Get Rich Education

Keith examines the opportunity cost of paying off a mortgage early and why homeowners with substantial equity may still feel short on cash, alongside observations on Manhattan's distinctive residential towers.

He speaks with Michael Gifford of Splitero, a mortgage and real estate executive, about home equity investments (HEIs) and how they exchange an upfront payment for a share of a home's future value.

They compare HEIs with HELOCs and cash-out refinancing, including differences in qualification, monthly payments, fees, and repayment timelines.

Keith and Michael discuss a practical look at how homeowners might weigh access to equity against the costs and trade-offs of sharing future appreciation.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. The opportunity cost of owning a home free and clear. New York City has some of America's most interesting real estate. Then, with an HEI, you can access cash in your home without refinancing. You don't make any monthly payments or pay any interest. Does it sound too good to be true? We're learning about home equity investments today on Get Rich Education. For years, I've sent listeners to Mid South Home Buyers in Memphis, and for years, I've heard the same thing back. Keith, there's a wait list. Well, not anymore. Mid South has grown into three markets: Memphis, Little Rock, and Dallas, with its classic renovations and now brand new construction. For the first time in years, there's enough inventory to buy today, and they've picked now to roll out their best terms in their 25 years, it's called the triple five, 5% property management for five full years, half their standard fee, and Mid South buys your mortgage rate down as low as 5% for qualified buyers. If you're paying all cash, ask about the forever five. That's 5% management for as long as you own the property plus special cash pricing, with 6200 homes under management, Mid South is the place to turn for turnkey real estate. Book your free investment strategy [email protected]. That's midsouthhomebuyers.com.

Speaker 1 1:42

Your list. to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:58

Welcome to GRE from Manassas, Virginia, to Manhattan, New York, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education, and I'm in Manhattan today. More on that later. I've been well known for talking about how your rate of return from home equity is always zero, and how that fact can drive your investor decisions, even if you're a homeowner and don't own rental properties. So then, what are you going to do with your dead equity? And I practice what I preach. I own a lot of properties, and I could pay them all off, but I have mortgages on them all out of choice, and in fact, I have never owned a single property free and clear out of choice as well. Well, with what we're talking about later today on the show, for the first time in some detail here, home equity investments or HEIs, you can get access to part of your equity in the form of a lump sum payment, 10s or hundreds of 1000s of dollars, without paying any interest or having to make any monthly payments at all. This is because it is not a loan; it is an equity sharing agreement. This way, if you're one of those people with an ultra-low pandemic-era mortgage, well, you can keep those terms in place and get access to cash and have it all. Now, you know, last month a publication as mainstream as USA Today they published an article and it was titled "Why Paying Off a Mortgage Early Could Be the Wrong Move. At that time, I shared a link to that article with you in the "Don't Quit Your Daydream" letter that I write to you every week. That article let us know that, according to Rocket Mortgage, about one in four mortgage holders make extra payments on their loans. Well, you might not find that part surprising because Americans are not very well educated on financial matters. But here's the part you may very well find surprising: per the Rocket Mortgage Report, those that make extra payments are most prevalent among those with the lowest rates. I mean, those people then are really paying an opportunity cost if they're speeding up the retirement of a pandemic era three or 4% rate. For almost everyone that's doing that, it is probably a rather gross misallocation of capital. All at once, they're losing scale, leverage, arbitrage, liquidity, and rate of return. USA Today says older Americans-they're the ones that are really interested in. Idea of being debt free. Younger homeowners, when they come into money, they're more interested in investing it rather than paying down their mortgage. Okay, that is what they have found, and that's all for takeaways from the USA Today article on rethinking paying down your mortgage. I am telling you, it is one of the biggest financial lessons people once learned that they need to unlearn. Rushing to pay off your mortgage-that is financial malpractice. You're told it's the responsible thing to do. It is not. It is equity jail. Your cash gets trapped in 2008 during the global financial crisis. Banks foreclose first on the homes with the most equity because it was the easiest way to recover their money. Liquidity is protection. Don't lose it. You pay opportunity costs. That money could be creating cash flow. You don't want to pay another $400 in interest this month. Well, how about losing the opportunity to create another $1,000 this and every month? And with inflation, you lose the advantage of paying back the loan with cheaper dollars. Mortgage payoff and accelerated mortgage paydown is a wealth-killing trap, and now I recently had lunch with the CFO of a publicly traded communications company in Anchorage, Alaska. Sharp guy, we got into a discussion about this. He is in the free and clear camp. He likes a free and clear home for peace of mind. Although, because he is a chief financial officer, he knows that it is a poor allocation of capital. One thing he said to me is what I hear some other people say. Well, if you lose your job, then you're sure gonna be happy that you have a paid-off home? No, you won't be. You're making my point for me. In most cases, it's just the opposite. If you lose your job, you're going to need money.

Keith Weinhold 7:11

You're sure not going to be able to get it if it's trapped in the home. And one thing is for sure: a bank is not going to give you another loan if you don't have a job, a paid-off home is one of the few places where you increase your risk while you simultaneously decrease your return. So keep your equity separated, liquid, and hopefully earning a return. Now, as we're talking about HEIs today. Don't confuse that with a loan, just because I've been discussing mortgage loans here. An HEI, again, home equity investment, is an equity sharing agreement, not a loan. Like I mentioned earlier, I am in terrific New York City this week as a real estate show, let me tell you about some of the interesting urban real estate that I'm interacting with this week. As I'm bringing you the show from Midtown Manhattan today, 31st Street between Fifth and Madison, about three blocks south of the Empire State Building. Besides the sights that everyone knows about, like the Statue of Liberty, the World Trade Center, Rockefeller Center, and the Brooklyn Bridge, I had the opportunity to do a collaboration with CNBC on Wall Street and in the financial district. Even though I'm more of a Main Street guy than a Wall Street guy, also did you know that some of America's tallest buildings were built here in just the past five or six years. Yeah, all the continent's 10 tallest buildings are in the U.s8. of the 10 are in Manhattan, and three of the 10 tallest buildings in North America are these new pencil towers.

Keith Weinhold 8:58

And you might remember that we've had a guest here on the show, both this year and last year, the star of the A and E show, The Real Estate Commission, Todd Drowlette. Together, we've got a chance to check out what are known as the Pencil Towers. If you're not sure what they are, these are buildings about one 500 feet tall on the south end of Central Park, and they're called the Pencil Towers because they are extraordinarily tall and narrow. In fact, one of them, called the Steinway Tower, is so slender that its height is 24 times its width. It is, in fact, the world's most slender skyscraper, and much of the Pencil Towers area is residential condos now? As far as renting out those condos, I have yet to determine the rent-to-price ratios for you, but I tend to doubt it's as favorable as what you're going to find at GRE Marketplace with our investment coaches here. True. Some of America's most jaw-dropping real estate, with sweeping views of Central Park and into New Jersey and way beyond, and clear day views all the way to Connecticut. Some more cool real estate interaction here. Did you know that nightly, from 1150 7p.m. to midnight, a lot of the video boards in Times Square sync up for a special show. They are not just showing their normal ads during that special short three minutes. That ought to be cool. One of my days here, I'm going to take the subway from my hotel and temporary GRE studio here over to Brooklyn, and then when I'm done, I'm gonna walk the Brooklyn Bridge back to Manhattan.

Keith Weinhold 10:46

So, did you know that the subway then goes under the river? Yes, the subway tunnel goes beneath the East River. The New York subway system has 14 underwater river crossings beneath various rivers, and by the way, that is not a phenomenon unique to New York City. There are also subterranean subway river crossings in D.C. beneath the Potomac, Montreal underneath the St. Lawrence River, and also in London, Paris, in Shanghai. Some really cool real estate here in New York City, there is just so much to do. I wonder if kids that grow up in New York City still say that there's nothing to do here, like I did growing up in my small hometown in Appalachian Pennsylvania. I hope they don't say that here in New York City. They can't possibly say that. Coming up straight ahead on the show, we're talking about how to access cash from your home. You don't need to refinance, and you won't pay any interest or make any monthly ongoing payments with HEIs.

Keith Weinhold 11:50

And this is helpful because a lot of Americans at this time they feel cash poor due to the high cost of living, and yet at the same time they've got all this inaccessible equity locked in their home. This can help solve that. I'm Keith Weinhold. You're listening to Get Rich Education. Let me ask you something. If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. And full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage.

Keith Weinhold 13:31

Start your pre-qual and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com. This is Rich Dad Sales Advisor Blair Singer. Listen to Get Rich Education with Keith Weinhold, and above all, don't quit your daydream. This waste guest is a career mortgage, real estate, and tech exec. He's acquired and sold over 1000 homes across the West Coast, holds a bachelor's degree in real estate, and he's a licensed broker in California. But he's doing something really interesting today that we'll discuss. Welcome to GRE, Michael Gifford.

Michael Gifford 14:21

Thank you. Thank you for having me on.

Keith Weinhold 14:24

Michael, Home equity investments (HEIs) I think they really make sense today for a few reasons. The average homeowner has about 300k in home equity. That's a record high, and about 200k of it is tapable. You've also got the fact that mortgage rates are historically normalized, but they're higher today than they were five and 10 years ago. So more people look for ways to access cash without refinancing, which is something we'll talk about. I brought up home equity investments and described them. To my audience last year, Michael and I basically let everyone know that it's not a loan. Instead, a company gives you a lump sum of cash up front in exchange for a share of your home's future value. A company like yours does that, and for the homeowner, there are no monthly payments and no interest, but you do have to pay back the company later. Did I summarize that about right? And what else should we know?

Michael Gifford 15:29

Yeah, that's right. I would say it's a product that more and more homeowners are seeking, as you mentioned. Right, homeowners now really have two assets. They have their home, but they also have a low-rate mortgage that they want to keep in place. And exploring alternatives to access that equity, you know, you touched on the dollar amount, but most homeowners come to us, and 60% of their home's value is their home equity, right? And so that's a large, large savings account that they need help accessing. And you know, with the interest rate environment being high and qualification for a lot of traditional financial products being difficult, homeowners need alternatives, and that's why Splaterro exists.

Keith Weinhold 16:05

Is this something that can be used only on primary residences or rentals?

Michael Gifford 16:09

Can do both. The majority of folks are using it on their primary residence.

Keith Weinhold 16:15

Okay, what's in it for you and your company? Because of course, you're giving a lump sum of cash to these homeowner borrowers without them having to pay any payments or interest.

Michael Gifford 16:29

There's no monthly payment on product, but we're sharing in their home's future value, right? And so, where home values are today with this much equity, homeowners receive that lump sum of cash. Often, you know, a little less than the numbers you were talking about earlier. They don't usually tap all of their equity that they have available, but then when they refi or sell in the future, they'll pay us back, and we'll get a portion of the home's value at that time.

Keith Weinhold 16:53

Okay, so are homeowners or investment property owners going for amounts more like 50k or 100k in a lump sum that you pay them.

Michael Gifford 17:02

They're usually in that 100 to 150k mark. You know, we're in 17 states. Kind of the average home price that we're working with now is about 650 or so, and of that, people have over $300,000 of equity in that house that they need to access.

Keith Weinhold 17:17

Yeah. Okay. Go ahead and give us an example. Perhaps if someone has a $500,000 home and it appreciates in value, and then the portion of that increase in value or equity amount that you would take.

Michael Gifford 17:30

Yeah. So just say that $500,000 home for number sake. Let's say we gave them 50k, right? So that's 10% of the home value. When they sell a refi in the future, we'll take 20% of the home value, so two times the initial percentage, or we also have a homeowner safety cap. So they never pay more than 17 nine nine annually. So whichever one of those two is less, say in the future their home goes up in value, will take 20% subject to that safety cap. So the homeowner knows that the most they'll ever pay right now is 17 nine nine er year.

Keith Weinhold 18:02

Okay. So if a 500k home goes up in value to 650k—

Michael Gifford 18:09

That be the 20% of the 650 or 17 nine nine on the 50k, whichever one is less.

Keith Weinhold 18:15

Oh, got it. It's 20% of the 650, not of the equity amount of the home's total value.

Michael Gifford 18:21

The home's future value. Yeah.

Keith Weinhold 18:23

Oh, got it. Okay, so we're talking about homes in an appreciating environment, which is typical. What if the property goes down in value? What happens then, Michael?

Michael Gifford 18:34

We still share in the same value, so 20% of the value of the home, whenever they choose to sell a refi or our 17 nine nine safety cap, whichever is less. So home goes down in value. Our investment could go down in value as well.

Keith Weinhold 18:47

Who have you found that's using home equity investments there? Because you know, Michael, I imagine sometimes it might be a person that's trying to create arbitrage and be savvy. But I'm just going to guess that more often you get homeowners that are in trouble and need cash in the short term with the rising cost of living, and a lot of them bought homes with three or 4% mortgages five or more years ago that they probably couldn't even afford to buy if they tried to repurchase it today. So, who do you find that's using HEIs?

Michael Gifford 19:17

Yeah, well, to comment on your last comment before I answer your question, is yeah, that's the case, right? A lot of homes have really appreciated in value and might have outpaced the income that the homeowner has. Maybe they've had some credit troubles. Maybe their debt to income ratio can't satisfy that actual home value, so they couldn't probably buy that house today. Right, but we're working with homeowners across the spectrum. You have the savvy homeowners with great credit scores and great income. They're using this product though still because it has no monthly payment. There are very few financial products where you can receive you know six figures of cash and not make a payment on it the next month. And so they're doing all sorts of things. They're repairing and renovating their house. They're doing the pool that they always wanted. You know, doing the kitchen renovate. They're paying for their kids' college. They're keeping up with cost of living, as you said, is expensive, and so people are looking at their homes now as a large savings account, and that number of home equity and that number in their savings account keep going up, and they want to be able to access it. We also see the other end of the spectrum, right, where you see the homeowner that can't qualify for a traditional product, right? They don't have the credit score. They don't have the income to actually use a traditional product, but they have a ton of equity in their house.

Michael Gifford 20:26

And so, for them, they're often faced with: Do I sell this house or use a credit card? Which are both not great choices with our product and our qualification. You know, not being a bank, there's no income verification requirement. There's no DTI calc on this because you're not making a monthly payment, we can qualify a lot more homeowners, all the way down to a 500 FICO score. A lot of those homeowners are doing the same thing; they're keeping up with cost of living, they're paying off their credit cards. Right? We see people's FICO scores actually increase because they've paid off all their debt with the funds that we give them, and they are actually in a better financial picture. And often, a lot of times, the word that we hear is relieved. Right? They have now the opportunity to use that home where they've gained all this equity to pay off all their debts and give themselves a fresh start. And that's a that's a pretty unique proposition for a lot of homeowners.

Keith Weinhold 21:14

So I don't think of this as a delayed gratification instrument, but sometimes it does not make sense to delay gratification, as I've shared with my audience. Sometimes the expense of delayed gratification is denied gratification. So you're certainly helping meet some short-term needs. And yes, HEIs, home equity investments, they really do occupy this interesting gap in the market. And for some of the reasons that I brought up earlier, it really is quite a timely period for using it here. Tell us more about the qualification and if there are any fees.

Michael Gifford 21:49

Yeah, the qualification process is quite simple. So you can go to Splaterro.com, do our quick application. takes five six minutes. We're mostly qualifying on the home itself and the equity that's in that home, so the value currently, and then the first mortgage, right? We're often behind their first low-rate mortgage that they want to keep in place, so we need to understand that very little, but some borrower qualification actually adds. Where's their FICO score, right? We can go all the way down to a 500 FICO, and we want to make sure people don't have recent bankruptcies or recent foreclosures. But for the most part, it's about the home and the actual equity that's in the home.

Michael Gifford 22:24

We charge an origination fee that's 4.99% and the homeowner pays that at closing, so that's paid at closing. Then they don't make any other payments until they're ready to repurchase their investment. Usually, that's when they are going to sell the house or refi the house. Most people think about this like a bridge product, knowing that in the next five to 10 years, I'm probably going to sell this house and upsize or downsize, and and or you know maybe the rate environmental change, and I'll refi out because often even after we extend funds, we're so low leverage with their first lien that these homeowners still have an incredible amount of home equity available to them after we've given them funds.

Keith Weinhold 23:02

Yes, you need to understand that first mortgage pretty well, like you said, because I imagine if there's a lien on the property, I think you touched on it. The HEI position, which you have, occupies that second or even third mortgage position.

Michael Gifford 23:17

Predominantly we're in second position, and that's because you know most homeowners refined eight to 10 years ago when rates were low, so they do have that three and a half 4% mortgage that they want to keep in place and not change. That's unique to the product that we can you know record behind that, and then they keep that in place.

Keith Weinhold 23:36

So for the you, the listener, as you're weighing HEIs in your head, you probably want to ask yourself some questions, and maybe Michael can help us answer some here, including how long do I plan to stay in this home or own this investment property? How strong is my local housing market? Just how much appreciation could I be giving up? Am I willing to share future equity gains? And I think another germane question is now: Can I comfortably handle monthly HELOC payments instead, and the pros and cons with using a HELOC, a home equity line of credit? Can you talk to us some more about that and weigh those trade-offs, Michael?

Michael Gifford 24:18

Yeah, we tell every homeowner to explore all their options, right? So it's not even just the monthly payment from HELOC, but also the qualification process, right? As we see in very public numbers for mortgages, the higher spectrum of the FICO scores are often the only ones getting originations these days, right? The qualification process for HELOC has gotten pretty strict, so that's certainly first and foremost, where to start. The next is, of course, yeah. How long are you going to stay in the property? The interesting part about our product, to go back to our prior example, is if we're owed say 20% in the future, that never changes. It's always 20% So you know, the home goes up, the home goes down. It doesn't actually change. It never goes to 25 or 30% It's just. Always 20% of that home value with that safety cap. So if you do feel like you're in a market that appreciates rapidly, right, or you could be having rapid appreciation in your home price, we have that safety cap in place. Let's just say your home quadrupled in a year, we have that safety cap in place of 17 nine nine. So you're never going to exceed that on an annual cost.

Keith Weinhold 25:20

You know, Michael, I find it amazing how many homeowners-not so much income property owners, but homeowners-they don't realize that if they have a three and a half percent mortgage and they want to get cash out and refinance it at today, say, seven and a half percent rate, they don't realize that they don't have to refinance the entire thing, and they can even take a second mortgage as a HELOC and leave that majority three and a half percent interest rate portion in place as a first mortgage. But with that being said, some are aware that you can take out a HELOC second mortgage. Talk to us some more about the pros and cons specifically of using a HELOC versus a home equity investment.

Michael Gifford 26:00

HELOC versus home equity investment, an HEI is much easier to qualify for, as the points we've already talked to, right? No income requirement, no income verification. You have a lot of homeowners that might have lower incomes or incomes that can support more debt, or maybe you're a small business owner, right? Maybe you're starting a business. The traditional financial institutions don't really like that as far as lending to you, and so makes qualification difficult. You also often, for many HELOC products, need a 700 plus FICO. A lot of homeowners are in the sixes, so that makes it difficult to understand. The biggest one though across the spectrum of homeowners is you have to make a monthly payment. So as soon as you get funds up from your HELOC, you're going to extract those funds. Some will even have restrictions, like you can't pay it off for six months, or there's prepayment penalties, or something else.

Keith Weinhold 26:47

Right.

Michael Gifford 26:47

ut you have to start making a monthly payment to them immediately. This is none of that. There's no prepayment penalties. You can pay it off whenever you want, and there's no monthly payments ever. So a lot of homeowners look at those two things: ease of qualification and no monthly payments as pretty big factors, no matter what their situation is, and that's why they're seeking alternatives to kind of the few traditional financial vehicles that people usually utilize in this situation.

Keith Weinhold 27:14

It can be difficult to explain why someone would not want a HELOC second, even if they don't draw against it, that way it could be there for access in the case of emergencies. So it sort of has this checkbook ability for you to draw against your HELOC when you want to, or just leave it with a zero balance. Is there any flexibility like that with HEIs?

Michael Gifford 27:37

We don't. You know, we extend the funds at closing, so the homeowner receives them. If they want to pay us back, they can pay it back in full. But that's not the same where it is, you know, a true line of credit as noted in HELOC.

Keith Weinhold 27:49

No, no, you talked before about a disconnect between being house rich and having accessible financial flexibility. Tell us more about that.

Michael Gifford 27:59

Yeah, you know, a lot in our financial system rewards very high income and very high credit score. And if you don't have one or both of those, it's very difficult. No matter how much equity you have in your house, to access it, even at lower leverage rates, right? If you have had some credit troubles, your options slim pretty quickly. No matter how much equity you have in that house, and that and that makes it difficult for a lot of homeowners, right? As costs increase, school tuition, whatever it is, increases. It's hard for a lot of people to make these monthly payments, and so you know, no matter how much equity you have in your house, qualification is still difficult for a lot of products. And as the interest rate environment ticks up, or if you believe it's going to be higher for longer, or even though it's you know not historic highs, it's still higher than it was a handful of years ago, and so that makes qualification even more difficult for folks.

Keith Weinhold 28:49

We've compared HEIs to HELOCs. What about comparing them to home equity loans and cash out refinancing?

Michael Gifford 28:56

Yeah, I mean the biggest one there for sure is a cash out refi. A lot of people want to keep that low rate mortgage in place. So if they have a three or a 4% rate, you know, I wish I had a crystal ball to be able to tell you when that's coming back. But a lot of people want to keep that in place, and so that included what you didn't ask about. But it includes reverse mortgage, right? A lot of people don't realize that you're going to get a reverse. You got to refi your first out. So that is really the big benefit of this as well as you're keeping that low rate mortgage in place, so your monthly payments aren't changing after you receive your funds.

Keith Weinhold 29:30

Tell us more about home equity investments. Some of the pros, some of the risks. Maybe something I have not thought about asking you.

Michael Gifford 29:40

Yeah, I think we've talked a lot about the pros. I think that you know we encourage all homeowners to explore all their options when they're looking to access the equity in the home, and then choose one that's right for them, their situation, and their timeline. Of course, the interesting part that we haven't talked about is our timeline. Right, we're making an investment that's as long as you're. First mortgage. So if you have 25 years left on it, we're going to give you funds for 25 years. Yeah, a lot of time when you use other products, you don't have that same term. If you have anywhere less than 10 years, we'll still give you the funds for 10 years and a max of 30 years. So we do what's called maturity match. We match the first liens maturity.

Michael Gifford 30:17

So when you make your last mortgage payment, you also then will pay us back at whatever point in the future that is, that's definitely a pro, right? There's no sort of short term. Hey, this is you have this money for five years or 10 years, and you might be uncertain. I'm like, I don't know if I'm going to sell this house or move out of this house in the next 10 years. What if the mortgage environment's worse, right? I don't want to refi out into a very high rate in 10 years. We don't know what's going to happen, so that's definitely a pro. I'd say the cons. If you can qualify for a traditional financial product like a HELOC, oftentimes they're a little lower in cost than we're going to be, right? So it could be a cheaper route as far as APR, but there's trade-offs in that. You're making those payments that we talked about. You have to be able to qualify for that product. That's really the biggest con I would say about this product. Outside of that, most people once they understand it and hear about it, they can't believe it exists, and they can't believe they didn't know about it before.

Keith Weinhold 31:08

We're talking with Michael Gifford of Splitero about HEI's home equity investments, where his company gives you a lump sum of cash upfront in exchange for a share of your home's future value, so it's not a loan. And for you, the homeowner or income property owner, there are no monthly payments and no interest. You pay back the company later. Tell us more.

Michael Gifford 31:37

I think that you know in today's environment, and both the real estate and the interest rate environment, a lot of people are locked into their homes, right? They've accreted all this value. They don't want to move because if they move, they have to change their mortgage, and that changes their monthly payment, right? Some call it payment shock. So you have the lock-in effect where they're locked in their house, and then they also have payment shock. And you know, it seems like the weather forecast, where there's a new term for these things every sort of every few years, but because of that, people are exploring alternative options that they haven't looked at before. We're one of those. We've been around for a number of years now. We operate in 18 states, and so we're helping homeowners really see that there are more options to access their home equity than just another you know, traditional product.

Keith Weinhold 32:23

Michael and I are doing a remote interview. He's in San Diego. Over Michael's shoulder on his desk, I can see a Los Angeles Chargers helmet. I was careful not to call it a San Diego Chargers helmet. That was the former home of that team. They have a really good quarterback, and the reason I'm bringing this up is because you have sports partnerships, which is really interesting. Tell us about that.

Michael Gifford 32:48

Yeah, we have a few sports partnerships. The Los Angeles Chargers, as you mentioned, have been great partners for us. We help them build a beautiful content studio where they film a lot of their broadcasts throughout the week, talking to players, coaches, you know, talking to matchups for the coming weeks. Great show there on YouTube in stadium. You'll see all of our assets. A lot of this is because you know a lot of the work that Splatero does is still on homeowner education. People call us. They say I've you know a couple $100,000 of equity in my house. How can you help? You know, I've never heard of you. And so we've had a few partnerships. We also partner with the Los Angeles Kings, which has been just incredible for us. Great organization and AEG, their owner across their plethora of assets. I would say, and so the sports partnerships have really helped us help consumer realize that you know we're a real company with a great offering, and people should check it out. And they've been great partners for us. We're homed in Southern California. I'm in San Diego, as you mentioned. Southern California is a very important market. We want to be able to invest these dollars in our backyard and make sure that homeowners in Southern California have the best options when they're looking to access the equity in their home.

Keith Weinhold 33:55

Whether you're personally helping Chargers quarterback Justin Herbert with his own home equity needs or not, Splitero is the official home equity partner of both the L.A. Chargers and the L.A. Kings. Well, Michael, it's really been interesting learning about this product because it's timely for a lot of people. If someone wants to learn more, what's the best way for them to do that?

Michael Gifford 34:18

splitero.com is the easiest way for them to do that, they can go through our application process. Only takes a couple minutes, or call us. We have our licensed homeowner advisors on the phones. They're willing to and able to explain our product, but also alternatives that we've discussed on this show. All of them have a ton of experience in the mortgage world, and so any homeowner situation, they're able to talk through and help them guide them to the right decision.

Keith Weinhold 34:43

Before I ask you if you have any final thoughts, that is sp l i t e r o splitero.com. Any last things that we should know, Michael?

Michael Gifford 34:55

That's it. I appreciate the time. You know, we're here trying to educate homeowners and help them access. The equity to really better their lives. We talked about relief earlier. We hear a lot of really unique stories from homeowners who came to us because they didn't have any other option, right? Or they're in a really difficult time, and us being able to give them that lump sum of cash allows them to do pretty powerful things. And so we hear a lot of great stories, and we're excited to help more homeowners in our markets.

Keith Weinhold 35:22

This should be able to help a lot of people. Thanks so much for coming on to get rich education.

Michael Gifford 35:27

Thank you, appreciate it.

Keith Weinhold 35:34

Oh, it was interesting to learn more about HEIs. When you initiate one, the lump sum cash windfall that you receive is generally not taxable. Don't expect to pay any tax up front, though you aren't making loan payments since it's not a loan. You still have a financial obligation secured by your home. Splitero records a lien against the property, typically subordinated in a second position, like we touched on there. If you think that an HEI is of interest to you, you'll easily see that you can get pre-qualified in minutes. Or if you just want to check it out further, again, it's there at Splaterro.com. Next week on the show, we expect to hear from a billionaire who is also the best-selling author of the 80/20 principle, also known as the Pareto principle, that ought to be deeply interesting. You've been listening to episode 628 of Get Rich Education. Keep growing your means with me every week to make sure that you hear me again, tap, follow, or subscribe either of those buttons wherever you're listening. It's free, and it helps you catch the next episode of the show. I'm Keith Weinhold. Don't quit your daydream.

Speaker 2 36:57

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

Keith Weinhold 37:25

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

Keith explores U-Haul's truck-to-storage marketing strategy before turning to the shifting housing market.

Housing intelligence analyst Rick Sharga joins him to discuss rising mortgage rates, affordability, regional home-price trends, and how inventory is shaping sales.

They also explore builder incentives on new construction and what delinquency and foreclosure data may signal for investors.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. Fannie Mae creates a housing market assessment of 100 economists and market analysts. We're talking to one of those 100 today. How much are home prices really increasing? Also, supply level, housing demand, and are there threatening cracks in the delinquency numbers and more today on Get Rich Education. For years, I've sent listeners to Mid South home buyers in Memphis, and for years I've heard the same thing back: Keith, there's a wait list. Well, not anymore. Mid South has grown into three markets: Memphis, Little Rock and Dallas with its classic renovations and now brand new construction. For the first time in years, there's enough inventory to buy today, and they've picked now to roll out their best terms in their 25 years. It's called the Triple Five: 5% property management for five full years, half their standard fee, and Mid South buys your mortgage rate down as low as 5% for qualified buyers. If you're paying all cash, ask about the Forever Five. That's 5% management for as long as you own the property plus special cash pricing. With 6200 homes under management. Mid South is the place to turn for turnkey real estate. Book your free investment strategy [email protected]. That's midsouthhomebuyers.com.

Speaker 1 1:36

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 1:53

Welcome to GRE from Lebanon, Pennsylvania, to Lebanon, Oregon, and across 188 nations worldwide. I'm your host Keith Weinhold, and you're listening to Get Rich Education. Before we analyze today's market with our housing intelligence analyst guest, you know there's a new super interesting real estate strategy out there that seems to be getting traction. What makes it fascinating is that it starts out as a customer looking to rent a moving truck, and then they end up renting real estate from a landlord. Now, do you think that this is manipulative, or is it just a crafty and savvy marketing strategy? Here's how it works. U-Haul uses a truck rental as a gateway to a longer-term self-storage customer. It's a natural cross sell. Someone moving belongings. Well, they might also need somewhere to put them. That's part of the reason that really I think this is more about savvy and less about manipulation. Here's how this U-Haul strategy works.

Keith Weinhold 3:05

All right, first you attract someone with an immediate need. Okay, a person that's searching for a moving truck from a place like U-Haul. That's a customer who is already in the middle of a move. When that customer is reserving the moving truck. They're offered a free month of storage with any qualifying one-way truck or trailer rental. Just one, only one free month of storage, and you could probably see where this is going. This is what U-Haul's doing. They're solving a related problem at the right moment, for the person that's moving, their new home might not be ready. That customer might be downsizing, or everything might not fit. Free storage makes saying yes easier when moving expenses are already piling up. Whether the customer wants the free one month of storage near the location they're moving from, or near the location they're moving to. Either way, we know human nature. Come on.

Keith Weinhold 4:09

Once belongings are in that storage unit, customers who still need the storage space are going to continue paying monthly, month after month. In a lot of cases, this might go on for years because moving everything out of that storage space now that would require time, effort, and potentially having to rent another truck from U-Haul too. So, what U-Haul did is that they turned a short one-time transaction of a truck rental into recurring revenue. The business logic is that the truck brings in the customer, and then the one free month that transitions them into storage, and that ongoing need keeps them renting. It starts out with a person saying, "I only need a truck this weekend, and then it becomes, "I'll use the free storage until I get settled, and that need that they thought would be temporary can last for months. And that is the U-Haul storage conversion strategy-pretty savvy stuff. Now, when it comes to charging people rent or being a savvy business person, do you think that Donald Trump has ever slept in a tent? Let's see.

Rick Sharga 5:30

Ever slept in a tent?

Donald Trump 5:31

Yes, I did in camp when I went to camp.

Rick Sharga 5:37

Where did you go to camp?

Donald Trump 5:38

I went to a camp hilltop up in Binghamton, New York, and it was okay. Does anybody know?

Rick Sharga 5:46

I'll be darned! Is that Bill? Great. Yeah. Did you charge the other kids rent?

Donald Trump 5:50

I know. I started looking. I started thinking about it. Started thinking about it.

Keith Weinhold 5:55

Hahaha. That is from the David Letterman show back in 2007. So this is when Trump's show, The Apprentice, was popular, and well before Donald John Trump became president. Thank you. I am grateful for you attending GRE's last live properties webinar recently. I hosted it along with the provider Mid South Homebuyers in Memphis. It was almost like a party. We had 410 registrants. So much involvement from you, and so many questions. People writing in the chat box how this show means so much to them. You know, seeing that, reading that during the event, like that was almost enough to make me cry. I didn't bring this up during the event because I didn't want to put the attention on myself, but I did see that appreciation you have for the show here, and I want to sincerely thank you for that. We crossed the 12-year mark here. Yes, episode one of the Get Rich Education podcast was released on october 10, 2014. This is 12 years of delivering a new show every week, 52 weeks a year, and never replaying an old episode. Always fresh real estate content.

Keith Weinhold 7:01

You definitely know where to find me, and when it comes to reliability, gosh, don't you wish that a mortgage lender first like understood investors? How about if a credible lender were built by an investor for investors with real humans and no call centers ever, and this lender actually taught you the math and even ran it with you. Education first. I just described Ridge Lending Group. That's why it's where I get my own loans. You can do that too for your next investment property. Start at RidgeLendingGroup.com. That's how they operate there at Ridge Lending Group. Now, back in May, you remember that I released an episode, and its title was "Our Most Important Message in Years, and that message sure is coming true. That was episode 606. Back then, you remember how I articulated basically the effects of the Iran War and the wave of inflation that it will bring, and how that's going to change the bond market and supply and the replacement costs of homes and the mortgage rates. Our guest and I will touch on those themes and more about both the good and the bad of today's housing market. We'll also spotlight where some investor opportunities are. I'd like to welcome back to the show a returning guest who I first learned about through a mutual real estate friend three years ago, and he's really become quite a regular here because he is so knowledgeable. He's a longtime housing intelligence analyst, and he's the president and CEO of the C.J. Patrick Company. Oh, it's a warm welcome back to, like me, a native Pennsylvanian, Rick Sharga.

Rick Sharga 9:24

Thanks for having me back, Keith. Always a pleasure to be here and share thoughts of our old home state,

Keith Weinhold 9:30

the Keystone State. And you know, Rick, you look at a lot of the same parts of the housing market that I do, but you also look at some parts that I don't look at very often. For example, delinquencies and foreclosures, which is something that we can get into. Just overall, what are your thoughts about the housing market as it stands today?

Rick Sharga 9:50

Well, as we speak today, the market is sort of in shock because we've seen mortgage rates jump up as high as seven and a half percent. In a year when most forecasts were expecting mortgage rates to go into the low sixes and maybe even the high fives, I think the market is kind of going through a transitional period trying to figure out who can afford what, whether people can actually afford to sell their homes, and how we adjust to a seven handle after we we had just gotten used to sixes not too long ago, so a little bit of frustration in the housing market right now. I think we've seen things slow down a bit, and there are implications for the path forward and for things that you wouldn't think about, like the impact of higher mortgage rates on on foreclosures. So there's all sorts of things going on right now.

Keith Weinhold 10:42

Right before the war in Iran began, Mortgage News Daily tells us that mortgage rates fell to 5.98% They've been up about one and a half percent just since that time, about seven months ago. And yeah, you use the word shock, Rick. I've been thinking the same thing, you know, people are going through an adjustment period with today's normalized interest rates-not historically high, but normalized interest rates amidst the somewhat healthy economy. 30 years ago, the economy was booming amidst the advent of everybody starting to use the internet, and now it's AI. Back then, 30 years ago, the federal funds rate was one and a half percent higher than than it is today, and mortgage rates were 7.8% back then. So I'm talking about 1996. This is four years before the.com bust and five years before a recession occurred, and back at that time, both home prices and rents grew substantially during that period. Even though affordability was better then than it is now, in fact, from 1996 to 2000, cumulatively, home prices grew 21 percent, and rents grew 14%. Now, pretty normal historic clip. So really, my point is that today's economy is fairly healthy. Rates have normalized, and now rather than the internet boom, we've got the AI boom. You use the word shock. Yeah, people need to adjust.

Rick Sharga 12:17

Yeah, and I think it's important when we talk about affordability, which is what you're getting at there right now. If you factor everything in, we're probably in the second least affordable period on record in terms of home prices. If you go back to the the least affordable time, that was probably in 1983, and the culprit there was mortgage rates that were 1819, 20, 21% The people were doing celebratory dances if they got a mortgage rate at 12%.

Keith Weinhold 12:48

Right.

Rick Sharga 12:48

And so you look at things historically, and you've pointed out correctly that you know at even at seven and a half percent mortgage rates, you know we're below the long-term average, which was 7.7, 7.8%

Keith Weinhold 13:01

Yes.

Rick Sharga 13:01

However, home price growth has outpaced wage growth significantly over that period of time, and we're coming off a very unusual set of circumstances in the housing market. Something that's really never happened before. When we got into COVID, and so we can we can blame a lot of this on COVID, and for the conspiracy theorists, we can blame a lot of this on the Federal Reserve. But the Federal Reserve took extreme measures to try and prevent a depression in the economy because nobody knew how bad things were really going to get, and we were in that zero interest rate period for some period of time, which drove mortgage rates down into the twos and threes. That pulled a lot of demand forward. People came out of everywhere to buy houses at historically low mortgage rates, and so home prices went up about 47% in the space of two years. And at the end of that, the Federal Reserve, in order to get inflation back under control, started raising the Fed funds rate, which drove mortgage rates up into the really as high as 8% at one point. So we saw property values go up by 45 to 50% Then we saw mortgage rates double. And if you look at at historical numbers from Freddie Mac, what you'll find is that in the history of the United States, we'd never experienced a period where mortgage rates doubled during a calendar year, and in 2022 they doubled not in a calendar year, but in a matter of a few weeks, and that sort of shock to the ecosystem. That one-two punch, extremely high price appreciation, followed by a doubling of mortgage rates, even though the mortgage rates aren't out of that long-term historical norm, was enough to kind of knock the stilts out of the housing market. So we've had a very different house market crash this time. It's not that prices fell 20, 3040, 50% It's that we went from 6 million sales to. 5 million, and then to 4 million, and we've been stuck in this 4 million range now for the last really three and a half years. There was a lot of hope that we'd start to feel more like a recovery in 2026, until the war in Iran started. Oil prices went up, took bond yields up, and took mortgage rates up with them, and so we're in a very unusual market in terms of housing right now, and it's a difficult scenario, particularly for first-time homebuyers who didn't experience that growth in home equity that people who owned homes back prior to 2022 did.

Keith Weinhold 15:36

I characterize it as we had a supply crash around 2020 or 2021, and that was followed by a transaction volume crash. And you know, it's funny, Rick. Actually, when mortgage rates started their sharp increase in 2022, my early reaction was like, you know, this is not so bad. A return to normalcy. You know what's with all this artificial intervention? There should be a cost to money. I mean, this is good, but you know, after three years of this slow transaction market, I don't really feel that way anymore.

Rick Sharga 16:13

People ask me a lot of times what's going to fix the housing market, and I give them the same answer, which bothers them because it's a boring answer, not something they can impact. It's time, and when 2022 happened and mortgage rates doubled, one of two things was likely to follow: either one, home prices would crater in order to fix affordability, or two, and this has happened before historically, we would go through an extended period of time where things would just slow down to a crawl, where sales volume would slow down, where home price appreciation would slow down, and it would give wage growth a chance to catch up. And during that period of time, what hope was was that mortgage rates would not necessarily go back into the threes and fours, but would come down at least a little bit. And over time, those three legs of the affordability stool, if you will-home price appreciation slowing down, wage growth continuing, and mortgage rates kind of flattening out-would improve affordability enough that people would start to come back into the market, and we started to see that. If we got into numbers last year, you found that there were actually more people who had a mortgage rate above 6% than below 3% and that's the first time that had happened since 2022.

Rick Sharga 17:37

So things were starting to get back to normal. We ended the year with quite a bit of momentum in terms of home sales, the last five months of the year we had higher year-over-year home sales, and price appreciation was slowing down. Everything was in place the way we were hoping, so that 2026 could be sort of an inflection point and lead the way to a recovery. Then Mother Nature weighed in in January and February, we had unusually severe weather in the Northeast and Midwest. I think home sales were down in the Northeast about 8% in those first two months because of bad weather. And as we started to recover in March, the war in Iran broke out and mortgage rates jumped. And surprisingly, with all that bad stuff happening, with inflation getting higher, with gas prices going higher, consumer confidence being at an all-time low, with all of that, if you go through the end of August, home sales are actually up 1.6% year over year. So there is a lot of pent up demand out there. We have a population that's aging rapidly into home buying age, and would like to become home buyers, just waiting for market conditions to allow them to do so. And unfortunately, now with mortgage rates up a full point higher than they were a year ago at this time, it's tough for people to at least get through the psychological barrier, if not the economical barrier.

Keith Weinhold 19:01

Yes, and I think the fastest way to relieve pent-up demand is with a drop in mortgage rates because wages aren't expected to increase as sharply and as quickly as mortgage rates can decline, and home prices continue to stay pretty stable. But Rick's got some slides prepared for us, and Rick, why don't you go ahead with your housing market detail? And for those of you in the audio only, Rick is really good at describing things for those that don't have the visual aid.

Rick Sharga 19:32

Thanks, Keith. Yeah, we'll jump in, and this is kind of a recap of some of the things we've already talked about to start with. Higher mortgage rates, you and I have been talking about quite a bit already, really have contributed to worsening affordability. So the market was starting to feel at least marginally more affordable. So things weren't affordable for everybody, but more homes were more affordable for more people, particularly those, and I'm sure you've talked about. In sort of the upper leg of the K-shaped economic recovery, if you break that K into two parts, the upper half is doing pretty well, and actually is where most homeowners reside. If you look at the lower half of that K, it's predominantly renters, and those renters need whatever breaks they can get to become homeowners, and these higher mortgage rates certainly aren't helping. For your listeners who are wondering about when rates will go down, the short answer is they're unlikely to go down at all until we get oil prices back under control, which means not until the war in Iran comes to a conclusion.

Rick Sharga 20:38

Very likely, because that drove bond yields up, and bond yields drive mortgage rates, but the bond markets are also concerned about the $40 trillion federal deficit, which leads the Treasury to print more bonds and sell more bonds in order to pay down the debt, and so they're now competing, and it also is a little bit concerned about the massive investment in data centers to support the growing AI business. So all of that is kind of in this big competitive scrum, if you will, which is causing the bond sellers to increase yields in order to sell these things off. So even once we get oil prices back under control, the likelihood of a huge drop in mortgage rates isn't great, but anything even back in the sixes right now would probably be appreciated by buyers.

Keith Weinhold 21:29

My audience knows that I personally don't make mortgage rate predictions. I think it's a fantastic way to be wrong, but I recently found it noteworthy, Rick, when Cotality's chief economist Selma Hep, to paraphrase her, she said that mortgage rates are not going to get down to levels where mass buyers want them for at least three years.

Rick Sharga 21:49

I think she's probably spot on. If you look at recent revised forecasts from the Mortgage Bankers Association, from the economics team at Fannie Mae, they've all raised their mortgage forecast for 2027 to be no better than the high sixes, and the likelihood of us being in the low fives or high fours, absent a huge recession or another global pandemic, really isn't particularly strong for the next few years. So I think Selma's probably spot on. We have seen home prices continue to increase, according to the National Association of Realtors. Sales prices increased on a year-over-year basis for the 38 th consecutive month. But it's important to note where these price increases are landing. So, the NAR said the prices went up by about 1.6% year over year. In the same month, the rate of inflation was 3.4%. So, if you look at a home price in adjusted dollars, if it went up 1.6 percent year over year, it's actually cheaper than it was a year ago. And so, home price appreciation is not keeping pace with either the rate of inflation or wage growth, and wage growth hasn't been exciting. But even at 3.1% which was the most recent number, wages are going up faster than home prices. So over time, this does have a little bit of a mitigating effect on affordability, and this is true no matter whose price appreciation numbers you're looking at. NAR had it at 1.6 percent. The FHFA, which is the government body that controls Fannie Mae and Freddie Mac, had it at about 2.3% in their most recent mark. And there's a report that Fannie Mae puts out that's based on the assessments from 100 different market analysts and economists, I'm honored to be one of those 100. But our collective number for the year is probably between 2.1% and 2.2% annual growth. So, for all intensive purposes, home prices have flattened out. And what's important to note for anybody who's looking to invest, anybody who's looking to buy a home, is these national numbers are useful, but in your local market they're useless. If you look at the top 300 metro areas, for example, across the country, what you would find is that about 54 of those markets are seeing home prices actually fall year over year, and a lot of those markets are concentrated in in Florida and Texas, that Gulf Coast region in particular.

Rick Sharga 24:27

There are a handful of markets where prices accelerated rapidly in the post-COVID era. Markets like Austin and Denver, Phoenix, Las Vegas, Seattle, Atlanta, and we're seeing some clawbacks, some some price corrections in those markets because they accelerated too high and too quickly, but if 54 of the top 300 metros are seeing price declines, that means that 246 are seeing prices go up, and a lot of the markets where prices are going up the most rapidly are in the. Northeast and Midwest, because there's a very strong correlation between inventory levels of homes available for sale and price trends. And by the way, those price declines for people who continue to be promoting the coming devastation of home prices in the country. I think this is one of the first things you and I ever talked about on your podcast. The markets with the biggest year-over-year price declines right now were Austin and Myrtle Beach, South Carolina, and in both cases, that enormous year-over-year decline was 4% On the other hand, you have markets like Wausau and Hartford, and and places in the Midwest and Northeast where prices are going up 567, 8% year over year. So really important to know what's going on in your local market or whatever local market you're looking to transact in, because the prices and the price trends vary pretty significantly across the country.

Keith Weinhold 25:58

And Rick, we're talking about home price change. It's interesting. There are so many different ways to divide up the market. A lot of our listeners and viewers buy entry-level homes, oftentimes single-family homes in the 300 something Ks and less. Do you have any sense for how much home price growth there is in entry-level homes versus the national number?

Rick Sharga 26:20

You know, you would expect that entry-level homes would see prices going up at a higher rate than, say, luxury homes. It's actually not the case right now, and one of the reasons I believe is not the case is because there's very little entry-level inventory available anywhere, and a lot of the inventory that is available is in a pretty sad state of disrepair, so really can't capture significant price increases. What we're seeing right now is that a lot of people in entry-level homes locked in at lower mortgage rates and simply can't afford to move up, so they're keeping these homes off the market, and for whatever reason, the again the the limited number of homes that are available and usually supply and demand would work to drive those prices up isn't working as much as you'd expect, at least in the data that I'm seeing. And again, I think it's partly because these the homes that are available tend to be older homes that need a lot of work.

Keith Weinhold 27:24

Yes, and with affordability for everything being difficult, yes, you can see how perhaps some of these people that have lived in these entry level homes for a long time, locked into low mortgage rates, might not have that much discretionary income for renovations and such. And boy, this really makes it valuable for a lot of the providers that we deal with that build new construction single-family homes, often in the three hundreds or less. That's what America really needs.

Rick Sharga 27:52

Yeah, I'm seeing the same thing you are when I look at investor data, Keith. The sweet spot is in the three hundreds, probably. Interestingly, the big institutional investors buy even cheaper when they're still buying, and they they really are focused on less expensive markets and smaller, less expensive properties that do need some work. But a lot of those big investors are actually redeploying their capital now into ground up construction, and partly that's because of the new legislation that was passed recently, the 21st Century Road to housing bill. One of the other interesting things, and this looks like a contradiction to what we just talked about, was while sales prices continue to go up, list prices are actually down for the 10th straight month, and so there's a difference between the final sales price, which is up year over year, and the list price, which is down just a smidge, about 1.3% year over year as well. What that suggests to me is that the sellers are getting a little more rational about their list prices today.

Rick Sharga 28:56

We do still see that a very significant number of properties that are sold are taking a price reduction. Depending on whose numbers you follow, data from Realtor.com that says about 20% of listings are taking a price reduction. They're probably talking about all listings, whereas some other groups are showing 40% list price reduction number. Like 40% of all homes are taking a list price reduction. I believe that refers strictly to properties that have been sold. And again, these aren't huge price reductions, but the fact that we're starting to see people get a little bit more rational with their list prices, the fact that we're seeing a continually high number of list price reductions also tells me that buyers realize they have a little bit more room to negotiate, and are probably negotiating a little harder before they close that transaction.

Keith Weinhold 29:48

You're listening to Get Rich Education. We're talking with housing intelligence analyst Rick Sharga with the C.J. Patrick Company with detail about today's housing market. More when we come back.

Keith Weinhold 29:58

I'm your host Keith Weinhold. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate-it's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed, but with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your pre-qual and even chat directly with President Caeli Ridge while it's on your mind. Start at RidgeLendingGroup.com. That's RidgeLendingGroup.com. s

Todd Drowlette 31:34

This is the star of the A and E show, The Real Estate Commission, Todd Drowlette. Listen to Get Rich Education with my friend Keith Weinhold, and don't quit your daydream.

Keith Weinhold 31:54

Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're going deep on the state of the housing market with housing intelligence analyst Rick Sharga, and Rick, I know you've pointed out a strong correlation between inventory and prices. It's like economics one on one is supply demand, and so much of price change has had to do with supply in today's market.

Rick Sharga 32:17

Yeah, it's really interesting, Keith. When you start to take a look around the country at inventory levels of homes that are available for sale, there's about a 4.6 month overall supply of homes available for sale, and that's a combination of how many homes are listed and how quickly they're going through that sales transaction. So it's not just raw numbers; it's kind of a calculation. But if you look at just the kind of raw numbers of inventory, we've been going up since 2021 at double digit inventory growth every year 15 20% more homes available for sale until late last year, and if we're looking at this year, inventory levels are up probably less than 2% year over year, so we're seeing fewer properties listed for sale. And in fact, the only reason inventory numbers are up is because it's taking a little longer to sell them once they're on the market nationally. The median number of days on market is about 60 days, but that varies wildly. If you're in a market like Denver, it might be taking you 90 days if you're in coastal California. It might be taking you 14. So it really depends on where you are in the country. But if you look at where we are compared to a year ago, almost every state in the union has seen at least a modest increase in inventory.

Rick Sharga 33:40

There are a couple of markets where prices have been falling. Markets like Florida, parts of Colorado, areas like Boise, Idaho, where there's been a retrenchment. So we had too much inventory. Prices started to fall, and so we're seeing inventory pulled back a little bit off the market. And if you go back as far as you know prior to COVID, when we had that buying boom, probably only about 19 or 20 states have more inventory available today than they did prior to Covid, and a lot of those markets are markets that we talked about earlier: southern markets, Gulf Coast states, some markets in the southeast where prices have weakened, whereas you got a state like Illinois, which is 62% less inventory available for sale. Parts of the Northeast similar numbers, and that's again where we're seeing home prices go up the most because people have to compete for the available properties.

Keith Weinhold 34:36

If you, the listener and viewer, remember the last time Rick was here, we had an episode about is there really a housing shortage? The short answer is yes. We continue to heal. We continue to build more and try to provide more available inventory to get ourselves back up to pre-pandemic levels.

Rick Sharga 34:54

Yeah, and two of the metrics that I look at, Keith, in terms of where the market is going. Are something called pending sales, which is a report that's put out that shows contracts that have been entered into, but the transaction hasn't been recorded yet. And the other is the mortgage purchase application index, people applying for a loan to buy a house, and both of those have been doing fairly well year to date until we cross that 7% mortgage threshold, at which point both of them dropped pretty significantly. So the mortgage purchase applications index dropped to about 13% lower number than it was a year ago, and in in September we had about 6000 fewer pending sales than we had the same time in September a year ago, so these two metrics are usually an indicator of what to expect in the months ahead. And what they're suggesting to me is that September and October home sales are probably not going to be terribly exciting as people adjust to these new higher rates. That said, we had been coming out of a period four consecutive months, starting back in April, where we sold more homes than we'd sold the prior year.

Rick Sharga 36:07

August broke that streak. We actually sold fewer homes than we did in July, and fewer homes than we did August a year ago. And we're coming up to a time in the year where 2025 sales actually were pretty strong for the last four months of the year, so I'm afraid that our our sales comps, if you go year versus year, are going to be challenged for the rest of this year. So the good news is, I mentioned a few minutes ago that at the end of August we were still 1.6 percent ahead of where we were a year ago in terms of home sales. The bad news is, in a best case scenario, I think we're probably going to be flat year over year by the time we get to the end of December. New home sales, interestingly, had a really good month of August. They had dipped down to about 607,000 annual sales in July, but zoomed up to about 684,000 in August.

Keith Weinhold 37:02

Okay, we're talking about brand new construction here as brand new resale. Yeah.

Rick Sharga 37:06

While the resale numbers look like they're flatlining at about 4 million a year, if we were to hold this 684,000 number through the end of the year for new home sales, we would actually surpass a lot of the forecasts for 2026. So, in a lot of cases, Keith, I'm seeing investors buying closeout properties from new home sellers and converting them into rental properties. I was recently speaking at an event in Northern California where I saw a builder advertising 2.9% mortgage rates. So the builders are buying down these mortgage rates in order to entice buyers. They're making price concessions. They're making concessions on fixtures and upgrades to the properties. So you know, for people looking not for a fix and flip investment, but for a rental property investment, don't look away from new home builders because they are looking for opportunities to move some of their assets, and the majority of them are making price concessions. In fact, there's a really unusual thing happening right now, Keith, in that the median sales price of a new home nationally is lower than the median price of an existing home.

Keith Weinhold 38:15

Right.

Rick Sharga 38:16

You mentioned building. I don't want to walk away from that. Housing starts are actually a little bit down year over year. That's true for both multifamily and single-family homes. The most recent numbers in August, we had about 1.27 5 million housing starts. Again, down year over year and month over month. On the other hand, though, building permits are actually up year over year. Almost 1.4 million building permits were issued. So, I believe builders have a good, positive long-term view of the housing market. But in the short term, the reality is they're trying to work through a bit of a backlog. There are 483,000 new homes available for sale at current sales rates. That's about an 8.5 month supply.

Keith Weinhold 39:01

That's a lie.

Rick Sharga 39:02

And normally with new homes, you're looking at a six to seven month supply. So right now, I really do believe what builders are doing is being circumspect about starting too many new projects and trying to work through the inventory they have, so they don't get caught in a position like they were right before the housing market crashed back in 2006, 2007, when they were sitting on about a 13 month supply of homes,

Keith Weinhold 39:28

I'm so glad that you spotlighted this, Rick, as new build homes being a potential opportunity for investors. It's the same thing that I've been telling my audience for over a year, because for more than two years now, builders have commonly offered generous concessions. For example, 12 days ago, I hosted a webinar with our provider in Memphis called Mid South Homebuyers, where they are buying down your mortgage rate to about five and three quarters percent on a 30-year fixed-rate loan, and they're also having their. Property management fee from the normal 10% down to 5% as new build incentives.

Rick Sharga 40:06

That's pretty generous, but it's not out of the ordinary for what we're seeing across the country, particularly from builders trying to wrap up a project. Keep in mind, they want to recapitalize so they can move on to the next build, and so it is an opportunity that is a little bit unusual for investors, historically speaking. Just a few words I wanted to share with you, Keith. You mentioned foreclosures. Right now, interestingly, mortgage delinquency rates are relatively low. If you look at all mortgages across the country, about 4.37% of those, just below 4.4% are in some stage of delinquency. That's lower than the long-term average, which is about five and a quarter percent, and lower than the numbers were prior to the pandemic. The outlier here is the FHA. So FHA loans are running at about a 12% delinquency rate.

Keith Weinhold 40:57

Wow!

Rick Sharga 40:58

And if you look at seriously delinquent mortgages, loans that are 90 days past due or foreclosure, about 6% of FHA loans find themselves there. So, over a half of all seriously delinquent mortgages are FHA loans, and that's despite the fact that FHA mortgages only account for about 15% of the market. So, a very disproportionate share. We talked about markets earlier where home prices have been declining, and if you look at where the FHA loans. So for your listeners looking for potentially distressed properties to buy, what I'm suggesting is the bulk of them in the next 12 to 18 months are probably going to be on FHA properties, and if you're looking for where those are, they have a disproportionately high share of market, starting in Denver, going down to Las Vegas and Phoenix, and then across the southern band of the country. 10% of all FHA loans are in Texas. 10% of all FHA loans are in Florida. 20% of all Oklahoma mortgages or FHA loans, so that's where you're going to see a lot of these FHA loans. They're in markets where property values have been declining year over year, not dramatically, but if you took out an FHA loan with a three and a half percent in Austin and property values are down 4% you're effectively underwater a year later, and if you also look at where insurance premiums have gone up the most for homeowners, it's the same markets. And if you were to look at where student loan delinquencies are the highest, it's also the same markets. So it's almost this perfect storm for FHA borrowers in that southern band across the country, and I suspect if I were to predict where we would see the most foreclosure activity in the next couple of years, that's really where I would be looking.

Keith Weinhold 42:53

Okay, so foreclosure activity a little low overall historically, but heavily concentrated with FHA borrowers, and I mean, there are some reasons for that. FHA versus conventional. I mean, with FHA, typically a smaller down payments used. Oftentimes, that borrower has a lower credit score and a higher debt to income ratio. Consequently, that's why more of them have gotten into trouble.

Rick Sharga 43:16

Yeah, they have less wiggle when they do get into trouble too. So, if you're an FHA borrower and you lost your job temporarily. You may never be able to catch up on your mortgage once you've missed a couple payments. It's in the industry we talk about being, you know, one broken water heater away from a pretty nasty delinquency cycle. The VA portfolio is also experiencing slightly higher than usual delinquency rates. Something for your listeners to think about, by the way, in this relatively high mortgage rate environment, is virtually all FHA loans and VA loans are assumable. Meaning, if you bought that property, you could, generally speaking, take over the loan from the original homeowner and get a second loan to make up whatever difference was required to buy that house, and that's one way to get a mortgage with a lower rate than what you would get on the open market today. Need to be working with somebody who can walk you through how assumable loans work. Not always something you might be able to use necessarily for an investment property, but certainly something worth looking into if you're looking for ways to save some money. We were talking about foreclosure activity. The first legal notice you get that you're in default on your loan is called a foreclosure start.

Rick Sharga 44:34

They're up about 10% year over year, and they're up to about 85% of where we were right before the pandemic hit. My suspicion is that we will be back to pre-pandemic levels by the end of this year. So that's the first stage of foreclosure. We're seeing foreclosure sales up about 6% year over year, but they're nowhere near where they were prior to the pandemic. So something is happening between that initial. Notice of foreclosure and a potential foreclosure sale, where either people are getting their loans modified and making payments, or increasingly a lot of these folks, when they get that foreclosure notice, are selling the property on the open market because they do have some equity and they'd rather protect that equity than risk losing it all to a foreclosure sale. So, again, a point for your investors out there: if you're looking at foreclosure activity, look at those early stages of foreclosures and reach out to the homeowner, because this could be a win-win scenario where you get a property below market value that's not in terrible shape, and you actually help that homeowner avoid a foreclosure and walk away with some money in their pocket, and foreclosure inventory not back to where we're seeing it normally. Prior to the pandemic, we were around maybe 350,000 homes in some stage of foreclosure.

Rick Sharga 45:54

Now we're at about 250,000, but it's the highest number we've seen since the government put all those restrictions in place back in 2020. So net net of all of this, Keith is that for the first time, really in the last seven years, we are on pace to see foreclosure activity to finally surpass 2019 levels. And I don't say that gleefully, and I don't say that dismissively. But even in 2019, we were looking at an unusually low number of foreclosures because the economy was strong. There was a lot of equity, and lending standards were so high. So it's been a long slog since then because of COVID, because of the government protocols that were put in place, and again because there was equity and lending standards. But if your buyers are out there looking at foreclosures, we're probably going to be back to those pre-pandemic levels by the end of this year.

Keith Weinhold 46:46

Okay, perhaps some more opportunity there,

Rick Sharga 46:49

And that's really all I had prepared in terms of prepared comments today, Keith. But there's a lot that we've already covered in terms of what to expect in the housing market. Now, what to expect in the distressed market? Foreclosures, distressed properties in general, still going to make up a very small percentage of overall sales. And for anybody expecting to see a boom in bank-owned properties coming to market or a huge number of short sales coming to market, neither of those appears to be in the cards for any time in the near future,

Keith Weinhold 47:23

and it sounds like everybody sure should get used to this normalized interest rate environment. Well, Rick, this has been great. How can our audience engage with you and what you do?

Rick Sharga 47:36

Well, I'm easy enough to find on social media, Rick Sharga at either LinkedIn or on what used to be called Twitter, you can also visit my website cjpatrick.com. But if you reach out to connect with me on either X or LinkedIn, just mention that you saw the podcast with Keith, so that I know you're not some Russian bot coming to Hackney. And you'd be surprised some of the the invitations I get on social media, Keith, or or maybe you wouldn't, but always happy to connect with people who are looking for information on real estate and mortgages.

Keith Weinhold 48:07

That is spelled S H A R G A. Rick, it's been great having you here.

Rick Sharga 48:12

Always a pleasure, Keith.

Keith Weinhold 48:20

Nice assessment from Rick. Both being native Pennsylvanians, he and I have the same favorite football team, and I've since talked to Rick about it. And wow, he really knows how to break down the NFL X's and O's stuff. One of the opportunities Rick brought to light is particularly interesting: new build home supply at eight and a half months, where six to seven is normal. That's part of what provides the motivation for builders to buy down your rate for you. They want to clear some of that supply. One thing that has not changed is that just regular buy and hold real estate still pays five ways simultaneously when you buy right, such that a total rate of return of at least 20 to 25% each year is not out of the ordinary at all. If you're new to this show, that might sound impossible or high flying or like you're taking some big risk, it is none of those things. This is why real estate has made more ordinary people wealthy than anything else. That's exactly why. And if you're uninitiated on that, I provided five videos for free. That is course level instruction. Me teaching you, and at the end of each video, with a typical property, I add up your rate of return, and it culminates in the grand total at the end of the fifth video. I can't recommend the series more. It's free, and it is wide open available. You don't even need to leave your email address. You can access. That course level video series called Real Estate Pays Five Ways at getricheducation.com/fiveways. You can land there and start watching immediately. Again, it's getricheducation.com/fiveways. That's with the number five. Now you know how I've discussed that waiting for lower mortgage rates is a losing strategy, and you just cannot count on that happening. And I haven't just said that for months; I have said it for years. If you've been waiting for mortgage rates to come down before owning investment property, maybe you think that next I'm going to say you'll be waiting a long time. Yes, you would be, but you might be waiting for something that is already available, and here's what I mean: in select markets, home builders are offering substantial incentives to move new inventory, and one of the most valuable incentives is that aforementioned mortgage rate buydown. With the way the numbers work. That is better than an overall price cut. And some of these providers are doing multiple incentives. They're both buying down your mortgage rate and cutting your property management fee in half, or giving you some other incentive. So while you might see these prevailing mortgage rates quoted a lot higher in the mainstream financial media. Some new build investment properties can come with builder-paid financing incentives that bring your rate meaningfully lower, still into the fives. And it's not always new build; sometimes it's resale property as well. That can change the entire deal and help ensure that you're paid up to five ways at the same time. A lower rate, of course, means a lower monthly payment, better cash flow, and a property that makes sense today, not someday if rates happen to fall someday. But you need to know where these opportunities are, which providers are offering them, and whether the property itself still makes sense after you look at rents, expenses, management, and the local market. This is exactly where we can help you with our GRE investment coaching. Our investment coach can help connect you with investor-friendly properties and providers in markets where the numbers make sense, including a lot of new builds with those rate buy downs and when and where they're available, and they sure are now in Florida, Tennessee, Georgia, Arkansas, Alabama, Ohio, Indiana, Kansas, and more. And see, because we deal nationally, and we do this for a lot of buyers. We have the scoop. We know what kind of offer sellers will accept because we've seen what other buyers have tried and what has worked and what hasn't, and it is actually free to meet with a GRE investment coach if you even wanted to buy something from us, you cannot because we don't have anything to sell. So build your wealth.

Keith Weinhold 49:25

This is why real estate has made more ordinary people wealthy than anything else. That's exactly why. And if you're uninitiated on that, I provided five videos for free. That is course level instruction. Me teaching you, and at the end of each video, with a typical property, I add up your rate of return, and it culminates in the grand total at the end of the fifth video. I can't recommend the series more. It's free, and it is wide open available. You don't even need to leave your email address. You can access. That course level video series called Real Estate Pays Five Ways at getricheducation.com/fiveways. You can land there and start watching immediately. Again, it's getricheducation.com/fiveways. That's with the number five. Now you know how I've discussed that waiting for lower mortgage rates is a losing strategy, and you just cannot count on that happening. And I haven't just said that for months; I have said it for years. If you've been waiting for mortgage rates to come down before owning investment property, maybe you think that next I'm going to say you'll be waiting a long time. Yes, you would be, but you might be waiting for something that is already available, and here's what I mean: in select markets, home builders are offering substantial incentives to move new inventory, and one of the most valuable incentives is that aforementioned mortgage rate buydown. With the way the numbers work. That is better than an overall price cut. And some of these providers are doing multiple incentives. They're both buying down your mortgage rate and cutting your property management fee in half, or giving you some other incentive.

Keith Weinhold 51:16

So while you might see these prevailing mortgage rates quoted a lot higher in the mainstream financial media. Some new build investment properties can come with builder-paid financing incentives that bring your rate meaningfully lower, still into the fives. And it's not always new build; sometimes it's resale property as well. That can change the entire deal and help ensure that you're paid up to five ways at the same time. A lower rate, of course, means a lower monthly payment, better cash flow, and a property that makes sense today, not someday if rates happen to fall someday. But you need to know where these opportunities are, which providers are offering them, and whether the property itself still makes sense after you look at rents, expenses, management, and the local market.

Keith Weinhold 52:10

This is exactly where we can help you with our GRE investment coaching. Our investment coach can help connect you with investor-friendly properties and providers in markets where the numbers make sense, including a lot of new builds with those rate buy downs and when and where they're available, and they sure are now in Florida, Tennessee, Georgia, Arkansas, Alabama, Ohio, Indiana, Kansas, and more. And see, because we deal nationally, and we do this for a lot of buyers. We have the scoop. We know what kind of offer sellers will accept because we've seen what other buyers have tried and what has worked and what hasn't, and it is actually free to meet with a GRE investment coach if you even wanted to buy something from us, you cannot because we don't have anything to sell. So build your wealth.

Keith Weinhold 53:10

You can book a time with a GRE investment coach at a time convenient for you to simply get clarity, look at real opportunities, and decide whether any of them fit your goals, you can open a calendar and set that right now at greinvestmentcoach.com. We can help you build your wealth. It's truly free at greinvestmentcoach.com. Next week, here on the show, a new way to build your wealth through real estate, and it's possible that you've never heard about it before. Until then, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 53:51

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 54:19

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

Keith examines the shift toward a buyer-friendly real estate market and the concessions investors may be able to negotiate.

He speaks with Sharon Lechter, co-author of Rich Dad Poor Dad and a financial education author, about scarcity versus abundance, building income-producing assets, and why action matters as much as access to information.

They also explore women's investing groups, evaluating mentors and AI-generated advice, and doing careful due diligence in today's market.

Sharon shares how her book Old Wealth, New Wealth, True Wealth broadens the conversation beyond money to include family, health, and lasting connections.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. Don't live below your means. Expand your means. And other timeless wealth-building quotes are attributed to the landmark book Rich Dad Poor Dad. We had its co-author Robert Kiyosaki on the show earlier this year. Today, it's the other co-author of the original book. It is mindset and motivation today on Get Rich Education. For years, I've sent listeners to Mid South home buyers in Memphis, and for years, I've heard the same thing back. Keith, there's a wait list. Well, not anymore. Mid South has grown into three markets: Memphis, Little Rock, and Dallas, with its classic renovations and now brand new construction. For the first time in years, there's enough inventory to buy today, and they've picked now to roll out their best terms in their 25 years. It's called the Triple Five: 5% property management for five full years, half their standard fee, and Mid South buys your mortgage rate down as low as 5% for qualified buyers. If you're paying all cash, ask about the forever five. That's 5% management for as long as you own the property plus special cash pricing with 6200 homes under management, Mid South is the place to turn for turnkey real estate. Book your free investment strategy session at MidSouthHomeBuyers.com. That's MidSouthHomeBuyers.com.

Speaker 1 1:38

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:54

Welcome to GRE from Montrose, Colorado, to Monterey, California, and across 188 nations worldwide. I'm Keith Weinhold, and you are inside Get Rich Education. Before we bring in this week's guest, Robert Kiyosaki's Rich Dad Poor Dad co-author, where you'll learn about the way women's investing differs from men's, the money relationship between parents and kids, and a whole lot more about how the 1997 book changed the world. I've got some real estate commentary first. Over the past month, that has turned into more of a buyer's market. Yeah, this environment has turned a little worse for sellers and a little better for buyers. A big part of the reason for this is that mortgage rates, although they're historically at normal levels, they have hit a two and a half year high. Now that part doesn't sound very buyer market friendly, but the reason it is in what's happened is that we already know that mortgage rate buydowns are perhaps the most common concession, especially among home builder sellers, but today, since fewer buyers qualify, you can ask for more concessions than just that. Along with the rate buydown, consider asking for closing cost help too. As a buyer, you can more aggressively negotiate repairs than you could a few years ago, as well. That's more appropriate that you ask. Now I don't know that you want to go as far as to ask the seller to throw in the fridge or the patio furniture, but you can request more concessions than you could previously, and yet it's not so bad for sellers because, depending on the measure that you use, home prices are still up one to 3% over the past year.

Keith Weinhold 3:53

And like I discussed last week on the show, I dug into numbers and I pointed out why concessions like a rate buydown are better for buyers than a discounted price is. If conditions are right, make a move. If they aren't, don't. I know that today's esteemed guest talks about the importance of taking action. You need to have some risk capital in your life-it's the only way that you're going to make it big. All wealthy people have this. It doesn't need to be reckless risk, but you do need a bucket so that you can invest aggressively. Risk capital. Now Warren Buffett, though I don't know if he really said it, Buffett purportedly once asked somebody to show him a billionaire economist. Buffett is still waiting. He has never met a billionaire economist, and the point is that. That's because economists-they just build models. You need to do. You don't get paid for the model. You get paid for the move. With that in mind, let's meet this week's esteemed guest. If you're even a little familiar with the financial education world, this week's guest needs little intro because you know it's really hard to think of anyone more influential in this genre. She is a five-time New York Times best-selling author and has advised 2u.S. presidents on the topic of financial literacy. She was tapped by the Napoleon Hill Foundation to re-energize the Think and Grow Rich books. I happen to know that she was just serving Cardone Ventures shortly before we sat down to speak here. And you know, some people don't actually know that she co-authored the international bestseller Rich Dad Poor Dad, and 14 other books in the Rich Dad series. And you know, frankly, her accolades are too numerous to mention, or else we wouldn't have time for a conversation with her. It includes that she is the only woman ever inducted into the Personal Growth Hall of Fame because she's such a motivator. And today, she's quite an active philanthropist and the CEO of Pay Your Family First. Maybe we'll find out what that is. She has not been with us since 2015. Welcome back to GRE, the incomparable Sharon Lecter.

Sharon Lechter 6:35

Thank you, Keith. I'm delighted to be with you, and I'm just as I said before we even started. I'm so proud of you and the success and the generosity you have in helping people understand the power of real estate. So thank you.

Keith Weinhold 6:47

That's kind of you to say. And you know, Sharon, nearly 30 years after Rich Dad Poor Dad, Americans have more financial content available than they ever have. So why do so many seem less financially prepared.

Sharon Lechter 7:03

Well, I think it comes back to financial mindset, and and I know you agree with this. What happens is we're raised with these old ideas of pinch your pennies, save for a rainy day. Yeah, money doesn't grow on trees, so we we grow up hearing this money negative, money negative, and so we develop a scarcity mindset, and we have to really acknowledge it, and then start shedding it. Because if you think about, we can't afford it. That's a negative, right? So it really reinforces scarcity. And when people start getting successful and they have some money, they start worrying about losing it. And so we have to really, along with financial education, we actually have to help with the mindset change from scarcity to abundance. You know, the whole concept of go to school, get a job, and retire is a thing of the past. And so, there's nothing wrong with being an employee, but you have to realize it's not what you do for your paycheck that determines your financial future is what you do with your paycheck that determines your financial future.

Keith Weinhold 8:07

Well said. You know, even if someone does get some formal financial education, their first teachers are usually their parents, and their parents do tend to reinforce that scarcity mindset. Money doesn't grow on trees, so even if you do get financial education later, you know it's during your formative years when you're impressionable that that scarce stuff sticks with you,

Sharon Lechter 8:29

and you sit back and you watch other people. So all of a sudden you get FOMO, fear of missing out, and yet you still are too fearful to take action. And I think that's why what you do through Get Rich Education is such an incredible gift to people because you are who you hang out with, and if you're hanging out with entrepreneurs and successful people, you're going to have probably it's going to feed your drive and your desire to succeed. But if you're hanging out with people that are just like well, whatever, you know, as Napoleon Hill and outwitting the devil, I share drifting concept. If you're just kind of drifting through life, that's where you're going to stay. You're not going to achieve the goals you set for yourself because you're not paying attention to it and you're not driving towards them.

Keith Weinhold 9:14

Yeah, and I think where scarcity might manifest itself once one grows up into an adult is a lot of times a person thinks they're doing the right financial thing, but it's often misdirected. People don't understand concepts like arbitrage and leverage, and they're concepts that we discuss a lot here. But those things are not complex or arcane. For example, a man will skip a family vacation and work overtime at, say, his medical job in order to make extra principal payments on a mortgage loan with a 4% interest rate. Well, now he and his whole family just lost leverage, arbitrage, and most importantly, lifestyle.

Sharon Lechter 9:58

Time. It's all about time. You know, I talk about you're financially free when the income from your assets exceeds your monthly expenses, and what does that mean? You have your time back, and so you have the opportunity to either spend more time with your family or contribute to society, and that's what has been a lost element. I mean, rich dad, poor dad. When we built the rich dad brand globally. We kind of redefined how people looked at money, and then when I started teaching through the Pullman Hill Foundation and Pay Your Family First, I really wanted to focus people's mindset and start implanting the word asset, asset, asset, asset.

Keith Weinhold 10:35

Yeah.

Sharon Lechter 10:35

You know, and I say assets are sexy to get people to understand that instead of getting asking for overtime or looking for a second job, less buy, build, or create an income-producing asset because then it becomes this 24-hour economic engine working for you, and you don't have to be there. And the more of those you can get, the more that you'll get your time back, and that's the goal. The differential, if you think about the cash flow quadrant, our second book, the left side, employee self-employed. That's you exchanging time for money, and there's only so many hours in the day and so many days in the week. The right side of the quadrant, as a business owner and investor, you have businesses, systems, people working for you. You have your investments, your real estate investments working for you, and so the amount of money you can make on the left side is limited because of the time. The amount of money you can make on the right side is unlimited because we can always get more assets that are generating income to us, and that allows us to have that lifestyle that we deserve,

Keith Weinhold 11:42

sort of assets that pay you versus work that drains you a lot of times, and with this wave of inflation, you know it seems Sharon like this has become even more relevant amidst the K-shaped economy, where I've often reinforced with people, boy, it's rarely been more apparent that capital compounds and labor doesn't.

Sharon Lechter 12:06

Oh, you're so true, Keith. And I think one of the other issues that's really been talking a lot about lately, trying to open people's eyes. There's a difference between being frugal mindset and a scarcity mindset. All right, a frugal mindset is a choice. You're choosing to spend less and keep more. Factual, right? Frugal. I'm just going to fly coach instead of first, so I don't have to spend so much money, right? Scarcity is all fear. It's all fear based. Is I'm never going to have enough, right? And that fear, high emotion, low intelligence. That fear just feeds in us and creates that first step is even harder to take because you're afraid. And so there's nothing wrong with being frugal, if you align yourself with what you keep, how you invest it. Are you investing it in your future? Are you putting in a savings account so you're actually walking backwards instead of forward, and you're investing? And so that's what so many people are doing, particularly women. I had a stat last week: 70% of the holdings for women investors are held in cash.

Keith Weinhold 13:18

I'm not surprised. Women are better than men at some things that might even include investing. But in my experience, I think with what you're touching on is women do tend to be more conservative. They don't think about the opportunity cost of maybe their purchasing power diminishing by 5% annually with money in a quote-unquote safe savings account.

Sharon Lechter 13:39

Yeah, women investing groups actually outperform men investing groups, but that's because the power of the group. Okay, again, your environment, and I think alone, women that fear base comes up, and they're afraid to pull the trigger. They're afraid they're going to lose it, and we find that in every aspect in the business world. Woman makes a mistake and she takes it as a definition of herself, and she carries that mistake around with her forever. Men, oh, that happened. Okay, let's move on. So it's really important to look in in the mirror and say, you know, we each have all the tools we need to be successful. God created us to be perfectly who we are, not someone else, and you have to make the decision. There are three things we can control, Keith, and I know you agree with this: your thoughts, your words, your actions. And when you start with a negative mindset, it impacts what you say, and it impacts what happens to you. Particularly when you're worrying about something, you are causing a physical onslaught to your body. Your negative thoughts you start losing your health, and so when you think about I can't afford it per se, that's a negative statement. Yeah, you just want to go to bed and turn off the lights.

Sharon Lechter 14:57

But instead, if you change the philosophy. And instead, say, "How can I afford it? Do you feel the difference? It opens your mind. It triggers your subconscious mind to go to work figuring out how you can afford it. So, by just changing the thought and how you express it, you change the results. My mother was the queen of worry, so I got a lot of practice, and I still have what I call my little worry storms. But I stop myself, and I go, "Okay, Sharon, instead of focusing on what I'm afraid is going to happen, what I'm worrying about, let's change my thought process, put on a different perspective, and say, I want to focus on what I do want to have happen? It changes everything. It makes you optimistic. It shows you brightness of future. And the world we're living in right now, we all need a little brightness of future. So,

Keith Weinhold 15:51

Don't say I can't afford it. It turns off your mind. Instead, ask how can I afford it. That activates the mind, and that's how something good can happen. You said something so interesting there. I think Sharon that women's investing groups outperform the results from men. Tell us more, including why do you think that is?

Sharon Lechter 16:12

Well, they don't pull the trigger as fast as men do, but because they're together, they do a group analysis and they've got somebody doing the deep dive, somebody who likes to look at the facts and the history, and so because together they feel more powerful, they feel more confident because they're not doing it alone, and the fact that they're looking at that, they're making decisions based on knowledge and information, they tend to outperform. So

Keith Weinhold 16:42

why don't men do that? Do men take on the mindset of more like, "Hey, I'm a rugged individual. I don't need anyone else.

Sharon Lechter 16:48

There's a lot fewer men investment groups. Men tend to invest more individually, or have somebody do it for them, and that you know it's really an issue more as from a women's lens than anything else, but they do outperform typical men's investments.

Keith Weinhold 17:06

Well, Cher, we're talking about a scarcity mindset versus an abundance mindset. I've got to bring up something. Don't live below your means; expand your means. That is a quote attributed to the rich dad world, and I absolutely love it. Tell us more about what is meant by "don't live below your means, expand your means. Because to me, Sharon, it seems like that articulates what people think but don't know how to say.

Sharon Lechter 17:32

And don't know how to do. That's the problem.

Keith Weinhold 17:34

Yeah.

Sharon Lechter 17:35

You know, I was given an incredibly precious gift. I had parents who talked about money at the dinner table? You know, they didn't have a lot, but they built a lot because I often share that I've been a real estate investor since the age of 10. Because my dad had real estate investments, I had to go scrub out bathrooms between tenants. He never learned the power of outside management. He always did it himself. But he also had orange groves, and he said, "Sharon, the oranges give me cash flow every year, but that property will increase in value. And today, that property is part of Sea World in Florida, so he was proven right. He had his own business; he was retired Navy, and so we talked about building assets. And it's interesting because my husband and I we just celebrated 46 years of marriage and our parents. That's actually, yeah. Thank you. We're similar ages. His parents had that scarcity mindset and frugality. You know, his father I think had every penny he ever saw when he passed. He would not spend any money. Now my parents, my father's would you know if he wanted something, he figured out a way to buy it, right? He didn't go into debt except for real estate. He was of the mindset that if I want something, I'm going to figure out a way to get it, and that concept we carried over into rich dad poor dad, and we actually carried that into our business relationship when we first started cash flow, I mean, we needed to buy a printer, and it was $300 or $400 at the time. We said, "Well, how are we going to make extra money? What kind of product are we going to sell to get that money? Because it's a matter of really understanding the power of creation, and if you want something, create a way to get it. Figure it out. Figure out how. When I talk about I can't afford it versus how I can afford it, it's so important for you parents out there to understand.

Sharon Lechter 19:31

When you say to your kids, "We can't afford it, you're continuing a generational impact of scarcity mindset. And so, if your kids ask for something, you say, "Johnny, Mary, how can you afford it? Because I can tell you, kids get very creative about ways to make money. You know, and as long as it's legal, let them do it and let them earn it, reach their goal, buy what they want, celebrate it with them. Because that's not the greatest dividend you have. The greatest dividend from that process is you see their self confidence grow, because they did it on their own. And once a child knows how to make money on their own, there's no stopping them. Financial education is the gift of a lifetime. It doesn't go away once you learn it. And you made the comment about the words arbitration or leverage, people don't understand those words because they've never heard them. They've never heard it, right? Yeah, they've never heard them. They don't know what it means. Leverage. Oh, that's like a rock and a board, right? That's leverage. You know, you have to say, well, if you turn that into money, yeah, that's what it is. That's what we're talking about. That's the problem, and that's when we wrote Rich Dad Poor Dad. I wrote it at the fifth grade level because I did not want it to be intimidating. Because when it comes to money, money and fear are together, and so by the time you understand more about money, all of a sudden that fear is going down, and your self confidence grows.

Keith Weinhold 21:00

Wrote Rich Dad Poor Dad at the fifth grade level. Hey, maybe that's pretty close to the average adult educational level. You know, you probably were on the right track there with that one. But yes, how valuable! If you're a parent and your child wants that Matchbox toy or that Star Wars action figure, don't say we can't afford it. Ask your child, okay, how could we afford this? And sure, they might want to start mowing the lawn or what have you. And yeah, when it comes to living below your means versus expanding your means, I'm thinking about the mindset of instead of moving into a cheaper apartment to save 300 bucks a month, how about trying to acquire a rental property again? How can we afford this that produces an additional $300 in monthly cash flow, and then that asset probably pays you in additional ways as well. You listen to Get Rich Education. We're talking to Pay Your Family Firsts, Sharon Lecter. More when we come back, including Rich Dad Poor Dad in an AI world. I'm your host Keith Weinhold. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals?

Keith Weinhold 22:08

A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge. While it's on your mind, start at ridgelendinggroup.com. That's ridgelendinggroup.com.

Robert Kiyosaki 23:36

This is our Rich Dad Poor Dad author Robert Kiyosaki. Listen to Get Rich Education with Keith Weinhold. Don't quit your daydream.

Keith Weinhold 23:53

Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're talking with Sharon Lechter, one of the most influential memes in the financial education space, anywhere and ever today, she runs Pay Your Family First, and she's still an active author. We'll learn about that before we're done today. But Sharon, talk to us about what might have changed over time, if anything, and if these sort of rich dad poor dad principles are really holding up in today's world of AI in the modern era.

Sharon Lechter 24:25

Access is the biggest issue. I mean, when we released Rich Dad Poor Dad, and as you said, we're coming up on our 30th anniversary. There was no internet. There was no Amazon. I know that's hard to believe. And so we literally had to get books into stores, and I would wake up in the morning and have faxes from bookstores all over the country, and have to ship out books to bookstores. But we did it because we knew we wanted to get the information out, and so now access to the information is easy-a stroke of a key on your laptop or on your computer or in ChatGPT. You can ask them a financial situation and get all kinds of information. The issue is taking action, so that hasn't changed. You know, taking action back in the early days of rich dad poor dad meant reading the materials, understanding it, attending a seminar, and actually going out and applying it. And today, you still have to take the action. I have something called your personal success equation that I have available. is an ebook that I give away. So you go to personalsuccessequation.com. But it really talks about your passion and your talent. So your passion could you've heard do what you love, love what you do. Well, I actually my passion came from the fact that we weren't teaching our kids about money. So my passion came from anger, and I still that way. When I get mad about something, I start another company.

Sharon Lechter 25:45

But your passion and your talent—I had years as a CPA, years in publishing, and so I could combine that. And that's where most of us stop. We try to do everything on our own. But true success is having that P plus T, and then times A, the power of association. You know, I really value our association, Keith. But do you have people on your team who are strong where you are weak? Do you have the right mentors in today's world? If we compare it to 29 years ago, it's more important than ever to have mentors because speed market is everything. Have someone there that can help you open doors and help you speed away and be there to be counsel for you. And then times a taking action. Again, you know a lot of people have read the book but not done anything. You have to take action. You have to apply it. And then all of it you wrap with a plus F: faith, faith in yourself, faith in what you want to do, faith that you can do it, and faith that you will succeed. And where most of us fail is that F is actually fear, and that fear paralyzes us because fear either paralyzes you or motivates you. And 98% of people are paralyzed by that fear. And so I talk about that, how each element and how you can find your roadblock? What's keeping you back from creating success?

Sharon Lechter 27:05

Power of association. Again, who are you hanging out with? You know, in Cashflow Quadrant, we talked about what quadrant are the people that hang out with you in. But really, think about: Are the people around you supporting you, encouraging you, pushing you, or are they trying to pull you back from doing what you know that you need to do? And that advice is such an incredible issue today, even more so than ever, and because of social media, which was not there 29 years ago. And so that's the difference. Yes, the information is accessible, but you have to take the action to put yourself in the right room, in the right opportunity, in the right environment to find the information you need. Because because it's so accessible, you need to take another step, and you need to make sure that the person you're watching or listening to has earned the right to talk to you. There's so many people that are making lots of money teaching something that they've never done.

Keith Weinhold 28:06

Right?

Sharon Lechter 28:06

And so it's very important to validate the teacher, validate the source, even more so in AI, right? Because AI can make things up. Make sure you're getting the right information to help you make that decision. But above all else, take action because you are the CEO of your life. Nobody else. It's up to you to make the decision and to take that first step.

Keith Weinhold 28:29

I'm hearing a lot there as far as the company you keep elevating your standards, and then there's something about the Dan Sullivan quote in there as well. When you're trying to get a task done, you know sometimes you want to ask who, not how, and understand that that is taking action as well, outsourcing it, and realize you're not going to be the best at absolutely everything out there. Are there anything else that have changed with foundational principles from Rich Dad Poor Dad or Napoleon Hill in today's environment? You touched on AI, of course. More expensive housing is a concern for some people. More persistent inflation, higher government debt than we've ever had. Is there anything else that that's changed, or any principles that you apply to those modern day issues?

Sharon Lechter 29:13

Well, I think it's really so much more important today to do really diligent due diligence. Right, I'm using that word twice because I mean it as it relates to interest rate, the inflation. And back in the you know teens, high inflation was very high, but you could still find a cash flowing deal. And the biggest issue for people today is understanding you want to make sure the numbers work. You got to do the numbers. You got to put your pen to the paper and make sure the real estate deal you want to acquire is going to cash flow in the right direction. Let your tenant pay the debt. You know, with inflation, where we've you know we've just seen rates go up again, been going down now they're up again. We have to take into account what that's going to. Impact on us, and there may be a dip in the value of the property, but if it's still positive cash flow, you'll lose the money only if you sell, because the value of real estate goes down and up, and over time it goes up, and so it's really important to make sure that the underlying asset is still generating a positive cash flow, so that you can continue building wealth from that perspective, and so today it's harder because so many factors have to be assigned to that. As far as inflation, as far as the price of homes, we've seen right now. You know, we've seen that tension between sellers and buyers for the last few years because the interest rate was high and the home values were high, so we had frustrated buyers and we had frustrated sellers. They couldn't find that piece, and so we look at where that margin is coming during that time. If you had complexes, you were you know in like Flint because you could actually increase your rents because the demand was higher, and so understanding the market variations that happen based if this happens, this is going to happen, and creating your real estate portfolio so that you can benefit from those changes. And I think that's even more important today than it was 29 years ago.

Keith Weinhold 31:17

Diligence is the opposite of negligence, and yeah, to your earlier point, Sharon, you know, don't say I can't afford it or I can't get a cash flowing property. Ask how can I, and we've been talking here about how there are a few strategies, something called the Burr strategy, where it's a great time to buy new build property because these builders are motivated to buy down your mortgage rate, often into the fives, to make that property cash flow for you. Answering that question, how can I do it? Well, Sharon, you're so prolific with everything that you're involved in, and despite all these initiatives that you undertake, you are still quite an author. Tell us about the book you're working on now.

Sharon Lechter 31:57

Well, I just in January released my 29th book, and it's called Old Wealth, New Wealth, True Wealth. And as you indicated, after the 15 rich dad books I wrote, I did four books with the Napoleon Hill Foundation. I did a book with Ink Magazine called Exit Rich, which I'm very proud of. And of course, with Napoleon Hill, I released Outwitting the Devil, Thinking Girish for Women, Three Feet from goal, and success is something greater. And then I also wrote a book called "How Money Works for Women, which I'm very proud of. It was with WealthWave, a company that does personal financial support. But it really, we took women from every decade of life and talked about the financial issues they face. It's just wonderful, and it's like a comic book. It's a four-color graphic novel, basically, and we talk about a woman that is in her 30s with two children, and she has to leave an abusive marriage and start over again, or another woman that has a very high-profile career, and she has to change her career because she has a special needs child. Somebody else that has wants to get married, wants to start a business. Another woman that was married 25 years, looking forward to a beautiful retirement, and her husband trades her in for a younger wife, and she hasn't taken the steps to create her own credit, and nothing's in her name, and that happens so often it just breaks my heart. Or you've been married 40 years, and your husband passes away suddenly, and nothing was prepared for it to transfer to you, and so you again you're left with no credit. So these are things that you know through stories we share the power of stories that help people open their eyes to things that could possibly happen to them, and how to find the resources and the support to handle with them, and so then my latest book, Old Wealth, New Wealth, True Wealth.

Sharon Lechter 33:49

After really changing how the world talks about money, you know, my runway is a little shorter ahead of me than it has been behind me, and I realize we have to talk about true wealth. We have so many Type eight personalities out there. We're striving to be a billionaire or multimillionaire, and along the way we lose our family, or we have our third or fourth spouse, right? Or we lose our health because we are working so hard we're not taking care of ourselves, and that's something that I experienced. It's so important for all of us to realize that true wealth is yes, having the financial resources to have the lifestyle you want, but who are you going to share that lifestyle with? Hopefully, my spouse of 46 years, my children who just celebrated 22 years. So where you have the depth of spirituality and love and connection, so your relationships, but also I have a nine-year-old granddaughter, and I want to be around them, and she gets married while I'm 72, so I better do something about taking care of my health, and so all of these aspects I talk about in old wealth, new wealth, true wealth, because old wealth is really the slow and steady. Accumulation of money, right?

Sharon Lechter 35:02

New wealth is understanding alternative investments, understanding, and a lot of that is like this quick, fast new money that people can't keep because they haven't learned the old wealth concepts. But then, true wealth is understanding how to apply that to build generational wealth, and true wealth is generational wealth and having family to leave it to, having the family that's close to you, and being able to have longevity by making sure that you have true wealth in your health as well. I'm very proud of it. I co-authored it with a client of mine who, at the age of 16, he was a nationally ranked cyclist, and everybody anticipated he would be at the Olympics. He was within the top one or two in the country, and he was practicing in New Mexico. Got hit by a car going 60 miles an hour. He actually was pronounced dead on impact. In fact, his mother got the phone call that he died. Luckily, they were able to revive him. But so many people, young and old, that experience something like that, they lose the drive to live and give up.

Sharon Lechter 36:10

But this young man was basically in a coma for a while. Took him a long time to learn to eat and walk. While he was in the hospital, he read Rich Dad Poor Dad, and so he took that same drive and discipline and started investing in real estate. So at age 25, he was a multimillionaire in real estate. And so he reached out to me. Didn't think he actually get to me. He talked to my office, and they said, "You want to talk to this guy? And he wanted to become a spokesperson to help other people in his generation because he sees them seizing opportunities for themselves, really doing the drifting, whatever. And I'm always looking for those younger generation spokespeople that can help encourage and inspire their generation to take the action to create that wealth, and that's why I'm so proud of what you're doing. My husband and I own a ranch here in Arizona called Cherry Creek Lodge, and go to cherrycreeklodge.com. It's out in the middle of the Tonto National Forest. It is a survival property. It's all solar powered. We have our own lake. We raise 500 head of cattle.

Sharon Lechter 37:18

We've got 42,000 acres of grazing rights, and so we have a beautiful retreat center that we built there, and we have business retreats a couple times a year. And he came to one of those, and we started talking about him writing this book, and he asked me if I would co-author it because he wanted my name on it, and I said, of course. When he sent me the first draft, I was like bowled over because it's set as a parable of three brothers: old wealth, new wealth, true wealth, and is set in the exercises and the things that we do at our ranch for our mentoring clients, talking about understanding leverage, understanding assets, understanding. You know, I show a picture of my ranch and the cows are walking along. I go. You see cows. I see assets, right? So getting that concept of cash flow and building multiple streams of income, and so I'm really proud of the book. It's all about the importance of mentorship and understanding buying, building, creating income-producing assets. And I'm known kind of worldwide with my line, assets are sexy, and the older you get, the sexier they become, so.

Keith Weinhold 38:28

Old wealth, new wealth, true wealth from Sharon Lechter. Check that out. Oh, it's been such a pleasure and valuable to have you back on the show.

Sharon Lechter 38:39

Well, it has been an absolute honor, and if they come to my website sharonlechter.com, anything you buy, I will autograph before we send it.

Keith Weinhold 38:53

Oh, so good to talk to Sharon, and on her website sharonlechter.com, there's a section that's prominently shown where you'll see why not take the road less traveled. I happen to know that Sharon has paid one-on-one mentoring there. She takes 15 mentees max. Like we were saying, knowing is not the same as doing. Some people don't take action, and you know, I really first learned this right before I started this show back around 2014 when I still had a day job. My coworkers at the State Department of Transportation, you know, they would often ask me like how I'm taking another vacation that they deemed as lavish. Back then, it seemed like I was always going to Hawaii. I told them that I owned rental properties, and at that time I had rental single-family homes, fourplexes, and apartment buildings. And it wasn't just that these things produced residual income for me, but I could also take a. Cash out refi on a property totally tax-free, and spend that money on a vacation to Hawaii or as a down payment on another rental property. And you know, as fascinated as those former coworkers seemed to be, virtually nobody took action. Now, maybe part of that, just a small part, is because they had a pension, not a 401k. So a lot of those state DOT workers just felt like it was worthwhile to allocate 30 years of their lives there. They were not willing to take the path less traveled, and shortcut that down to five or 10 years in real estate. I told you before that it took me 12 years because it took me a few years to really devote myself to it. But yes, you've got to act. To Warren Buffett's point, I have still never met a billionaire economist. Big thanks to the terrific educator and motivator Sharon Lechter today. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Unknown Speaker 41:16

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

Keith Weinhold 41:44

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

Keith asks why so many people end up competing in the "Grind Olympics" of the traditional day job, and explains why separating income from time is key to building real wealth.

He then counts down the top five ways to give a rental property a raise by increasing its net operating income, and points to the lever investors most often overlook.

Keith also looks at what has happened to home prices during every major stock market crash since 1980, and shows why negotiating better financing terms can beat simply getting a lower purchase price.

He offers practical strategies for building cash flow, creating value and investing with more confidence in any market.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. Does your day job have you competing in the Grind Olympics? It's something that you never signed up for, and the top five ways to increase your rental property's income. Then, when stocks crash, what happens to real estate? You'll see historically today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.

Speaker 1 1:34

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:50

Welcome to GRE from Wheeling, West Virginia, to Whiting, Indiana, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education. Before I get into basically giving your rental property a raise with the top five ways to increase its income, first let's get the context of pulling back and understanding your compelling why for all of this. You may or may not like investment property itself-it's more likely rather that you love what it does for you. That's how it is for me. What do most people do? It's like they're training for the Grind Olympics. Are you doing this too? But you don't remember signing up? I mean, that's kind of what the day job is, society's vortex gradually pulls you into it. The investment property is what gradually tilts you out of it, or it gives you that option. For so many, the day job, it's sort of like this competition that really no one officially announces it yet. Millions enter it. Who can work the longest hours? Who can answer the most emails? Who can miss the most family dinners? Who can delay their life the longest? And at the end of it all, something we call retirement. If you're a winner, not a loser. The winner, you receive a gold-colored watch, lukewarm sheet cake, and a little party at age 65, and that's assuming that the finish line hasn't been moved to 70.

Keith Weinhold 3:40

This is especially bad and prevalent in the United States, where you start out with just two weeks vacation. That's about the worst grind in the developed world. I really myself started questioning this lifestyle when I was a teenager, and this is because my older friends, sort of those that were getting into their late teens, they were relatable to me, and they started going down this path and telling me about it. And suddenly, they couldn't play baseball or tennis with me during the day because they started working during their summers. Now that's not so bad in itself, but stay with me. I also looked at the adults around me and noticed that most traded the majority of their waking hours for work that they didn't even like. Now, my dad was a good worker. He worked 7 a.m. to 3 p.m. faithfully Monday to Friday, and despite being a good worker, he certainly didn't love his job. As a teen, then I found it confounding that so many people were working Monday through Friday, primarily why, primarily to reach the weekend. Wednesday was celebrated as. Day, this sort of strange admission that the work week was something to climb over and survive. You're surrendering 50 weeks to earn two weeks of vacation. You're repeating that very bargain for 40 years and hoping you still have enough money, energy, and health to enjoy retirement. And what puzzled me most was where this was happening. We are not some impoverished nation with paltry resources and limited opportunity. This is the United States, the most powerful and perhaps the most prosperous nation in the world.

Keith Weinhold 5:40

This is the part that I still can't work out in my head. Almost everybody falls into a narrow, rigid groove and grinds. Eventually, the groove becomes a rut. Then the rut gets a job title and a dental plan. Many even form their identity around this. Fear is the number one motivator that gets employees to show up at work. So then, do most people lead fear-based lives? It's almost insane. Sheesh! We have skyscrapers, interstate highways, world-class universities, abundant natural resources, advantageous geography, rule of law. We've got vast capital markets. We've got technology that sent people to the moon before I was born. Endless possibilities, but yet the standard life plan is to spend our most vivacious years doing something that we didn't even want to do. What a paradox! How could a nation create so much wealth while so many people have such little control over their own time? Even then, as a teenager, I remember thinking, "Gosh, there has got to be a better way than this system somehow. I didn't yet know the way, so I started going to college at age 18.

Keith Weinhold 7:16

But this path put me on that same trajectory of get good grades, land a job, max up my 401k, which would reduce my salary, and work for four decades, and then cross my fingers and just somehow hope that promotions, inflation, taxes, a stock market that I couldn't control, and life itself would cooperate. I mean, that plan could kind of work, but your time is still doing most of the work. Your employer rents your time usually one hour at a time, and if you stop supplying the hours, then soon enough your income stops too. Capital compound. labor doesn't. The better path is to gradually separate your income from your time. That's what I began doing when, while I was working full time, I bought my first income-producing rental property a few years later, a few years after college, in fact, doing that on the side, divergent, black sheep. I was stepping out of the groove. Now I own an asset that created leverage and income, whether I'm working, sleeping, camping, climbing a mountain, or spending time with my family. So the goal then it's not to avoid hard work entirely. I mean, meaningful work that can even provide some purpose and achievement and pride. But what provides wealth? What are you going to do for that? Wealth is what happens when you're not working. Wealth is what happens when you're sleeping. Labor produces income. Assets create wealth. Grinding should be a season, even your contribution to society, but not your primarily financial strategy. So the bottom line is that we don't want to win the grind Olympics, income-producing assets help us build a life that we don't have to postpone. The entire conventional life plan, the whole thing, just never felt right to me. Intuitively and rationally, deep down, you know, think to yourself: Doesn't at least some part of you feel that way too? Thank God that I found real estate. I don't love it. I love what it does for me. You've got to love what it does for you.

Keith Weinhold 9:54

One attribute that your income property gives you is control. So. With that in mind, I put together the top five ways to increase your rental property income countdown style from number five to number one. Since you do own an asset that you can control, so we're talking about giving your rental property a raise here, and you know your property does not even need to appreciate in order for you to make it more valuable, your property doesn't need to sit around waiting for the market to appreciate like it's waiting for a promotion from corporate or something, which always takes too long. You can manufacture more income yourself. So net operating income or NOI, it only has two moving parts. It is property income minus operating expenses. Push income up or pull expenses down, and you've effectively given yourself a raise. Better yet, on an income-valued property like a five-plus unit apartment building, every additional dollar of NOI can create far more than $1 of property value. So here are the top five ways to increase your property's income.

Keith Weinhold 11:10

The fifth best way is to add ancillary income, because monthly rent it's not the only asset inside your property. Now, depending on what property type you have and what the local laws are, you can charge for pets, parking, storage, laundry, furnishings. You can charge for internet packages, utility reimbursement, reserved garages, upgraded amenities, or you can even charge in some cases for application, administrative, or lease break fees. The best ancillary income it provides something that the resident genuinely values. We're here to serve and give value to others. Importantly, it should feel like an option for your tenant with these things, not some toll booth placed between the tenant and their front door. We know how annoying it is to have a tip screen swung around and placed in your face. Even an additional 25 or $50 per unit each month that can become meaningful across several properties. The fourth best way is to cut your controllable operating expenses, and you know what most investors do, and it is easy to fall into this, and I certainly have too at times. You know, most investors they carefully negotiate the property's purchase price at the beginning, and then they spend years casually accepting every recurring bill, audit your expenses rather than just accepting last year's cost plus inflation.

Keith Weinhold 12:49

So closely look at your property management fees, landscaping and snow removal, pest control, cleaning, trash service, water consumption, and any leaks that you might have. Common area electricity, repair labor and material markups, service contracts, and preventive maintenance. Gosh, I really lost a lot of money in pest control one time when the pest would just move from one apartment unit to the other, and we just couldn't get it trapped or stopped. Loyalty is admirable in marriage. It is less compelling when your landscaping company raises its price 14% every year. So solicit competing bids, consolidate your vendors where you can, install efficient fixtures where the payback period makes sense and where the break-even math works. But now, don't confuse expense reduction with maintenance neglect.

Keith Weinhold 13:53

That is one danger. So you know, if you delay a $300 repair until it becomes a $3,000 emergency, well, that really doesn't increase your NOI. It merely makes this month's numbers lie. Now, as I tell you about this list, you might think sometimes, "Oh, I've heard of that one before. Okay, but yeah, are you actually doing it? The third best way to increase your property's income is to challenge taxes and shop insurance because property taxes and insurance they are really among your property's largest operating expenses. So therefore, if you get good at this, you can both increase your net income and you will have gained a new skill that you can apply later and elsewhere. Yet you know a lot of owners they treat property tax and insurance sort of like the weather. They complain about them and then they just assume that nothing can be done. Possible moves that you can make are appealing in excessive property tax assessment, correct inaccurate property records. You can compare insurance carriers as often as annually. Adjust your deductibles when it's appropriate. Be sure you remove redundant coverage. Make sure that there's no overlap there. You can add safety or resilience improvements that qualify for insurance discounts, and then at the same time, sometimes that improves your property's value. You can check the property's classification and claims history for any errors there. So you know every legitimate dollar saved that flows directly into your NOI, your net operating income. Remember, mortgage payments though they do not factor into NOI. Neither do major capital expenditures. Refinancing can improve your cash flow, but that does not increase the property's NOI, and that's what we're talking about today. But when it comes to property tax appeals, you remember a while back on the show, perhaps a year ago, I went into detail on just how you can do that.

Keith Weinhold 16:00

Now we're up to number two. The second best way to increase your NOI is to raise rents intelligently, and really this is the most obvious strategy. But it isn't as simple as typing a larger number into your renewal letter and then just sort of hoping that your tenant doesn't notice. Bring rents closer to market without automatically chasing the absolute maximum. That can include gradual increases at renewal, premiums for upgraded units. How about a premium for the unit with the best view? If you have one of those, higher rent for furnished units, appropriate charges for garages or shorter lease terms. I mean, shorter lease terms, like a six month instead of a 12 month, that can get you a bump up in the rent. Be sure to eliminate any unnecessary concessions, like the first month's rent is free. Do you really have to continue to do that? And use better listing photos and copy to support higher rents. It's easy to have AI write some good snappy copy for you today. So the objective here is economic occupancy, not merely the highest advertised rent, because raising the rent $100, if that's going to create an extra month of vacancy that is stepping over dollars to pick up dimes. Know the market, understand the tenant, and make increases that improve NOI rather than merely improving the asking price for the REM. And the top way, the number one way to increase NOI is reduce vacancy and turnover. Yes, you might have heard that before, but it is still the most overlooked NOI lever, even though it's number one. An occupied unit at a sensible rent that often produces more income than an overpriced empty one.

Keith Weinhold 17:58

The way to improve your occupancy is by you starting renewal conversations 60 to 90 days before that lease comes due. Respond quickly to maintenance requests. I mean, few things frustrate a tenant more than a ceiling that is leaked for a month. Pre-market an upcoming vacancy that you have. Start that process early. Complete your turns faster, screen residents carefully, and unless you're in an especially hot market, consider offering renewal incentives when turnover would cost you substantially more than doing that. So there are a bunch of ideas for reducing vacancy and turnover. Another one, more of a modern-day one, is for you to buy and operate new build property because tenants tend to stay in new builds longer. They love that feeling that no one has ever lived there before. Suppose a unit rents for $1,800 a month. All right. Well, then one vacant month costs you $1,800 before cleaning, repairs, utilities, advertising, and leasing expenses. So the true cost of that turnover could easily be three or $4,000. And when you consider that, then giving a good resident a $250 one time renewal incentive that doesn't look generous that looks profitable for you. Keeping a responsible tenant, you know that might be the biggest quote unquote rent increase available. Just simply keeping a responsible tenant because occupied properties produce income, and empty properties produce invoices.

Keith Weinhold 19:48

Now that I've told you about the five ways to increase your property's income, let me give you some more motivation for this. It's about how $250 can become 50. $1,000. Suppose you select just a few of these five improvements, and say that that increases your NOI by just $250 per month. Okay, that's nice. That's cash in your pocket, and if you happen to apply it to a five-plus unit apartment building, since it's also valued on NOI. You take 250 bucks times 12. That is $3,000 a year at a 6% capitalization rate. Take 3000 divided by point 06. That is $50,000. You just created 50k of additional property value from only $250 of monthly NOI creation. Yeah, you are up 50k now, and here's the thing: you did not do anything that substantial. It's not like you added another story to a property, or you discovered oil underneath your parking lot, or you convinced a celebrity to move in. Okay, these are practical things that you can do in control. You simply operated the property better, and this forced appreciation relationship that applies most directly, though, to commercial and larger multifamily properties because those are the types that are valued based upon their income. A single-family rental or a duplex or a fourplex that is generally appraised primarily through comparable sales. So its higher NOI might not immediately produce the same increase in appraised value, but in either case, higher NOI it still means more cash flow for you, a stronger financial cushion, and a better performing investment. The bottom line here is that you can wait for the market to increase your property's value, or you can operate the property better and create value yourself, raise income, control expenses, and keep good residents. That is how you improve NOI without increasing your blood pressure.

Keith Weinhold 22:10

Coming up on the next few shows, we're going to speak with the original co-author of the book Rich Dad Poor Dad. Yes, we had Robert Kiyosaki on here earlier this year, but we're going to talk with the co-author alongside Robert Kiyosaki. A lot of people don't know who that is. That is going to be interesting on another upcoming episode. The man that wrote the book on the 8020 rule called the Pareto principle, he will be here. That's where 80% of the results come from. 20% of the effort. So here on GRE, there's a lot of education, strategy, and mindset coming up straight ahead today. When stocks crash, what happens to real estate? That's next. I'm Keith Weinhold. You're listening to Get Rich Education. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals. A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself.

Keith Weinhold 23:27

What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts-they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine. You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com.

Kirsten Tate 24:31

This is author Kristen Tate. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.

Keith Weinhold 24:49

Welcome back to Get Rich Education. I'm your host Keith Weinhold, and this is episode 625. AI songs are becoming more popular. Fortunately. AI podcast hosts-they really aren't that much of a thing yet, or else I might not be here. Thank goodness that listeners still want to hear from a real person. When stocks crash, what happens to home prices? Since 1980, there have been 10 or more major stock downturns. Guess how many of those cause national home prices to crash? Exactly zero. Now there was one pretty enormous housing decline, but that one started in housing. And what happens next? It reveals something that every real estate investor should understand a lot like real estate right now. Stocks are hovering near their all-time highs. Okay, both major assets, real estate and stocks, bumping up against all-time highs. There is a predictable rhythm about what happens to real estate when stocks crash. Now, when we look at stocks' seven big downturns that occurred just this century, as measured by the S&P 500, you know, first a lot of people think that stocks are overvalued here in the late 2020s. That is based on measures like the historic P/E ratio, the Shiller cape ratio, and the Buffett indicator. I mean, some investors are just disillusioned by how stocks' movement makes so little sense anymore. For example, when the latest labor number showed that 162,000 jobs were added in a month. That tripled expectations. I mean, people should have been like, "Hey, go USA! This is great. People are employed. All that. Nope. The stock market fell specifically in response to that. Why? Because strong employment increases the chances of higher interest rates, and sure enough, the Fed did then raise rates.

Keith Weinhold 27:09

Oh, geez, what? So a labor market collapse is then bad for America, and that's good for stocks. Yes, that is how it works. That is just stupid. So, with that context in mind, let's see what actually happened to national home prices this century during all the major stock market downturns that were not caused by housing, and then we'll get back to housings. Okay, during the dot-com bust in 9/11, that whole period about 25 years ago, stocks again. This is all per the S and p5 100 crashed 49% Home prices were up 23% during that time. We'll get back to the global financial crisis shortly. During the 2011 debt ceiling crisis, do you even remember that stocks went down 19 percent. Home prices went down just slightly, 1 percent. During the 2018 Fed tightening and trade war sell-off, stocks were down 20 percent, a classic bear market. Home prices were up 1 percent. Then came COVID. In barely a month, stocks plunged a jaw-dropping 34% This was in 2020. It was like a flash crash. What happened to home prices then? They were up 1% just a little. So, are you beginning to see a pattern, or perhaps a lack of one here during 2022's inflation peak and Fed tightening bear market stocks fell 25 percent. Home prices they were up 4% during that time period, and then during the 2025 tariff sell-off, you might remember Trump called that Liberation Day. Stocks were down 19 percent. Home prices. were essentially unchanged.

Keith Weinhold 29:06

All right, so there they were: six major stock market downturns this century, not one housing crash. All right, now let's turn the telescope around because 2008 was different since the crash was real estate induced, and it is the only time in the life of you or I or anyone alive today, even a 90-year-old, where national home prices took a significant fall. In fact, they were down 27 percent, and it took them a few years to fall that much. All right. Well, what did stocks do during this period? They fell even more, down 57% more than twice as much, 57% I mean, just imagine having a million-dollar stock portfolio and seeing its value cave in, down to 430k from a million. Okay, that's what really happened march 6, 2009, when the S and P hit its global financial crisis low, and that happened over a 17 month stock collapse. Okay, so what's really the summary? It is that in the six times that stocks led a price crash this century. Real estate held up, or it rose, and the one time real estate led the crash, stocks fell more than twice as much.

Keith Weinhold 30:31

It was 27 %versus 57%. All right. Well, that is what's happened this century. But you know this cause and effect relationship or lack thereof, that didn't just begin happening in 2000. When we stretch the history back to 1980, which is Jimmy Carter, almost Ronald Reagan era days, stocks had four more big downturns. We had the Volcker Bear Market, the famous 1987 Black Monday stock market crash, the Gulf War sell-off, and the LTCM crisis. During those four stock crashes, home prices also either stayed resilient or they rose. All right. Well, all of this is because homes and stocks, you know, they just aren't connected by some push and pull relationship. Stocks reprice in seconds. Fear spreads. Algorithms sell, and billions of dollars can disappear before lunch. Instead, housing moves more like a cargo ship that you're trying to turn around in the Mississippi River, it can take a long time. Housing transactions take months. Prices depend on local supply and local incomes, and mortgage availability, and whether homeowners are actually forced to sell. Housing provides something that every human actually needs and cannot be easily disrupted by AI. I mean, AI still cannot download a three-bedroom house onto a vacant lot. And of course, during any stock crash, what else happens with real estate? Your rent just keeps coming in as well. So the bottom line here is we're learning from history rather than having a hunch again. Home prices don't react to stock market crashes. Stock crashes and housing downturns are different events.

Keith Weinhold 32:32

A falling stock market it can eventually weaken consumer confidence. In in a severe recession, some of that can trickle in and affect housing, but history shows that a stock crash alone has not caused national home prices to fall. When stocks scream, real estate just kind of shrugs. Now, as we get back to talking about today, with real estate being cash flow challenged, you usually need a deal in order to make the numbers work. And as we know, for more than two years now, it has been wise to buy new build property and have that home builder buy down your mortgage rate rather than getting a property price discount. And do you realize that it actually works out better for you in almost every case for you to get your rate bought down than it is to get a discount. Yeah, it is often substantially better. Let's just think about an example. Say you're putting a 20% down payment on a 300k property at a seven and a half percent mortgage rate. Okay, let's compare your seller discounting the purchase price by 20k versus them instead using 20k to buy down your mortgage rate. All right, in the first scenario, let's call it then a purchase price reduction. The seller reduces it from 300k down to 280k. Your monthly payment would be 1566 $1,566. All right. Well, then your monthly savings from the price discount would be $112. You would also need 4k less for the down payment. Okay, 112 bucks a month is helpful to you.

Keith Weinhold 34:18

That might buy you dinner for two at the Olive Garden or something, at a wildly overpriced airport convenience store. By the way, this is a bottle of water and one almond, 112 bucks. Okay, but now let's compare it with the second option. If instead of a price discount, you pay the full 300k and use the 20k as a seller credit, a credit from the seller, and you use that to permanently buy the mortgage rate from seven and a half down to five and a half percent. In this case, even though it's a larger amount financed, your monthly payment is no longer 1566. It's just 1363, so your monthly savings is no longer 112 bucks. That Olive Garden dinner for two, it is 315 bucks. So therefore, using the seller credit instead of reducing the purchase price that ups your monthly cash flow by about 203 bucks. All right, and this was just an illustration. It's not a universal lender rate sheet carved into a stone tablet. But the larger lesson remains. Okay, terms are often more important than price. Negotiate the financing. That is the lesson. And of course, you can try to use this most anywhere with any seller, but it's been especially popular with American home builders for two plus years now.

Keith Weinhold 35:47

The bottom line is that the best deal isn't always the property with the lowest price; it is the one with the best financing, and it's one of the strategies that Mid South Homebuyers is going to offer on Wednesday night's webinar just two days away, and there's no negotiation needed. They are offering this, and it's where I'm going to be appearing live, and you're invited to join us from the comfort of your home or a coffee shop or wherever you are. So we're talking about properties in Memphis, Little Rock, and North Texas. New build properties for as little as about 200k, and some fully renovated resale properties for as little as 150k, and even less than that. Now, low price isn't reason enough to own an income property, but it's the fact that you get a strong rent in a stable market to support that, and they're offering what they call their triple five terms. They'll buy your mortgage rate down into the fives and provide property management for just a 5% fee for five years. And I just learned that for attendees of Wednesday night's event, they will even announce a promo code there, and you will get triple five terms for life on both financed and cash deals.

Keith Weinhold 37:12

And you know, I've got to say that when I began in real estate investing, I wish that any of this would have existed. Like when I began, I wish there even would have been new build property available. They just didn't even have that for income property when I started out. And the fact that it's managed for you from day one, I didn't know about that when I started out. I thought I had to invest only in my home market and then manage it myself. And here you get investor advantaged geographic markets, and then if that's not enough, you get that rate buy down into the fives and property management costs. It's basically cut in half to help improve your property's cash flow, and you can almost think of this as lifetime cash flow. You get to control a sustainable business model that's resistant to AI disruption, and yeah, it's sustainable. I mean, people will pay you to live there. That has happened for centuries. It's sort of the opposite of a cryptocurrency that will not exist in two years. It happens Wednesday night. You'll get to see me live along with the renowned providers from Mid South Homebuyers and their properties and their generous incentives and all the new AI investment that's acting as a tailwind coming into Memphis. Registration is free at getricheducation.com/midsouth. It's 8p.m. Eastern on Wednesday night. I'll see you there, getricheduceducation.com/midsouth. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 38:57

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

Keith Weinhold 39:25

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

Keith examines why renters made up nearly 80% of U.S. net household growth last year, and how housing supply explains the gap between rents falling 8% in Austin and rising 17% in San Francisco and Chicago.

Terry Kerr and Matthew Van Horn of Mid South Homebuyers join to discuss new-build rentals under $200K in Memphis, Little Rock, and North Texas, in-house property management, duplex deals, and financing incentives with rates bought down into the fives.

The episode closes on the AI buildout reshaping Memphis, where xAI's Colossus, Anthropic, and Google are driving billions in investment and a share of the new tax revenue back into surrounding neighborhoods.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. U.S. rent growth is led by cities with AI investment and those with a lack of new housing supply. Then we're talking about new build properties for under 200k that cash flow and with mortgage rates that are bought down into the fives today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again, that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/mid south.

Speaker 1 1:33

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:49

Welcome to GRE from Davenport, Iowa, to Smethport, Pennsylvania, and across 188 nations worldwide. I'm Keith Weinhold. You're listening to Get Rich Education. Hey, near the end of today's episode, I'll announce where I'll be appearing live and inviting you to join me. But first, most real estate headlines that you see out there for quite a while now, they tend to focus on just how difficult buying a home has become amidst higher prices and mortgage rates-it's kind of an old story by now. But for investors, the other side of that story is what matters. When fewer people can buy homes, well, more people have to continue renting them. Only 6 million of America's 50 million renters can afford to buy the median home. In fact, so that means then that only 12 percent of America's renter households can afford the median home. That is just remarkable, and that's exactly why they have to keep renting, but you know what's more remarkable is the growth of this group of people itself. Last year, the U.S. added an estimated 898,000 renter households, but only 234,000 homeowner households. That's per the Census Bureau. All right. So then, renters accounted for nearly 80% of the nation's net household growth. Gosh, that is staggering. Well, let's look at the rent change and their factors in some of America's largest cities over the past three years, in Austin rents down 8% over the past three years, lowest anywhere. San Antonio minus 4% Denver minus 1% and then you got a couple cities, Phoenix and Dallas that are even no rent change the past three years because they've had some overbuilding. Raleigh, North Carolina, up 1% Nashville, Orlando, and Houston all with rents up 2% over the last three years. Still pretty modest. Jacksonville, Tampa, and Charlotte each up 3% Atlanta up 4% Miami also up 4% Los Angeles and Memphis both up 6% Seattle has had rent growth of 8% the past three years. Boston really with a lot of growth in tech jobs and not much new supply added. So Boston, Massachusetts, 10% rent growth. Philadelphia, 11% rent growth. New York City, famously not adding much supply. Rents are up 14% since 2023. San Francisco and Chicago leading the charge rents up 17% in both San Francisco and Chicago over the past three years. Now the biggest reason for the variability in rent change since this time it's largely the same reason for capital price change, for appreciation level, and that is the factor of supply. You know, remarkably, the eight cities that have built the least, they have the eight highest rent growth stories, and most of those are higher cost coastal markets that have high building regulation. I mean, sheesh. That's where approving new housing can take longer than choosing a speaker of the house, and that's how already expensive markets remained resilient.

Keith Weinhold 5:57

Namely, I'm talking about places like New York, Boston, Chicago, and San Francisco, and then you've got these pandemic-era magnets like Austin, Phoenix, Dallas, and Nashville. What these places did is they attracted residents and developers along with them, but yet they've all got really slow rent growth stories, like I just outlined. So what really happened here in these pandemic-era magnet places, again, Austin, Phoenix, Dallas, and Nashville, is that builders showed up like food trucks at a music carnival, and eventually the construction wave caught up with demand. Then you know we got to look at the Sun Belt. A lot of people talk about the Sun Belt like it's just one market or one place, and of course that's not true because I just told you about how Atlanta and Miami rents rose 4% the past three years. Well, a number of other places in the Sun Belt just stayed about even, but it's really the tech hubs like Boston and San Francisco, that are just surging, really soaring with rent growth amidst the AI boom, because they've really been the beneficiaries of that. So yes, apparently even the people building our robot replacements then need a place to live. The robots themselves don't pay rent yet. It's rarely been more apparent that real estate is local when there's this 25% Grand Canyon between Chicago and San Francisco's 17% rent growth, and then Austin's 8% loss. And again, I'm talking about that period just over the past three years. Now rent declines-that's something that really doesn't happen very often.

Keith Weinhold 7:48

They tend to be even more rare than a loss in overall home prices. But you know, rent declines-they can create buying opportunities. What happens is that softer rents-they pressure your current cash flows for sure, and that hurts, no doubt about it. But over the longer term, what that does is that discourages new construction, and then that sets the stage for tighter supply down the road. So that is really the rent growth story the past few years in the United States. We're going to discuss rents and prices some more, and then the excitement of the profound amount of new AI investment into a place where you might not be thinking about it in, and that is Memphis. Listen to what SpaceX, Anthropic, and Google are all in the process of doing there, and what that could do to rents. We'll talk to the premier provider of Memphis rental property, and they also place your tenant and they manage it for you, so that all you do is little more than collect the monthly rent check, and they also offer this in Little Rock, Arkansas, and more recently in North Texas, founded in 2002, Mid South Homebuyers they are one of America's original turnkey real estate providers, and you know they're quite possibly the oldest major provider that still operates today. We're going to talk to the man that actually sets the rents there, and in fact, Mid South is so renowned and respected that for a long time, if you wanted to own rental property from them, there was a waiting list that once reached 24 months, and frankly, in that scenario, investors would just kind of settle for the first property that became available-that doesn't happen anymore. There is no waiting list, and you actually have a choice now. Let's talk to this week's guests. Back on the show today, the Memphis-based team that has provided more. More income property to GRE listeners than anyone in history. They were first on the show with us almost 12 years ago on episode nine. It is Mid South Homebuyers founder Terry Kerr and director Matthew Vanhorn. It's a warm welcome back to the show.

Terry Kerr 10:18

Thank you so much, Keith. Always love being on your show, man.

Matthew Vanhorn 10:22

Yeah, so glad to be back, Keith.

Keith Weinhold 10:24

You know, I was talking with you earlier, and you had brought up something that struck me as interesting, and yet it could be true that when it comes to cash flow in real estate, we are living in the good old days. Now, nationally, cash flow has been challenged because purchase prices and mortgage rates are both up, and rents haven't quite kept up proportionally. But there, in the markets that you deal in, you can still get it with a small down payment because you do have a high ratio of rents in proportion to a low purchase price. Some of them still under 200k for a good rental single-family home, and incentives that get your mortgage rate into the fives. So tell us more about how we could be living in the good old days now.

Terry Kerr 11:09

Well, you know we're very fortunate to be working in some towns where the price to rent ratios are still super favorable comparatively. You know you mentioned that you can get into a house for under 200,000, we even have new construction houses that folks can get into for under 200,000. Yes, one of the other ways that we're able to make the deals pencil out and make it to where these are definitely the good old days is through a promotion that we've had going on for a bit called the Triple Five, where we buy the rate down into the fives and have a 5% management for five years. So these are definitely the good old days here at Mid South.

Matthew Vanhorn 11:51

One thing that you preach on your show, Keith, is about looking at history over hunches. Right, and when I look at the history, everyone. who comes to me now says, "Man, I wish I had bought 10 years ago. I've yet to hear anyone say, "Man, I wish I'd bought less 10 years ago. Never happens, you know. And 10 years ago, well, 10 years ago was 2016, and a lot of people say, "I wish I had bought more then, and the reality is, a lot of people were scared to buy then. You know, their times were uncertain then. We were unsure where things were headed then. Always, and maybe people looked at our prices back then as they started to hit $75,000 for a home, and thought, man, things are getting expensive. But my belief is truly, Keith, that 10 years from now, people will look back and say, man, I wish I had bought more 10 years ago. I mean, we're living at an incredible inflection point. I believe in history, you know, where we know that the world is changing with AI and with various factors that are happening. We're on very much the cutting edge of all of that. You know, I don't have a crystal ball, but I just believe that 10 years from now, people will say, "Man, you guys were so lucky to be able to invest in a time when AI was in its infancy, and like before prices had skyrocketed, like they are now in 2036. That's just my belief, Keith. Looking at history over hunches, there,

Keith Weinhold 13:31

I very well believe that could be true. The truth is, for you as an investor, when you buy a property, it's pretty likely you've paid more for that property than anyone has in history, and it's also pretty likely that when you sell that property down the road, you are going to sell it for more than anyone ever has in history. People always think that times are uncertain, and they're going to continue to feel that way because nobody can know the future, of course. And Terry, you talked about your incentives with the triple five. That's for someone that makes a small down payment where they can get their mortgage rate bought down into the fives. They get five years of property management at 5% and we're big fans of leverage here. However, if someone wants to pay all cash, you also have an incentive known as the Forever Five. Tell us about that.

Terry Kerr 14:26

Yeah, so the Forever Five for somebody who pays cash, they will get 5% property management forever because they are not getting the benefit of the interest rate buydown. So we want to treat our cash buyers fairly as well, and that's been very popular.

Keith Weinhold 14:43

And if you, as a cash buyer, participate in the Forever Five, and then you go on to refinance the property, maybe to pull cash out after you've closed, you still get those incentives for the duration of your ownership of the property.

Terry Kerr 14:56

Absolutely.

Keith Weinhold 14:58

Now, Matthew, interestingly. You talked about an inflection point. We'll get into that later. There is a clear inflection point with Memphis and with AI. But before we do that, why don't you talk about your core business and some of the markets that you serve and what the drivers are there?

Matthew Vanhorn 15:18

Yeah. Right now, when you invest in Memphis, you are investing in stability. We still have great cash-flowing assets in Memphis for as low as $100,000. We have great cash-flowing assets in Little Rock for as low as $120,000, and even Texas, we have assets there for as low as 215,000, which I don't expect you to see those kind of prices in the future. I think we're at a very lucky point where you can get into Texas for as low as 215. We're still seeing strong cash flow in our markets, especially with our triple five promotion. I mean, we've looked and listen. We realize it's harder to find cash flow than it used to be. That is true, and that is why we've rolled out this triple five promotion, where it really helps these deals pencil for our investors. It gives you five years of reduced property management. It gives you 30 years of a fantastic fixed rate on your interest, and my belief is that your rents will continue to grow faster than your expenses. So that five years from now, even if there is a property management adjustment in year six, which that would adjust to the normal rate of 10% or for investors who have more than six homes with us to 8% I believe that you're going to be in a much better place six years down the road because of the factors we know that rents increase, your resident pays down the mortgage, and I believe that this happens at a rate that's faster than your expenses grow.

Keith Weinhold 17:02

Talk to us about what you're doing as far as new build versus resale properties, because so many providers today are finding that they're doing more volume of new build than they are of resale properties, and this is really a good, important, fundamental thing that people like you are doing because amidst the national housing shortage, there's an even greater shortage of those entry-level properties. So now that you've been doing new build for a little while, tell us about that and what kind of effects that makes. How good that is for the investor. How much longer tenants are being retained for a longer duration in the new build property versus resale, and just more about that new build versus resale.

Terry Kerr 17:46

Sure, man. So we got into doing new construction, you know, out of necessity, and also because our investors were asking for it, our renters were asking for it, and so also we couldn't find as many rehabs, and you can't force a good deal to come onto the market to find for rehab. And so we went on a absolute tear for dirt. So within the last 12 months, we picked up over 400 vacant lots, and so we kind of have the dirt stacked up for the next while, and we're doing that in both Little Rock and in Memphis. And so, what we've seen on the leasing and on the acquisitions for our investor side is that our residents absolutely love it. We could ask more in rent than we're getting for these new construction properties, but we're tempering ourselves because we know that what makes a property cash flow for the long term is lease renewals for the residents. So in Memphis, as an example, our average rent for a brand new three-bedroom, two-bath, 1400 square foot house is 1450. And Matthew, what's the price point on that? Is it like 198,000 bucks? Is that it? That's right. And so they're just flying off the shelves from a rental standpoint. And like I said, we could get more in rent and still sell them at that 198 or maybe more. But we're wanting to make sure that we're leaving enough meat on the bone all the way around the horn, and to your question, Keith, about additional length of resident stay, we haven't been doing new construction long enough to really have good data points on that. But if the interest in the new construction product by our residents is an indicator of length of resident stay, it's going to be longer than our rehabs.

Matthew Vanhorn 19:42

Yeah, and another thing that I think that's interesting is that we are often building these new construction homes in the same neighborhoods where we have done our newly renovated homes, and so that continues to bring up the value of our renovated properties. Which I think is a beautiful thing that not all investors have connected the dots on yet with what we're doing in these neighborhoods. I think it's a beautiful thing because some residents are going to prefer that four-two new construction, like Terry mentioned, and other residents are going to prefer to pay a little bit less and get that three-one ranch-style home that we love so much here at Mid South,

Keith Weinhold 20:24

and you, the listener, you might be wondering about really properties, including new build income properties for under 200k. But I can attest to you that I have walked inside these properties myself with Mid South home buyers, several of them, so we're not just talking about the glossy brochure version of how a property looks. This is real with the low purchase prices in Memphis due to them being the transportation hub of the nation and an awful lot of other reasons. But the whole thing that makes this stick together for you, the investor is the property management, and you you never hear anyone rave about their property manager, seemingly. But with your management and making this hands-free for the investor, I have got to say I don't think I have ever heard one complaint about you guys's property management. So tell us about that. When someone gets sort of enamored with owning in one of your markets, Memphis, Little Rock, or with what you're doing in Texas, tell us about that handoff to the property manager and how important it is to have that in-house management. Because if there ends up being some construction or rehab problem, you know the manager isn't pointing fingers at somebody else because the renovation and the management is all done in house.

Terry Kerr 21:46

Yeah, absolutely. It's super important to have it all in one house, so no one's pointing fingers at someone else. And really, Keith, it all boils down to value. It's the biggest piece, and just how I mentioned a few minutes ago about how we could get more in rent for the properties than we do, but we know that the properties need to continue to stay occupied, and reducing turnover is the main thing that's going to make an asset perform. And so that's kind of the foundation of where we start as a turnkey outfit, and then it's just treating our residents, treating them with the respect that they deserve, answering the phone when the you know heating element goes out on a water heater and getting it fixed quick, and so delivering value from a rent to property ratio, if you will, and then also just giving really good customer service to the resident because if you do that, the property is going to perform.

Matthew Vanhorn 22:42

I was blessed to work on the management side of the business for 14 years before jumping into the sales seat. So I know firsthand, you know how important it is to make this work for the resident. So it's not like the residents have interests and the investors have interests that are misaligned. We have to make this work for the resident to make it work for the investors. And like Terry's saying, when we provide ultimate value to the resident, our investors thrive. And so, at its core, it's it's some very basic things that we do here, Keith. That I think make all the difference. And it's just spending the time is one of the biggest thing. It's literally just answering the phone when residents call. It's just the basics that I think we do so well. And to spend that time and to answer the phone, you have to have an actual staff, you know. And here, just down the street at our central office, you can walk right in, right up to Gabby's desk, and she can help you with any of your concerns if you're a resident. And I think that's becoming so rare today, Keith, to see that level of service on the property management side. So many property managers want to do just the bare minimum, and they're really just looking to extract value and to just move on. We, the most of the people who work here, Keith, we have, I think, about 120 employees, and a lot of them aren't necessarily thinking about sort of the sales side like I do. They're simply thinking about the mission they have for taking care of the residents of Memphis and Little Rock and Dallas, and that's really all they think about, and that's why this is successful.

Keith Weinhold 24:23

I was laughing earlier. I just find it funny how you put that. Like the bar is so low for property management that oh my gosh, this manager picked up the phone on the first try. I can't believe it. Like that's how low the bar is for property management, and your management there has been superb. We're going to talk more, including how Memphis could be on the precipice of being both the brains and brawn behind AI, including why data centers can be good for communities. More on that when we come back. You're listening to Get Rich Education. Our guests are Terry Kerr and Matthew Van Horn. Of Mid South Homebuyers, I'm your host Keith Weinhold.

Keith Weinhold 25:03

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Naresh Vissa 26:36

This is GRE Real Estate Investment Coach Naresh Vissa. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.

Keith Weinhold 26:53

Welcome back to Get Rich Education. We're talking with founder Terry Kerr and director Matthew Van Horn of Mid South Homebuyers, the provider that's provided our listeners with more income property than anyone else in history for years. That popularity created a wait list that was often several months long. I'm pleased to tell you that there is no longer a wait list, so you, the investor, can get a deal done in a pretty short period of time. One reason for that, to Terry's point, is the fact that more new construction has been brought on since they weren't able to buy rehabs at the pace that they wanted to. Since we are in a housing shortage, how do you stop the shortage? You build new. One thing that you're building new are duplexes as well. So tell us more about the duplexes that you offer because sometimes that interests investors to buy one income property and have one loan with two doors.

Terry Kerr 27:53

Sure, absolutely. And you know, Keith, actually, we just bought a whole street of duplexes. We bought 18 duplexes, and talk about forced depreciation brought the whole street up, and it's actually located. We have other duplexes besides these, but it's actually located just three minutes from here on the Green Line. Really coveted place to live. You can just hop on the Green Line and ride your bike all you know all the way. Well, goodness, about 100 miles or more. Yeah, duplexes are rare here in Memphis, and we've been fortunate to stumble across a good chunk of them.

Matthew Vanhorn 28:30

Actually, in Memphis, there was a moratorium on building duplexes for over 40 years, and so that's part of why they're rare. Wow, is that you just weren't allowed to build them for a long time, so when we're able to come across them, it's a great thing because we know investors love them. And the fact that we're able to grab 18 right here in Midtown on the Green Line, right by our huge library, which is is an awesome place, we're really excited for those as well as the other duplexes. Like Terry said, we have others available, but be looking out for those Waynoka duplexes. Yes,

Keith Weinhold 29:04

amidst the housing shortage, I have seen many U.S. cities these past few years with zoning changes allowing duplexes to exist where only single-family residential properties could previously. Tell us more about the duplex rents and prices.

Matthew Vanhorn 29:21

Yes. So Waynoka duplexes, as an example, these are 2121, so a two one on each side of the duplex. They're compact, so I think they're about 700 square feet on each side. They are priced on the rent side at 925 a month per side, so 1850 in total rent, and so those are going to be selling for around the 220 mark.

Keith Weinhold 29:50

Okay, those are some really attractive numbers. They are ratios that work. There inside Mid South, you've done an awful lot. More to help grow your team and help better serve investors on the investor side. Now, you know, frankly, I really never look at how you're marketing yourselves to buy rehab properties over there on that side with what you're doing. But actually, sat down and had lunch in person with your marketing director a few months ago. You've got a new website now, and so much of that is the interface with the investor in the white glove service that you offer them in order to make it easy for investors. Tell us more about that.

Matthew Vanhorn 30:34

Yes, we're really proud of the new website that we've rolled out. It really is designed to make buying as easy as possible for investors, and not just buying easy, but to understand the process as well as you can, to understand and do your due diligence as well as possible from the website. And so, one thing that you'll notice is that with each property now, you can click a run profit projection is a button on each property, and it brings out a detailed pro forma. You can get downright nerdy in there. Adjust different inputs on different down payments, different interest rates, different loan products. You can toggle back and forth to see the cap rates on cash versus leveraged, and like I said, you can get downright nerdy with it, which is nice. It's something we did not have before. The pictures are really crisp on our new website now. We have available homes on our website, which is a fantastic thing for investors. Previously, with the waitlist system. We would show our website, and investors would go on there, and they would say, "Hey, there's nothing available. Right, and so that was the biggest problem. We have different markets, different products. Texas, as an example, it's going to be more high growth. Memphis is going to be more high cash flow, and so different investors have different parameters. We can actually match you to what you need now.

Keith Weinhold 32:02

You guys have such a good reputation, and also you've been offering turnkey rental properties longer than any other provider I know of in all of the United States. But because your reputation preceded you in the past, I think some people would stay on your wait list for a few months, and then as soon as one property came available, they would just take it, regardless of what it was, and they still tended to rave about your service. But today, you actually have some choice.

Terry Kerr 32:31

We do, we do. In addition to providing extra properties through new construction, we've also been fortunate to, you know, continue to develop our banking relationship. So we would not have been able to to do what we've done by ramping up volume if it weren't for our good lender partners. So, cheers to that!

Keith Weinhold 32:49

Right, and these banking relationships are what allow you to offer interest rates in the fives to investors. Well, Matthew mentioned it earlier that we really are on this tipping point, this likely pivot point where AI has really-you could have long called it the brawn behind a lot of what moves America-that being Memphis, being that transportation hub that you are-but it's also now positioned to be the brains of AI as well. I mean, perhaps the biggest infrastructure story in America is now happening there in Memphis, the most affordable major castle market in America, and I don't know that anyone has connected these dots. So it's an exciting time. Tell us about that.

Matthew Vanhorn 33:37

It is an exciting time, and I think you're right. I think investors at large have not connected those dots, like you said, Keith. Right now, if you've ever used Grok, if you've ever used Claude from Anthropic, it's being powered right here in Memphis, Tennessee. I don't know if everyone knows that of how much money that Google is pouring in to Memphis, how much Anthropic is pouring into Memphis? How much SpaceX is pouring into Memphis? It's really phenomenal. It's dramatically raised the amount of tax revenue that we've been able to generate, and that tax revenue benefits the city. And so we're already an advantaged market when it comes to investors, and this AI infrastructure I think poises us to be even stronger of a play, especially for those who get in sooner rather than later. While it's the good old days, Keith.

Keith Weinhold 34:36

We have seen what AI can do to a rental market. Now, I'm certainly not projecting this on Memphis, but San Francisco has seen two-bedroom rents up 26% year over year due to this influx of AI money that you're talking about.

Matthew Vanhorn 34:56

Absolutely, and we have been seeing rent growth in. In Memphis, and I think that's interesting because I've heard investors as I go to different conferences, and they say, "Yeah, rent in Memphis has been kind of flat. And what a lot of people tend to do is they look at reports that talk about what has happened over the past, let's say, two years. And so a lot of investors they want to invest when they get that report, and it says, "Hey, rents are up 26%. Well, once you get the report, it may not be the most optimal time. I'm blessed to be on the cutting edge of the knowledge here, you know, because I'm part of the property management company. In fact, I set the rents personally still on these homes, and so I see them ticking up, Keith. I'm not saying it's necessarily San Francisco style here, but I do see the rents ticking up here after a little bit of a period where it was a little bit flat in 24 and 25.

Keith Weinhold 35:57

Yes, we are talking to the man that sets the rents on this huge collection of properties that we have here. Memphis is now home to the world's largest AI supercomputer. That's XAI's Colossus, the biggest single-site AI facility on the planet. You touched on it. Anthropic is paying 1.25 billion a month to run Claude on it. Google just signed a deal worth up to $30 billion starting october 1 in one year. Therefore, XAI became the second largest taxpayer in the city after FedEx. And sometimes you might wonder, okay, but will that translate to that community, to that local neighborhood, well, the city has committed 25% of the property tax revenue from those sites to infrastructure in the surrounding neighborhood. So this is a multiplier effect that we're talking about in Memphis.

Matthew Vanhorn 36:54

That's it exactly. So the neighborhood where SpaceX has built these facilities, and so they built Colossus, which alone was the largest supercomputer in the world. Then they built Colossus Two, which was even larger than the first one. And by the way, they're prospecting a third facility. Guess the Colossus Three. So already the biggest. Then they built a second. They're about to build a third. And these are in the communities where we're already investing, Keith. So these are communities that are already great neighborhoods where we have great blue-collar working-class renters who love their homes from mid south, take great care of them, and now they're going to get the benefit of that 25% of a huge number in tax revenue going into improve the infrastructure in their community. So you're talking better streets, you're talking water treatment, you're talking money going into schools, which is super important. It even goes into just cleaning up the community, which is directly helpful to our property values here, and so I'm really excited that we're seeing this growth here in areas where we already were investing, Keith. So we were lucky enough to already be ahead of this even before we recognized this growth headed to Memphis.

Terry Kerr 38:19

And one of the nice things about that is, is we've already got hundreds of houses that we're managing in these neighborhoods, and so all this new growth is just benefiting the investors who've owned in these neighborhoods for many, many years.

Keith Weinhold 38:33

There is clearly some momentum here, and at worst, it provides some real ballast under the greater Memphis economy. Before I ask you two, if you have any last thoughts, I would like to cordially invite you, the listener, to an exclusive free virtual event with all three of us live. It is next Wednesday, the 30th. The event is called Memphis: The New Brains and Brawn Behind AI. Why the smart money is moving now. Sign up is open now and is complimentary at getricheducation.com/midsouth. So therefore, the webinar takes place the night before the new Google money starts flowing in to Memphis on October 1, and at the event you'll see actual properties, real cost flow numbers, and Mid South's best deal terms ever. Like we touched on earlier, with those rates in the fives and five years of property management at just a 5% rate, and these incentives are all available exclusively to live attendees. It ought to be really cool. Again, it is next Wednesday the 30th. Sign up at getricheducation.com/midsouth. Any last thoughts, fellas?

Matthew Vanhorn 39:52

We run regular tours here in Memphis. You can come visit us on site, and most people don't come. Visit us on site, but we love it when you do. So, if you are interested in seeing us firsthand, want to put your boots on the ground here, please sign up for a investor tour where we'll show you the facility here where we're sitting, show you the warehouse, we'll show you the process of renovations, we'll show you a junker home that we just bought, we'll show you one midway. We'll show you the final product. We'll show you renovated homes. We'll show you new construction, and give you a great grasp on what we're doing here at Mid South.

Keith Weinhold 40:30

That website is midsouthhomebuyers.com. Yes, I have done that tour with you guys. Yeah, it's interesting that you take us into the Junker home first, and that way we can see chronologically how you go through the process until we're in a newly renovated one near the end that's beautifully done. I still remember how much those hardwood floors shined in your product there. Yes, you, the listener, are cordially invited to join us September of 30th, a live event, all three of us. That is getresuceducation.com/midsouth fellas. It's been great having you back on the show.

Terry Kerr 41:07

Thanks so much. Thank you.

Keith Weinhold 41:14

Earlier in the show, I mentioned Memphis's 6% rent growth over the past three years. When you break it down per Zillow, that's just up 2% for Memphis multifamily, and it's up 9% for Memphis single-family rentals. Besides all the good stuff happening in Memphis, it has excited some people when they recently extrapolated their mega successful model out to the Dallas-Fort Worth metro and surroundings. For example, in Princeton, Texas, where they offer brand new construction, a two-bed, two-bath single-family home renting for 1675 a month and selling for under 200k. It's 192k. In fact, next week on the show, I will discuss what happens to real estate when stocks crash, and I'll talk about a lot more. But September 30th-that is the day of our event. It's also the day before substantially more AI investment dollars start pouring into Memphis, and the good old days could very well be investing here before that happens. Join the three of us for an inside look at why billions in new investment might be creating a pretty rare window in Memphis real estate. You're going to see actual properties, real cash flow numbers in Mid South's best deal terms ever, followed by a live Q and A, and it's available exclusively to attendees. Again, you can sign up at getricheducation.com/midsouth. Until next week, I'm your host Keith Weinhold. Don't quit your daydream. daydream.

Speaker 3 43:04

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

Keith Weinhold 43:32

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

Keith welcomes back macroeconomist Richard Duncan of Macro Watch to examine where mortgage rates are headed and what's driving them there.

Duncan explains how the U.S. shifted from capitalism to what he calls "creditism" after the dollar left gold in 1971, and why today's AI investment boom, rising defense spending, and a $40 trillion national debt are all pointing inflation and interest rates in the same direction.

He also makes the case for rental property on land as a long-term inflation hedge, and answers a question many have asked: if the government can print currency, why does it collect taxes?

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. You're going to get a good idea of where future mortgage rates are headed as we're talking to one of the world's most brilliant macroeconomists today. Will AI be more inflationary or deflationary? And the profundity of how we're on the brink of moving into a completely new economic system today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Home Buyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.

Speaker 1 1:34

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:50

Welcome to GRE from Lancaster, Pennsylvania, to Lancaster, California, and across 188 nations worldwide. I'm Keith Weinhold. You're listening to Get Rich Education, and I really appreciate that you're here. Yes, those two cities, though spelled the same, are pronounced differently. Framing this entire episode today with our brilliant guest, you'll learn which direction future mortgage rates are probably going to move, and it's decidedly either going to be higher or lower. You'll get a clear answer. Now I've said that trying to predict mortgage rates definitively is foolish. We're only talking about probabilities today. Look, have you ever wondered if the government can just print its own currency? Then why do they have to collect taxes from us. We're going to get that answer today. Back in 1971, the U.S. economy left a system of capitalism, in fact, and embarked on a journey of creditism as defined by today's guest. Well, now we're about to leave creditism. You'll learn what is poised to replace it, and it is an AI-fueled answer. You know, to prep you with some context today, I've said it here before. But when you start talking about the enormity of a national economy, the words billion and trillion start to get thrown around a lot. A trillion seconds ago, you know how long ago that was. That takes you further back than the Roman Empire, because a trillion seconds is 31,700 years. Well, 31,700 years ago, that is just about as far back as when the plains of Europe were being roamed by Neanderthals. Yeah, that was a trillion seconds ago. Coming up on the show here, the man who wrote the book on the Pareto principle 30 years ago. That's the 80-20 principle, where 20% of your effort yields 80% of the results. We'll talk to him and learn how those insights can improve your life on a different upcoming episode.

Keith Weinhold 4:08

Here, the book Rich Dad Poor Dad was originally written by two authors. One of those two was Robert Kiyosaki. We had Kiyosaki on the show here with us in June, and by the way, the New York Post recently wrote an article, and they cited the Get Rich Education podcast in how Kiyosaki revealed on the show here that he is 1.2 billion dollars in debt. You can find that in the September 1st edition of the New York Post. That's the June 1st episode of the Get Rich Education podcast that they're citing. Well, a lot of people they don't know who the other author of Rich Dad Poor Dad is, but we're going to have her here with us on the show soon. So some really fascinating episodes coming up. Let's meet today's guest. Returning this week is one of the foremost macroeconomic minds in the world. He was this show's first ever guest nearly 12 years ago on episode seven. A prolific author, he publishes the popular video series Macro Watch at RichardDuncaneconomics.com, and he's really influential. For example, not long ago, he presented his economic policy proposals to congressional members of the House Ways and Means Committee. Hey, it's a warm Get Rich Education. Welcome back to the incomparable Richard Duncan.

Richard Duncan 5:39

Thank you, Keith. Thank you for having me back on.

Keith Weinhold 5:42

I don't know if you and the audience are ready for this. This is some perspective. It recently made news when the U.S. hit its national public debt milestone of $40 trillion. When Richard made his GRE debut here in November of 2014, it was $18 trillion. That national debt has more than doubled since you were first here, Richard.

Richard Duncan 6:07

That's right. The government has been playing probably the leading role in keeping the economy growing, and a couple of times since then has played the sole role in preventing a new Great Depression in the aftermath of the crisis of 2008 and during COVID, it's the massive government budget deficits, often more than a trillion dollars a year. Last couple of years, it's been 1.8 trillion dollars. That's been driving the economy, and whenever it needs some additional support, the Fed steps in and creates a few trillion dollars here and there, and combined they've been keeping the economy growing and, in fact, booming. And wealth has absolutely exploded as a result of the government spending and the Fed money creation. In 2008, the total wealth of all the Americans net worth $60 trillion. Now, it's tripled to $180 trillion. That that is a direct result of the government's intervention through budget deficits and paper money creation by the Fed.

Keith Weinhold 7:14

I will call that the world's least desirable investment portfolio minus 40 t. That is one way to think about it, but when you bring up interventionism, you know something I shared with the audience about a month ago, Richard. It is just remarkable to think about all the crises we've had just since 2020. We had COVID, we had Russia's invasion of Ukraine, we had Israel, Gaza. We had tariffs. Now we've got the war in Iran, and what is the result of all this? Largely due to government interventionism. Oh, both the stock market and real estate market in the U.S. are near all-time highs.

Richard Duncan 7:54

Who would have imagined? But things work very differently now than they did in the old days when money was backed by gold, and the Fed and the government played a much smaller role in the economy. It's a different world now. That was capitalism. This is creditism. Our new economic system is driven by credit growth, and whenever necessary, the government steps in with massive budget deficits, and the Fed steps in with massive money creation to make sure that credit keeps expanding and the economy keeps growing, because if credit doesn't keep expanding, if it even dips a little bit like it started to in 2009, then the whole bubble implodes and we repeat the 1930s Great Depression, probably followed by what happened in the 1940s.

Keith Weinhold 8:39

This is interesting. When you were first here 12 years ago. You talked about how society isn't so much capitalism that it's creditism, and you expounded on that. And before we're done, I know that we have now morphed into a new ism, post-creditism that Richard is going to share with us, it's fascinating. But Richard, since you were last here, the Iran War is new. It's been going on for over six months now. So I'd like to get your thoughts on that, and principally, if the Iran War is going to create lasting inflation or only a temporary energy spike. What are your thoughts?

Richard Duncan 9:20

Let's broaden this out. I know that your listeners are very interested in in real estate, and of course that's very impacted by interest rates. And interest rates are impacted, of course, primarily by inflation. So it is true that the Iran war is pushing up energy prices, and that's pushing up inflation. It's not just Iran alone. Before that, we had trade tariffs, and that's pushing up inflation. And on top of that, we've simultaneously got this extraordinary AI investment boom, and the investment by the hyperscalers is just mind-boggling. The four biggest hyperscalers-Amazon, Alphabet, Microsoft, and Meta-they're expected just the four of them to invest something close to $750 billion this year. 750 billion, just four of them. Now, to put that into perspective, the U.S. military, in one year, the most recent year, only spends half that much on procurement and research and development, roughly 320 billion. You've got these four hyperscalers spending twice as much as the U.S. military does on procurement and research and development. That is just hard to wrap your mind around, and of course, that's pushing up everything from the cost of memory chips to electrical equipment, the cost of electricity itself, power generation equipment, and all the kinds of materials that go into building data centers. So that's another source of inflation. And then there is this wealth effect that I just referred to a minute ago. Wealth has tripled from $60 trillion to $180 trillion since 2008. All that wealth is giving a lot of rich people a lot of money to spend on a very large scale, and that also is inflationary. So all of those things are inflationary, and none of them seem to be going away in the immediate future. Now, on top of that, the inflation is not the only thing that is affecting the interest rates. Other things are affecting the interest rates as well. For instance, the budget deficit this year looks like the U.S. budget deficit is going to be quite close to $2 trillion. So that will be $2 trillion of government borrowing, and this doesn't look like it's going to go down anytime soon either. President Trump is requesting $1.5 trillion for the total defense budget in fiscal year 2027, which starts in October. That's up from just $900 billion in fiscal year 2025, so that's a huge increase in military spending, which makes the percent-

Keith Weinhold 9:20

Increase plus, y

Richard Duncan 10:52

Going to keep growing, and that spending will be inflationary as well. But so the government is going to have to borrow, so the demand for money from the government is enormous, and as I've just mentioned, because of the AI boon, the hyperscalers and many of the other companies in the AI industry or related to the AI industry, they're also tapping the bond market on a very large scale. So demand for borrowing from these AI-related companies, the demand is pushing up interest rates. This is not directly related to inflation, so you've got a lot of demand for borrowing from the government and from the private sector related to artificial intelligence primarily. So that's on the demand side for money, and on the supply side, well, the United States is not making a lot of new friends these days. We seem to be losing friends pretty quickly, and many of the people who were very enthusiastic about buying American government bonds in the past are becoming increasingly reluctant to do so. Most of them still are. Most of them don't really have any viable options, but on the margin, there are fewer friendly buyers of our debt, and so fewer people willing to buy the debt also puts upward pressure on U.S. interest rates. So recently, the 30-year U.S. government bond hit a 19-year high at 5.33% That's a very high number, and this has spooked the Treasury Department. Treasury Secretary Besant has begun doing some very unusual things that suggest that he's very concerned. He has helped stop the yen from weakening by selling some euros that the U.S. government owned and buying yen. He did this to make the yen stronger, and this meant that Japan wouldn't have to sell its U.S. government bonds in order to have dollars to use to buy yen to make the yen stronger. So that was a strange move.

Richard Duncan 9:20

And then more recently, he's announced that the Treasury Department is going to start buying twice as many long-dated bonds as it has been doing. Each operation now, the Treasury Department has been buying $2 billion worth of bonds at the long end and financing it with short-term borrowing. So borrowing at the short end, the say two-year bonds, which have a much lower interest rate, and using that money to buy 10 or 30-year bonds that have a higher interest rate, in order to push up the bond prices and push down the bond yields at the long end, to try to hold down the 30-year bond yield and the 10-year bond yield, which of course directly affects the mortgage. This is beginning to seem like there's some degree of, well, let's call it perhaps not panic, but deep concern in the Treasury about how high interest rates in the U.S. are going, and just moving forward with this idea, all of these pressures, the inflationary pressures are not likely to go away anytime soon. The demand for borrowing is not going to go away anytime soon. So there's going to continue to be this upward pressure on interest rates. And I think ultimately, what we are going to see is another big round of quantitative easing from the Fed. The Fed is going to have to step back in and announce that it's going to create a great deal of money one more time, and use that money that it creates to buy government bonds to push up their price and to drive down their yield. And we shouldn't forget that already the Fed is currently printing, creating money. It launched a new program. What is it called? Reserve management purchases. This was a program they announced in December last year, where they were just going to create some money and inject bank reserves into the financial system, so that they could manage reserves at a good level, so everyone would have plenty of liquidity. Just since December, they have created $210 billion. This is kind of going under the radar, but $210 billion since December is not an insignificant amount of money.

Richard Duncan 14:49

If the budget deficit this year turns out to be 2 trillion, then that's financing 10% of the government's budget deficit, right? More than 10% So we've already got a significant amount of money creation by the Fed going on currently, and that's not enough to prevent the yields from moving sharply higher. So I think what we're going to get is another much bigger round of quantitative easing in the not too distant future, and that's going to have a lot of ramifications.

Keith Weinhold 17:00

That's a really interesting insight, and Richard, one word keeps popping into my head as we have this discussion. Okay, inflationary pressure correlates with higher interest rates, sure, but how much are these high bond yields, which flow right over to our mortgage rates, a result of an erosion in trust. I'm thinking about trust

Richard Duncan 17:24

to some degree, yes, but not overwhelmingly. The reality is, at the end of the day, there is a certain amount of money in the world that has to be invested somewhere, and that is the most important fact to understand. There is a pool of money; it keeps getting larger, and it has to go somewhere. And U.S. government bonds are considered the safest place for it to go. For instance, the United States has a very large trade deficit with the rest of the world. For the last two years, the current account deficit, which is more or less the trade deficit, has been 1.2 trillion dollars a year. It's easier to understand it as a trade deficit. That's been throwing off 1.2 trillion dollars into the surplus countries. The surplus countries sell things in the United States, countries like China and Vietnam and all the others. They sell things in the United States that they make at home. They get paid in dollars. They take their dollars back home to China and Vietnam and all the other countries, and what do they do with the dollars? They own dollars. They've got to do something with those dollars. They're getting 1.2 trillion more dollars every year. Now, the thing they do with it primarily is they buy treasury bonds with it, and so there is an inherent and growing demand for treasury bonds. You may be thinking, okay, they could take those dollars and they could convert them into euros. That's true, they could, but whoever they buy the euros from, they then own dollars, and they would need to buy U.S. dollar-denominated assets with them. The main driver behind the buying of Treasury bonds is just the fact that there are so many dollars in the world, an increasing amount of dollars outside the United States that need to be invested in U.S. dollar-denominated assets. People can lose confidence in "quote unquote, but what are they going to do with their dollars? It has to go somewhere, and so it ultimately ends up going round and round, and an enormous amount of it ends up in U.S. Treasury bonds, and that's not going to change so long as the U.S. has a very large trade deficit with the rest of the world. The rest of the world is going to keep accumulating dollars for that reason, and they're going to keep accumulating Treasury bonds for that reason.

Keith Weinhold 19:44

Well, what do these effects mean for real estate, Richard? I mean, which force you think will ultimately win for housing here with this increased inflationary pressure? Is it more of a damaged affordability problem, or do we see rising? Placement costs that continue to help float real estate values up.

Richard Duncan 20:05

Real estate prices, home prices, have not been performing very well over the last year to two. Pretty flat, unlike in prior years, immediately after COVID when they were booming. I suppose that's what we're going to continue to see for some time. If interest rates remain high, the affordability is not there. But if we do get this new round of quantitative easing, which I think is a real possibility, then that will effectively push down the interest rates, making home affordability better. And at the same time, by creating more money, that does push up asset prices across the board. So over the long run, I do believe that real estate is a very good investment, and also it can be a very good investment from the point of view of providing diversity in your portfolio. I'd like to focus in particular on it can be an inflation hedge. So, if you buy a house and use a say a 30-year fixed mortgage, and then we or a 15-year fixed mortgage to pay for a significant part of that purchase, and then we do get inflation, then the inflation eats away your mortgage. Your mortgage evaporates because of the inflation, so in that way you're somewhat protected from the risk of future inflation by having inflation destroys your debt. In other words, so that helps. So I do believe that buying houses, I think rental income is a very good investment, particularly houses on a piece of land buy the house with a fixed rate mortgage. You rent out the house, and over 10 to 15 years, the house pays for itself, and it keeps appreciating in value over time. Decade after decade, it will become increasingly valuable over the long run, and you'll have also a supply cash flow, and you'll have this inflation hedge that I just described. So I think owning rental property that is on land, I'm not so keen on buying condos. There's no limit as to how many condos can be built in the air, but there is a limited amount of land in the world, and so land is as good as gold because if gold goes up; the land will also go up for the same reasons. So I think owning rental property is a very important part of having a broadly diversified portfolio, which is usually the best thing for most people to do to have a broadly diversified investment portfolio.

Keith Weinhold 22:37

Yeah, in this era of both war and increased interventionism, yeah, we still have a resource here, real estate that is scarce, that is necessary, and is built with this basket of goods and commodities constituting that replacement cost.

Richard Duncan 22:53

I agree.

Keith Weinhold 22:55

Well, Richard and I have a lot more to talk about when we come back, including what phase of the economy that we're in post-creditism and a lot more. You're listening to Get Rich Education. Our guest is the publisher of Macro Watch, Richard Duncan. I'm your host, Keith Weinhold.

Keith Weinhold 23:12

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Robert Helms 24:44

Hey everybody, it's Robert Helms of the Real Estate Guys Radio Program. So glad you found Keith Weinhold and Get Rich Education. Don't play your daydream.

Keith Weinhold 25:04

Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're talking with Richard Duncan. Check out him and his work at RichardDuncanEconomics.com. So much interesting stuff has happened in the macroeconomic world since we last had him here with the Iran War, with the AI arms race heating up, and with hitting that milestone of $40 trillion in total public national debt. Which, by the way, that $40 trillion-that is more than the combined debt of Germany, Japan, France, Italy, the UK, and Canada. That's basically the entire rest of the G7 just to try to get your head wrapped around that $40 trillion number, and you know, Richard, when it comes to the government, their income and their expenses and their assets in their debt, some wonder, including me, if the government can just print its own currency, then why must they collect taxes from us?

Richard Duncan 26:04

Okay, well, to understand the answer to that question, it's necessary to understand that it wasn't always possible for the government to print its own currency. Up until 1968, 1971, the Fed was legally required to back the dollars it created with gold, and the United States had the obligation to allow other countries to convert the dollars they accumulated into U.S. gold. So up until then, that wasn't a possibility for the government to finance its spending by money printing. And so, over the centuries that preceded, the government would tax the people to obtain the money that it needs for spending. So imagine today: here we are. The government now is spending about $7 trillion a year, and its tax revenues are about $5 trillion a year. So if it suddenly said, "Okay, we're not going to tax anyone anymore, that would mean that people would have an extra $5 trillion to spend, and if the people started spending $5 trillion, we would have hyperinflation, because there's only a limited amount of industrial capacity in the United States, or even in the world for that matter. It couldn't absorb a $5 trillion of additional spending from households and businesses, so it's not that they can't technically create the money as much money as they want to pay for everything they want. The constraint is not money creation technically; it's the inflation that it would produce if they just stopped taxing everyone and just created money instead. So that's the reason they can't.

Keith Weinhold 27:46

Just slowly taper it away and give people some income tax relief. Why can't they do that?

Richard Duncan 27:52

Well, that's what they've been doing. Taxes are far lower now than they were under when President Reagan took office, and that's one of the reasons we have $40 trillion in debt.

Keith Weinhold 28:03

Okay, but that is how the income and expenses look on an annual basis, right, Richard? This is how I think of it. Like the United States basically has 5 trillion in annual income, much of it from personal tax collection, and 7 trillion in annual expenses. That's how we get to the annual deficit of about 2 trillion, which rolls into that $40 trillion of overall debt.

Richard Duncan 28:30

That's right. What you said is correct. But we would have much more than $5 trillion income from taxes had the government not reduced the tax rate so often and so radically, starting in the early 1980s under President Reagan, if taxes hadn't been cut so sharply, we wouldn't have a two-trillion-dollar budget deficit, $40 trillion of government debt. So they've already been tapering the amount that they tax by cutting tax rates very sharply over the last decades,

Keith Weinhold 29:02

I guess a lot of people, admittedly me included, haven't been thinking about it that way. Maybe because it's painful, and I do write checks to the IRS. But when we talk about this propensity for continued inflation, one component of this is what's happening with the AI arms race, and I know you've looked at this closely. You know, because one thing I think about is, well, wait, will the AI arms race actually be deflationary over time because it lowers production costs and makes us more efficient, or is it going to be inflationary because it requires enormous capital and electricity and infrastructure in the building of these data centers. So you know I can see it going either way with the AI arms race, inflationary or deflationary. But since you studied it a lot, including talking about it on macrowatch, tell us more about the AI arms race and what this all means, Richard.

Richard Duncan 29:59

So yes. On your point that you just made, in the short term, it looks like the AI boom is going to be inflationary. Yeah, it's driving up electricity prices, land prices, and all of the things that we discussed before. Everything that goes into making artificial intelligence intelligence, including memory chips, which drive up the cost of your iPhone and iPad. So it's inflationary in the short run, but over the long run, it could probably and probably will be quite disinflationary or even deflationary. I think that's several years away. Now, moving on to the next question, the AI arms race. I think it's very helpful to understand the world around us by putting it in the context of how our economic system has evolved since dollars ceased to be backed by gold. 1968, the Fed was no longer required to back dollars with gold. 1971, President Nixon said, "Sorry, Europe, we we said we would let you convert your dollars into gold, but we changed our mind and you can't. So after that, there was no longer any gold backing for the dollar, and here are a list of things that have happened as a result of that change. Our huge trade deficits couldn't have happened if the dollars were backed by gold. The huge budget deficits that we have couldn't have happened. The Fed couldn't have created trillions of dollars through quantitative easing. Inflation rate has fallen from the 1980s, from the the mid teens to well below the Fed's 2% inflation target for most of the last 20 years, and wealth in the United States has exploded, as I mentioned, from 60 trillion to 180 trillion. That wouldn't have happened if dollars had remained backed by gold because credit has exploded. Total debt or total credit, two sides of the same coin. Total debt in the U.S. It's government debt, household debt, corporate debt, Fannie Mae, Freddie Mac debt, all the debt. It first went through $1 trillion in 1960. Now it's 110 trillion. So 110 times increase in my lifetime in total debt. That wouldn't have happened if dollars had remained backed by gold, and because of all of that credit expansion and the massive trade deficits we had with the rest of the world through globalization occurred, and that allowed Asia to industrialize, and Asia wouldn't be industrialized as it is now. China wouldn't be an economic superpower as it is now had dollars remained backed by gold, because it wouldn't have been able to grow through export-led growth. And so, China, instead of looking like it does today, it would look like it did in 1970, basically being a very poor third world country, and globalization has pulled hundreds of millions of people out of poverty.

Richard Duncan 32:47

They would still be in poverty had dollars remained backed by gold. The Soviet Union probably would still be around because the U.S. under President Reagan wouldn't have been able to to spend so much on the military that it bankrupted the Soviet Union trying to keep up with us, and finally, China wouldn't be the national security threat that it's become now because it wouldn't have had a trade surplus and it wouldn't have had any economic growth to speak of for the last 50 years. That's the world that we're living in now. The world we live in now is the direct result of dollars no longer being backed by gold, and to understand the world around us, you have to understand that that's the starting point. Now, coming to your question, this explosion of wealth that has been created under the system that I call creditism-we did have capitalism. It was driven by saving and investment, Capital accumulation, hence capitalism and investment that drove capitalism. That's not how our system works. Our system is driven by credit creation and consumption, and more credit creation and more consumption. That's creditism. It used to be driven by private sector credit growth, but the private sector became too heavily indebted in 2008, and they blew up, and that almost resulted in the complete collapse and bankruptcy of every bank in the United States and probably most of the banks around the world as well. So the government had to step in, and since that time, it's been government borrowing primarily.

Richard Duncan 34:17

This driven creditism and kept credit expanding with the help of the Fed, so this has been the evolution of creditism and has produced extraordinary amounts of wealth. So it's had two consequences that we need to focus in on now. For one, I've mentioned already, it turned China into an economic superpower, which is now on the verge of overtaking us, not just economically, but also technologically and militarily, it's become an extreme national security threat to the United States. But the second thing that has occurred, the creation of all of this wealth has provided the funds that have allowed a. Technological revolution to occur so quickly, this AI revolution that we're now living through, that is the direct result of the ample liquidity that has been created and flowing around the world, originating largely from the Fed's printing press and the government's budget deficits. That's created trillions and trillions and trillions of dollars of wealth that wouldn't have existed otherwise, and that wealth has gone into funding this development of data centers and the technology that's created the artificial intelligence. Now we are experiencing this AI revolution, and it's become quite apparent to everyone that whoever wins the AI arms race is going to rule the world. We're on the verge of machines becoming more intelligent than humans, and then after that point, through self-training and self-improvement, going on 24 hours a day, they're going to become exponentially more intelligent than humans very quickly, so whoever wins this race is going to have dominance of every other country in the world. So, as creditism has evolved, it has created a national security threat in China and has created artificial intelligence. And as a result of the two combined, we now have this artificial intelligence arms race with the United States that must win. That's why President Trump is calling for a 1.5 trillion dollar defense budget.

Richard Duncan 36:30

So this is one of the main themes that MacroWatch has been focused on this year. I've done a series of videos on the new defense spending boom, looking in one video at the traditional titans of defense like Lockheed Martin, RTX, Boeing, in another video looking at the new up-and-coming Silicon Valley challengers in the defense industry, companies like Andrel, Palantir, and most important of all, SpaceX. This is now the driving force in the economy. the The absolute necessity of winning this AI arms race is going to require much greater government spending on the military, and it's going to require what we're seeing extraordinary amounts of money being invested in developing artificial intelligence because whoever gets there first wins, and whoever doesn't is going to be subjugated by the winner. So that's where we are. So that brings us up to we've been discussing the change from capitalism into creditism, and we've seen how creditism has evolved from being first driven by private sector credit to later being driven by government sector borrowing and spending, now leading to this AI arms race, which I think we're now moving toward a different kind of economic system beyond creditism. So let me back up just a minute and say that economic systems are best defined by the constraints that limit what they can do. So we've been talking about capitalism. Capitalism's main constraint was the requirement that money be backed by gold, and when that constraint, when that gold-backed money constraint was removed, the constraint was gone. The economic system evolved into a different kind of economic system. Creditism has created extraordinary amounts of wealth and growth since early 1970s. This is not the first time economic systems have evolved. If you look back through history, there have been many different kinds of economic systems. They've all been defined by the constraints that binded what they could do. If you go back to hunter-gatherer economic system, that economic system was constrained because the people didn't have tools for cultivation or any way to store the food that they created for long-term storage, but once they developed that those tools and the ability to store food, those constraints were removed and they evolved into a different kind of economic system. Ultimately, into feudalism. Feudalism was an economic system that was constrained by very poor roads, so there was very little transportation. There were no banks, so no banking system or credit, and there was very limited legal social mobility.

Richard Duncan 39:28

But eventually, cities developed, and because of cities, trade flourished, and that removed the constraints that had defined feudalism. Okay, so fast forward, capitalism was constrained by gold-backed money. When gold was removed, we moved into creditism. Now here we are in creditism, late-stage creditism, and we're seeing this phenomenal expansion of artificial intelligence. So every economic system throughout history has. Had two constraints in common. There have been labor constraints, a limited labor supply, and there has been the constraint of limited human intelligence. We're now, thanks to artificial intelligence, on the verge of removing those two constraints that have limited every economic system up until today, when artificial intelligence is embedded in humanoid robots, that's going to remove the labor constraint. We will no longer have any labor constraint. Robots will be able to produce all the labor and then some that's required. So there goes the labor constraint, and when we hit superintelligence, that's going to remove the constraint of human intelligence that has bound economic systems. So those have been the two primary binding constraints on every economic system so far, and they're just now about to be removed by artificial intelligence. We're moving into a new era without intelligence constraints and without labor constraints, and this is going to radically change everything. When those constraints are removed, creditism is going to evolve into an economic system that's no longer driven by credit creation. It's going to be driven by intelligence creation, knowledge creation, or an explosion of cognition. So I call the new system that we're moving toward cognitism, because rather than being driven by credit as creditism is, it's going to be driven by exponential expansion of intelligence or cognition, and it's probably going to create undreamt of wealth, but it's going to completely change from bottom to top everything about the world and society and social relations that exist today, and that is what we're very quickly moving into over the next 10 to 20 years. That that's where we're going to go, and I believe it deserves a new name. So I've coined the term cognitism to describe this new economic system. The post-creditism world is cognitivism.

Keith Weinhold 42:12

Wow, this is massive. Ever since we met, you talked about creditism, and really, that's the economic system that we live in, not capitalism, so we're on the brink again of moving from creditism into cognitivism, because oftentimes these forces and their change are defined by having the constraints removed, and we're on the brink of removing the labor constraint and the human intelligence restraint from creditism to move us into cognitivism over the next 10 or 20 years. I'm just reviewing what you said as I'm thinking this through, Richard. Talk to us at least a little about what the ramifications are for us, just everyday people and investors with this cognitimism economic system.

Richard Duncan 43:02

It's very difficult to guess what the consequences are going to be. They're going to be not only economic, but they're going to very quickly become political, and the political consequences are difficult to guess how they will play out. But it does look like when robots can do all the manual labor, and machines can do all of the intellectual work on a much more accurately, much more rapidly, much more flawlessly than humans can. There won't be any need for humans to have work unless legislation is in place to ensure that they do, and if they don't have work, then they're going to not have any income. And if they don't have any income, they're going to start being very unhappy, and they're going to start rioting, and governments are going to begin to fall, and we don't know how that's going to play out. So there's going to have to be arrangements made to ensure that people do have enough income to benefit from all of the extraordinary wealth that could be created through limitless labor and limitless intelligence, but to work in a way that can satisfy our wildest dreams and beyond our wildest dreams is going to be a matter of restructuring the political economy, if you will, to ensure that people benefit from this technological revolution that is now speeding up.

Keith Weinhold 44:30

Yeah, I would say all we do know is we don't know and how it's going to turn out. But you know whether it's been tractors replacing horses or whether it's been the advent of the assembly line, or whether it's been the advent of the internet, people always say it's going to destroy net jobs, and historically, it really hasn't.

Richard Duncan 44:53

You're right, but the replacement of horses with automobiles didn't really work out so well for the horses.

Keith Weinhold 45:00

So, is there any way we can think about this in order to stay nimble as investors and everyday people, Richard? As we move into cognitism.

Richard Duncan 45:10

Absolutely, everyone needs to subscribe to Macro Watch, and they'll be able to follow it very closely there as I map it out as it unfolds from month to month.

Keith Weinhold 45:22

They should, and it's fascinating, and you've really been on the cutting edge of that. Tell us more about subscribing to Macro Watch, something that a lot of listeners should be interested in.

Richard Duncan 45:33

So my background is has been in finance. I started working in Hong Kong in 1986 as a securities analyst, I later on became an economist and then a strategist. I worked for the World Bank for a couple of years in Washington. I was the head of global investment strategy in London for ABN AMRO Asset Management. So my background is in finance, and I have spent most of my career living in Asia for the last 40 years, primarily in Asia. Along the way, I've written four books. The first one was the Dollar Crisis back in 2003. The most recent one was The Money Revolution in 2023. So my background is in finance. But 13 years ago, I launched Macro Watch. Macro Watch is a video newsletter. Every couple of weeks, I upload a new video. It's essentially me making a PowerPoint presentation discussing something important happening in the global economy and how that's likely to impact asset prices. So it's essentially become a compendium of the global economy. Essentially, everything that has happened in the last 13 years at the macro level that matters is discussed in these macro watch videos. For instance, there is a complete history of everything the Federal Reserve has done since it was founded in 1913. There is a complete description of government debt from the beginning, the increase in government debt and budget deficits. It explains things like how the Fed actually creates money, what are bank reserves, what is Japanese monetary policy, what is European monetary policy. All the major macroeconomic developments are described there and are available to subscribers every two weeks. They upload a new video, and so if your listeners would like to check it out, my website is richarddunkeneconomics.com. That's richarduneconomics.com, and if they'd like to subscribe, hit the subscribe button. And I'd like to offer everyone a 50% subscription discount.

Keith Weinhold 47:36

Thank you.

Richard Duncan 47:36

They'll be prompted to put in a discount coupon code if they use the discount code GRE, like Get Rich Education, they can subscribe at a 50% discount. They'll find it very affordable, and at the very least, they can sign up for my free blog while they're there, and they can follow my work that way.

Keith Weinhold 47:57

It is fascinating the AI arms race poised to have us completely change economic systems from criticism to cognitism. Richard, is there any last thing that you would like to leave us with? Whether it has something else to do with AI, maybe I didn't think about asking you, or something with the Iran war and the inflation, or anything else in the economy. Any last thought for what we should do or be aware of?

Richard Duncan 48:24

One thing, of course, I think is very important is for everyone to learn to use AI as much as they possibly can. It's easy to use, and it will teach you how to use it. And as we evolve into this new world is going to be crucial to make use of this most important tool humanity has ever had-the ability to use AI. This suddenly gives you access to all the world's knowledge. All you have to do is ask, and it will tell you in a very friendly way. So, by being able to use AI, you'll be in a much better position to survive the transition and prosper in the decade ahead.

Keith Weinhold 49:09

That is an actionable way to stay on top of it, Richard. It's been valuable as always. Thanks so much for coming back onto the show.

Richard Duncan 49:16

Thank you, Keith. I've enjoyed it.

Keith Weinhold 49:24

Yeah, keen insights from Richard as always. Yeah, the U.S. sure has been making enemies the past couple years. That could make other nations less likely to buy our debt, and then in turn, it takes higher interest rates in order to attract bond buyers. Well, that in turn increases mortgage rates. But to some extent, other nations have to buy our debt. Richard says that a bigger round of future QE is a distinct possibility. That is code for money printing. That's clearly. Inflationary, but few seem to know we've already been involved in liquidity operations since last December. Whether that's called QE or something else, it is taking more government spending to keep up with the AI race. That's inflationary too. What about that? When horses were replaced with cars. How did it work out for the horse? I don't know if that made it better or worse for the horse. Maybe horses were out of work, but then they got to live free. Will AI make that very predicament apply to humans? Nobody knows. The economic system will have moved from creditism to cognitism when the economy is no longer driven by credit creation but intelligence creation, from RichardDuncanEconomics.com, you can hit the subscribe to MacroWatch button and enter the discount code GRE for a 50% discount. Just about everything that you heard today is poised to drive mortgage rates higher, not lower. Big thanks to Macro Watch Mastermind Richard Duncan today. Next week it's a more real estate centered show. I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 51:21

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

Keith Weinhold 51:49

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

Keith breaks down the "baseline trap" in investor psychology, showing how rising income and lifestyle creep can quietly undermine the feeling of financial freedom.

He then shares a grounded outlook for U.S. home prices, outlining how inflation, AI-driven job growth, limited inventory, and strong homeowner equity are shaping the market.

He closes with a data-driven look at where population growth is heading through 2040, especially in Texas and Florida, and what that could mean for long-term real estate demand and investing strategy.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. Investor psychology often falls into the baseline trap. Learn what's going to happen to home prices over the next year. Then more than half of America's population growth until 2040 will occur in just these two states. All today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth

Speaker 1 1:34

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:50

Welcome to GRE from Jackson Hole, Wyoming, to Jackson, Mississippi, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education, and Happy Labor Day. Let's talk about your investor psychology, because as you grow your wealth and your portfolio size, there is a trap that you will almost certainly fall into, and I'm not infallible. I've fallen into this trap to some extent too. That is the baseline trap. It's the tendency for every improvement in your income, your wealth, or your lifestyle to become your new normal. Once this happens, the improvement stops feeling like progress, and you need even more just to feel equally successful, if you get used to flying first class and then you have to drop back to coach again, it feels less like flying and more like being deported. Psychologically, we fall into the baseline trap because the human mind evaluates Life relatively, not absolutely. We don't simply ask ourselves how good is my life, how good is my situation. Instead, we ask how does this compare with what I've recently experienced, what I expected, and what others have, and there are a number of forces that drive the baseline trap. One is hedonic adaptation. Hedonic means pleasure seeking. People rapidly adjust to improvements. The first month of receiving a new $5,000 in passive income that feels transformative. After two years, it feels completely ordinary. The income didn't become less valuable. Your nervous system simply stopped registering it as new. Yesterday's luxury became today's wallpaper. A force driving the baseline trap is a shifting reference point. Gains and losses are measured against a mental baseline. Once your portfolio reaches, say, a $2 million net worth, well, your mind soon begins treating the $2 million as mine. You're like, hey, this is mine now, even if much of it came from recent appreciation. A decline to 1.8 million, therefore, feels like losing 200k rather than still having substantially more wealth than you did just a few years ago. Well, instead, you're only focused on the 200k paper loss. Then there's loss aversion psychologically. Losses generally hurt more than equivalent gains feel good. After a higher standard becomes normal, surrendering and. Any part of it feels like some blood-curdling loss. That's why reducing spending from 20k to 15k per month that can feel painful, even if 15k once felt luxurious to you.

Keith Weinhold 5:16

There's also the lifestyle creep component. People convert variable gains into fixed commitments. What do I mean? I mean like a strong income year. Oh, pretty soon that becomes a larger mortgage. Rental cash flow that becomes a vehicle payment. A bonus that becomes private school tuition, portfolio appreciation. Well, that supports new borrowing. See, pleasures that were once optional have now become obligations. And you got to ask, wait, how did that happen to you? You're supposed to have a life of options and not obligations. That's what financial freedom is supposed to be. The baseline then is no longer merely psychological; it becomes embedded in real monthly expenses. Then there's also the dangerous driver of the baseline trap that's called, oh no, social comparison. We commonly measure success against our peers, but instead, what you should do is measure it against your former self. Because as you become wealthier, see your comparison group changes too. If you've got five rentals, you soon stop comparing yourself with someone that owns none, you might even begin comparing yourself with people who own 50 of them, and why not? It's natural, after all. That is where you want to go, despite enormous progress. See, that's how you can feel left further behind. Then there's the recency bias. Your mind gives enormously disproportionate weight to recent experience. A few years of 15% returns, like what happened in 2021 and 2022 in real estate. Oh, you could begin expecting 15% after rapidly appreciating real estate, continued appreciation feels normal. A favorable cycle gets mistaken for the natural baseline, and then when conditions normalize, ordinary performance feels rather defective. Then there's identity inflation. That's a trap. This is when accomplishments become woven into your very identity, like I'm a multi-million-dollar entrepreneur, or I own 20 properties, or my income always grows. Okay, once success becomes identity, maintaining the baseline feels necessary just to preserve your self worth. Now, with this condition, see a temporary setback. It doesn't merely affect the numbers.

Keith Weinhold 8:08

It feels like evidence that you're becoming a lesser person, and the brain rewards progress more than possession. Humans are energized by movement toward a goal, reaching the goal often produces less lasting satisfaction than you expect. Buying the 10th rental creates a dopamine hit, and owning it three years later does not. The investor therefore creates another target, not always because another property is even needed, but because continued pursuit restores the feeling of progress, success erases the memory of constraint. As your wealth grows, it becomes difficult to remember emotionally what financial insecurity even felt like I mean you might intellectually remember earning 60k, but you no longer experience today's 300k income in comparison with it. Your comparison point quietly changes from your former life to your best recent year. The paradox is that your circumstances improve faster than your experience of them? The goal is not to stop growing; it is to prevent every improvement from becoming a new psychological necessity. Keep growing your means, but don't let success redefine enough every time you achieve it, don't let it redefine enough. Let's say you acquire rentals and you do generate another 5k per month. The trap is that your spending and expectations gradually rise by 5k. You're wealthier, but you don't. Don't feel freer. Instead of investments buying freedom, they merely finance a more expensive baseline, and it can distort how you view your portfolio. 10 properties once felt like an extraordinary accomplishment, and soon 10 feels ordinary, and 20 becomes necessary. You keep moving the finish line, and this is closely related to hedonic adaptation and lifestyle creep. But it extends beyond spending because your definition of enough keeps on rising. So the antidote certainly is not living small forever-it's deliberately separating the growth rates of your assets and your lifestyle. What you want to do is grow your means faster than you grow your baseline. Really, that's the key. You're gonna be more satisfied. Instead of simply living below your means, you sure do want to grow your means, but don't let every gain become a permanent new obligation. Let some additional cash flow purchase you things like time, resilience, and optionality-not merely nicer recurring expenses. If your lifestyle rises as fast as your passive income, you're wealthier, but no freer.

Keith Weinhold 11:28

So here's what you do: when your income rises, let your lifestyle rise about half that much. Otherwise, if you upgrade your lifestyle too much, say that you receive an extra $3,000 in monthly rental income, then you add in a luxury car payment, better vacations, and more expensive restaurants. Pretty soon, that extra 3k that feels necessary instead of liberating, and then there's also the record income comparison part of the trap. Say your business earns $1 million during an exceptional year. The next year, it earns a still impressive 850k, but you experience it as failure because the unusually strong year became your new baseline. Don't let that happen. You can compare yourself to others that can be motivating, but the more important comparison is to the former you. Now, another way that investors fall into the baseline trap in real estate is how an exceptional market becomes the standard. Say that you bought rental properties in 2012. Well, 2012 was perhaps the best time to buy real estate in generations. This was shortly after the global financial crisis, so there was this confluence of low prices, low interest rates, strong cash flow, and you had little competition as well. I mean, you had it all in 2012, and those deals performed spectacularly in today's market. Available properties produce lower initial cash flow, but they could still deliver respectable total returns through appreciation, rent income, principal paydown, tax benefits, and inflation profiting. But a losing investor rejects all of those things because they aren't as attractive as the once-in-a-generation deals of 2012, or even the rock-bottom low-rate days of 2020, they fell into the baseline trap. The trap here is that an unusually favorable period for real estate became the new benchmark. It's sort of like how last week I told you about how the deal structure always changes over time from the Reagan administration until today. Today the deal is with Burr properties, and it's also with buying new builds with rate buydowns. But see, in 2012 there were almost zero available new build properties that were created for investors to rent to others.

Keith Weinhold 14:25

Over time, with these new builds that you're adding now, you're going to have fewer maintenance and repair expenses. Tenants tend to stay in new builds longer, and new builds appreciate better over the long run. See, I wasn't getting any of those benefits in 2012, and I bought rental real estate in 2012, and I bought real estate recently as well. Not falling into the baseline trap, because today it's still difficult to find any investment bet. Than residential real estate with a loan, it is a scarce asset that people are going to continue to need. So here we are today, about 15 years on from 2012. Water market conditions like now. Let's talk about that and what can we expect for the next year? National home prices keep rising, but they're only about one half of 1% higher than they were a year ago. I mean, that's an appreciation level with the enthusiasm of someone attending a seven a.m. meeting. I do expect national home prices to keep rising modestly over the next year. Let me tell you about why, and then what the drivers are. And to be clear, we're talking about single-family homes up to fourplexes here. I'll discuss apartments later today. Well, the drivers for continued price growth are many of the same reasons that home prices are up just a little since last year. There are four of them. These four are inflation, the AI boom, short inventory, and a lack of distressed sellers. So let's unpack all of these four factors that I've identified for putting a floor underneath home prices, inflationary pressure is poised to raise replacement cost, energy, wages, and tariffs make those inputs more expensive, and the more war we have, the more inflation we have. A home is a bundle of land, labor, lumber, concrete, copper, and all sorts of energy inputs, plus 14 trips to Home Depot because someone forgot the correct nails and screws. That's what a home is. Recent home price growth it has lagged today's 3.4% CPI inflation rate. So again, we're not even talking about inflation-adjusted gains here. AI that creates local housing heat. It's not so much a nationwide driver of home prices. And in a moment, I'll tell you the top five housing markets for AI-led home price growth, but how does AI investment push up home prices anyway? How does that happen? People are getting high salaries, signing bonuses, and stock options that produces well-funded buyers. They make big down payments, or they even pay all cash for homes, and when a buyer pays all cash for a home, they can pay absolutely any price because they don't have to get an appraisal that comes along with a loan for a financed property.

Keith Weinhold 17:53

That's how all cash buyers can really push up prices. The growth in AI companies that has really helped push the S and P 500 higher that fuels a wealth effect nationwide that makes everybody feel wealthier regardless of where you live as long as you're invested in the stock market but the localized effects with those higher AI wages and signing bonuses in order they are most potent in San Francisco, San Jose, Seattle, New York City, and Boston, and none of those are good cash flow investor markets. Still, short housing inventory is contributing to higher prices, and hey, it's time that we check on this again. Ever since the inventory crunch started to plummet in 2021 and reached its lowest point in 2022, I've been updating you on the housing supply, and I always keep it same same. I cite the same data source, the Federal Reserve Economic Data's active listing count, Fred's active listing count, which counts single-family and townhomes and condos, all wrapped up in this number. And the figure it still hasn't recovered at 1.1 million homes. Now it is 2% higher than last year, 2% more supply than last year, but overall housing supply is still 9% below pre-pandemic levels. And there's one important thing to keep in mind that most don't think about when you hear that figure that housing supply is 9% below pre-pandemic times in 2019, that does not mean we're 9% short. That is because even in 2019 there was a housing shortage, and we are 9% below that yet, keeping. Upward pressure on prices and the most supply-constrained markets today. It includes both good and poor cash-flowing investor markets.

Keith Weinhold 20:10

They are New York City, Chicago, San Francisco, Hartford, Providence, Milwaukee, Boston, Cleveland, Virginia Beach, and Kansas City. All of those places remain especially tight with housing inventory, and then finally, this fourth of four reasons I've cited for continued upward pressure on home prices are the fact that distressed sellers-they are few and far between-and you need a lot of those in order to have a serious down cycle, after the 2008 housing crash, millions of owners were underwater. They owed more on their homes than they were worth. Lending standards were irresponsibly loose. Adjustable rate mortgages were resetting higher. I mean, a lot of people had little choice but to sell or to hand the keys back to the bank. Distress, distress, distress. Today is almost the mirror image. Here's what's really happening with homeowners having this record equity position today-an average of over $300,000. Many also locked in at fixed mortgage rates below 5% it means that they're enjoying perhaps the cheapest long-term debt that they are ever going to have. Lending standards have been strong, foreclosure rates remain low, and virtually nobody is being forced to sell. That matters more than most people think because housing crashes need a lot of forced sellers, owners who must accept almost any price in order to escape the property. But today, most homeowners they can simply either stay put, or if they're going to move out of the home, keep it and rent out the home, or they can wait for a better offer. No distress. In other words, buyers might be frustrated, but sellers-they're just not desperate. And without desperation, it is difficult for home prices to fall sharply. So the bottom line here with today's home prices and looking into next year, home price growth is apparent, but it's weak. The ingredients for a national price collapse are nowhere to be found, so this does not spell boom or crash. Home prices appear poised to keep slowly grinding higher, but with this low affordability, that keeps them from soaring, say 10 or 12% higher. I don't see that happening. And of course, each December, I make my home price forecast to the exact percentage point for the year ahead, so you can look forward to that soon. The Get Rich Education home price appreciation forecast that I made late last year for this year. It looks like it's going to be almost spot on. Of course, unlike a lot of analysts, transparently, I also give you the result of how closely the forecast hit the target every year, so you can look forward to that too. Hey, if you like this show, there's more content where this comes from. Sign up for our complimentary newsletter. That way, you can see the graphs and charts and maps that I break down. If you like what you hear on Get Rich Education, every week I show you what's really happening with real estate rents, inflation, interest rates, and the economy, and more importantly, what you can do about it. You'll get sharp insights, useful opportunities, and a few laughs along the way. Yeah, a couple knee slappers sprinkled in there with actionable strategies, like the savviest way to get rent increases. Get smarter in just a three to four minute read every week. Join 1000s of smart investors right now at greletter.com because your inbox could use fewer coupons and more financial freedom. That is greletter.com. More straight ahead.

Keith Weinhold 24:20

I'm Keith Weinhold. You're listening to Get Rich Education. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Chaley Ridge. While it's on your mind, start at ridgelendinggroup.com. That's ridgelendinggroup.com. Let me ask you something. If you've worked hard to build wealth, is your. Money positioned to actually support your goals. A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts. They built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866.

Dana Dunford 25:59

This is Hemline's co-founder Dana Dunford. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.

Keith Weinhold 26:15

Welcome back to Get Rich Education. I'm your host Keith Weinhold. There will only ever be one episode 622, and you're listening to it. I hope you're enjoying the late summer. I'm wringing every bit of time and enjoyment out of it that I can. I don't know if this part was enjoyable, but I ran an all-out mile on a track. I wanted to see how fast I could run a mile. I had a friend pace me, and I got a 631. I was happy with that since I hadn't done any specific training. Yes, a mile is more than four laps on a track as well. Did you know that? Yes, this detail-oriented shaved mammal here diligently measured off that extra nine point something meters. Ah, I'll tell you that fourth lap hurt so badly that if my buddy weren't there, I might have just quit and not finished the mile. But summer's days are numbered, and that's too bad because it is my favorite season of the year. The NFL season kicks off in just two days on the ninth, with Seattle hosting the New England Patriots in a rematch of last year's Super Bowl. So then, I guess it looks like your productivity for the week will end with a respectable two-day run as you tune in to that game. Where is the future demand for real estate going to come from? It comes from a growing population. The U.S. is expected to add 21 and a half million people from 2025 to 2040. 21 and a half million more people. The overall population it's expected to grow from about 341 million up to 363 million. That is where we're going. That's per the Census Bureau and the University of Virginia, projecting 341 up to 363 by the year 2040, which is just a little over 13 years away. Okay, so that part is not so surprising, but here is what is absolutely staggering: more than half of this entire increase is projected to occur in just two states, just two of the 50 states, more than half of the increase. Do you know what they are? In fact, I showed you a map of this in a recent newsletter, but I can talk about it and expand on it more here. \

Keith Weinhold 28:52

The two states that are expected to account for more than half of the nation's overall population growth through 2040 are Texas and Florida. They're already the second and third most populous states, respectively. It's kind of like America looked at the map, checked their weather app, and started packing sunscreen. Texas is expected to add 6.6 million residents. Florida welcoming another 4.6 million during this span. So that is over 11 million new people between them. This is like taking the entire population of Georgia and dropping it into those two already booming states, that much growth in this fairly short period of time, for real estate investors, more people that generally means more demand for our housing product, and I'll get back to the staggering Texas and Florida imbalance in just a moment. Because there are big gains in other investor-friendly southeastern states like Georgia and Tennessee, the Mountain West should swell alone. The South, okay, the region that the Census Bureau delineates as the South, which sort of runs from Maryland all the way down south and then west out toward Texas, the South just until 2040 is expected to account for 78 percent of the growth. That is just staggering. Cash flow hotbed Indiana that should grow by nearly a quarter million residents as well. The Carolinas are ballooning. Already the most densely populated state in the nation, New Jersey, that will get more dense with some pretty healthy population growth. Its residents have not discovered elbow room, but not every state is adding population. 14 states are expected to shrink, led by Illinois losing 650,000 people and New York down 457k. Again, this is all through 2040. In fact, a small loss cluster actually runs through the South, though West Virginia, Mississippi, and Louisiana-they're projected to lose 440,000 people combined. You know that whole theory that sometimes you hear people talk about, like with Earth warming and drying, you're going to have people stampeding toward the freshwater Great Lakes states. That is probably farcical. That just has not shown up in the data. That people are moving in droves to say cooler Michigan and Wisconsin for those reasons.

Keith Weinhold 31:46

It's just not happening now. Of course, population projections are not delivered from Mount Sinai on stone tablets. Besides births and deaths, the level of future immigration, of course, that's the real wild card here. After the Trump presidency ends by 2029, the next administration that could tighten or loosen the immigration spigot, that could materially reshape the map. But they're probably not going to tighten immigration. I mean, they couldn't because the flow really couldn't be crimped much more than it already is. People love to poke fun at California, but even in 2040, it is expected to barely retain its crown and edge out Texas to still be the most populous state: 39 million versus 38 million, respectively, for California and Texas by 2040. But yeah, Texas and Florida-they are the real stories here, and why droves of people are attracted there for cheaper housing, jobs, warm weather, a business-friendly environment, and Texas and Florida are also places where builders can still build without completing some side quest worthy of a video game with all their permits and regulations and roadblocks. You're largely free of those things in Texas and Florida. Now there are two more important factors to keep in mind here. Some bigger picture context. I've talked before about how the overall American mobility rate is down, and this is a long, long trend. Decade after decade, fewer people move and more people stay put, which is contrary to popular belief. This lower mobility rate, and another factor that gives you perspective is that as real estate investors, we know all this stuff I've been talking about here. These population changes-they only look at the demand side. The supply side matters just as much, despite their slower population growth. Northeast and Midwest states build less new inventory, and that is why Northeastern and Midwestern housing prices and rents are still growing faster today than they are in the Sun Belt, despite all of those Sun Belt construction cranes. You know, too many construction cranes. It looks bullish, and it actually is, but it spikes supply and it suppresses prices. And really, the bottom line here with American population growth from now until 2040 is follow the people, but count the rooftops. Population growth creates housing demand, while limited construction creates scarcity.

Keith Weinhold 34:46

The best opportunities often emerge where those two forces collide. That's what you really want to look for: demand and scarcity. Now, the apartment space. We all know that's been beleaguered for about three or four years, ever since higher mortgage rates set in and high construction levels conspired to keep apartment rents suppressed. In fact, multifamily construction had a peak in this cycle during 2024. That's when 600,000 units were built back in 2024. That was the most new apartment supply since 1986. That is when Cheers, MacGyver, and Miami Vice were on television. Run DMC was on urban radio. MTV was a dominant cultural force, the most new apartment supply since 1986. That's when kids were playing with GI Joe's, He-Man, and My Little Pony. For adults, fashion-wise, they were wearing enough shoulder padding to survive a minor collision. So, lots of new apartment supply to get absorbed. It is getting more and more absorbed. There are more signs there now because the national median apartment rent has now increased for seven months in a row. That's according to Apartment List. Also, the apartment vacancy rate has dropped for six straight months, and do you have any idea what the national apartment vacancy rate is? It has dropped down to now 7.1% Inevitably, overbuilt apartments will be absorbed with a growing population. Lots of great episodes coming up here on the show, where you might be in for a surprise next week. A renowned macro economist will be here on the show with us. I think we all know that in 1971, the U.S. had a lot of economic changes. That's when Nixon completely eliminated us from the gold standard, and the economic system shifted from capitalism to creditism back then. Well, now we appear to be leaving creditism and entering a new economic phase. This could be seismic. Next week here on the show, he'll reveal what the new era is called and how you need to prepare for it, that's next week here on episode 623. If you haven't yet, be sure to hit the follow button or subscribe button on your podcatcher so that you don't miss it.

Keith Weinhold 37:31

Again, if you like what you hear here each week, the GRE "Don't Quit Your Daydream" letter gives you the sharpest ideas of the week in about three or four quick hitting minutes, you'll get surprising housing data, wealth building strategies, timely opportunities, news that a lot of times you can't get anywhere else, and maps and charts that make you say, "Wait, what? It's smart, useful, entertaining, and completely free. Thousands of investors read it every week, and believe it or not, I'm actually more of a writer than a talker. Don't just listen to Get Rich Education, get the letter at greletter.com. That's greletter.com. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 38:23

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

Keith Weinhold 38:51

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

Keith explores how real estate strategies have shifted from the 1980s to today and explains why investors need to adapt deal structures to changing interest rates, lending conditions, and market cycles.

He highlights current opportunities in new construction and builder rate buydowns, along with the long-term benefits of fixed-rate debt.

Keith is joined by economic futurist and author Richard Vague, who challenges conventional beliefs about inflation and interest rates and explains how government intervention, war, and supply constraints shape asset prices and leverage decisions.

Together, they provide a big-picture framework for understanding how today's macro environment affects real estate investing decisions.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. Learn how dramatically real estate has changed from the 1980s through the late 2020s. We'll be sure that your approach is changing with it. Then a great guest and I discuss how war and future calamities will affect mortgage rates, inflation, and your real estate today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Home Buyers, the largest turnkey company in Memphis with more than 6,000 homes under management, for a free live webinar, the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth. Again, that September 30th. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.

Speaker 1 1:35

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:51

Welcome to GRE from Cambridge, England, to Cambridge, Massachusetts, and across 188 world nations. I'm Keith Weinhold. You're inside Get Rich Education. You could be doing anything with your time. I'm grateful that you choose to listen to me every week. You know, real estate investors sometimes say, "Ah, there aren't any deals anymore. What they usually mean is the deal structure that they learned five years ago stopped working. There are always opportunities in real estate, but your approach changes with interest rates, lending standards, inventory, construction, government policy, and just the overall economic cycle. The best investors don't wait for yesterday's market to return. That's like someone still hoping for Blockbuster Video Store to reopen. They identify what today's market is offering instead. Just consider this historic retrospective on real estate investing from the Reagan administration to today, in 1981, the 30-year mortgage rate peaked above 18.6%. I mean, just imagine proudly telling your friends that you locked in at 17% before rates went higher. That mortgage needed its own defibrillator. By 1984, rates were still near 16%. The strategy then, the approach, was for a buyer to assume the existing owner's lower rate mortgage that they locked in a few years earlier, perhaps in the late 70s, that's how you got a good deal, assuming that existing owners lower-rate mortgage. You can't do that so easily today.

Keith Weinhold 3:50

By the late 80s and early 90s, the opportunity shifted from assuming attractive debt to buying distressed properties. The S and L crisis was upon us. Savings and loan failed lenders found themselves holding piles of distressed real estate, so investors bought foreclosures and REOs at discounts. They improved neglected buildings and then they repositioned them for income. You probably know that REO stands for real estate owned on a bank's balance sheet. All REO means is bank-owned property, but that's what you did. You found those, and then you scooped up a deal that way. As the 1990s progressed, interest rates declined, and loans also became really easy to obtain. We were tilting into the loosey-goosey easy lending environment. In the 90s, it was popular to buy an undervalued property, renovate it, raise the rent, and refinance it based on the improved value. That process later got a buzzy acronym and became known as the Burr strategy: buy, rehab, rent, refinance, repeat. By 2005, financing got more creative. This is when I was a new real estate investor. I remember obtaining what were known as 8015 five combo loans. This meant an 80% first mortgage, 15% second mortgage, and 5% down payment. You remember those? If you've been around for a while, you do. And see, this way you could avoid paying PMI, and you could control property with an astounding 20 to one leverage ratio due to that 5% down payment, but soon enough lending just got absolutely too creative and easy. The quiet lending party turned into a boisterous kegger, delivering the 2008 financial. crisis, and pretty soon I could no longer get any loans. From 2009 through the early 2010s, you could buy foreclosures and short sales at enormous discounts if you could find the loan.

Keith Weinhold 6:20

Financing was tough, but prices were super low. It might have even made sense to pay cash at that time. Fear was everywhere right after the global financial crisis. I mean, it really took courage to act when others were hiding under the bed. By 2020 and 2021, the opportunity changed from cheap property to cheap money. Mortgage rates dropped below an absurd 3% as a result of the COVID pandemic. You could lock up extraordinarily cheap debt for less than the inflation rate, and then let inflation nibble away at it like Pac-Man. Of course, a lot of us are still benefiting from that today, but that opportunity is long gone now. But it doesn't mean that deals are gone today. Where's the opportunity? One of the best ones is often found in new construction, large build. have got to keep moving their inventory as they build these homes because they have got to keep their crews busy. An unsold house for a builder-I mean-that produces as much income as an unplugged Bitcoin miner. Rather than make conspicuous price reductions, builders use their financial muscle to buy down mortgage rates for you, often in the 5% range or even lower.

Keith Weinhold 7:52

Builders might also offer you closing cost assistance, upgraded finishes, or other incentives that a single resale seller just can't match. So from the Reagan administration to today, over 45 years, the winning strategy just keeps morphing. It started out back then as assume the loan, over to buy distress, then to renovate and refi, then it was a creative financing wave, and then cheap debt, and today take the builders buy down. That's where we are. The mistake is deciding in advance what a deal is supposed to look like. The best deal structure changes, and of course, it's going to change again. The investor who keeps fighting the last war is always going to conclude that the opportunity has disappeared, but it hasn't. It's just changed clothing. Still, though, today's new purchases now-they're not as good as the deals that they were five years ago, but the best investors keep investing. They keep adding to their portfolio. It's what they've always done. Absolutely zero winning investors that are successful over time look back and say things like, "I didn't add anything to my portfolio during that 10-year span for this or that reason, the market changes, and you've got to adapt with it. That's a way to think about it. Take solace in knowing a few things. Deal structure changes over time are inevitable. And larger picture, you are investing in a product that is sustainable residential real estate in the form of long-term rentals. These entry-level properties are a scarce asset that people are going to continue to need. I mean, that's what we do here. Just compare. To the fads that we avoid around here, like NFTs, metaverse real estate, which we discussed on the show a few years ago, but said is highly dangerous, eye buying, value add apartment syndications, SPACs, or how about ICO funded altcoins? We don't chase the latest hot thing here at GRE. It is about what's sustainable, necessary, and cannot be easily disrupted by AI, and that's one reason that Get Rich Education is still standing strong after 52 episodes every year for almost 12 years now. Shortly, we're going to bring in a rather esteemed guest today on the future direction of interest rates and inflation. Interestingly, he believes that raising interest rates does not cool inflation, and that's contrary to popular belief. I'm going to press him on this and ask why, but first, our new Fed chair, Kevin Warsh. He's only been on the job a few months now.

Keith Weinhold 11:07

He is gaining a reputation for not forecasting what they're going to do ahead of time, like his predecessor had. I guess I tend to like his disposition and the way that he communicates, I sense some pragmatism with Warsh, but gosh, it often seems that a new Fed chair gets off to a well liked start, and then they do something that lots of people criticize. Like, remember in 2004, late Fed Chair Alan Greenspan suggested more borrowers could benefit from adjustable rate mortgages shortly before rates rose and ARM resets became financial landmines. In 2007, Ben Bernanke said that subprime mortgage problems were likely to be contained. Oh, right after that, they helped trigger the global financial crisis, and more recently, the Jerome Powell gaffe, which I'll mention in the interview shortly. Here's what current Fed Chair Warsh says about inflation:

Kevin Warsh 12:14

For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression, that's hard to shake, that the Fed's implicit inflation target was somehow above 2% Let me reiterate, there is no soft inflation target. There is no soft implicit target, not on this committee's watch. There's only a target, and it's 2%

Keith Weinhold 12:42

It's obvious that he is serious about getting inflation back down to 2% That tends to point toward interest rate increases. Let's discuss that and more with this week's brilliant guest. This week's guest is an economic futurist keynote speaker, and he's quite a popular author. He is chair of the board of the Public School Employees Retirement System. That's the largest public pension fund in Pennsylvania. Previously, the Pennsylvania governor appointed him as the secretary of banking and securities for the Great Commonwealth of Pennsylvania, he's also the founder and president of several various organizations today, and he serves on several boards, including at the University of Pennsylvania and the School District of Philadelphia. I mean, I hardly know how he has time to do it all, but he made time for us today. Hey, it's great to welcome back Richard Vague.

Richard Vague 13:45

It's such an honor to be with you. I certainly enjoyed our last session, and it's really wonderful to be back.

Keith Weinhold 13:51

Well, and so much has changed since you were last here, Richard. First, why don't we pull back and talk to us about the general state of the national economy today, as you see it.

Richard Vague 14:04

ou know the economy was rocking along okay, and you know since you guys are such experts in real estate, I'll tell you one of the most important statistics, in my opinion, is the number of unsold homes, and by all rights, that number should be about 2 million homes. It's only about a million and a half. So there's a deficiency in our housing stock in the United States, which is, yeah, I think good news for the housing industry. It's always good to have a reason to have to grow. You may recall that in 2007, that had gotten up to four millinomes, which was a catastrophe, as we all know. So, it's the economic statistic I looked at first and most closely, and that was, you know, an okay number, and a lot of the things were going along. You know, not fabulous, but not terrible. Things were kind of moving. And all of a sudden now we have the war in Iran, and that's creating all sorts of problems for us, which you know I think you guys are concerned about. So I generally think the economy's been good, but there's a lot of dark clouds on the horizon.

Keith Weinhold 15:15

You know, Richard, I was recently sharing something remarkable with our audience. To your point, just since 2020, consider all the calamities that we've had: COVID, Ukraine, Israel, Gaza, tariffs, and the Iran War. Just since 2020, what's the result of all that? Both stocks and residential real estate are near all time highs.

Richard Vague 15:42

Yeah, well, you know, one of the things that's true is that this is something I go to in great detail in my book Paradox. But the more debt there is, the higher asset prices go.

Keith Weinhold 15:53

Yeah.

Richard Vague 15:54

You know, in the case of housing, that broadly helps middle America. In the case of the stock market, the top 10% of the country owns 87% of the stocks, so that tends to go to the wealthiest instead of to the broad population. But yeah, those two things are at highs.

Keith Weinhold 16:12

You're touching on your well-received 2023 book, The Paradox of Debt, and you know, Richard, amidst all these calamities and all this potentially unprecedented level of government intervention that we've had-you know-it makes one wonder during the next crisis, which is inevitably going to happen, will the government just step in and provide relief again? And how would that look?

Richard Vague 16:38

You know, I think that's one lesson that government has learned indelibly. Way back in 1929, in the couple of years that followed, the government did not step in, and we saw what happened. And I think there's a generation of economists that understand the role of government in a calamity, and you know it's pretty simple. You know the government comes in and crops up financial institutions as they did in 2008, simply by providing the liquidity or buying the bad assets, or the government steps in with relief checks as they did in such a massive way in 2020. But the government has learned that at least to some degree, it needs to intervene. I can't imagine that ever not being true.

Keith Weinhold 17:26

Goshmright when you think about 2020s stimulus and how emergency lending facilities were set up, you had the payment protection program, stimulus checks, mortgage loan forbearance. It's just like this government won't let the asset holders fail.

Richard Vague 17:46

Well, yeah, you know, there's failure, and then there's something that's hurtful but not quite failure. You know, I can imagine that the government will be able to prevent, in some circumstances, certain asset prices going down some amount, it's actually fairly commonplace for stocks to go down 10 or 20% I can see real estate prices going down as they have in the commercial office space. Yeah, but yes, the government will step in when those things become extreme to prevent a true calamity.

Keith Weinhold 18:19

Of course, one consequence of the interventionism is elevated inflation. I know how you've talked before about how the level of inflation is higher than most people think. For example, you'll see today's CPI numbers in the mid threes. Talk to us some more about why inflation is higher than most people think.

Richard Vague 18:41

Well, I have studied inflation, you know, fairly diligently, and inflation really relates to the constriction of supply. And if you look over the 250-year history of the United States, we haven't had that many episodes of bad inflation, and they've always related to a constriction of supply. Most of them have occurred during a war when, for obvious reasons, you know, supplies are constricted. The big 1970s episode of inflation was because OPEC, which had so much more power back in those days, acted to you know punish the United States by constricting supplies, and the price of a barrel of oil went from $4 to $40 a barrel. Yeah, between 73 and 79. COVID was another instance where inflation related to constriction of supply. That was you know people couldn't go to the meat factory to cut meat. People couldn't go to the factories to build things, so all of a sudden our supplies were decimated, and we had a short burst of very painful inflation. Well, now we've got the straight of four moves, and that is impacting the price of oil. I think it's going to impact the price of oil more going forward because. Because we've been able to rely on reserves, both the U.S. has been able to rely on reserves, and China has been able to rely on even greater reserves. And you know we haven't seen the brunt of that, but unless something's resolved pretty quickly, I think in the fall and winter we're going to see even more problematic prices there. But we know agricultural prices and even the flow of commodities like wheat are constricted by the constraints in the Strait of Hormuz and, frankly, other waterways as well. Now, one of the things the numbers that you see reported tend to underreport inflation because it looks at a year-over-year number and doesn't really capture it if it's moved up more sharply in the last month or two. So we look at it on a month-by-month. We you know we break it down about as to as many parts as you can break it down into. But PPI, which is kind of a leading indicator on the eventual CPI PPI's producer price index, it was 4.7% this last month. That would suggest to you that things which are in the mid threes now, which is more higher than we want, you know, probably trending over. Maybe not next month, but you know, over the next three to six months, I'm not going to be surprised if the number's more in the four to five range. So, yeah, I think inflation's being somewhat underreported at the moment.

Keith Weinhold 21:29

The PPI being that harbinger of consumer prices, often four to six months down the road. And Richard, the last time you were here, when it comes to checking and controlling inflation, you said something so interesting. You said that higher rates, which is typically the response in order to try to quell inflation, higher rates actually do not lower inflation, and you did not get a chance to expand on that because we ran out of time. Tell us more about why higher rates do not reduce inflation.

Richard Vague 22:05

Well, I'm going to answer that a couple of ways. One of them is higher rates don't open the Strait of Hormuz.

Keith Weinhold 22:12

Right.

Richard Vague 22:13

You can put rates as high as you want, and it's not going to open the Strait of Hormuz.

Keith Weinhold 22:16

Chairman Warsch doesn't open the Strait. Yes, he doesn't get oil produce nothing.

Richard Vague 22:20

Strait of Hormuz.

Keith Weinhold 22:21

Yeah.

Richard Vague 22:21

And so we can do all we want to on raids, which is a very blunt instrument, and it's not going to address the supply constraints that are geopolitical and war related. So, if you want to curb inflation right now, there's two things to do. One of them's you know end the war with Iran, and the other is to kind of back off a lot of these tariffs that have become so problematic. I think there's a place for tariffs. I think there's certain things China's doing that you know a call for an appropriate level of tariffs. I'm not sure we should be big tariffs on Canada and some of these other places, which have the effect of increasing the cost of our farm equipment and cars and other things like that. So, if you really want to address inflation and address the things that truly underlie inflation, and if the second way I'd answer this is to say, go look at the debt, track the data from you know 1945 or 50. You know, we really look at the post World War II period as the place we really learn things from, and over that period, increased government spending has been accompanied by reduced interest rates and reduced inflation. So, reduced interest rates and reduced inflation have gone hand in hand, and rising interest rates and rising inflation have gone hand in hand, and it's a really easy thing to look at. We've got the data on our site, but there's only been three periods where you've had big shifts in government spending and rates. They're pretty easy to look at, and there's actually empirically an inverse relationship between rising interest rates and it's the opposite of what economists tell you.

Keith Weinhold 24:09

I think, in general, economists tell us that when inflation is high, you raise interest rates because consumer spending is about 70% of the economy, and those higher rates therefore incentivize people to be savers because they're getting paid a higher yield, keeping those dollars out of the economy, and they're less incentivized to be borrowers and expand the economy that way. I think in general that's why economists say that higher interest rates reduce inflation. Do you agree with that?

Speaker 2 24:40

Well, no, I don't, and the reason I don't is because when you look at the data, that doesn't happen. These are easy things to check, and what I would say to you is that rising interest rates increase costs, and you guys know that better than anybody in the world.

Keith Weinhold 24:56

With mortgages. Yeah.

Richard Vague 24:58

What do rising interest rates do to? Cost of your mortgage.

Keith Weinhold 25:02

Everything increased substantially.

Richard Vague 25:03

It has system prices at the grocery store. Well, the grocery stores have to pay our interest for their inventory. So the more intuitive and obvious thing is that rising interest rates increase prices. And by the way, if you and I were to go look at the data right now, which I look at almost daily, that we would see periods of rising interest rates correlate to periods of rising increased costs.

Keith Weinhold 25:29

Well, I'm glad you look at history because I often say here at Get Rich Education, if you want to know what's going to happen in the future, it's easy to have a hunch, but it's more important to look at history. Can you talk to us some more about how, over the long term, higher interest rates don't suppress inflation? If that's what you're saying,

Richard Vague 25:47

yeah. The greatest rise in inflation, you know, in my lifetime was the late 1970s.

Keith Weinhold 25:55

Yeah,

Richard Vague 25:56

and for the entire time that interest rates were going up, prices and inflation were going up, and it wasn't until interest rates started coming down that inflation started coming down. So we could look at any number of periods, and if you're going to argue the opposite, you need to go find me some data.

Keith Weinhold 26:15

Okay. Well, speaking in more modern times, in the last wave of inflation that we had, the CPI peaked at 9.1% in June of 2022. This is the whole famous Jerome Powell: inflation is only transitory. Oh shoot, no, it's not. I better hike rates. He did, and then inflation came down. Is it as simple as that cause in effect, or did something else make inflation come down post COVID.

Richard Vague 26:42

Inflation came down, and it came all the way down in July of 2022. It didn't come down gradually over six, 912, 18 months. You go look at the length monthly inflation. Inflation came all the way down in July of 2022, and stay has stayed down all the intervening period until very recently with the Iran War. July of 2022 was before there was a dramatic increase in interest rates.

Keith Weinhold 27:18

Right,

Speaker 1 27:19

that's simple.

Keith Weinhold 27:21

What caused inflation to come down? Then is it because supply began to arrive on the market again?

Richard Vague 27:27

People went back to work, started building things again.

Keith Weinhold 27:30

Producing.

Richard Vague 27:32

And the problem was folks had not been able to go to the factories and make things, and so we had a you know global supply deficit. Well, the nice thing about that is that you know money incends people to scramble back to work, make things again, and you know once they start doing that, and the Fed actually produces something they call the Global Supply Chain Pressure Index. You can get it on the Fed site. If you look at it, it's supposed to be kind of at zero, and anytime supply chains are disrupted, it shoots up. And any you know, any time the opposite happens, you know there's overcapacity. It goes down, and you can see exactly when supply chains repair is happening. So go look at the. It's called the GSCPI. It's on the Fed side. You'll see that global supply chains had largely started to be dramatically repaired in the spring and summer of 2022, and naturally, supply and demand works. All of a sudden, supply starts showing up, and prices go to hell.

Keith Weinhold 28:39

We're talking with economic futurist author and Pennsylvania's governor-appointed former secretary of banking and securities Richard Vague, more when we come back on the affliction of inflation, what this means for real estate investors, and more. This is Get Rich Education. I'm your host Keith Weinhold. What if you got your mortgage loans the same place I get mine. You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge. While it's on your mind, start at ridgelendinggroup.com. That's ridgelendinggroup.com.

Keith Weinhold 29:29

Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call or text family to 66866. That's family to 66866.

Dolph Derues 30:31

This is the king of commercial real estate, Dolph Derues. Listen to Get Rich Education with Keith Weinhold and don't quit your daydream.

Keith Weinhold 30:45

Welcome back to Get Rich Education. We're talking with Richard Vague. Richard is the founder and president of so many organizations today. He's the author of several popular economic books. He chairs the board of the Public School employees retirement system. That's the largest public pension fund in Pennsylvania. He's in a lot of places at once, seemingly. Richard, we're talking about inflation before the break. What is the right inflation rate?

Richard Vague 31:16

Well, like I said, inflation. If you look at the entire 250-year span of the United States has it been an affliction that has affected us that often? It is political kryptonite. So when it does happen, it steers our consciousness, and it you know certainly affects your industry. But you know, if we look historically, the Fed targets 2% It's not a bad thing to target. We never really have achieved that level for any length of period. I think if you look at it over the past several decades and take out the high inflation periods, it probably has averaged closer to three. So I don't think two to 3% is an inappropriate level, and I kind of suspect it'll be a level that typifies our future once we get past, if and when we get past this more.

Keith Weinhold 32:09

Yes, not long ago, I was looking at the history of the CPI or the CPI's equivalent, and over the last 100 years, the rate is about 3.2% and we haven't hit that government-mandated 2% target, which is stated right on the Fed's website. We haven't hit that for any month in about five years now, and this asset inflation, as we know, this disproportionately enriches existing asset owners, and it widens this inequality. Something that's more recently been known as the K-shaped economy, can you talk to us some more about this exacerbating wealth inequality?

Richard Vague 32:48

Well, you hit the nail on the head. Something on the order of 80% of all the net wealth held by Americans is in the form of two things: stock and real estate. If you want to talk about wealth, it's those two things, and those two things, probably 60 or 70% of all of those in the U.S. are held by the top 10% I think it's a single-digit number of those that are held by the bottom 50% So you know, if inflation and debt growth push asset prices up over time. It is a mathematical inevitability that the rich get richer faster than those in the middle and at the bottom, and that simply means inequality will increase through time. I believe that's structural. Unless you address that in very some very specific way it will continue.

Keith Weinhold 33:43

Inflation affects real estate investors more than it does the average person because we borrow these big pools of money often at 75 to 80% loan to value, and in a sense, although we know it's bad for general society, and we do think about the K-shaped economy. Of course, inflation benefits us because it debases our debt. But even if you're not a real estate investor, even if you just own your own home, you know, Richard, I really think it begs the question: Is a 30-year fixed-rate mortgage one of the best forms of debt ever created for ordinary Americans?

Richard Vague 34:22

The 30-year mortgage, which was created, you know, that started on that path in the 1930 s for the very reasons we all know and love, which is getting Americans to own their own home, and has been, you know, a game changer for the country, and truly one of the great things that's been done, and I hope it's something that we continue to defend and preserve.

Keith Weinhold 34:46

Well, that brings up leverage and the prudent use of leverage. As real estate investors, we have this benefit of getting all these 30-year fixed-rate loans without the threat of a. Margin call being made. We're not borrowing over in the stock market. When you sign your loan documents, it doesn't say that the bank can call your note due at any time, but one could take it too far. And when it comes to debt, I think that really begs the question: Where does intelligent leverage end, and then dangerous leverage begin. What's the border?

Richard Vague 35:25

Well, you guys are experts, and I'm not. But the very simple premise is starts with not overpaying for the property to begin with. It is not an exact science, but generally speaking, I think we can tell when prices are relatively high in a given market and or a given year and relatively low, and you you'd always want to kind of be at least in the middle or somewhat on the low end before you acquire a property. So that's step number one, and then step number two is really just giving yourself a buffer, you know. We saw in the global financial crisis that real estate loans were being made in some cases at 100% of value. Yeah, and frankly, we saw at least some episodes within that folks borrowing over 100% of value, and certainly they were very happy when that happened. But we know there's zero margin for error when you do that, and perhaps even a negative margin for error when you do that. So I would think, you know, you guys know better than me, but you know, I hate to borrow it much more than like 90% of value, maybe 95% if it's a smaller asset and you have a government guarantee, and if you can do it at lower leverage, you know, 70 or 80% of value, that's not a bad thing to consider. I tend to think in the real estate world that you know I've seen many investors, particularly in the commercial space, buy things with lower leverage, 50 or 75% But then, as the asset proves itself, they work with their lender to increase the debt-to-value ratio, you know, and get more money at it over time as it becomes an increasingly proven asset. So they migrate their way from 75% to 95% over time. I think that's a logical path.

Keith Weinhold 37:20

That acronym Ninja Loans, which were popular from about 2000 to 2007, that acronym Ninja means no income, no job or assets, and you might still get a loan of 110% of the value of the property. It was profligately irresponsible. Well, Richard, in a moment, I want to ask if you have a resource that our audience can follow along with you if they would like to do so. But before I do that, do you have any last thing that you would like to talk about? Maybe something that I did not ask you, whether it has to do with the general economy or real estate or interest rates or inflations. Is there something else that we should know?

Richard Vague 38:00

What I would do is just endorse your podcast.

Keith Weinhold 38:04

Thanks.

Richard Vague 38:05

You're approaching this in a very intelligent way, and you're very empirical, and I think your listeners are doing themselves a service by continuing to follow what you do. That's a really reasonable, secure, and yet bold path towards creating wealth, then I think you're to be commended.

Keith Weinhold 38:27

Oh, I appreciate the endorsement. I'm always blown away at our following, but you have some resources worth following as well. Tell us about that.

Richard Vague 38:36

Well, we do. We have a weekly video ourselves that it's about a five-minute video, and you can go to our website, which is tycos.com. So t y c h o s.com, and you know we have data on the site. If you're a real geek, you could go in and you can look at our macroeconomic data. You know, but if you're not, you can sign up for the video, and we come out with what we hope is a short but relevant video once a week talking on some aspect of the economy, and you know we'd love to have folks join that if they're interested.

Keith Weinhold 39:10

Well, it's valuable. I suggest you, the listener, check that out. Richard oftentimes turns conventional economics on his head, just like he did with us today, talking about how if there's higher interest rates, that does not necessarily mean lower inflation. Richard, it's been valuable as always. It's been great having you back on the show.

Richard Vague 39:30

It's an honor to be with you. Keep up the great work.

Keith Weinhold 39:38

In this remote interview, I got a beautiful look over Richard's shoulders there on the screen at Center City, Philadelphia, in the ornate buildings there. I will be in that part of the nation again shortly. Big thanks to Richard Vague. If you're looking him up, it is spelled V-A-G-U-E. We've got a. A lot of terrific content coming up on the show over the next few weeks, including fresh takes on building your wealth that you've never heard before. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 3 40:18

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

Keith Weinhold 40:46

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

Keith debunks alarmist predictions of an 80–95% housing crash and explains why inflation, constrained supply, and strong demand continue to put upward pressure on home prices.

He breaks down key trends in renter mobility, highlights how the AI boom is driving record-breaking rents in San Francisco, and contrasts "dopamine culture" and money maxing with GRE's philosophy of growing one's means through income property and leverage.

Keith also discusses how the Seven-Figure Solution framework helps real estate investors more effectively integrate properties, taxes, insurance, and retirement planning.

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Join Mid South Home Buyers' one-time, free live webinar featuring Keith Weinhold on September 30 at GetRichEducation.com/MidSouth to learn how Memphis' economic expansion could create new real estate investment opportunities, and have your questions answered in real time.

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Complete episode transcript:

Keith Weinhold 0:01

Welcome to GRE. I'm your host Keith Weinhold. An alarmist calls for a housing price crash of 80 to 95 percent. We'll listen to it. This city's rents are up 26 percent annually. The rise of dopamine culture and money maxing has made its way into personal finance. Then an invitation to join us for a special event today on Get Rich Education.

Keith Weinhold 0:29

What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6,000 homes under management, for a free live webinar, the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms MidSeal has ever offered. Reserve your free seat at getricheducation.com/midsouth. Again, that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.

Speaker 1 1:35

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:51

Welcome to GRE from Naples, Italy, to Naples, Florida, and across 188 nations worldwide. You're listening to one of America's longest-running and most listened-to shows in the real estate world. This is Get Rich Education, and I'm Keith Weinhold. Yes, the very founder of this snaggle-toothed operation right here. I'm a longtime real estate investor myself, erstwhile writer for both Forbes and the Rich Dad Advisors, serving on the Forbes Real Estate Council, you can also see my work in the USA Today and Business Insider. I'm the creator of Real Estate Pays Five Ways and the Inflation Triple Crown. Oh, after all that, really, I'm just a shaved mammal with slack jaw, a highly leveraged hominid of the landed gentry, right before I discuss the housing price crash of 80 to 95% you know, keep in mind that most people think that if you're in real estate, then you've got to be either a realtor or a landlord. I am neither a realtor nor a landlord. People also think that it takes tons of money. It does not. Now you could pursue no money down strategies, but that takes some time to learn and skill to develop. Now I was a landlord in the early years of my real estate investing, but after about six years of that, I hired a property manager and never looked back. Therefore, keeping this mostly passive, a 20 to 25 percent down payment on a carefully selected residential rental property includes ones that today can still have purchase prices below 200k. That's purchased in a geographically investor advantaged market. Okay, that is the center of what we do here because when you own property this way, now you've got the margin where you can pay a property manager to enjoy the five ways that you're paid mostly passively. Be a savvy borrower.

Keith Weinhold 4:02

Now, when you're between deals and accumulating capital to add the next piece of property to your rental portfolio, that's where you can flip and do the opposite in the short term and be a real estate lender for perhaps an eight to 10% stable return. That's what I do, rather than getting three and a half percent, which is the going rate today in a high yield savings account. So be a lender between deals in the short term, or you're a savvy borrower long term. Now the late analyst at Housing Wire, and he was also a past guest here on the show, Logan Modashami, he brought this 80 to 95% housing price crash media piece to my attention. It's in the form of a meta reel that got a lot of attention. Let's play it. I mean, this type of nonsense circulates out. It's not founded on anything substantive, and this just absolutely does not serve anybody. You've got to take this type of thing as entertainment, but it's being presented in a serious, informative way, and just listen to the basis for the claim.

Hayden Weston 5:19

The United States housing market is about to collapse 80 to 95 percent, which means that homes that were worth 1.5 million are going to be worth 300,000. The reason is simple: the U.S. housing market has reached its most unaffordable level in history. People cannot afford to buy homes, and if people cannot buy homes, the market must correct. The question is how hard the market is going to crash, not if it will. According to CPI and price history data, this is predicted to be worse than the 2008 housing bubble. We are going to see prices drop 80 to 95 percent.

Keith Weinhold 6:02

A housing price collapse of 80 to 95 percent. This is from a platform called Hayden Trades. It has got to be the worst example of trying to steal attention rather than serving people. Gosh, don't even make 20% or 50% crash predictions anymore go for far higher, I guess. He says it is according to the CPI and price history data. This doesn't even make sense. Now the low affordability mentioned that part is true, and this is what's slowed home price appreciation. But here in the late 2020s, there was more upward pressure on home prices, not downward inflationary pressure, which is rampant. That is poised to raise replacement cost because a home is a bundle of land, labor, lumber, concrete, copper, and energy. America's best job markets face land and regulatory constraints that pressures prices upward, and regulations are not easily repealed either. There's a large reservoir of sideline buyers that still want to own, and single-family home construction is woefully insufficient, keeping the supply down. Indeed, there is more upward pressure on home prices, not downward. This coming inflation wave, that's exacerbated by war, is unfortunately, or fortunately, if you're positioned, it's poised to widen the K-shaped economy where winners win bigger and losers lose more. The boat is leaving the dock. Are you on it?

Keith Weinhold 7:54

The distance between the boat and the dock just keeps increasing, and eventually you won't be able to make the leap, the jump from the boat to the dock. Now, in the near term, because we're approaching the fall season, when you hear stats about median home prices, note that prices are lower in autumn and winter than they are in spring and summer. It happens pretty much every year. Now, why is this? Well, one reason is that a lot of people don't think about is simply the fact that smaller houses get sold in the winter compared to the summer. And why would this be? This is because families with school-age children who need larger homes get their deals done in summer months before school starts. That is one reason why median home prices are higher in the summer than they are in the winter. When you look at a long-term price chart of homes, this is why you see peaks each summer and dips each winter. Now, investors like us. Now we're not buying so much for school-age children considerations, but this phenomenon affects the median prices that you see quoted in most any market. That is how that works, and why homes present better in the summer too. Green lawns, Leaves, flowers, and natural light improve curb appeal. Some say buy when the snow is flying, sell when the flowers are blooming.

Keith Weinhold 9:32

Shortly, I want to tell you about the city with rents that are up 26% year over year, and there's no end in sight to those rent increases, either. But first, there's a significant national real estate trend. Now, a lot of times, the discussion about the rental market centers around the level of rents or the vacancy rate, and those metrics sure do matter. But what about tenant retention? That is. Renter mobility rate. How long do residents stay? Well, renter mobility is down, down, down. They are not moving around. That's the big trend. Tenants are staying longer. Renters are waiting longer to buy homes than prior generations did. I mean a lot of people are beginning to wonder if their starter home will arrive before their first social security check does? The share of renters planning to move within three years that has plunged since 2019 from 57% then down to just 37% now. This is according to a national survey from the New York Fed. 57 down to 37% that plan to move within three years. Yes, this means that even after the pandemic waned, renters plan to stay in place longer. Everyone is staying put longer, and what exactly is keeping all of those moving boxes in storage? You guessed it. Buying their own home is more difficult to afford. It's kind of like an obstacle course where the down payment is waiting at the finish line, which is a long ways away. It's like an ultra marathon. This decline in renter mobility. This is obviously good news for income property owners and landlords because vacancy and turnover are our greatest expenses. People are paying more.

Keith Weinhold 11:39

You know, it's interesting that many are staying and put because a lot of renters often pay three to 5% annual renewal increases, especially in single-family rentals. Among apartment dwellers, there are currently more move-ups than move downs. People willing to spend a little more, and part of this is because a lot of people have just simply given up, completely given up on buying a home, choosing instead to fritter away their money on DraftKings parlays, couchie predictions, meme coins, burritos whose delivery fees cost more than the burrito, and a dozen forgotten subscriptions quietly feeding on their checking account. Yeah, a lot of people have just given in. Besides falling renter mobility, there is also falling homeowner mobility. One reason it has fallen is due to the well-documented mortgage rate lock-in effect. But mobility is down among both groups, among renters and homeowners, for a few different reasons. Like I've mentioned in previous shows, America is aging, and older people move less. Remote work means people don't have to move for a job, and housing inventory remains limited. This means that there are few attractive alternatives to move into, whether you're a homeowner or a renter. Those are some reasons as to why mobility is down for both groups. And the New York Fed analysis shows that renter mobility it is especially weak among that subgroup that believes that they will never own a home. I mean, this group of people really isn't moving. They are staying in place even longer. This group that believes that they will never own a home, and this is a skew toward lower income renters for sure, but even upper income renters are staying longer. You know, I own a lot of single family rental homes myself, and I'm just thinking now, I can't even remember the last time someone's moved out. It might be over a year since anyone has moved. The average renter's perceived chance of ever owning a home that has fallen, and this is significant for investors. Okay, that percent of renters that ever hope to own a home has fallen from 52% back in 2015 down to just 35% last year. 52% down to 35% The amount of renters that think they'll ever own a home. Both single-family rental and apartment renters are staying longer. This is both types, and it's not because these renters stop wanting homes. About two-thirds say that they would prefer to own if they had the money to do so. This is substantial. The drop in American mobility rate. I mean, that part is actually decades long, and this seems to catch people off guard. A lot of people falsely believe that people are moving more often, and that's something I've touched on before. This deeply hurts.

Keith Weinhold 15:00

Certain industries like moving companies, furniture stores, and yes, real estate agents—all these groups of people have got to be wondering where did everybody go? The answer is nowhere. Apparently, they are not going anywhere. So the bottom line here, with this lack of mobility, is that renters feel locked out, owners feel locked in, and landlords feel locked up with their tenants staying longer. Although this is good news for landlords and investment property owners, you know there is one thing to be careful of amidst these longer tenant stays, and that is, well, say you buy a rental property with an existing tenant in place that's been there for a while, it's more likely then that that tenant is paying below market rent, and why would that be? Well, because generally, the longer a tenant stays, the more likely it is that the previous landlord gave them a break on the rent. Now, why does that happen? Well, landlords can get lazy about bumping up the rent, and see what's really going on is that the previous landlord, perhaps the person you bought the property from, they themselves bought the property at a much lower price years ago than you did today, and therefore their mortgage payment is lower, and therefore the lower rent was able to cover their mortgage payment. So they weren't too worried about it. But if you're buying at today's prices, well, then you cannot stand for yesterday's rent amount, and that's why it's more likely that you need to bump up the rent to market rent. Although national rent growth is pretty flat, San Francisco continues to rewrite its record book per Zumper's national rent report.San Francisco's one-bedroom rent is up 23% year-over-year to 4,180 bucks, and two-bedroom rent is up 26% to over 6K, 6,020 dollars for the median rent in a two-bedroom San Francisco apartment-the first time they've ever topped 6K there. Yes, the city continues to lead the nation in annual rent growth, and even ahead of New York City for two bedrooms. That's because this is where the growth of the AI industry has collided with a supply-constrained housing market, high demand over low supply. I mean, you might remember that San Francisco was hit especially hard by the pandemic, but its bounce back has been amazing. Even beleaguered San Francisco office buildings are filling up again amidst the AI boom. Now, the Bay Area's previous tech boom back a while ago that was led by tech giants like Facebook, Apple, and Google. All right, that boom was largely concentrated in these sprawling suburban office parks in Silicon Valley. Now Silicon Valley is not in San Francisco. It is depending on just where you're going, perhaps 60 minutes south of San Francisco proper. But see, this time the city limits San Francisco finds itself as the epicenter because a lot of the newest, biggest names in tech like Anthropic and OpenAI, they are headquartered in the very same city neighborhoods that were struggling with occupancy just a few years ago, and see a big part of what's going on, and there's a lesson in this for you as when a lot of other cities built like Phoenix and Austin did, San Francisco did not, and what's interesting is that the publication, the San Francisco Standard, it reported that get this last November a two-bedroom apartment overlooking Alamo Square was advertised for $5,000 per month. That was already 30% above San Fran's median two-bedroom rent at the time, but despite that fact, so many people attended the open house that the property manager had to divide them into two touring groups. Qualified applicants were then emailed and told to submit their best offer of rent. Okay, basically an invitation to a bidding war here. One tech worker and her roommate bid $5,100. Management responded that they had reached the second round and invited them to increase their bid again, and they declined to increase their bid and they lost the apartment. Those. Same article reported that an even more extreme marina neighborhood example, the winning renter offered substantially above asking price, six months upfront rent, and twice monthly professional cleaning. What kind of prospective tenant offers their landlord professional cleaning? I've surely never had it happen. That and bidding wars are now taking place for San Francisco rentals. Could an AI surge and a lack of supply make anything like that happen in your rental market? That remains to be seen, and probably not to that extent. I've got more for you straight ahead, including the trend of money maxing. I'm Keith Weinhold. You're listening to episode 620 of Get Rich Education. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Chaley Ridge while it's on your mind. Start at RidgeLendingGroup.com. That's ridgelendinggroup.com. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family 266866.

Keith Weinhold 17:22

Although national rent growth is pretty flat, San Francisco continues to rewrite its record book per Zumper's national rent report. San Francisco's one-bedroom rent is up 23% year-over-year to 4,180 bucks, and two-bedroom rent is up 26% to over 6K, $6,020 for the median rent in a two-bedroom San Francisco apartment-the first time they've ever topped 6K there. Yes, the city continues to lead the nation in annual rent growth, and even ahead of New York City for two bedrooms. That's because this is where the growth of the AI industry has collided with a supply-constrained housing market, high demand over low supply. I mean, you might remember that San Francisco was hit especially hard by the pandemic, but its bounce back has been amazing. Even beleaguered San Francisco office buildings are filling up again amidst the AI boom. Now, the Bay Area's previous tech boom back a while ago that was led by tech giants like Facebook, Apple, and Google. All right, that boom was largely concentrated in these sprawling suburban office parks in Silicon Valley. Now Silicon Valley is not in San Francisco. It is depending on just where you're going, perhaps 60 minutes south of San Francisco proper. But see, this time the city limits San Francisco finds itself as the epicenter because a lot of the newest, biggest names in tech like Anthropic and OpenAI, they are headquartered in the very same city neighborhoods that were struggling with occupancy just a few years ago, and see a big part of what's going on, and there's a lesson in this for you as when a lot of other cities built like Phoenix and Austin did, San Francisco did not, and what's interesting is that the publication, the San Francisco Standard, it reported that get this last November a two-bedroom apartment overlooking Alamo Square was advertised for $5,000 per month. That was already 30% above San Fran's median two-bedroom rent at the time, but despite that fact, so many people attended the open house that the property manager had to divide them into two touring groups. Qualified applicants were then emailed and told to submit their best offer of rent. Okay, basically an invitation to a bidding war here. One tech worker and her roommate bid $5,100. Management responded that they had reached the second round and invited them to increase their bid again, and they declined to increase their bid and they lost the apartment. Those. Same article reported that an even more extreme marina neighborhood example, the winning renter offered substantially above asking price, six months upfront rent, and twice monthly professional cleaning. What kind of prospective tenant offers their landlord professional cleaning? I've surely never had it happen. That and bidding wars are now taking place for San Francisco rentals. Could an AI surge and a lack of supply make anything like that happen in your rental market? That remains to be seen, and probably not to that extent. I've got more for you straight ahead, including the trend of money maxing.

Keith Weinhold 20:46

I'm Keith Weinhold. You're listening to episode 620 of Get Rich Education. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com.

Keith Weinhold 21:23

Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family 266866.

Robert Kiyosaki 22:26

This is our rich dad, poor dad author Robert Kiyosaki. Listen to Get Rich Education with Keith Weinhold, and there is I respect Keith. He's a very strong, smart, bright young man.

Keith Weinhold 22:47

Welcome back to Get Rich Education. I'm your host Keith Weinhold. The rise of quick hit dopamine culture has definitely hit the personal finance world, and this is not a good trend for a lot of Gen Zers, who are those age 14 to 29, sports gambling is increasingly a part of what they think is financial planning. A recent survey from the wealth management platform Betterment shows that 26% of Gen Zers, more than one in four, then consider sports gambling as part of a deliberate long-term financial strategy. If you think that's bad, more than half of Gen Zers, 52% say they've rerouted funds from investment over to sports betting in the past year, and that's versus just 24% of all Americans. Yes, the rapid legalization of sports gambling means it's never been easier to bet your whole paycheck that the Mets are going to lose 100 games this season. When a prediction market or a sports book starts to feel like a retirement strategy, we have a problem, and this is congruent with the rise of dopamine culture across all of society, where we've gone from playing sports, then to watching sports, and now to gambling on sports. In the kitchen, it's where we've gone from home cooking to leaving and getting fast food, to ordering Uber Eats, it's where media has gone from film and TV to streaming shows, and now with dopamine culture, it is watching reels. It's how shopping has gone from first high street shopping, then to Amazon and now to the TikTok shop. It's how communicating with people. It's gone from handwritten letters to sending emails to Snapchats. It's how we've gone from newspapers to breaking news to rage bait. As far as what we listen to for music, this rise of dopamine culture-it used to be vinyl records, and then Spotify playlists, and now it's trending sounds.

Keith Weinhold 25:11

It's gone from finding love to casual dating to infinite swiping. How about the way we look at and share photos? It's gone from photo albums to camera rolls to Instagram stories, and how about the way we access information with this rise of dopamine culture? It's gone from libraries to Google to Chat GPT, and that brings us to money maxing. Okay, yes, here in our finance world, the rise of dopamine culture has led to this. Yes, that is apparently a word now. Money maxing-it's all one word with 2x's. It sounds like something invented by a 22-year-old who's got three credit cards, three hoodies, and one fork. Okay, but money maxing-that is one of the newest personal finance trends spreading across social media. Now, the maxing stuff in that whole suffix that first became popular through terms like looks maxing, which means trying to maximize your physical appearance, whether you're male or female, and now people are sleep maxing, health maxing, career maxing, and I guess it was just inevitable until they were money maxing. And what it really means is optimizing your financial life so that every dollar works harder for you. That could include using a high yield savings account, earning credit card points and rewards, automating your investments, negotiating bills, and eliminating wasteful spending-eh, in other words, it's just another internet reinvention of financial responsibility. I mean, your grandparents just called it being sensible.

Keith Weinhold 26:58

Now, I do like the fact that young people are talking about money. I mean, as we've covered before, financial education is desperately needed. Schools will teach you about the parts of a biological cell, but surely not how to read a mortgage statement. So you can graduate knowing that mitochondria are the powerhouse of the cell, while believing that a tax refund is free money from the government. So you know, directionally, money maxing is good, but see, it usually only focuses on one side of the equation. That's the problem with money maxing. It only focuses on spending less. And here at GRE we take a different approach. The old financial advice is live below your means, and GRE's philosophy is grow your means. You should only live below your means earlier in your financial life when you sort of have to and you need to form capital for investments. But grow your means so that you can have the means to do things. I mean, that is the point of financial betterment.

Keith Weinhold 28:09

Long term, financial betterment is certainly not sustainable by saving money by getting a haircut at home, only watching men's fast pitch softball at the Moose Lodge because it's free instead of going to a Major League Baseball game, saving $120 on air tickets by adding an extra layover on your trip itinerary, or a buy one get one free deal on Hillshire Farm Bacon. Now, of course, you shouldn't waste money if you're paying for six streaming services and you're only watching one. Well, cancel the others. If you carry a credit card balance at 24% surely extinguish that financial dumpster fire. But you cannot shrink your way to an extraordinary life. There is a floor beneath how little you can spend, there is no ceiling above how much value you can create for others. You can cancel your coffee, you can stop eating out, you can turn down the thermostat until your living room feels like a meat locker, but eventually there is nothing meaningful left to cut. That is the weakness in traditional money advice. It treats personal finance like a sinking ship, and it just hands you a bucket. Growing your means is building a bigger ship. The most powerful form of money maxing is not squeezing another 2% off your grocery bill. It is increasing your income. It is acquiring productive assets and creating systems that pay you repeatedly. I mean, saving 20 bucks is fine. Creating another income stream can continue for. Years. This is the difference between subtraction and multiplication. Most money-maxing advice really isn't different than that conventional advice. It's living in the world of subtraction. Cut this. Cancel that. Buy the generic cereal. Drive across town to save 12 cents per gallon. Hey, congratulations! You just spent 40 minutes of your finite life to save $2.80. Real wealth is built through multiplication. Multiply your income, multiply your skills, multiply your relationships, learn a new system, multiply the number of people you serve with rental property, and then multiply your money through productive assets. Now, this does not mean to spend recklessly. Growing means is not permission to inflate your lifestyle every single time your income rises, but it means directing more attention toward expansion than deprivation.

Keith Weinhold 30:59

Ask yourself a better question. Instead of asking how can I save another $100 this month, ask how can I create another $1,000 of monthly income. That very question activates a completely different part of your brain. Now maybe you develop a valuable skill. Maybe you negotiate your compensation. Maybe you start a business. Maybe you acquire an income property. Maybe you turn knowledge, intellectual property, or an audience into a recurring revenue stream. You start looking for leverage rather than looking for coupons and leverage, that is the real engine of what money maxing ought to be. Leverage means accomplishing more with less of your personal effort, and there sure are a lot of forms you can leverage other people's time. You can leverage systems and technology. We're going to talk about a system later here. You can leverage media where one message reaches 1000s or millions of people, and in real estate, you can leverage other people's money. You can scale. A few weeks ago, here I discussed four different types of scale. Real estate investors can get them all at the same time. If you remember, they are financial leverage, like with the five ways. There's operational leverage, there's geographic leverage, and finally replication. You use a relatively small down payment to control a much larger asset while your tenant pays you rent, that income helps cover the property's expenses and mortgage, and over time, inflation tends to lift rents and property values. While your fixed rate debt becomes easier to repay with diminished dollars, I mean that is real money maxing right there. In fact, GRE's real estate pays five ways framework might be the ultimate money maxing system. One property can produce cash flow; it can appreciate. Your tenant can gradually amortize your loan for you. You get the tax benefits, and inflation can transfer wealth from the lender to you through your fixed rate debt, five simultaneous financial benefits attached to one asset. Oh, and we're going to take that and compare that with saving 50 cents on toothpaste. Now, both things technically do improve your finances, but they don't even belong in the same zip code.

Keith Weinhold 33:41

Now, none of this means that every leveraged property is a good investment. In fact, leverage amplifies outcomes. A well-selected, properly financed property is going to accelerate your wealth creation. But a bad deal with thin reserves-hey, that can accelerate your introduction to an attorney. Money maxing still requires judgment. You want durable income, adequate liquidity, responsible underwriting, and you want to have enough reserves to withstand the inevitable surprise. Because every rental property eventually introduces you to something that is leaking, squeaking, or perhaps refusing to pay. The goal is not to optimize every dollar so aggressively that your financial life becomes fragile. And really, that is an important warning about all forms of maxing. Optimization can go too far. Someone might transfer money among five banks to chase these tiny promotional yields, and open 12 credit cards for bonus points, and then monitor every purchase with the intensity of airport security. Okay, I mean technically they're optimization. Their money, but they're also turning their life into like an unpaid accounting internship. Your money should create freedom, not become another demanding employer. Effective money maxing focuses on the big levers first. Get some big wins. Increase your earned income. Own those productive assets. Use good debt prudently. Reduce taxes legally. Protect yourself against catastrophic losses. Maintain liquidity, and then optimize the smaller expenses. Do not spend three hours clipping coupons while ignoring a poorly structured $400,000 mortgage. You do not congratulate yourself on saving $9 on lunch while leaving 50k idle in an account that earns almost nothing. So we don't obsess over credit card points while carrying a balance because paying 24% interest to earn 2% cash back is not money maxing. That is like arithmetic getting mugged in an alley. And there's also an important difference between looking rich and becoming wealthy. Social media rewards visible consumption on things like cars, watches, first-class seats, rooftop dinners, actual wealth-that's something that's often invisible. It is the rental property quietly producing income. It is the ownership stake compounding in the background. It is the tax strategy that's never going to appear in a photograph, and it is the growing gap between what you earn and what you need to live.

Keith Weinhold 36:46

The person displaying the most wealth can have the least. The person saying very little might own the building. So yes, embrace money maxing. Know where your money goes. Eliminate the waste. Negotiate recurring expenses, automate your good decisions, and make your dollar purposeful. Each dollar, but don't stop with living below your means because that is only financial defense. Growing your means is financial offense. Saving money can make you more secure. Owning productive assets-that's what can make you free. The highest form of money maxing is not becoming the world's most efficient consumer. It is making the transition from consumer to owner. Own businesses, own equities, own real estate, own assets that produce value while you sleep, travel, or spend time with the people that matter to you. Because your time is limited, and yet your appetite for generic cereal is also limited. But your ability to create value, acquire assets, and grow your means. That is far less limited. Live below your means if you must, but don't stay there. Grow your means. That is true money maxing. And the number one reason that people don't acquire wealth. Do you know what it is? It's that it simply does not occur to them that they can.

Keith Weinhold 38:24

That is what Brian Tracy said. That is so incredibly simple, and it's true. If you want a money max, you need to have a great system. Let me tell you about a system called the Seven Figure Solution. Now you've been listening to me weekly for almost 12 years here, which I'm immensely grateful for. You've been earning money, investing well, and here with the seven-figure solution, you're going to be able to finally see how it all goes together. It's about making sure that your real estate and other assets appropriately fund your retirement in a way that gives you protection against market downturns, a tax advantage pool of liquidity, the death benefit of a life insurance policy, and actually introduces you to a new form of leverage all at the same time, the liquidity is key because this is where a 401(k) or IRA limit you. Those vehicles have taxes and penalties if you want to use those funds early, and this does not.

Keith Weinhold 39:34

But the seven-figure solution-it's not just for retirees. In fact, our own in-house investment coach here, Naresh uses something like this, and he's in his 30s. It also gives you a significant tailwind during your investing career. Integrate the seven-figure solution the GRE way, where we have a conscientiousness about leverage in cash flow, and in this case, part of it is how to prove. Leverage a life insurance policy. When it's time to tap that policy's cash value, you take what is a policy loan, not a withdrawal, because you're borrowing against your cash value, and therefore you're using the funds in more than one place. That's the leverage, and then the IRS does not tax loan proceeds, and this reminds me of a billionaire borrowing against the value of their stock rather than having to sell any of those assets. And yet, this can be done tax-free. It's similar to what you can do with the seven-figure solution, even for non-billionaires, it is buy, borrow, die. This leverages an indexed universal life policy, and there is the right way to do this and the wrong way to do it. Part of the seven-figure solution is that your cash value can have an upside ceiling and loss protection on the downside. That's really something that you only care about more as you're closer to retirement. And there are some mistakes to avoid here. You don't just want to set up the seven-figure solution off of a website, and it's based on products that you might have heard of from companies like Nationwide and mass mutual. I strongly encourage you to learn more, see how it all goes together, and learn how the seven-figure solution compares to other vehicles like a Roth IRA, 401k, and even a 721 and 1031 exchange. This is very much about you being able to picture your future, you've been building your real estate portfolio either from your investment coach or on your own. This is how the puzzle pieces finally are all going to go together. I am cordially inviting you to join us for a special live event, the Seven Figure Solution. It is co-hosted by our own GRE investment coach Naresh and Haven Bridges Jared, who you heard from on the show with me last week. By attending live from the comfort of your own home or from anywhere, you can have your questions answered in real time. It is this Thursday, the 27th, at 8 p.m. Eastern, 5 p.m. Pacific.

Keith Weinhold 42:23

Most people spend decades building wealth, and then they lose far too much of it because the retirement pieces were never designed to work with each other. So you're going to see how real estate, taxes, insurance, and retirement income can fit into one coordinated strategy, helping you grow and protect your wealth, access capital without immediately selling your assets, and potentially avoid losing hundreds of thousands of dollars to taxes unnecessarily. So it's not just another collection of disconnected financial tips. Really, it's your opportunity to finally see the entire retirement picture and understand what might be missing from yours. It's complimentary to attend. The longer you wait, the fewer options you could have. Decisions made today can affect your wealth for decades. Don't wait until retirement day to discover that your plan had expensive holes in it. There are some moving pieces here, so it's especially helpful that you attend this one live, and that way you can have any questions answered in real time, so that you really understand. And you might have been one of thousands of listeners that have attended our property webinars before, and they are important to building your portfolio. But this one could very well be more important in seeing your big picture, seeing your retirement, and seeing that your heirs aren't left with a giant tax bill too. You can reserve your seat now for the seven-figure solution at grewebinars.com again. That's grewebinars.com. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 44:14

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

Keith Weinhold 44:42

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

Keith breaks down why global crises, geopolitical shocks, and nonstop "doom" headlines haven't stopped stocks and real estate from reaching near all-time highs, and what that means for investors focused on inflation-resistant assets.

He also discusses Memphis as a surprising cash-flow market poised to benefit from the AI boom, sharing details on an upcoming webinar with Mid South Homebuyers.

Keith is joined by real estate investor and educator Jared Garfield to unpack the "Seven-Figure Solution," a strategy that combines cash-flowing rentals with tax-advantaged life insurance to create liquidity, reduce risk, and support long-term retirement income.

Together, they explore how disciplined portfolio growth, smart leverage, and coordinated tax planning can help real estate investors better align their assets with their long-term financial goals.

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For predictable 10-12% quarterly returns, visit FreedomFamilyInvestments.com/GRE or text FAMILY to 66866

Join Mid South Home Buyers' one-time, free live webinar featuring Keith Weinhold on September 30 at GetRichEducation.com/MidSouth to learn how Memphis' economic expansion could create new real estate investment opportunities, and have your questions answered in real time.

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Complete episode transcript:

Keith Weinhold 0:02

Welcome to GRE. I'm your host Keith Weinhold. The world is about to end again. It's the economic disaster that never arrives. I'll break it down. Then you've been earning money and investing well all these years. How does it all go together? It can culminate in the seven-figure solution, it's about seeing your future today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. And September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6,000 homes under management, for a free live webinar, the likes of which I've never done before, we're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.

Speaker 1 1:39

You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.

Keith Weinhold 1:55

Welcome to GRE from Kankakee, Illinois, to Cherokee, Iowa, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Recid Education, and the world is about to end. Even if you survive, your portfolio surely won't. Oh, jeez. At least that's the impression you get from mass media and what I'll call the Doom Scroll Industrial Complex. Fear creates urgency. Urgency attracts eyeballs. Eyeballs attract ad dollars. And I guess that using a slogan like "everything will probably be fine" well, that's never been a great ratings strategy. Now, can what has happened since 2020. Just this cheery little sequence: COVID, then Ukraine, Israel, Gaza, tariffs, and then the war in Iran. All that just since 2020. I mean, that right there sounds less like an economic timeline and more like a movie plot, or that the world is repeatedly spinning the wheel of misfortune. Yet after all of that, what is the result? Both stocks and residential real estate are near all-time highs. Apparently, the apocalypse has been postponed yet again-at least economically speaking. Now let's zoom out and break down these threats and a few more, all just since 2020, because 2020 is the year where, of course, you had the COVID-19 pandemic, economic shutdowns, the fastest major stock bear market in history, supply chain breakdown. You saw empty shelves, and there was unprecedented government intervention from the Paycheck Protection Program to stimulus checks to mortgage loan forbearance. Then, in 2021 and 2022, you had post-COVID inflation and supply shortages. Now, this was more of a result, not strictly geopolitical, but a major investment threat, and that led to aggressive interest rate hikes. From 2022 to the present, you have Russia's invasion of Ukraine, energy and food shocks came from that, sanctions, instability over in Europe, and really a heightened nuclear risk in 2023. You had the U.S. regional banking crisis. Remember SVB, yes, Silicon Valley Bank, Signature Bank, First Republic. They raised fears of a financial contagion that would spread like fat. Than a secret in a small town, it actually made me buy some gold. From 2023 to the present, you had the Israel-Hamas war and this broad Middle East instability, Hezbollah attacks, Houthi attacks, Red Sea shipping disruptions. It's almost like a geopolitical group project. And then from 2025 to the present, you have renewed U.S. tariffs and a global trade war, and this year you have the U.S.-Israeli war with Iran and the Strait of Hormuz disruption. That is the biggest current geopolitical investment threat because it combines all of these things: war, oil disruption, inflation, higher interest rates, and a recession risk. So it's a lot like this particularly unpleasant smoothie that's been blended together.

Keith Weinhold 5:55

All right. Well, all of that-that is just an absurd amount of uncertainty and disruption only since 2020, and though major markets are at all-time highs in the face of this, let's acknowledge that some were hurt here, like apartment building owners vulnerable to interest rate resets, and certain commercial sectors like office. Even worse, let's be sensitive to the fact that COVID in wars have resulted in a real loss of life. GRE's enduring strategy of primarily owning long-term residential rentals with fixed-rate debt has been comparatively really resilient. In fact, these calamities-they probably made you better off from the inflation that it has spurred. More people work from home. Well, that means that they're consuming our product while higher inflation debased our debt and jacked up our property values and our rents. And you know somehow every. single generation thinks that their collection of crises is uniquely terrifying, and it is not. And what do I mean by this? Well, in the 1980s, people feared war with the Soviet Union, the Cold War. A global population explosion so bad that millions or billions of people would surely die from hunger. You had the AIDS crisis. You had a hole in the ozone layer. Well, all those things. Virtually zero investors make decisions based on that stuff: an imminent Soviet attack or mass starvation from overpopulation. There is one thing that is 100% certain here, and that is that more shocks are coming. In case you don't want to sleep well, you can get worked up over the certainty of future calamities, artificial intelligence is making cyber attacks faster and more scalable. AI has even created entirely novel viruses. A confrontation between China and Taiwan that could create risk in the semiconductor space.

Keith Weinhold 8:18

A blockade that might disrupt the world's advanced chip supply, creating more inflation and more uncertainty. Here is what's changed, though, for what investors care about. You know what has changed with today's set of calamities versus those of the 1980s and earlier, because there is something, and it's a big deal for investors. Here's what's changed: recent history shows that the government does more to intervene during disasters, stimulus checks, liquidity programs where they're printing trillions, bailouts, pushing interest rates down to almost zero, quantitative easing. How about a foreclosure moratorium? Anything you know during COVID, it was a lot of these things, and it was the CARES Act, and it was a student loan payment pause. I mean, the Federal Reserve even set up emergency credit facilities. We now know that when the economic building catches fire, policymakers they rarely stand around admiring the flames. They just flood the place with currency. So the best investors they keep prudently building real estate portfolios in the face of risk, not the absence of risk, because the latter does not exist. This incessant government intervention, whether you agree with it or not, it gives you more safety cushions the next time that things fall apart. That's why what appears risk. Is still risky, but less so. So there is more incentive to take on prudent risk than I've ever seen. You know, no politician wants America to fall apart under their watch. So increasingly, they'll just paper over the problem by printing, printing, printing, and then, therefore, the resultant inflation, the consequence of this, that can be dealt with under the next president's watch, not theirs. In fact, future calamities they almost make you want to own scarce real assets that benefit from inflation, not a hedge, a benefit. Trying to time every war, election, banking crisis, tariff announcement, virus, and Fed decision. Trying to time all of those things-that is usually ineffective. You either own more assets, or you get left behind in everything that's happened since 2020. That just underscores this. In fact, Berkshire Hathaway, the closely watched company that Warren Buffett ran for a long time, but he still has influence in.

Keith Weinhold 11:16

You know, they recently began moving out of cash and into assets, they ended their long net selling stretch. In fact, in the latest quarter ended, they've now done the most buying that they've done since early 2022. They have jumped back in the game. It appears that Berkshire Hathaway got tired of sitting on the sidelines and seeing others make gains, and they're pretty bullish on housing too. They bought a home builder. The bottom line here is that shocks are going to keep arriving, and yet productive assets and well-financed residential real estate has repeatedly survived them and just continued appreciating. Don't wait for a risk-free world because you'll wait forever. When you evaluate all these calamities, just since 2020, again, COVID, Ukraine, Israel, Gaza, tariffs, and war in Iran, and then you realize that both real estate and stocks are near all-time highs anyway, and the government keeps backstopping asset owners like never before. This is just a fresh angle on how much better off you are when you prudently own more inflation-benefiting assets sooner. I want to tell you about something called the seven-figure solution. You've been here listening to me weekly since 2014. You've been earning money. You've been investing well, and now you're going to see how it all goes together. It's about making sure that your real estate and your other assets appropriately fund your retirement in a way that gives you protection against market downturns, a tax advantage pool of liquidity, the death benefit of a life insurance policy, and actually introduces you to a new form of leverage all at the same time. Now the liquidity here is key because this is where a 401(k) or IRA limit you, they have taxes and penalties if you want to use those funds early. This doesn't, but the seven-figure solution-it's not just for retirees. In fact, our own in-house investment coach Narayish uses something like this, and he is in his 30s. Let's discuss it, and then you'll see where I have an invitation for you, where you can get involved. I'd like to welcome in a guest we last had on the show a few years ago.

Keith Weinhold 13:54

He's a frequent guest on popular shows, including our friends over at the Real Estate Guys Radio Show, and this guest has also been a terrestrial radio show host himself. He's a long-time real estate educator and an active investor, just like you and I. So he speaks from experience and not a textbook. He's the creator of what we'll discuss today, called the Seven Figure Solution. Welcome back to the show, Jared Garfield.

Jared Garfield 14:21

Hey, it's great to be with you again. Thanks for having me.

Keith Weinhold 14:25

It's so good. Now you're with the Haven Bridge Group, and you help people, especially real estate investors, with what's called the seven-figure solution. Tell us about it.

Jared Garfield 14:37

it. Well, Haven Bridge, we get the name for that because people are really looking for a haven of safety, and the bridge is kind of what crosses the gaps that could kind of destroy your wealth, and it's the path to get there. So we want to take people on a path to safety, and the seven-figure solution is the idea that if you're going to be drawing out even 4% per year to not outlive your money, because people are living now. To 8590, 95 years old, and so that means you could have 35 years in retirement. And with inflation and different things like that, you really have to have a lot bigger nest egg than what most people realize. So a seven-figure solution is how to get to more than a million dollars liquid that you can draw on in a tax advantaged manner for the rest of your life, while also having living benefits. And we pull real estate in with it because we want people to have 10 or 15 or 20 rental properties by the time they retired. That they 1031 exchange regularly, so that they're always keeping tax advantages. So that even in retirement you have strong tax advantages, and ultimately we think that when you're 65 or 70, you might want to go from 30 single-family houses to 1031 exchange into one institutional asset that's a little bit less management intensive.

Keith Weinhold 15:57

Okay, so this is a tax advantage vehicle that real estate investors can use during their investing career, and those tax advantages then really convert into something that you can use in retirement as well.

Jared Garfield 16:11

Yes, what it does is it's a vehicle that instead of saving the money from your cash flow from your rental properties in the bank, we say, well, why wouldn't you rather invest in something where it grows tax-free, number one, and then number two, you don't have the penalties like you would with a 401k, where you get taxed and you get penalized 10% if you pull it out. It's liquid, usually about 80 to 90% liquid, so you can pull from it whenever you like, and you can use it for down payments to grow your real estate portfolio. But you can earn sometimes between five and even seven or 8% in a tax advantaged manner where you're not taxed on it, but you're earning a much higher return than if you put the cash flow into a bank.

Keith Weinhold 16:51

All right, so you're building this tax advantage pool of capital that grows over time, and this is important to have some liquidity. You know, Jared, I've often talked to our audience, about three to 5% of your portfolio value ought to be kept liquid. Maybe with a vehicle like this, you would want to put in more of that because real estate investors we have expenses, so you have this liquidity to cover things like vacancies and major repairs, or perhaps you could even use this account for future down payments on additional investment properties. Is that how it's utilized?

Jared Garfield 17:27

Yeah, absolutely. And I get it partially this way because in my early 20s, I got up to where I had about six rentals, and at the time, I also owned a real estate brokerage, and I was doing very well. I was making a six-figure income and things. And what happened is, I back when a

Keith Weinhold 17:41

six-figure income was a big deal.

Jared Garfield 17:43

Yeah, back in the early 2000s, it was a little bit better money. But the funny thing was, I had four rental properties that all went vacant at the same exact time, and so now all of a sudden, I was paying like 4500 bucks a month in mortgages, not counting the house I lived in, but I had to cover four mortgages on four of my rental properties all at the same time, and I hadn't saved the cash flow, so I didn't have a huge emergency fund. All my liquid capital went into down payments and into renovation money to rehab the properties. Okay, and so it put me in a real bind, and I was out driving a Volvo S80 around throwing two paper routes in the mornings, and then going to my real estate brokerage after my paper routes to cover those rental properties. And so this was basically meant as a way to say, okay, this is a way that I have the liquidity. I'm getting a higher return, but now my tenants are not only buying me the houses, but they're also giving me a couple million dollars in life insurance, and they're wrapping my investment component or the cash value of that, the cash value part of the policy. They're wrapping that in a way that it grows tax-free, so it just accomplishes a lot of things. But the other thing that's a beautiful thing about it is there's a lot of things that we call living benefits.

Keith Weinhold 19:02

All right, so you have the living benefits and the tax advantages, and I know how you have pointed out that this can save an investor 10s of 1000s of dollars in taxes per year and hundreds of 1000s or more over time. Can you tell us more about that?

Jared Garfield 19:20

Yeah, because what happens is the money that goes in is growing tax-free, so you don't get taxed on any of the growth. But what we really like about it is, let's say that you're cash-flowing $2,000 a month off your rental properties, and you're putting 2000 a month into this policy. Usually, after the first year, if you're max funding, 80 to 90% of that's liquid. So if you've got 24,000 sitting in there, you've got access to 89 to 90% of the money. So it's pretty liquid. But what happens is over a 20 or 30 year period, that money could turn into three or 400,000 a year that you can pull out in the form of policy loans. And by doing that, it's not taxed. And you can pull that out throughout your retirement tax-free. So if you were paying 25% in taxes and you're pulling out 200 grand a year, that's $50,000 a year in retirement that you're saving in taxes. But that could be over a 20 or 30-year period. So over 20 years, that 50,000 could end up being a lot of money. I mean, 500,000 over 10 years, a million over 20, and so that means you don't have to accumulate as much. But a lot of our investors love it because they'll save it up with discipline, and then that way it's there if the furnace blows. So it makes your real estate safer, but it also becomes your down payment funds to expand your portfolio.

Keith Weinhold 20:40

Okay, the seven-figure solution is the vehicle that we're talking about here, and what part of the IRS code, just briefly, is it that gives this tax advantage?

Jared Garfield 20:51

It's Internal Revenue Code Section 79 that allows it to grow tax-free. In the 1980 s, doctors and a lot of very wealthy people were using this to the point that IRS changed the laws. They went and sued the insurance companies because doctors would go in and dump $2 million in, and they would buy a $2 million life insurance policy. So they were self-insured, which meant that they didn't have any cost of mortality on it. So they basically got all the benefits of the tax-free growth and the tax-free pullout. And the IRS said, "Wait a minute! We think you're doing tax evasion. So what they did is they came around and they said, "We're not going to let you use this loophole anymore for the very wealthiest people to have this. So they came to a compromise, and the compromise was that if you wanted to put in 2 million, you had to maintain a corridor where there had to be a little bit higher amount of life insurance. So you might have to buy a $2.3 million policy, but then you could still dump, say, $2 million in and have all the tax advantages. It's a strategy that's been used for over 100 years by families like the Rockefellers and the Hunts and J.P. Morgan. The very wealthiest families have always used these strategies to grow and protect their wealth.

Keith Weinhold 21:59

Okay, so it's a part of the tax code that allows cash value to accumulate within and be withdrawn from a life insurance policy tax-free.

Jared Garfield 22:11

Correct, and it gives you living benefits, which I alluded to a minute ago. And the living benefits are if if you end up having to go through things like long-term care, disability, if you can't perform, you know certain functions for a certain period of time, chronic illness, critical illness, terminal illness. If any of those things happen to you, you can borrow against the policy and have access to money during those things that would normally decimate your wealth, because you can actually access the death benefit in advance.

Keith Weinhold 22:42

Now I know a little about the six risks. Tell us about that.

Jared Garfield 22:47

Well, Keith, there are six risks that all investors face regularly. The first one is inflation erosion, and that means that your purchasing power often ends up leaking out of your balance. And the balance might look fine, but inflation can eat away at it. So even if you've raised a lot of money, if inflation means that you can buy half as much five or 10 years from now, then you know your wealth isn't as big as you thought. The second is the volatility setback, and that's sequence of return risk. That means that if you retire on a bad year where things really bad, stock market drops, you could end up using your money at a time where it really weakens your wealth because it may have dropped by 50% So if you had a million, now you have a half a million, and you're spending 100,000 a year. At the end of year one, you might only have 400,000 left. So sequence of of return risks from volatility setback, tax drain. That's just the compounding cost of an uncoordinated tax picture can really be a problem, and then the next one is liquidity. If you don't have liquidity and you've locked up all your money and you can't access it until you're 59 and a half without significant taxation and 10% penalties, the liquidity lock is a problem. There's the longevity paradox. What happens if you outlive your money, you know. So living longer is a benefit, but it exposes you to where you might not have enough money to live on in your latter years. The last two are care avalanche, and that is if an unexpected health event happens at the wrong time, it could really destroy your wealth because medical costs have spiraled out of control, and then the last one is the line to land, and that's only one of the six that's really about growth.

Keith Weinhold 24:28

Right, only one of the six of those was about growth. I can't stand the longevity paradox. Yeah, we think we all want to live a long time, but then it's more difficult to fund living a long time, and if you outlive everybody, nobody shows up at your funeral either. The longevity paradox-one of the six risks that the seven-figure solution can really help you with. Now, tell us more about funding it, so you can get a good cash value balance in. There, I know that one way you do it is actually with short-term rentals instead of a paycheck.

Jared Garfield 25:06

We love short-term rentals, especially for our highest net worth clients, because the reason is is the bonus depreciation of the big beautiful bill. Oh, right! You could take up to like 150 or even $200,000 in year one, they take that depreciation that they used to spread out over a whole lot of years, and they make it to where if you get with your CPA and you analyze your short-term rental, you could potentially take all of the furnishings, all of the artwork, all of the dishes and things that are in the property. Sometimes they'll let you take components like the appliances, the air conditioning unit, the furnace, and they'll let you take it all in year one instead of having to line item it and spread it out over you know 27 and a half years. So what this means is, if you have a short term rental, then you you might get like 150 to 200,000 tax break in the first year on the right property, but it's better than that because instead of having to have like 750 hours to hit full-time real estate professional status, it cuts the hours that you have to have significantly down. I think it's more like 150 hours or something like that, or 300. It's like half the hours, and so you can hit the benefits of taking unlimited passive loss much easier if you have a couple of short-term rentals.

Keith Weinhold 26:24

You're listening to Get Rich Education. We're talking with Jared Garfield about the seven-figure solution, something that takes some time to understand, but it can give you a tax-advantaged pool of capital that grows over time, and it also creates this overall tailwind, not just during your investor life, but then it provides tax advantaged retirement income at the same time. More on this when we come back. You're listening to Get Rich Education. I'm your host Keith Weinhold. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group and MLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com, that's ridgelendinggroup.com.

Keith Weinhold 27:25

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Speaker 2 28:28

Real Wealth Network's Kathy Betke, and you are listening to the Always Valuable Get Rich Education with Keith Weinhold.

Keith Weinhold 28:46

Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're talking about the seven-figure solution with Jared Garfield. Something that can be a particular benefit to real estate investors both during your investing career and then once you're in retirement as well, and this can take the form of either an indexed universal life policy or a whole life policy. There are a lot of wrong ways to do this and wrong things to get into. We're talking about the right way. Part of that is funding it as best you can. Can you tell us more about that?

Jared Garfield 29:20

Well, there's a lot of different ways to fund it. A lot of our clients will come in. We have some people who will use rollovers if they're nearing the end of retirement. Some people will roll over a 401k into a cash value life insurance policy because they can do it over a five or seven year period, and they pay the taxes when they roll it over, so their taxes go up a little bit for five or seven years of retirement, but then what happens is that means that during their retirement they're not taxed on the income all the way through retirement, so that can save really significantly. But a lot of our clients will do a flip and dump 40 or 50,000 a year in by just saying I'm going to do one flip a year and use that to. Fund the whole thing, or they'll take the cash flow and dump the cash flow into here instead of the bank, just so that they get the living benefits and they get the much higher return with still 80 to 90% liquidity. So could be cash flow from rentals, could be money from a flip, or sometimes some of these short-term rentals can make 20 to $30,000 a year, and if you get $100,000 tax break, you have more money that's not going to Uncle Sam, and then because that's your discretionary income now, because of the tax break, you could use that money to for down payments to grow your portfolio or to do a flip.

Keith Weinhold 30:35

Now, Jared, I sort of think of the cash value that you're accumulating in this policy as safe money that grows at a slow to moderate steady rate, but if it rarely or ever loses value, can you tell us more about that and the rate of return expected in the policy?

Jared Garfield 30:52

Yeah, absolutely. With the IULs, it's going to depend a little bit upon the carriers and stuff like that, and whether you go with a mutual company and stuff like that. It can vary, but a lot of times people are going with things that are what we call indexed. So you can actually index it to the S and p5 100 if you think that we're going to have a bull market and the market's going to really go up strongly. You can index it to the market, and sometimes they'll have a participation rate where they'll say, "Okay, you can participate up to 12% So if the stock market does 17% the most you can make is 12% So you're giving up a little bit of upside, but that's still not nothing. I mean, that's not three or 4% You can still make you know 10 or 12% that year, but you're giving up the part above the participation rate. And the reason that you do that is if the market tanks and drops by 30 or 40% The worst you can do is 0% return. Zero is my hero because you didn't lose anything. So if you had a half a million sitting there, you don't go down to 250 and then wait eight years to get back to break even. Instead, you're still at half a million. And if the market goes up next year by 20% and you had a 10% cap. Then your half a million, you know, is now at 550,000. When everybody else, if it went up by 10% they're at half the amount that they had.

Keith Weinhold 32:13

You have a story or example of how you've helped somebody with this, because I know a lot of investors that are passionate about utilizing the cash value inside an insurance policy tell us.

Jared Garfield 32:28

Well, I've got one friend who's a developer, and he did like a $5 million policy. And every time he flip a subdivision or flip a house, and let's back

Keith Weinhold 32:36

up. Does a $5 million policy mean that's the death benefit?

Jared Garfield 32:40

Yeah, that's the death benefit. Thanks for catching that. That's the death benefit, but that also has a correlation to how much money you can dump into it. So if you have a $5 million policy, you can dump a lot more money in for the tax free growth. And the quicker you hit that death benefit amount, at that point you're self-insured, and so at that point you really don't have cost of insurance on administering the policy hardly at all, and so at that point, when you're what we call self-insured, the return on the investment becomes a lot better. But this particular developer was able to use this policy because he had so much cash value in, and if he sold a house, he'd take 40,000. If he sold 10 a year, he might take you know 400,000 and dump it into this policy, and so it made him bankable. And he was able to use the money to go out and do new subdivision developments because the bank would actually use the policy as the collateral to be able to give him loans at much lower interest rates.

Keith Weinhold 33:38

That's valuable. Tell us about that. I don't want to use the wrong words here, but then effectively with this example, are you borrowing against the funds in the policy? So therefore, you can get those dollars working for you somewhere else, all while simultaneously the cash value continues to compound and grow. Sort of another form of leverage.

Jared Garfield 34:01

Correct. What they basically do is they basically freeze part of the amount and say, okay, we're using this as the collateral and stuff like that to be able to do the loan. But if it grows and and makes 7% you're still making the money off of the money that's sitting in there. It's just collateralized as part of the loan. And some people will even use it to like go buy a car, like instead of buying a car and going getting a bank loan and paying 7% to the bank, they might borrow money out, go pay cash for the car from the life insurance policy loan, and pay 2% instead of 7% But they're paying it to themselves, and as long as they're paying the interest to themselves, if the money that they borrow out could potentially still earn the same money and earn 7% even though you had borrowed out. So it's doing two things for you at the same time, as long as you're paying that loan interest. But and that depends on the option that you take when you do your loan.

Keith Weinhold 34:54

We love leverage around here. Leverage trumps compound interest. In so many ways. Oh, I'm really glad that you told us some more about that using the funds in more than one way at the same time. Tell us more about what it costs for the investor, the costs of setting this up, and then what some of those trade-offs are, Jared.

Jared Garfield 35:18

Well, that really depends on the individual. I mean, everybody has to sit down and be able to decide what is acceptable for them. You know, a lot of times people will want to max fund the 401k that they're doing at least just to the amount that's matched. But then after that, this could be a great place instead of putting a whole bunch more money into a 401k. Some people will elect to say, "I'm going to put the matching portion into my 401k, but then I'm going to take my cash flow from my real estate and money that I could have contributed to other alternatives and put it into this because I want the liquidity. I want to be able to leverage this money and pull it out without any restrictions. That as long as I can pull out 80 to 90 percent, I could go buy a car wash, or I could invest in a business, or I could, you know, do whatever I wanted to. I could loan it to my kids for their college and make them pay me loans back to my policy. There gives you a lot of flexibility to do it. But the thing that we love about it is we'll do what's called an illustration, and it may end up if you start at the right time, it could be a six-figure passive income stream at retirement, and then if you have the real estate, because this helped you grow your portfolio, where without doing the strategy, you might have ended up with say 10 properties. We might be able to get you to 20 or 30 properties working together as a team with your real estate coaches and stuff like that. Then we can potentially grow your real estate portfolio, and what we want to do is 1031 exchange every seven to eight years. I don't believe in holding properties for 30 years.

Jared Garfield 36:47

I believe in exchanging them every seven to eight years because when the tax benefits have been used up, if you exchange to twice the size portfolio, you have better appreciation on a portfolio worth twice as much. But that new value, you still get the depreciation advantages, where the old value that was half, you know, the depreciation is used up. So you're you're getting new depreciation on the higher value assets, and then our goal would be that by the time you don't want to be involved in managing the property managers, that at some point you're going to have a 200 unit apartment complex with on-site management, and at that point you don't have any financial worries really because you're 1031 exchanging into those apartment complexes, but you have so much equity that you're still maintaining depreciation during your retirement years. When most people who have lesser plans don't have the tax advantages,

Keith Weinhold 37:41

I love that you said so much of that, and to you, the listener, Jared is licensed to do this, and our own in-house investment coach. You mentioned coaching. Naresh has the proper licensing as well to holistically help integrate this into your investor life. And for example, yes, we are rarely of the mindset that you would hold a property for all 30 years because after seven to 10 years, your leverage ratio gets worn down, and then additionally, if you're buying turnkey properties, oftentimes that's when capex expenditures start to enter into the picture. So yes, oftentimes we do these seven to 10 year holds.

Jared Garfield 38:23

I love that. Yeah, that's a really really good strategy, and and it always makes it to where you can grow so much bigger portfolio by not being taxed through that exchange. And you know, believe it or not, there's actually even ways when you have extra cash boot, they do allow if you notify them in advance. Sometimes you can take some of the cash boot on the exchange and roll it into some of the products that we utilize.

Keith Weinhold 38:47

For more specifics, I know you said it's based on one's individual situation, but how much does it cost to set up a policy? And then, are there any ongoing maintenance fees? Can you give us more specifics there?

Jared Garfield 38:59

So, there's small fees to administer the policy because you have people who are trading and doing different things and working within the policy for the funds. But usually, you can set policies up as low as 100 or even $200 a month. We don't usually recommend that because you want to max fund it. Usually, when you're doing these strategies, if you're just doing $100 or $200 a month, you're basically buying life insurance, but you're missing a lot of the benefits because what you want to do is to be able to max fund it. So what we like people to do is get as minimum life insurance. That's not in our advantage because we get paid based on the premium of the amount of life insurance you get. But you get the smallest amount of life insurance for the amount that you can max fund. I would much rather have somebody get a $500 a month policy that, let's say, they could put you know a thousanmd a month in or something like that, than to have somebody get $1,000 a month policy where they're paying a thousand a month but they can't max fund it because by max funding it you're maximizing the growth component of the cash. Value, and so it depends on how much you want. But you can go anywhere from $100 or $200 a month to we have clients that will dump $20,000 a month in because they really want to shield as much money as they can from tax growth.

Keith Weinhold 40:15

Tell us more about who the seven-figure solution is for and who it's not for.

Jared Garfield 40:20

Well, if you're living month to month and you don't have discretionary income, it's probably not a good solution. In that situation, you probably want to get term insurance and just make sure that you cover catastrophic things. But if you've got discretionary income and you've got an extra four to $500 a month that you could use to max fund, we figure most people need life insurance anyway, and the way that we teach it, when you mix it with real estate, rather than pulling it from your monthly budget, doesn't it make a lot more sense to let your tenants buy the houses for you, but also pay for a half a million or a million dollar life insurance policy for you, where the tenants are covering the savings for anything that happens at the property with capex or vacancy or damage, and at the same time covering life insurance and potentially a six-figure passive income that's tax advantaged at retirement. So I pull the money out from other assets and let the assets cover this asset.

Keith Weinhold 41:18

Oh well, Jared, this has been great. Before I ask you if you have any last things to tell the audience about the seven-figure solution, I invite you, the audience, to join us. It's going to be Jared and our own in-house investment coach, Nareesh, bringing you a live online event that you can join from the comfort of your own home next Thursday, the 27th at 8 PM Eastern. You can register now; it's free at grewebinars.com because there are a lot of moving parts, and it does take some time to wrap your head around this, benefiting from the cash value of an insurance policy. And this way you can have a Q and A, and you can get answers in real time at this event. It's called the Seven Figure Solution: Build wealth, reduce risk, and create tax advantage retirement income through real estate. Again, it is next Thursday, the 27th at 8p.m. Eastern, you probably have generated some questions inside your head while you're listening to this, and you can sure have them answered there as you're going to learn a whole lot more about it next Thursday. This could help a lot of people. Jared, do you have any last thoughts?

Jared Garfield 42:38

I think the only thing is that we like to work with the team. We like to work with your CPA. We like to work with your real estate investment coach. I used to be a coach and trainer for Robert Kiyosaki, who wrote Rich Dad Poor Dad, and he always talked about power teams. And so we want to be able to be a part of your power team and work with your other advisors to help you implement something. We're not here to give you tax advice. We want you to be able to work with your investment advisors and your CPAs, and just be a part of the team. But I would point out that over my career, I've owned hundreds and hundreds of single-family cash flow rentals, duplexes, fourplexes, apartment complexes. I've done some land development, and I implement these strategies myself. I had 17 Airbnbs, and so these are the strategies that I implemented as a full-time real estate professional. I felt like that this strategy of having a seven-figure solution could help you to avoid some of the pitfalls that I experienced in my 20s.

Keith Weinhold 43:32

So much all comes together for one pretty comprehensive solution. It's the intersection of growing your portfolio, getting tax advantages and having the death benefits of insurance and more all coming together next Thursday, so that you can learn more. Jared, it's been great having you back on the show.

Jared Garfield 43:52

Thanks, Keith. Always glad to join you.

Keith Weinhold 44:00

Integrate the seven-figure solution the GRE way, where we have this conscientiousness about leverage and cash flow. In this case, it's how to prudently leverage a life insurance policy. When it's time to tap your cash value, you take what is a policy loan, not a withdrawal, because you're borrowing against your cash value, hence using the funds in more than one place, and the IRS does not tax loan proceeds. This reminds me of a billionaire and how they borrow against the value of their stock. That way, they don't have to sell their assets. This is similar to what you can do with this. Another thing is that you know real estate investors are not used to a volatile ride because our asset values stay stable. You heard Jared mention the acronym IUL there. That's an indexed universal life policy. It's a real benefit. That says you tie yours to the S and P five hundred. Well, that index was down 18% in 2022, and that your cash value can have an upside ceiling and loss protection on the downside-an option that you'll care more about as you get toward retirement. In 2008, the S&P was down 37% so the math is cruel on value losses. In fact, it's even worse than it sounds because if you're down 30%, then you need a 43% gain just to get back to even. That is just math.

Keith Weinhold 45:39

There are some mistakes to avoid here, and you don't just want to set up your seven-figure solution off of a website. And it is based on products that you might have heard of from companies like Nationwide and Mass Mutual. I strongly encourage you learn more, see how it all goes together, learn how the seven-figure solution compares to other vehicles like a Roth IRA, 401k, 721 exchange, and 1031 exchange. This is very much about seeing your future. You've been listening to me here every week for almost 12 years, earning money from your day job, building your real estate portfolio, either from our investment coaching or on your own. This is how it all goes together. Next week with Jared and GRE investment coach Naresh. By attending live, you can have your questions answered in real time. One last time, you can sign up for the event for next Thursday, the 27th at 8 PM. Eastern, 5 PM. Pacific. Learn about something that's potentially really valuable to you: the seven-figure solution at grewebinars.com. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.

Speaker 2 46:59

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 47:26

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