've heard every amazing Florida In-migration stat by now? Well perhaps not. In the latest year over year, Florida saw 740,000 people moved there.   Speaker 1 (00:44:23) - Yeah, basically three quarters of a million in just one year. That is truly astounding. That's clearly the most of any state in the country. And with all the growth, Florida's property market became recently the second most valuable in the US last year that bumped New York down to third place. That's according to Zillow. So this population growth is leading to a prosperity increase in the value of Florida property. So I think a lot of people get focused on these things, like wondering if the fed will raise rates another quarter point at their next meeting, and if that's going to show up in mortgage rates. And they wonder about the mortgage market in the future, and it feels like something that you cannot control. But now you can with this rate, buy down courtesy of the builders. So joining us on the webinar to learn all about it. Again, it's all new build and we make that really clear and spell it out for you. In next week's live event, you get to select from one of the two options.   Speaker 1 (00:45:29) - To make it clear here, either a 5.75% rate or the 224 program, which means two years of free property management, 2% of the purchase price and closing cost credit, and a $4,000 lease up fee credit. Sign up. It's free. It's our live event next Monday night, the 27th at 8:30 p.m. eastern at 530 Pacific. Register at GRC webinars dot com. Until next week. I'm your host, Keith Weinhold. Don't quit your day. Great.   Speaker 4 (00:46:02) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of get Rich education LLC exclusively.   Speaker 1 (00:46:30) - The preceding program was brought to you by your home for wealth building. Get rich education.

I don’t keep much money in a savings account, money market account, or treasury bonds. They only pay 5% interest. Instead, I get 10-12% cash returns and semi-liquidity by private lending on real estate and operations with Freedom Family Investments. My guest, the company CEO, Dani Lynn Robison and I discuss how it works. They’re a family of 7 real estate-centric companies. They pay me 10-12% on a loan that I make to them that funds their real estate and business operations. You can too. It’s called their Master Note.  Text FAMILY to 66866. These private lending programs have just a $25K minimum, accredited and non-accredited, returns up to 12%. Rather than getting in on the equity side here, which is usual, you’re getting in on the debt side. This way, you’re more liquid than when you buy property yourself. We discuss 3 vital investor questions: Who do you trust? Where do you begin? What’s the best path for you? Dani Lynn & I discuss a good investor outcome. We also discuss how when things went wrong, the investor/lender still got completely repaid. I can personally tell you that they’ve always paid me on-time and in full. Some people don’t like to share where they personally invest, but this could really help you. Vocabulary terms explained: financial runway, demand depositor, time depositor, vertical integration. If a high-yield passive return of 10-12% sounds interesting to you, text FAMILY to 66866. Resources mentioned: Show Notes: GetRichEducation.com/475 For 10-12% returns with Master Notes with  Freedom Family Investments: Text “FAMILY” to 66866 Dani Lynn Robinon’s book, “Get Real”: https://www.amazon.com/Get-Real-Understand-Estate-Investing/dp/B0BZF99S5K For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments.  You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Timestamps:   The importance of increasing income (00:01:28) The speaker emphasizes the importance of increasing income rather than cutting expenses and discusses the concept of a financial runway.   The need for liquidity in real estate investing (00:04:05) The speaker explains the need for liquidity in real estate investing and recommends having 3 to 5% of the total value of a real estate portfolio in liquid funds.   Investing in residential real estate for strong returns (00:06:44) The speaker discusses the benefits of lending to the long-term stability of residential real estate and related businesses, highlighting the potential for strong returns.   The acquisition and growth of Freedom Family Investments (00:11:35) This topic covers the growth of Freedom Family Investments, including the number of units acquired, funds raised, and the value of their portfolio.   The concept of vertical integration in real estate (00:12:38) This topic explains the concept of vertical integration in the business world, specifically in the context of real estate companies. It discusses how vertically integrated companies have more control over their supply chain.   The Master Note Program by Freedom Family Investments (00:15:45) This topic introduces the Master Note Program, a lending program offered by Freedom Family Investments. It explains the program's features, including high yield returns, liquidity, and the option to compound interest.   Private Money Lending and Investing in Materials (00:20:57) Danny explains the process of private money lending and how investors can invest in materials for discounted prices.   Expansion of Opportunities for Passive and Active Investors (00:23:34) Danny discusses the various opportunities available for passive and active investors, including turnkey real estate, private money lending, and funds.   Minimum Investments and Accredited vs Non-Accredited Investors (00:26:22) Danny explains the minimum investment amounts and the options for accredited and non-accredited investors, as well as the different investment opportunities available for each category.   The trust question (00:30:14) Importance of trust in investment, transparency, and how to choose trustworthy partners.   The worst deal (00:32:21) A story about a bad investment deal, the importance of honoring commitments, and how volume can mitigate risks.   Get Real (00:35:28) Introduction to the "Get Real" book series, the importance of authenticity and transparency in real estate investing, and the power of sharing failures.   Time Deposit Accounts and Demand Deposit Accounts (00:38:36) Explanation of the differences between time deposit accounts (like CDs) and demand deposit accounts (like checking and savings accounts).   Vertical Integration in Business Strategy (00:38:36) Definition and explanation of vertical integration as a business strategy where a company takes ownership of multiple stages of its supply chain.   Financial Runway (00:38:36) Definition of financial runway as the amount of time one can maintain their lifestyle without the need for a paycheck.   Complete Episode Transcript:   Speaker 1 (00:00:01) - Welcome to. I'm your host, Keith Weinhold. Why settle for growing your money at a 5% interest rate in a savings account, money market account, or treasury bonds? You could earn double that or more. In fact, we're talking about exactly where I invest my more liquid dollars myself, often with a real estate centric backing. Today on get Rich education.   Speaker 2 (00:00:28) - You're listening to the show that has created more financial freedom than nearly any show in the world. This is get rich education.   Speaker 1 (00:00:51) - We're going from Hartford, England, to Hartford, Connecticut, and across 188 nations worldwide. I'm Keith Weinhold, you're listening to episode 475 of the Get Rich Education Podcast, the Voice of real estate investing since 2014. Don't live below your means. Grow your means. It's in your genes. Most people tie up so much life energy in their job, and they're scared to death of losing their job because it provides everything to them, not just their salary, but their health care, their retirement, and even who they are.   Speaker 1 (00:01:28) - And then even their very identity is in their job now. So that might be okay, especially if you truly get a deep existential meaning from your job and you get that sense. In fact, in that case, thank you. You're probably serving society, and I might be a beneficiary of that. But now we isolate the fine part of your job. It is a real mystery to me how so many study, how work works, so few study how money works. And yet money is the main reason that people go to work. In the personal finance world, it's more important to increase your income, then cut your expenses. Spend more time building a cash flow statement. See that's constructive to your standard of living, not a budget which is destructive to your quality of life. Think of residual income in terms of what I'd like to call your financial runway. Your financial runway. Yeah, it is that amount of time you can maintain your lifestyle without the need for a paycheck. So the length of your financial runway is measured in time, and it is critical for you to lengthen this runway if you hope to retire early and it can dramatically reduce your stress.   Speaker 1 (00:02:49) - Level two well, that can create outcomes so that you can say, go on a super long vacation and make your ostentatious display of time wealth as it is now. At some point in your life you probably listen to and had. The real estate pays five ways epiphany. And it is really compelling to then keep the majority of your capital invested there, for sure. But you likely don't want to keep absolutely 100% of your dollars there because you need some liquidity to fund the operations of your daily life. In fact, you can make the case that you need more liquidity than a non real estate investor does. Now, a six month emergency fund is the rule of thumb for laypeople, but on top of that is real estate investor. It's also a good idea to have 3 to 5% of the total value of your real estate portfolio in liquid funds. Now, a lot of people hold liquidity in a bank, and you do that as either a demand depositor or a time deposit. In fact, in banking vernacular, do you know the difference between demand deposits and time deposits? Well, demand deposit accounts, they include things like checking accounts, savings accounts and money market accounts.   Speaker 1 (00:04:05) - And they're called demand deposits because they allow you to withdraw your money from the account whenever you want to. That is different from time deposit accounts, like a CD, which requires you to deposit your money for a specific length of time. So that's the difference between a demand deposit and a time deposit. So time deposits like a CDS certificate of deposit. Therefore they pay you a high your rate of interest in exchange for your reduced liquidity. Now with that understanding, let's take a time out here to remind ourselves of something. When money flees the stock market, which it often does, it usually ends up in bonds as demand for bonds goes up, their interest rates go down. Then, as bond interest rates go down, investors go back to stocks in pursuit of yield and everything reverses. So that is an ebb and flow of funds, which creates a degree of equilibrium. But it also moderates your return. And you're also never going to get in and out at just the right time trying to time those markets.   Speaker 1 (00:05:22) - So when it comes to your dollars that you don't have being actively leveraging real estate, you know you can't hit every note in the symphony yourself with just one investment vehicle. It takes an orchestra full of your prosperity, all your dollars, all playing their notes boldly to help you hear the complexity of the. Position. Well, when you park money at an everyday bank or a treasury bond. Either way, you're now making a loan and oftentimes the exact way that that loan is backed your collateral that's actually unknown to you. Well, instead of that, what we're talking about today is that you can lend to the long term stability of residential real estate and related businesses and still get a strong return. And yes, I'm focused on the resilience of residential, just like we have here at from day one. Now, when it comes to something more precarious, really touchy section like office real estate. We work. They're expected to seek chapter 11 bankruptcy protection after that embattled office space company missed interest payments that it owed to its bondholders.   Speaker 1 (00:06:44) - So instead, you can keep your more liquid and semi liquid dollars working for you as a loan to someone else in residential, and enjoy some of the condensation on that pipe with returns that are about double what you can get on a 5% savings account today. Now, today it is the right time to talk about returns of 10% plus, because just a year or two ago, we were in this inversion where inflation was higher than interest rates. That's atypical. In fact, in June of last year, CPI inflation peaked just over 9%. And you got to ask yourself, how attractive is a 10% return on your liquid dollars? If inflation is 9%, well, that's not attractive to you at all because you real rate of return would only be 1% in that case. But now with inflation down, you can get a higher real return again. Today, interest rates are higher than stated CPI inflation and even the true rate of inflation. If you know where to look for that and you have a sense for what that is today, I'll help you know where to look, because it's exactly where I invest my liquidity today.   Speaker 1 (00:08:02) - See, in order to do this, it's really investing like a billionaire. And you don't need to have some wealthy sounding name like Brandon Meriweather, Rudiger, Bertram Lawrence, Perry Bottom or Carruthers Davenport. You don't need any names like that. You just need the knowledge. No, I guess I won't call you Carruthers if you preferred, but I think you'd sound like a guy that blows rings of smoke into people's faces. And I don't think that's a good look for you. We'll talk to the custodian of my funds here shortly. I make private loans to her company. She and I both serve on the Forbes Real Estate Council. She is a strong visionary, and she's not afraid to discuss problems either. That's something I really like. In fact, I'll be sure that comes up. This could really help you today. That's next. I'm Keith Weinhold in your listening to get Rich education. Diary listeners can't stop talking about their service from Ridge Lending Group and MLS. 42056. They've provided our tribe with more loans than anyone.   Speaker 1 (00:09:10) - They're truly a top lender for beginners and veterans. It's where I go to get my own loans for single family rental property up to four plex. So start your prequalification and you can chat with President Caeli Ridge personally, or even deliver your custom plan for growing your real estate portfolio. Start at Ridge Lending Group. You know, I'll just tell you, for the most passive part of my real estate investing, personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%. Their minimums are as low as 25 K. You don't even need to be accredited for some of them. It's all backed by real estate, and I kind of love how the tax benefit of doing this can offset capital gains in your W-2 jobs income. They've always given me exactly their stated return paid on time. So it's steady income, no surprises while I'm sleeping or just doing the things I love. For a little insider tip, I've invested in their power fund to get going on that text family to 66866.   Speaker 1 (00:10:27) - Oh, and this isn't a solicitation. If you want to invest where I do, just go ahead and text family to six, 686, six.   Speaker 3 (00:10:39) - This is Hal Elrod, author of The Miracle Morning and listen to get Rich education with Keith Weinhold and Don't Quit Your Daydreams.   Speaker 1 (00:10:56) - Okay. I'd like to welcome back onto the show today, the co-founder and CEO of the whole operation Freedom of Family Investments. There's seven real estate centric companies based in Centerville, Ohio. By the way, the other co-founder is her husband, Philip, whom you've heard on the show before. Hey, we are graced with the presence of Dani Lynn Robison.   Speaker 4 (00:11:15) - Hello, Keith. I'm so happy to be here.   Speaker 1 (00:11:18) - So good to see you again. I've got to congratulate you on your success. You've got 62 team members. They're now in your vertically integrated companies. And by the way, that's a term vertically integrated that might throw some listeners off. I'm going to come back and explain just what that term means. They've done over 1500 deals now.   Speaker 1 (00:11:35) - They've acquired 600 plus units since 2020, and they've raised more than $20 million through podcasts and word of mouth. And they now have a portfolio valued at $32 million. Plus, they've been in real estate since 2008. And they'll tell you that they have a perfect track record of always returning investor capital, including to me, I'm one of their investors and paying 100% of the returns as promised, even if they themselves lost money on a deal. We'll talk about what losing money on a deal looks like in a moment. And in fact, you, the listener, you've probably heard me talk about how I personally participate for a high yield return with them myself, with Danny Lin's company backing me near the middle of Gary. Episodes like this right here. You know, I'll just tell you, for the most passive part of my real estate investing personally, I put my own dollars with Freedom Family Investments because their funds pay me a stream of regular cash flow in returns are better than a bank savings account up to 12%.   Speaker 1 (00:12:38) - Well with having. Listen to that. Danny, I want to ask you about your master note program shortly. But first, since this is get rich education, emphasizing the education part here, I think the term vertically integrated, that might throw some people off. It sounds like a mouthful. And. And what is that, Danny Lynn seven syllables. But it is a term that you, the listener, you see that and hear that across the entire business world, vertically integrated. That's a term for a business strategy where a company takes ownership of two or more stages of its supply chain. So, for example, a vertically integrated automaker, they might produce automobile components and vehicles and also sell directly to customers. All right. That's ownership of multiple stages of a supply chain. So to me it comes down to vertically integrated. It means that you now have more control. So Danny tell me about how that vertical integration applies to your seven real estate companies.   Speaker 4 (00:13:41) - You nailed it. As far as the definition and really why we created all of the companies when we first initially created our turnkey real estate company, we hadn't had the intention of bringing everything in-house.   Speaker 4 (00:13:54) - But as we outsource different pieces of the renovation or the property management, we found that the lack of control that we had was hurting us and hurting our investors. And so one by one, we would bring in a company. So first was renovations. Because of all the contractor nightmares that many fix and flippers have experienced themselves. We had them too, and in spades because we were doing volume. So we brought that in-house first so that we can control the subcontractors and the project management and the scopes of work and how we paid our contractors. The next thing we brought in house was property management. And then we had a brokerage so that we could just list our properties on the MLS internally and keep that in house as well, since we had to have a broker anyway. And then acquisitions got brought in-house because the wholesalers were buying all of our deals from went dry with deals and we're like, hey, we need deals. And so we brought the marketing in-house and started doing acquisitions. And then I've told this story of drugs, thugs and bugs many times about our 56 unit apartment complex.   Speaker 4 (00:14:54) - That led to company number six, which is our funding syndication company. That was a really great company because it allowed our private money lenders to be able to start putting their money to use 24 over seven instead of going in and out of deals. And then company number seven is going to be a hard money lending company, because as we've raised all of this capital, we found that there's times we have excess capital and we don't want to say no to incoming investors. So we started using that to network with our mastermind groups and saying, hey, let us know if you've got a deal going on. We'll underwrite it. And if we feel like it's a good deal, we'll go ahead and lend on that deal for you. And it allowed us to keep putting that money to work for our investors. So it's been really fantastic. Help us as an internal company, helped our investors be able to earn more returns and helped other our entire network just do more things with us.   Speaker 1 (00:15:41) - That's a vertical integration. And like that it hadn't heard that before.   Speaker 1 (00:15:45) - Drugs, thugs and bugs can lead to an epiphany that creates a new company bringing more in-house. So you have to listen to the least you need to remember is vertical integration. That means control. And one of your company's vertically integrated into that, Danny, is something that can benefit the listener here, and that is your lending arm. Now, your most popular program for giving everyday investors high yield returns is your master note program. That's actually a common program in the private lending industry, but some might not know about it. So go ahead and talk to us about what your master node program is.   Speaker 4 (00:16:25) - So this was brought to us by an investor who was working with us and said, hey, I love your private money lending program. You know, I've researched you. He actually found us on Forbes and came to our office and visited and said, I would really love to lend, but I don't necessarily want to keep going in and out of deals. And so we worked with an attorney and said, hey, what can we do in order to keep an investor's money at work? And so he talked with us and we explored different ideas, and we kind of went back and forth between us and the investor and the attorney and ultimately created this program called the Master Note Program, which offers investors 10 to 12% returns.   Speaker 4 (00:17:03) - It offers them liquidity so they can get cash out at any year that they want. So they'll invest in every single year they have the opportunity to say, hey, I'm going to go ahead and give you 180 days notice to get my cash back. So the liquidity piece has been really, really powerful, especially for private money lenders, because they reason that private money lenders like that program is because they know that, that they're going to get their capital back in 12 months or less. And at that point in time, they're going to say, hey, do I want to invest again? Yes, okay, I do. Or hey, I could use this money for something else that I was waiting for. And in the meantime, it was earning interest while I was waiting to use it for this other avenue. So the master note program was really just meant to have flexibility and to be able to customize the program based on the investor's goals. So what we've done is created a five year auto renewing note.   Speaker 4 (00:17:55) - So that way these investors can say, hey Danny, I've got $100,000. I'd like to invest that with you. And at that $100,000 level, that is 12% interest. And so they put the money in, and they know that every single year it's either going to auto renew or they're going to say, hey, I'm ready for the money to come back to me. And it also allows us to give them compound interest. I would say over half of our investors are not investing with us for distributions or cash flow. They actually are investing with us because they trust us and they trust our track record, and they want their money to grow. And so they actually choose to compound instead of taking the distributions, which allows for faster growth.   Speaker 1 (00:18:39) - Your master note program 10 to 12% returns. I know it's just that 25 K minimum. So it's really available to investors. So okay. Unlike an all say five year certificate of deposit from a bank that might only pay you 5%. Plus you're illiquid for five years.   Speaker 1 (00:19:00) - With a conventional instrument like that, you can cash out your master note any year, or you can just keep rolling it over. You have the option.   Speaker 4 (00:19:09) - Exactly right. And so what's interesting is we all like liquidity. I know Philip and I like liquidity. It's nice that you got this peace of mind that you can access your capital if you choose to do so, but in reality, most of us leave the money exactly where it's at. We like to see the growth. We like to see, you know, the returns that we're getting. And we get excited and we're like, where else am I going to put this money? So I love having the ability to get it back. But I would say 95% of the people in our master program and even our funds, after they get to the period in which they committed to, whether that be a year or three years, just depends on the vehicle that they're using. They stay there like, I love this, this is fantastic. You can keep my money and just keep it growing.   Speaker 1 (00:19:51) - Real estate is largely thought of as an equity based investment. You're the listener, putting 20 to 25% down and borrowing the rest. That's great. We talk about the virtues of doing that all the time, but you are not very liquid when you do that. Here. We're getting on the opposite side rather than being on the equity side. You're on the debt side, you're making a loan and you have higher liquidity this way.   Speaker 4 (00:20:18) - Exactly right. And so with our master Note program, the way that we worked it out with the attorney is it's used for both deals and our business growth. So that's really important that I think that we talk about because the private money lending. Let me give an example. Private money lending. You are going to maybe loan a $70,000 and that's going to cover an acquisition and rehab of a property. But maybe you had $100,000 available. Now your $70,000 is backed by a lien on that property. And then once we're done with the rehab and once we resell the property, then we're going to give you all of your capital back, plus the interest that you were owed for the time that we borrowed your money.   Speaker 4 (00:20:57) - Now, this is where our private money lender said, Danny. Danny, will you keep my money? And if you're a private money lender, I have to say no, I can't. I have to give you back your money because you have to sign a release of mortgage. There's a lean on that property. You have to sign the release that you got your capital back, and then we can give you another deal. And that might take two weeks or two months. What the most master program provided for investors was allowing them to invest with us still being used on deals, but for our protection, if we didn't have a deal to put money into, then we can use it for the growth of the company. So right now we're actually partnering with another investor who is out of Columbus, and we are creating a home supply company of materials. We have this opportunity to buy materials at huge, huge, massive discounts. And so we're working on acquiring the office space that we're in, which has 20,000ft² of warehouse right next to us, and we're going to buy in bulk all of these materials.   Speaker 4 (00:21:54) - And not only is that reducing the cost of our business and our rehabs, but now we can help other investors in the local area save money. And we have created a revenue stream. As a result, the growth of all the companies has been a result of working with investors exactly like this. So now the investor gets to say, hey, Danny, I'm going to give you $100,000 and I'm going to invest it in this master note program. Now they got to use $30,000 or more of their capital, as opposed to the $70,000 example I use for private money lending, so they can put all the capital they want to use. And then me, if I have a $70,000 deal, that I'm still going to use it on that same deal, and it's owned by our company, and then that other $30,000, then I can use it for things like we're buying materials in bulk, and it's allowing us to save money on those rehabs. It's allowing us to create another revenue stream. So it allows us to have a little bit of flexibility, and it allows the investors to have a higher return, still have that liquidity piece and still have it backed by real estate and or our business.   Speaker 1 (00:22:59) - Well, what an explanation. And you know what's interesting, Danny Lee, and listening back to that is the realization that most bank depositors don't have any idea how that bank is investing their money. They don't know how their deposit is backed at all. But with an explanation like that, that's substantive, we really do hear. So it's really an interesting contrast. We discussed the details of your master note program, including where you can get up to a 12% return. Tell us about the other opportunities that you have besides your master Note program.   Speaker 4 (00:23:34) - Because of our vertical integration, we have many different things that we can offer. If you're a passive investor, we have turnkey real estate. We do have private money lending, the master node program. We have funds that also provide great returns. And one of them we're getting ready to launch in the next couple of weeks, is offering even more liquidity, allowing people to get in and out in 90 days. So for those who don't want to wait a full year, maybe they just want it.   Speaker 4 (00:23:59) - Hey, I just want to put my money to use and I want to have this access to it every 90 days. We're now allowing people to have that option, and that is really a reflection of our conversations with investors in seeing what they want based on today's market, today's economy, what they feel comfortable investing in. So that's some of the passive investor opportunities for our active investors. We don't typically serve them. But I thought, hey, you know what? We are buying all of these deals and we're getting all of these leads, some of the deals we don't want, maybe because we have enough and we don't want to buy another one because our rehab team is stretched and we don't want to have a house sitting for a couple of months for our rehab team to be able to get to it sometimes. There's other reasons. So now we are starting to wholesale properties to investors who are active, that are wanting to flip the properties themselves for a higher profit. And because we are vertically integrated, we said, hey, if you want to buy one of these wholesale properties that we're not buying ourselves, we have a renovations department, we have a property management department, we have a brokerage.   Speaker 4 (00:24:58) - So if you're an out-of-state investor, you've got an entire team you can leverage through us to be able to buy a property as is, get it renovated, and then either sell it on the market or hold it and have our property management company look after it. So we're just continually trying to expand what we can do in service of other investors.   Speaker 1 (00:25:18) - I love that we can let the term vertically integrated just roll off our tongue. Now that everyone knows that, it means having control of multiple portions of the supply chain of their business, a real estate business. In this case, again, we're talking with Danny Lynn. She is the co-founder and the CEO of Freedom Family Investments. You deal with investors on both the more active side and the passive side smartly. I know, Danny Lin, that you don't call turnkey real estate investing passive, even though it's mostly passive. It's not completely passive. You have both passive and active sides. You know what investors want. You know the pallet of items to offer them with what interests them.   Speaker 1 (00:26:00) - So with that in mind, tell us just a bit more on the landscape overall in just how you serve people. I know a lot of them. For example, they might wonder, do I need to be accredited or do I need to be non accredited? And tell us more about the minimum investments amounts kind of that bar to clear in order to participate with you, just like I am myself.   Speaker 4 (00:26:22) - For the minimum investments, it's $25,000. That's typical for turnkey properties. That's typical for our master node program, and then $50,000 for some of our funds, also our private money lending program. And then for the accredited versus non-accredited, we have both options. So there are rules as to when we can offer certain investment opportunities if you're non accredited. So things like private money lending, turnkey investing, master node program those are all opportunities for non accredited investors. And then for our accredited investors we have funds that are it's 506 C. It's a little bit technical but it's the way the SEC says hey you can talk about this.   Speaker 4 (00:27:01) - You can advertise it but you can only allow accredited investors inside. So as we work with our attorney we are like, okay, we don't want to serve just accredited investors. So how do we make sure that we're serving both at the same time? And so we've made sure to just really have a variety of offerings. And I talked to people a lot about what you said about active versus passive. I think that's a really, really important conversation because many people who are getting into the real estate game, they don't know whether they want to be active or passive, and so many of them end up being active first, only to realize they just created another job for themselves. And then they go, okay, I don't want to do this anymore. I actually want to live a quality life. I want to spend time traveling. I want to spend time with my spouse or my kids and just enjoy life. And I didn't mean to create another job, even though it is building wealth. And then they move to the passive side so that they can get mailbox money or have their money working for them while they sleep, or while you are traveling like you just got back from traveling.   Speaker 4 (00:28:05) - Keith and I loved watching your Facebook post, right? I love having that educational piece of really talking to somebody about what their goals are, what the quality of life is that they want, so they don't make a mistake of going active, only to feel like they lost some time because the active journey is difficult, like it's not been easy to build seven real estate companies, and we've got two more in the wings that we're getting ready to launch that we talked about even the the home supply company. It's not an easy road. You make a lot of mistakes, you lose a lot of money. And so when somebody has capital to invest in, their goal is to grow their wealth, build wealth, have a legacy, be able to retire and not worry about money. Going the active route may seem like I'm going to make more money because I'm going to get the big chunk of equity, but it ends up being something where they learn the hard lessons themselves and then usually waste a lot of time and energy and frustration, only to realize that they probably could have made equal, if not more on the passive side and not had all the stress.   Speaker 4 (00:29:06) - So I love really having that conversation with everybody. I love active and passive investors alike. It's just making sure that they truly know what journey they want to be on.   Speaker 1 (00:29:16) - In my mind, the term ROI return on investment is more active and a term that I've talked about wrote I return on time invested with that being considered that falls more on the passive side with you guys experience and understanding, you're surely quite cognizant of that. Why don't you talk to us about some of the other questions that you get from new investors, things that really they want to know about before going ahead and making a loan and participating in a lending opportunity with you.   Speaker 4 (00:29:49) - So the top three questions that we get is where do I start? Which path is right for me and who do I trust? And I actually talked to one of our investors who has grown his seed capital of $100,000 into $2.5 million with us over the course of four years that he's been investing. Every time he has capital, he's like, what opportunities do you have and where can I put my money? And again, we talk about compound.   Speaker 4 (00:30:14) - He has been compounding since day one with us and is really allowed his capital to grow extensively. I was interviewing him to tell his story about his journey with us and his experience. He actually said, you know, those questions are funny, Dannielynn. I would tell you that you should ask them in the opposite order. You should say, who do I trust? And then once you know who to trust, then ask, where do I start and which path is right for me? And I do agree that the trust question is the most critical piece of the puzzle, right? So many times I get on the phone and I talk to investors who have lost money working with somebody else, and so they've maybe heard me on your podcast or seen me somewhere else and heard me say over and over, private money lenders, our investors are our number one priority. I am never going to put myself in a position where they're not receiving their full capital back, receiving every single penny owed for the interest of the time that I was using their capital.   Speaker 4 (00:31:11) - And I'll allow myself to lose money to make sure that they get paid. And that's so important to me that I tell people very often they said, you want to work with people that will be transparent enough to say, this is my worst deal, this is what happened. And what you're going to get by asking that question is a revealing of their character. Yeah, who they are. How did they treat that situation? How was the investor treated in that situation and what happened? Did they tuck tail and run? Do they walk away, which many investors do? They get frustrated and they're like, oh my gosh, I lost all this money. What am I going to do? And they just they stop answering their phone. They stop answering emails. And then the investors are stuck with the house. I think the questions like that are really important. Looking at track records and just asking the hard stuff, understanding the true nature of a person. And then lastly, the which path is right for me is a question of really understanding that active and passive piece, and then understanding your goals when it comes to money, is it cash flow, is it growth? Is it tax benefits? Is it liquidity? What are the things diversification.   Speaker 4 (00:32:11) - There's so many goals you can have in investing. And if you don't know the questions to ask, then you might not be hitting the goals that you truly desire in life.   Speaker 1 (00:32:21) - We learned about a really good investor outcome there. How about a bad outcome or a worst deal? And then how did you cover that to make sure the investor is made whole?   Speaker 4 (00:32:33) - Our worst deal is a duplex in Dayton. And what happened was one of the reasons we brought our renovations company in-house, because we had a project manager, we had a runner, and one of the processes that we have is when the contractors are rehabbing a property, then the runner will go to the properties and just double check that what their invoice is saying, that they actually did the work and then we will pay them. So the project manager is trusting the runner. The runner is saying he went to the houses and we're paying this contractor. And it turns out one of the contractors had not done anything. The pictures that they were submitting to us was from another property they were rehabbing, so it looked like he was doing the work.   Speaker 4 (00:33:12) - The runner? Yep. The runner was relying on those pictures as his proof instead of actually going to the property and physically seeing the work being done. And we were paying them as a result of this hierarchy of process that we had. So we ended up having a property where none of it got rehabbed, and we paid the full amount of rehab to that contractor. So we had to pay for the rehab twice. So in this situation, we lost over $50,000. Our investor didn't even know what happened. And I say that not because we weren't being transparent, it's because we were going to do exactly what we said we were going to do. They were going to get all of their capital back, and they were going to get every single penny of interest owed. We ended up asking them at the end of 12 months, do you mind extending on this loan? We're still working on it. It's okay if you don't want to. We will still get you paid back, plus all interest, and we'll replace your loan with another private money lender.   Speaker 4 (00:34:06) - They said no, it's no problem. Absolutely. You can extend. So by the time it was all done we actually had the house fully rehabbed. We had lost a lot of capital. The reason that we can cover situations like that and make sure that we're honoring our word to our investors is because we do volume. When you do volume, I tell people, this is what I say. If you've been in real estate long enough, you understand you're going to lose money. You're understand that you're going to pull back walls and find things that you did not anticipate. So doing volume was our way of mitigating that risk. If we're doing ten deals a month and two of them go bad, well, we've got eight others that are covering the two that went bad. And so it's a numbers game for us knowing that we're going to find some duds, we're going to make some mistakes. And that's okay because we're playing the volume game.   Speaker 1 (00:34:53) - Ah, that harrowing story about the contractor and the rudder that comes back to the old Ronald Reagan trust, but verify they're right.   Speaker 1 (00:35:01) - So. Right. Well, thanks for sharing a more difficult story with us like that. Well, Danny, as we're winding down here, you do a lot of things there at Freedom Family Investments because you have this big holistic picture. Since you are vertically integrated company, and that's given you the experience and the wisdom. Do a lot of things. I know you have a book published and you're speaking at events around the theme get real. I own your book. Get Real. Can you quickly tell us more about it?   Speaker 4 (00:35:28) - So our very first book was Get Real, understand Real Estate Investing before it's too late. And it was just our first book. And it's going to be a series of Get Real Books was our first book to really introduce people that were new to real estate. What is it? Why do we love it? Why do we have such a passion for building real estate businesses and love that we can not only grow wealth for ourselves, but we can help other investors do the same? And then the get real part of it.   Speaker 4 (00:35:52) - The reason that we love this is actually one of my marketing team members, actually, you know him, Matthew. He's the one that came up with a Get Real brand. And it's really become something that people say, hey, Flip and Dani, you guys are so down to earth, like, I feel like I can talk to you about anything and you're so transparent. You tell us the ups and the downs and the crazy roller coaster rides, and there's so many people that are on social media or on podcast that will just tell you the rosy rainbows and sunshine stories, you know, as if nothing goes wrong. And I think reality is, is people want to work with people that are just more authentic, that are willing to share, hey, I'm human, I'm not perfect. We're going to make mistakes, but watch how we correct those mistakes, watch how we act during those situations. I think if you can do that, you actually gain more trust. And that's something that surprises a lot of the masterminds that I'm in.   Speaker 4 (00:36:43) - When I say they say, how do you have so many investors? How do you raise so much capital? I'm just like, I'm just authentic and transparent about everything that we do. And that garners a lot of trust in the people, because not a lot of people are willing to talk about their failures. That $50,000 loss on a duplex. And I don't know why, but it builds trust instead of loses it. And their jaw drops to the ground going, oh my goodness, I can talk about my failures. And I'm like, yes, start. People want to know that you're real. So I think that that get real concept is important. So we're going to keep on building creating some more books. We have investors that are giving us ideas of, hey, write a book about this. So we're going to keep on releasing them. And we're also speaking in events nationwide and just really just getting down to earth for people and letting them know, hey, stop telling yourself your can't. Anybody can build wealth.   Speaker 4 (00:37:32) - If you run a great podcast, you have so many loyal listeners and we love talking to them, and you have helped educate people for years and years and years, and we just need more people out there doing that.   Speaker 1 (00:37:45) - Well, thanks. The name of the platform and book is Get Real, Danny. Dannielynn, in closing, why don't you let our audience know about the best way to reach out to you and learn more about your private lending programs, including your Master Note program? Because for you, the listener, if this sounds interesting, here you go. Mean this is where I tie up a lot of my liquid funds for a high return. Let our audience know how they can learn more.   Speaker 4 (00:38:11) - All you have to do is text family to 6686, six.   Speaker 1 (00:38:17) - Dani Lynn, it's been valuable. As always. Thanks so much for coming back onto the show.   Speaker 4 (00:38:21) - Thank you so much, Keith. It's an honor.   Speaker 1 (00:38:29) - Yeah, good stuff from Dani Lynn Robison of Freedom Family Investments. Today, let's review what we've learned.   Speaker 1 (00:38:36) - Demand deposit accounts, which include things like checking accounts, savings accounts and money market accounts. They allow you to withdraw money from the account whenever you want, whereas time deposit accounts like CDs require you to deposit your money for a specific length of time. Vertical integration that's a term for a business strategy, where a company takes ownership of multiple stages of its supply chain and the term financial runway. That is, the amount of time you can maintain your lifestyle without the need for a paycheck. As you know, I often like to leave you with something actionable. Their Master Note program offers 10 to 12% returns, some liquidity, and just a 25 K minimum. And another way to think about it is that, in fact, then that is a 10 to 12% cash on cash return. And if you're interested in being more nimble than that, there are other lending programs where you can get a strong return with just 90 day liquidity. And to get started on any of them, or simply learn more. Text family to 66866.   Speaker 1 (00:39:45) - Until next week where we've got a great show for you. I'm your host, Keith Weinhold. Don't quit your daydream.   Speaker 5 (00:39:55) - Nothing on this show should be considered specific, personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.   Speaker 1 (00:40:23) - The preceding program was brought to you by your home for wealth building. Get Rich Education.com.

Will higher interest rates and inflation persist for a decade? An upcoming recession always seems to be perpetually just around the corner. Learn when it should finally happen. Macroeconomist Richard Duncan joins me. I tell you a funny story about when he was GRE’s first-ever guest in 2014. Currency is now being destroyed—called Quantitative Tightening. Negatives for future asset prices: QT, higher rates, student loan debt repayment, stronger dollar, asset prices already inflated, high personal asset-to-income ratios, higher oil prices, looming government shutdown. Positives for future asset prices: monetary stimulus hangover, high employment, CHIPS and Science Act, Inflation Reduction Act, The AI Revolution, prospect of lower future inflation and interest rates.  Richard provides his opinion and insight on today’s real estate market. If inflation-adjusted credit growth is less than 2%, expect a recession. If it goes negative, expect a depression. Get a 50% Discount on Richard Duncan’s MacroWatch video newsletter. Use the code “GRE” at: RichardDuncanEconomics.com Resources mentioned: Show Notes: GetRichEducation.com/474 Get a 50% Discount on Richard Duncan’s MacroWatch video newsletter. Use the code “GRE” at: RichardDuncanEconomics.com For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold

Failed deals. Capital calls. Lost investor money. A dreadful and sobering conversation ensues for many in some commercial real estate sectors. Residential (1-4 unit) and commercial (5+ unit) real estate fortunes are decoupling.  Multifamily commercial loans are at the mercy of interest rate resets. Residential is stable due to low supply and sustained demand. Neal Bawa from MultifamilyU and I outline the multifamily problem. Values have plummeted 25%.  The magnitude of the multifamily problem is about 1/80th of the 2008 Global Financial Crisis. There are two reasons for the office apocalypse—both declining income and increasing expenses. Only 3% of office buildings in downtown cores have a floor plan that can be converted to residential. Dreadful.  There will be possible discounts in the hotel industry due to a lack of funding and loans. Retail has surprising bright spots. We discuss the future of rents through 2026. Will multifamily problems create contagion into 1-4 unit residential? We discuss.  Timestamps: Multifamily industry changes and challenges [00:00:46] Discussion on the new difficulties faced in multifamily, such as failed deals, capital calls, and banking industry challenges. Opportunity arising in the multifamily market [00:01:12] Exploration of the current opportunity in the multifamily market due to a 25% reduction in prices from the peak, caused by distressed transactions and high interest costs. Anatomy of the problem with floating rate debt [00:05:57] Explanation of the issues faced by apartment building owners or syndicators when they have floating rate debt without rate caps, leading to potential deal blow-ups. The rate cap issue [00:08:29] Discussion on operators neglecting to buy a rate cap or buying a rate cap set too high, leading to negative cash flow. Magnitude of the multifamily reset problem [00:09:47] Comparison of the current multifamily reset problem to the global financial crisis, highlighting the challenges faced by operators. Challenges in refinancing properties [00:12:10] Explanation of the challenges faced by properties in refinancing due to decreased net operating income and increased mortgage costs, leading to potential loss of investor money. The availability of multifamily loans [00:16:50] Neil discusses the availability of commercial real estate loans, particularly in the multifamily space, and how it differs from other asset classes. Lending challenges in the commercial real estate space [00:18:03] Neil talks about the severe lending challenges faced by asset classes like office, retail, and self-storage, while expressing confidence in the stability of multifamily lending. Contagion and the impact on the 1 to 4 unit space [00:20:56] Neil discusses the limited level of contagion that could affect the 1 to 4 unit space due to problems in the multifamily market, highlighting the healthiness of the single-family market and institutional interest in it. The Troubled Office Sector [00:25:35] The speaker discusses how the office sector is facing a long-term demand crisis due to the decrease in office occupancy and the challenges of converting office buildings into residential units. The Ten-Year Problem in the Office Sector [00:27:06] The speaker explains that the office sector is about to face a ten-year problem, with defaults and declining values affecting the downtown core and other assets. Bright Spots in Retail and Hotels [00:29:21] The speaker highlights that retail occupancy is higher than multifamily occupancy, and despite the Amazon effect, retail is doing well. They also mention that hotels have seen strong recovery post-pandemic. Hotels and Multifamily Discounts [00:32:55] Discussion on the current cash flow opportunities in hotels and multifamily properties, potential discounts in the next 12 months. Retail Reinvention and Rents in a Recession [00:33:57] Exploration of how retail can sustain itself through experiential offerings, the resilience of rents in past recessions. Artificial Recession and Rent Growth [00:35:33] Analysis of the possibility of a recession and its impact on rents, the strength of the US economy, and the expected short duration of the recession. The recession and its frequency [00:40:56] Discussion on the frequency of recessions and how they are a normal part of the business cycle. Learning opportunities at MultifamilyU.com [00:41:31] Information on the webinars offered by multifamily ewcom, covering various topics including single-family and multifamily projects. Appreciation for Neil Bawa's insights [00:42:22] The host expresses gratitude for Neil Bawa's informative contributions and welcomes him back on the show. Resources mentioned: Show Notes: GetRichEducation.com/473 Neal Bawa: MultiFamilyU.com and Grocapitus.com For access to properties or free help with a GRE’s Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE  or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review”  Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold   Complete episode transcript:   Speaker 1: Today's guest is well known as the mad Scientist of multifamily. He's a data guru, self-described self-described process freak, and an outsourcing expert. He's a ten figure man with his billion dollar plus multifamily portfolio and his 900 plus investors. He's also the CEO at a multifamily education company because he's a really good teacher. It's been about a year and a half since you were first here. Welcome back to Neal Bawa.   Speaker 1 (00:00:40) - Well, thanks for having me back on. It's it's a delight to be back. Had a fantastic conversation with you last time. So I'm looking forward to this one. We did.   Speaker 2 (00:00:46) - The last one was so fun and spirited. But my gosh, since then, Neal, about a year and a half ago, so much has changed in the multifamily industry. We know that a lot of new difficulties have come into multifamily, like failed deals and capital calls and the need to raise bridge debt and banking industry challenges.   Speaker 2 (00:01:06) - So where would you like to start to help give us some perspective on all that?   Speaker 1 (00:01:12) - Well, think opportunity is finally here. You know, when when we talked a year and a half ago, I was I said things like, well, prices are too high. I said things like, I don't know where the margins are. I don't know how people make deals work. I don't know how they make them pencil out. Right. Um, in some ways, I'm still saying some of those things, but it's certainly not because of pricing anymore. So, you know, the single family market is a perfect sort of benchmark for the world that live in multifamily. As far as I know, in the last 12 months, single family prices have either been flat or up 1% or down 1%, depending upon which analyst you pick. But it's certainly been an extremely, extraordinarily stable market in terms of prices, where it's it's you know, the volume, of course, has cratered. It's down a ridiculous percentage.   Speaker 1 (00:02:00) - Whereas multifamily was an industry that has hurt more because of the portion of multifamily that was purchased or traded in the 2020, 2021 and 2022 time frame. Almost all of those trades happened using bridge loans which were floating, whereas almost all single family transactions were 30 year fixed loans. Right. So so two completely different things have happened. Normally the single family and multifamily market tend to be in lockstep. And that's certainly been the case for ten years. But over the last 18 months, single family and multifamily have separated from each other. And the big reason for that is almost all of the distressed transactions that you're talking about, that you're alluding to all of those cash calls. They are related to bridge loans, which had floating debt. And that floating debt has gone from, you know, 6% to ten, eight, you know, 11%, even for for some of these, these operators making it extremely difficult to make numbers work, making it very difficult to pencil. But on the good side, we've now seen compared to the peak, which was probably about 20, 21 months ago, we've seen a 25% reduction in prices, which is huge because we mean multifamily usually as an asset class, doesn't go down 25% simply because it its value is based on rents, you know, and rents rarely go down.   Speaker 1 (00:03:22) - They hardly went down for 6 or 7 months in 2008, so we didn't see much of a decline there in 2008, simply because, you know, the, the, the income was strong, but this time, the much, much higher cost of interest means that our overall post mortgage income is down. And that's why prices are down 25%. So both opportunity and distress in the multifamily space.   Speaker 2 (00:03:46) - That's such a staggering number. So let's frame that. Multifamily prices down 25% since their peak or year over year. And then just to be clear, we're talking about five plus unit residential apartment buildings with that figure.   Speaker 1 (00:04:01) - Yes, I'm glad you asked the question that way because I do need to qualify a few things. So so first thing is down from peak and depending upon different markets, the peak was either the last quarter of 2021 or the first quarter of 2022. And in a couple of markets, even the second quarter of 2022. So it's I'm not saying year over year, it's basically they're down 25% in the last 18 or 20 months.   Speaker 1 (00:04:25) - Um, so the second piece is that the down 25% is predominantly, let's call it hotter markets in the United States. So if we're talking about a steady Midwest market like Kansas City or Indianapolis, then you're probably seeing a decline of half that amount. So maybe 12.5, 13, 14%, where if you're talking about a very fast growing market, you know, all the Texan markets, the Floridian markets, then you might be seeing declines of that 25% level, since a lot of the transactions that did happen in the last two years were in the faster growing markets, that 25% number is still reasonable. And some people listening to this show might say, no, I don't think 25% is right. It's more like 20, it's more like 18. So I'll. Be at that by saying it's a pretty wide range. We're seeing as little as 18% in some of these fast growing markets, you know, hot markets. And we're also seeing markets like Phoenix, where we're seeing 27, 28% declines in price.   Speaker 1 (00:05:23) - Also, the the range is dependent on the number of units. We are seeing smaller declines if you've got less than 100 units. Right. So smaller properties, we're seeing a smaller decline maybe 15%. And then when we are seeing properties that are 300 units or more, just the whoppers, we're seeing 30% declines in those assets. So so a lot of it is really dependent upon, you know, because the bigger the size, the harder it is to finance it these days, the less the banks want to take a risk on it. So the bigger the property, the harder, harder it's hit at this point of time.   Speaker 2 (00:05:57) - The bigger the property, the less liquidity. So maybe, Neil, to help the listener get a full understanding, maybe you can take us through the anatomy of where a common problem is with what happens to an apartment building owner or syndicator when they got this floating rate debt and they didn't get a rate cap and rates spiked? What exactly happens that makes these deals blow up?   Speaker 1 (00:06:24) - Right? First, want to, you know, set the size of the of the problem.   Speaker 1 (00:06:28) - Right. So when you compare it to 2008, it's not comparable in 2008, the total size of distress or you know, potential distress was 8000 billion or $8 trillion. So it was it was a it was an absolutely staggering event. Luckily, not a lot of that distress actually happened. So that was good. But the the total size of distress was in that $8 trillion or $8000 billion range, the total size of distress in the multifamily market appears to be in the $100 billion range, so about 1/80 of the size of the distress in 2008. So keep that in mind. Also, as a percentage of the overall multifamily industry, there's about 100,000 multifamily properties in the United States that are on the bigger size. Let's call them more than 50 units. There's 20 million apartment units total. 100,000 are the bigger properties. Of those 100,000, the distressed portion of the portfolios is about, from what I can tell, about 3000 properties. Maybe it could be as much as 4000, but 3000 is a very common number.   Speaker 1 (00:07:30) - So about 3% of the properties are distressed. And why are they distressed? Multifamily has been doing incredibly well. Rent growth has been phenomenal, especially in 2021 where it was 15%. Just so you know, they the 50 year average is about 2% rent growth. So 15% is you know, champagne time. So so we've certainly had positive trends. And we continue to see positive trends. You know there's there's less and less people can afford a mortgage. So there's basically a you know brand new renters being created every day because of mortgage rates being this high. But the, the the downside was that a portion of those 100,000 properties were purchased in late 2020, 2021 and then, you know, 2022, and they were purchased using floating debt. And the the so we're talking about those 3000 properties. Those 3000 properties either didn't have a rate cap. So when when you you're purchasing using, you know, bridge debt or floating debt, you want to buy a rate cap. So if rates do go up they hit that cap.   Speaker 1 (00:08:29) - And then anything above that cap is something that the rate, you know, cap selling company reimburses to you. So that way you're not affected by but by going above that, well, some of these operators neglected to buy a rate cap, which was a really bad thing to do. But then there were others that other operators that bought a rate cap, but their rate cap was set too high. So, you know, they basically didn't think that rates would go up. So they did put a rate cap in. But instead of buying a rate cap at 6% or 7%, they may be bought a rate cap at 8 or 9. They were basically looking for the worst case scenario, and so they bought the cheapest rate cap that they could find. And now, you know, rates have gone up and they've already hit that rate cap. Maybe it's eight and a half or 9% and it had eight and a half or 9%. That mortgage is still too high for that property to cash flow. So now the property has negative cash flow.   Speaker 1 (00:09:18) - So there's I personally know of a few dozen properties where the negative cash flow is between 20,000 and $200,000 a month. And that negative cash flow means that the syndicators, the the general partners are basically putting that money in themselves, or they're taking short term loans and they are now looking for a solution there and their solutions are limited. I can give you a list of those, but their solutions are limited because the property is is negative cash flow and nobody wants to touch a property that's negative cash flow.   Speaker 2 (00:09:47) - Did we say that he's a data driven guy or what? That was some great perspective that the magnitude here of the multifamily reset problem has been about 1/80 of what the problem was in real estate during the global financial crisis. That was a great way to put things in perspective. Yeah, Neal, you know, it's such an interesting mindset that an operator would have the awareness to buy a rate cap with their floating rate debt, but yet not have the cap be low enough in order to keep them out of trouble.   Speaker 2 (00:10:20) - That's really unusual to me. Do you have any idea what percent of operators have bought a rate cap with their floating rate debt?   Speaker 1 (00:10:30) - I think a majority of them have. So I'd say more than 50% of the properties that were purchased during this time did have caps, but a lot of the caps were set high. So that that was a very common thing, where the caps were set to 8% or higher, as opposed to them being set at, you know, 6 or 6.5%. So it's more of a high cap issue rather than a no cap issue. And I think the bigger the secondary challenges, let's say let's say they had a good rate cap, right? So I bought it. Let's say you bought a property in the, um, let's call it the final quarter of 2020. And you bought a two year rate cap. And the rate cap was good. It was 6.5%. Yeah. Good for you. Right. But that rate cap was a two year rate cap. So now it expired basically last year.   Speaker 1 (00:11:14) - And so since last year you're now up at 10 or 11%. And, you know, a year's gone by. Your property is bleeding. Maybe it was doing well, but now that it's been bleeding for a year and you've been paying all of that bleed out of your operating expenses, now you're in trouble. And maybe you bought it. Three rate cap. Well, if you bought the property in the final quarter of 2020, then in about a month or two months from now, we're in the final quarter of 2023. Well, that rate cap is going to be gone. And then maybe in the next three, 4 or 5, six, seven months, all of your operating budget, all of your operating, you know, fund is going to be, you know, gone because you have this much higher mortgage. So what's happening is that this is one of those situations where there isn't a trigger on any one particular day, and a huge number of properties come to market. There were a lot of properties purchased in the final quarter of 2020, all four quarters of 2021 and the first three quarters of 2022.   Speaker 1 (00:12:10) - Right. So you're looking at a total of eight quarters. So each quarter, a certain percentage of those properties get to the point where either their rate cap is gone. Right. So it's finished because you bought a one year or two year rate cap, or they're they're at the point where even without the rate cap, their loan is expiring. So a lot of these bridge loans were two year loans and three year loans. And so the vast majority of the challenges that the multifamily industry is going to face are going to be in 2024, because that's when a vast majority of either rate caps or mortgages expire. And because because the net operating income of these properties has gone down and the and the mortgage cost has gone up, most of these properties cannot be refinanced. So I'd say out of the 3000 properties, you could probably refinance using some mechanism, a thousand of them, maybe a third of them. And that could be, you know, do a cash call, get, you know, money from your investors.   Speaker 1 (00:13:07) - Or you could do what is known as a pref lending, where you basically take money from an outside party and that outside that extra money helps you refinance into into perm debt. So those are your options. And the third option, which is likely to be most common, is that you go out and sell your property. But from what I'm seeing, the vast majority of these properties that don't get refinanced. So out of 3000, the 2000 that don't get refinanced are likely to come to market, and the vast majority of them will end up losing all of their investor money or a majority of their investor money. And so you, you know, if it's a $100 billion problem, that's, you know, we're talking about 30 to $40 billion of investor money, and a majority of that 30 to $40 billion could be lost.   Speaker 2 (00:13:48) - Yeah, that is troubling and really concerning as far as those LPs, those limited partners, those investors in someone else's syndication, hopefully that syndicator, that operator is communicating with their investors.   Speaker 2 (00:14:03) - But for investors, is there anything they can do to identify cracks in the arm or where they might be losing their deal, where they might be losing their money, where they might be throwing good money after bad if a capital call is requested?   Speaker 1 (00:14:18) - I think it's a very difficult thing to do for a limited partner because you have, you know, you have more, you have much more exposure to the deal than you would when you invest in the stock market, where you know, there's almost no exposure unless it's a public company. Um, but and these are all private syndications. But I think that a lot of investors simply don't know how to read the, the budgets versus actuals. They don't necessarily know how to read the Performa. So it's it's challenging. So if you're somebody that is. Comfortable doing that. I suggest you dive in and basically ask a lot of the questions of the syndicators. I have one such property, so, you know, I was lucky in that during that time a lot of my colleagues had I have people who I know colleagues that bought 10 to 12 properties during that time frame.   Speaker 1 (00:15:02) - It was very normal. I bought one and a half. So one of those properties was my own property, exited one of my partners. So I call it a half a property because it was already mine. Um, and then I bought purchased one other property in a military metro. So I was able to get it for a lower price because it was a military metro. And usually the prices are lower for, for for military towns and, and that property, you know, I'm having the same challenges that I've described. So, you know, the the rate cap issues and the fact that basically prices have gone down by 25%. And I'm dealing with it by constantly communicating with my investors, giving them, you know, options. You know, here's, you know, how when, when we were when we were all selling these these shares to investors, we gave them a, um, a sensitivity analysis showing them, you know, worst case scenario, best case scenario, you know, in a middle case scenario.   Speaker 1 (00:15:55) - And so now we're basically doing a sensitivity analysis based on what we are seeing in the marketplace today. And and giving them feedback on what our options are and think a lot of it comes down from the the general partners communicating with the limited partners. And if the your general partner is not very communicative, is not giving you information, ask for one on one meetings, ask for you know, more information in their webinar or in their updates. I think this is a time for limited partners to be vocal.   Speaker 2 (00:16:25) - You've learned about the problem in the larger apartment space. You've learned about how operators and apartment syndicators are dealing with the problem. And then, Neil, where do you think that we're going next and think maybe we should ask and look at it through the lens of where do you think we're going next with the availability of multifamily loans, could this help the source of capital dry up?   Speaker 1 (00:16:50) - And so I think the answer is we are going to a very dark place with availability of commercial real, you know, loans.   Speaker 1 (00:16:57) - Multifamily is in a privileged asset class. So, you know, the the term commercial real estate is sometimes meant to include multifamily, sometimes not. So I'll assume that multifamily is part of commercial real estate, but there are many other asset classes. So there's office which is the next biggest asset class. There's retail hotels, there's self-storage, you know, and and a few others like mixed use. And of those commercial real estate asset class, there's only one that's privileged and that's multifamily because there are not one, not two, but three lenders who are government or quasi government organizations whose only job it is to keep lending in the multifamily space liquid, and also the single family space liquid. And they are Fannie Mae and Freddie Mac and hard. Right. So Housing and Development Authority. So these three lenders right now are extremely, extremely active. And what has happened is that in in good times, call it 20 early 2022. You had life companies. You had all these private, you know, bridge capital, you had all kinds of capital that was lending to the multifamily space.   Speaker 1 (00:18:03) - Now some of that capital has backed off. There's still a huge percentage, I'd say probably 40, 50% of all loans that are being done today are these kinds of private, you know, groups. But think the government or quasi government groups are much more active today and their lending. So I don't think multifamily lending dries up at all. I don't think that that's the case. I think it dries up for the non privileged asset classes, hotel, retail, self-storage, office. These are the classes that are likely to see, you know, near lending dry up especially because on a fundamentals basis there's absolutely nothing wrong with multifamily. In fact as I mentioned I think we're a lot better off than 2019 to 2023 given that home prices have gone up 40%, incomes are only gone up 15%. So there's a very large number of Americans that simply cannot qualify for a single family home anymore. And so those people have to go to apartments. So the the fundamentals are really good for apartments. That is not true of office.   Speaker 1 (00:19:02) - So office is an asset class that is experiencing the worst fundamentals it has seen in its entire history. And so I do think that there's going to be very severe lending challenges in the commercial real estate space. But I haven't really seen that multifamily, and I don't anticipate seeing it in the future as well.   Speaker 2 (00:19:20) - Well, I don't know if any of that could have as much fun as last time. There were rather gloomy subjects to discuss here with Neal and come back. Can this problem in the multifamily space create contagion for the 1 to 4 unit space? And like with what Neil touched on, what about other commercial sectors like office and retail? How troubled are they when we come back? This is get recession. I'm your host, Keith Weinhold.    Speaker 2 (00:20:14) - Welcome back to Get Rich Education. We're talking with the mad scientist of multifamily, a big brained visionary. He's also an excellent teacher. I'm sure you can tell as you're listening to him here. And if you're listening in the audio only Bawa is spelled b a w a new. Here on this show, we talk an awful lot about investing in the 1 to 4 unit space and the advantage of the 30 year fixed that long term fixed interest rate debt. Do you see any areas for contagion with problems in the multifamily five plus unit space bleeding over into the 1 to 4 unit space?   Speaker 1 (00:20:56) - Yes, but to a limited level, I think that the the 1 to 4 unit space is the healthiest that I've seen in a very long time.   Speaker 1 (00:21:05) - And there's reasons for that. One of the biggest reasons is multifamily, which is the most well sought after asset class for institutional investors who don't typically don't usually like the 1 to 4 unit space. There's a few companies in that space, let's call them half a dozen, but there's several thousand companies that invest in the multifamily space. Some of them are right now looking at single family as a, you know, as a, you know, safe haven to park some of their money. Right? So there's, you know, more institutional level interest in the single family space because of its access to those, you know, those those 30 year fixed loans. So there's and the fact that single family prices basically haven't declined. So I think that there's there's a lot of interest in the single family space. Um, keep in mind that millennials are reaching their peak years of household formation. So they started in 2019. So until 2025. So from 19 to 2025, those are the peak years of household formation for millennials.   Speaker 1 (00:22:01) - And that's also putting a cushion under the single family space there. Contagion is some form of contagion is inevitable. I think that the office market is going to see spectacular levels of contagion, similar to 2008. I think that the other associated markets, like hotel and retail, are going to see some level of contagion, though I certainly don't expect it to be as bad as office. And then multifamily is going to see some contagion, as we mentioned, because of these 2 or 3000 properties that have to be basically sold into the marketplace and prices are down, which always creates contagion. Why? Because think about it. You're a mid-level bank. So a mid-level bank in the US is $250 billion or less in assets. Well, a lot of these assets are these banks are the ones that loaned out money to multifamily and retail and hotel and in office, and now are being forced by the Federal Reserve through a process known as mark to market. They're being forced to write down the value of these assets because these assets, you know, there's still you know, there's still active loans, but maybe they they loan $20 million.   Speaker 1 (00:23:00) - And now basically they're $20 million is only worth 18 or 16 or 15. And so now the fed is saying, hey, you know, you got to mark these assets down in value. And as they mark them down to value, that can lead to the banks becoming or mid-sized banks becoming less stable. I don't think this affects any of the large banks in the US, but the midsize ones are affected. And some of those mid-sized banks do lend to the single family space, but not a lot. I find that the single family space, when I look at their source of lending, not a lot of those mid-sized banks are involved. There's a little bit they do some brokerage work, but then they're selling those loans back to Fannie Mae and Freddie Mac and a bunch of other, you know, governmental type organizations. So I don't see a sense of contagion in the single family space. I do see potentials of some price declines because until about two months ago, mortgages were predominantly in the sixes. They, you know, they spiked up once to the sevens and then they pulled back into the sixes.   Speaker 1 (00:23:56) - Now they've gone into the sevens and they may stay in the sevens for a substantial amount of time. When that happens, that can affect the single family market as well, simply because, you know, you can get to the point where supply is higher than, than demand. So I wouldn't be surprised if there's a pullback in single family prices. Let's call it 5%. But I'm not predicting the kind of challenges where the office market think we could see 40% declines in prices from peak, whereas single family you might see 5%. I think that's still an incredible outcome for the single family market compared, you know, just looking at the outrageous increases in prices since Covid don't I don't think that's a even a pullback. I would just say that's a balancing out.   Speaker 2 (00:24:44) - Who know the residential housing market. Really, it's something that's non-discretionary on a human need basis. Everyone needs to live somewhere and they will either own rent or be homeless. And you talked about some of those affordability challenges before. The lower the homeownership rate gets, the more renters you have.   Speaker 2 (00:25:05) - So long term, we will have some demand baseline for both multifamily and properties in the 1 to 4 unit space, of course, but the same thing cannot be said about some of these other commercial sectors, especially the troubled office sector space, where you have more and more abandoned buildings downtown. And a lot of these office buildings cannot be easily converted from offices to residential units. So why don't you talk to us about some of those other troubled commercial sectors, starting with office.   Speaker 1 (00:25:35) - Office is in a apocalypse. I think that this is far, far worse than 2008 and far, far worse than than 2001, because 2008 and 2001, they were liquidity crisis. They were short term, you know, demand crisis. This is a long term demand crisis because, you know, I read very important documents from companies that are in the key swiping business. You know, when you enter an office in a downtown core, you're swiping your card. And so those companies actually have phenomenal day by day data of how many people are actually going into offices today.   Speaker 1 (00:26:11) - It's been more than a year since companies started calling back, you know, people to the office and think that by now every company, whether you know, they're they're forcing five days back to the office or four days or three days or two days, everyone's sort of, you know, put their line in the sand. And we're at the point where, you know, this, this is what offices look like going forward. And if I'm right and this is what it looks like going forward, it is simply catastrophic for the office market in the United States, because we're still seeing key swipes at 50 to 60% of the people that used to swipe in before Covid. And that number is staggeringly, staggeringly low. And if this is what it settles at, you know, some companies are two days, some three, some four. I think we're in for a world of pain for the office market. You also, you know, there's a lot of people that in these podcasts basically will often say something like, no, the office stuff will get converted into residential.   Speaker 1 (00:27:06) - And I have news for you, only 3% of office buildings in office in downtown course have the floor plate, the floor plate necessary for residential conversion. Why? Because residential conversion by law requires that every every single room have a window. So what is happening is most of the time you basically can only convert the buildings on the edge, the, the square footage on the edge of a building, but that's central core but then becomes worthless. And if you don't have a use for it, then you still have to buy that office building to convert and you have to buy it at a reasonable price. The math doesn't work. I mean, you'd you'd need to see office values down 80% for, for, you know, a somebody who's converting to multifamily to say, fine, I'll just leave the 60% in the middle empty and I'll just convert the size. So 80% declines in value are needed for that kind of conversion to happen. So we are about to see a ten year problem in the office sector.   Speaker 1 (00:28:03) - And it's also dragging down all of the other assets in the downtown core. So we are seeing we just saw a $727 million default on two hotels in San Francisco. We saw a $558 million mall default. Also in San Francisco, we're seeing defaults across the board in New York, Boston, Seattle, San Diego, Miami, sort of heavy markets where this these challenges are happening. We're seeing a lot of these and it's happening in a very, very slow way. Keith. And the reason for that is the office market, their average lease is, you know, five years long. Some leases are ten years long, and a lot of these companies haven't gone out of business. So if the company is in the lease, they're continuing to pay even though the office is empty. But the moment that lease comes up for renewal, either the company doesn't renew it or they renew maybe half the space. Right. And so we we already know that this is an incredible debacle, but it doesn't seem like it at any given point of time because it's happening in a very slow motion way.   Speaker 2 (00:29:02) - Well, that's such a good point about how there will be this slow drain, this slow leak when these office leases expire over time. What about other areas of the commercial space, any other particularly troubled areas or bright spots that you see going forward?   Speaker 1 (00:29:21) - Ironically bright spots. And this is where I've been proven wrong in the past. You know, I've often maybe 4 or 5 years ago talked about the retail apocalypse, right, where Amazon would basically, you know, lead the retail market to become illiquid. Well, none of those things have happened because of two reasons. One is the retail apocalypse with people like me, you know, being on on 200 podcasts, talking about it, a lot of development of retail that was scheduled to happen simply didn't happen. So the very.   Speaker 2 (00:29:48) - Late podcast, people lost confidence. No. They were invested in retail.   Speaker 1 (00:29:52) - Exactly right. So so, you know, I fulfilled that prophecy. Think. But bottom line is that there's there's been very responsible levels of new construction in retail.   Speaker 1 (00:30:02) - So, you know, they haven't built a lot. Very few models have been built in the United States in the last few years. And even some of the malls that have been repurposed, some of their square footage is being used up for, for multifamily. And so that was one. The second reason is that retail is being very careful with pricing. So, you know, over, over the last 5 or 6 years, the retail market has adjusted to new forms of pricing, where, you know, you go into a mall and you see a gym where before the pricing of that mall never really allowed for a gym to be in a mall. It just gyms, you know, they want, you know, a lower price per square foot. And so malls have adjusted, strip malls have adjusted. And so today we have a surprising event where retail occupancy in the United States is higher than multifamily. This is the first time ever that multifamily is about a little under 95%. Now it's 94% occupied.   Speaker 1 (00:30:52) - Retail is 96 or 97% occupied, which never happens, right? Normal. Normally retail is right around 90%, 88%, something like that. But the high level of occupancy shows that that retail is doing well. Now, having said that. So so on the occupancy side, they're doing really well. There's there's really no pullback in terms of demand. But on the other side, because of the fact that interest rates are so high, retail cap rates are very high, which means prices are low. So prices are very reasonable there for retail. And so I think that real opportunity that I'm seeing I wouldn't invest in office at this point, Keith, because you don't know the end of this process. You don't know how long it takes. I think it takes a decade. So I might get 50% off in office and I don't want it. I just don't want to touch that asset class. It's tainted. Now, if I get 40% off in retail, I think I'm interested because fundamentally I don't see a demand issue if this is the highest occupancy that retail has seen ever.   Speaker 1 (00:31:53) - And at the same time, I'm getting a 40 or 50% discount simply because of lack of lending. Well, that is to me a classic opportunity to look at because once again, fundamentally, nothing is wrong with demand. And I realize that the Amazon effect is extremely real. But what I'm seeing is that that people want that experience of shopping. And so even amongst the young people, sure, each year Amazon, you know, goes up a little bit. But now Amazon's growth is no longer a hockey puck. Amazon's growth is sort of like this. You know they're growing by 10%, 15% a year, which is still great for Amazon. But I think when you when you project that across a 300 million person market that the US is retail no longer has to fear for an apocalypse. So this is actually a pretty good time to take advantage of the 40% discounts that I think will happen in 2024 for retail. Same thing. Everything I just said also applies to hotels. Hotels came out of the pandemic very strong, with huge increases in ADR or average daily rates and huge, huge increases in occupancy.   Speaker 1 (00:32:55) - So hotels right now are a very robust cash flowing business. If you've got good hotels and good locations, you're making a lot of money. They're cash flowing like crazy because their orders have gone up and their occupancy has gone up. So they've taken two positive hits. But once again, I expect there to be discounts simply because of a lack of funding, a lack of loans. And you can you might we might easily see 30%, maybe not 40, but 30% discounts in hotels in the next 12 months. So think both of those are really good opportunities, along with multifamily discounts at 25%. So this is an opportunity. This is a case of distress creating unusual levels of opportunity. I don't think we're quite there yet, Keith. We're beginning to see some distress in multifamily. We're certainly seeing distress in office. We haven't heard anything about the distress in retail or hotels yet. That's because a lot of their their loans don't don't trigger until 2024. Right. So that's we'll see what happens next year when these loans start to trigger and you can't really refinance them.   Speaker 2 (00:33:57) - I completely believe that inflation has thoroughly soaked in to hotels. You talk about their ADR, their average daily rate. I've recently stayed at hotels in Denver, Omaha, Chicago, Toledo and Boston, so I've gotten a pretty good sample size and sure feel the hit there. And interestingly, the last time I shopped at a mall, it was the biggest mall in this city, and I noticed a bowling alley that I had not noticed there before. And I went bowling and noticed an ice skating rink was there. So I just wonder how much retail can reinvent itself if it tilts enough into the experiential part, rather than just buying items off a shelf at a store, maybe that can help sustain that retail sector, to your point. Well, Neil, maybe we should wrap up really on what supports an awful lot of values in multifamily, and that is rents and the direction of rents, especially if we have almost hate to say this. R-word, a different R-word, a recession, because it seems like this thing has been around the corner forever.   Speaker 2 (00:35:03) - I know historically that rents are quite resilient in a recession, something that you touched on earlier back even during the 2008 global financial crisis, when I was a landlord, I owned fourplex buildings. Then I noticed that I had a pretty good steady stream of renters. My rents didn't really go up much, but they were really resilient. They didn't go down, and that's because people couldn't get a loan. So that was an affordability problem. Then we have another affordability problem now. But if we do tilt into recession, what do you think that is going to do to rents?   Speaker 1 (00:35:33) - I think we are going to see a decline in rents if a recession happens. Now, that's a question. By the way, six months ago, if you told me, you know, a recession wasn't going to happen, I'd say, no, that's not possible. We are going to go into a recession. However, I must admit that the US economy has truly, truly, truly outperformed beyond anyone else, beyond anyone's imagination.   Speaker 1 (00:35:54) - So today, the chances of a recession are certainly not 100%. Might be 50%. But let's assume that it happens and a recession happens. I think what is very, very likely is that this recession will be very short. So once again, if you're not paying attention to to to what's happening in the marketplace, this is a time that, you know, I was born in India and this is my adopted country. I feel very proud of the US economy today. If I compare the US economy to the Canadian, the eurozone, the Germans, the Japanese, we are outperforming every one of those economies. We're at the point where we're outperforming China, which almost never happens, by the way. And so we have an extraordinarily resilient and strong economy at this point. So if it falls into a recession just because the fed keeps hitting it over the head with this interest rate hammer, I think that recession will be fairly short, because as soon as the economy does go into a recession, the fed usually figures that out within a few months.   Speaker 1 (00:36:47) - Then they can stop hitting us with a hammer. I'm not saying that they'll just cut interest rates back to zero, but they certainly will provide some cushion. Maybe they cut rates by one one time, two times, just to make the market breathe a little bit easier. Because this is an artificial recession, there is no shortage of demand in the US economy. There's an incredible number of open jobs. There were as many as 11 million jobs now. Now there's about 9 million open. So there's there's a and wage growth has been so strong. Right. Because we have so many people retiring that at this point, for the first time since the early 60s, I believe, or late 60s, we actually have pricing power. So anyone who wants to be employed can ask for more money and get it. And so wage growth has been about four, 4.5%, which is really good for rents, by the way. It's phenomenal news because we needed wage growth for future rent growth. So we have a artificial recession if it does happen.   Speaker 1 (00:37:38) - And that artificial recession is being caused by the fed because they want that wage growth to come closer to 2% from the 4% that it's at, because everything else has come down. Right. So commodities have come down with the exception of oil, and so has, you know, so have the supply chain issues are gone, rents are down. So in the US the last 12 months, rents were flat and in some markets they might be down 1% or 2%. Austin I think was the only market that was down a lot. But most other markets were down very, very small amounts. So rents have been flat, which is, I think, really credible because if you look at rents over the last two years, they're up 16%. So in 2022 they were up 16%. In 2023 they were up basically zero. So if you average that out now you're looking at 8% rent growth, which is phenomenal compared to the long term average of 2.5%. So we've been outperforming on rent and we needed to take a breather in the last 12 months have been that breather.   Speaker 1 (00:38:32) - Now, if the recession happens, I do expect rents to go down, but not normally they don't. So in a in a in a six month, three month or six month average recession, you know, the average US recession is two quarters. So six months normally you don't get rent drops. You might get, you know, the rents plateau out. Or maybe their rent growth drops from 3% to 1%. That's that's much more common this time. We might see rent growth in a short recession drop by maybe 1% or 2%. And the biggest reason for that is supply. The largest supply of apartments in the history of the country is delivering, starting basically the beginning of 2023 until the end of 2024. So these two years, 2023 and 2024 are massive apartment supply years. And obviously, as you supply 500,000 apartments into an economy that overall is not outperforming, is is doing okay, but and it starts to go into a recession, then you're going to see some concessions. And that concession drives down the price of multifamily, which then drives down the price of single family rentals.   Speaker 1 (00:39:36) - So we could see a decline in rents. I'd say probably 1% to 2% is is possible, but that decline is likely to be short. So I think let's assume that the recession starts in the final quarter of 2023, which might not happen. I think it's more of a Q1 and Q2 of next year. If the recession does happen, those are the two most likely quarters. As soon as the economy rebounds and becomes positive, we should see very strong and stable rent growth. Well, I would say stable rent growth for the rest of 2024 by 2025, a lot of that incoming supply is done. So now supply supply and demand are in balance. So in 2025 I expect strong rent growth as much as 4 or 5%. And in 2026 I expect very, very strong rent growth. We might we might see 6% rent growth in 2026. So 2024 is that year where rent growth is a little bit shaky because of this. Word, the recession word. And, you know, whether it happens or not is we don't know.   Speaker 1 (00:40:37) - And when it happens, we don't know how long it lasts. But I think because it's an artificially induced recession, it's likely to be the vanilla US six month recession, which basically drives wages closer to that 2% target for the fed, and gives the fed the room to start easing up on interest rates.   Speaker 2 (00:40:56) - Recessions are not good. Perhaps the one positive about a recession is that then we can all stop talking about and speculating upon when does eventually happen, because on average, it does happen every five years. It's just a normal part of the business cycle. Well, Neal, this has been very informative around the multifamily world and beyond, including projections for the future. You've always got such great insight in stats on the pulse of the market. If someone wants to learn more about you and your resources, what's the best way for them to do that?   Speaker 1 (00:41:31) - Come join us at multifamily. That's multifamily, followed by the letter EW.com we get about 20,000 registrations in our webinars. We do about a dozen webinars each year.   Speaker 1 (00:41:41) - We do them on single family multifamily. We do them on other asset classes like office. We just did one on on on the office apocalypse and people like that because there's no education fee, there's no subscription, there's no upsell. People come join us. They learn a lot. And occasionally during one of these webinars, if you have a multifamily project that we are doing, we mention it for about 30s. And if that sounds like it's interesting, you can, you know, jump in and you know and participate. But otherwise, you know, there's a lot of tens of thousands of people that have never participated with us in any of our projects that come and join us at this ecosystem of learning called multifamily EW.com.   Speaker 2 (00:42:22) - Neal Bawa, Gro Capital and multifamily EW.com. It's been informative, just like it was the last time you were here. It's been great having you back on the show.   Speaker 1 (00:42:32) - Thanks for having me on, Keith.