Epic Real Estate Investing - Housing Market Crash as Mortgage Rates Spike? | 1238

Episode Date: September 27, 2022

Knowledge is power, and this one comes to you for free! Is that even possible? Sure it is. In this episode, Matt will share the new essential book every worried American investor needs to read. The book is called 7 Imminent Threats to Your American Dream, and you can get your copy at epicfreedombook.com. Download it for free and learn everything you need for getting wealthy! BUT BEFORE THAT, Matt shares two phone calls where you can hear some tricks on how to close better deals. Are you ready? Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. When you're getting free houses off the MLS, with real estate agents involved even, you know something's up. The market is presenting opportunities that remind me of when I got started, when I barely had two nickels to rub together. You know, if I were to buy, sell, hold real estate, I had no other option than to use creative financing. And it's the only way that I've operated since. And I'm taking advantage of what the market is doing to add more to my portfolio. Here, check this out. Welcome to the all-new, Epic Real Estate Investing Show.

The longest running real estate investing podcast on the interwebs. Your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, EpicR-E-I.TV. If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to rei-aise.com. Here's Matt.

I got this house for free. Now, it doesn't look like much, and it certainly needs some work, but it's a nice neighborhood. And the market comparables have its after repair value at $175,000. Kind of hard to believe that when you're looking at it, but that is what's so. the most recent sales had that conservatively at $150,000, but I did my numbers at $130,000 to compensate for the direction that the market seems to be moving. You know, for fix and flips right now, you shouldn't be going into them with best case scenario thinking. So this is just a one-bedroom, it's almost a studio house,

and this is something I wouldn't normally purchase, but a few things had me reconsider this one. First, it was free, and it's in a decent area. And I'll play the live call for you in a minute of how I got it for free. Say the thing is I used to be of the mindset. I was just about three-bedroom and two-bath houses because that's where the most demand is, whether you're renting or flipping property. That's this kind of investing 101. But I met a guy a few years ago.

He was about 90 years old. He was getting out of the business and he'd made his fortune on one-bedroom houses. I was like, how is this so? And he went on to explain that he would attract an older clientele, typically senior citizens. and he really liked that type of tenant because they almost never called him. You know, they didn't have the normal complaints that your younger tenants would have, and they just wanted to be left alone. And they would stay for a really long time,

if that wasn't like their last resting place. And I remember that conversation ever since, and it's completely transformed my thinking about one bedroom properties. Now, the third thing is what the most recent data is showing. It's showing that small little properties like this, their rents are increasing faster than anything else. and much of it is due to the rising affordability issues on the sales side of the market. And the big impact on rent regarding the multi-bedroom properties,

that's kind of already seen its massive appreciation. We're seeing that cool off right now. But it turns out that people still need a place to live. And if they can't afford to buy and the two-bedroom, three-bedroom, four-bedroom properties have already exceeded their budget, then this is what they're looking at. And so everyone is rushing to these little properties, and now these are appreciating really fast, too. So the market or the overall economy, it's rather unique of, and for many reasons, at which I've covered extensively here recently, but it's going to require some unique thinking

to navigate this thing. Doing normal, that's risky right now. And I just gave a talk to a group of real estate investors about what we're all facing. And I shared with them a new report that I just wrapped up that every worried, concerned American investors should read before doing their next deal. And I had no idea that just Chapter 1 would have such an impact on. the group, but it did. And if you'd like a copy, I'd be happy to give it to you. I made it really easy for you. I uploaded it over at epic freedombook.com. So I found this deal on this new service

that I'm working with, and I'm really just kind of tinkering with it. And I'm bringing a group of my private clients along for the journey, and we are meeting a couple days a week, and we're doing deals together. And this one, it happened to be the first one. I mean, we had six offers accepted within the first 30 days. But this one, this was the first one. And that service, by the way, is Privy, P-R-I-V-Y. And if you'd like to check it out, you can go to EpicPrivy.com. Use that link, and they'll give you some special attention

because they'll know that you actually came from here. And if you want to step around at the end, I'll explain how I'm using it and why I'm kind of excited about it. But when I found this property, I called up the listing agent, and I told them that I wanted to make an offer and I didn't have representation, and I asked him to represent me. And so he did. And the property was listed.

at $71,000. And based on the cops, it seemed like a great deal as is. So I gave the seller what they're asking for. I gave them $71,000 and the agent submitted the offer. And then just a few hours later, it was accepted. So now that I had an accepted offer, it was time to begin my due diligence. And I did some really kind of quick surface due diligence first. And I had to call the agent back right away.

And at this time, I happened to be in session with my private clients. And so I had the recording going because I'd post the record. so they can refer back to them later. So I'm really glad that I had the recorder going so I can play this back for you so you can listen in on how this all went down. Hey, Joe, it's Matt. How are you? Hey, Matt. How's going?

Oh, pretty good. Done some preliminary due diligence here before I have the actual inspector go out and I just wanted to run something by you. Sure. I had my guy go in, the contractor going to look, and he gave me his bid, and then I got a buddy there that's an appraiser,

and he just kind of did a quick and dirty appraisal, not an official one. Absolutely. And so I got that preliminary stuff down. I just kind of want to get that kind of information before I spend any money on the inspection. And then also wanted to run it by you that I'm about almost to the exact dollar, $10,000 off.

$10,000 off the initial. Yeah, the price, yeah. Gotcha. On this one, I don't think we can carry that, mostly because that's about what the owner owes. Got it. He has debt on this.

He's not going to sell it for a loss. I think we're probably in and around. So we're at 71, right? So I want to say he owns it for 60 to 61

once everything sells. Yeah, that's the magic number, actually. Not even the magic number. I mean, the guy's not going to sell it for a loss or a break even.

So it's just one of the situations where we're kind of we're kind of stuck with what he owes on the property. Understood. And understandably, you have to turn a profit and or, you know, resale it or whatever to make money. Right. No, I meant that was the magic number for me, by the way.

It's like, then it would make sense. I get. I mean, in this particular case of this guy's pretty strapped, I mean, hold on to it. Okay. You know, he's not going to walk away with the profit. But then we have to pay commissions. So that's where this gets a little trickier because we have to at least build it. I think built in like three grand of commissions for both sides of the equation, which is, you know, not, it's, it's nothing.

Right, right. We're doing it for bare bones. For sure. Yeah, so that's kind of where we're at on it as well. Would he be able to carry? What's that? Would he be able to, like, let me take over and I'll take subject to his loan? It's something we could discuss, but I don't believe.

he was open to it originally when our investment group approach him on either. Got it, got it. I'm not sure. It's something I'll ask for you. Okay. Do you know what his payments are on that? Payments, I don't know. Because my guy is the investor side, investor agent, he deals all that up front and basically

just kind of hands me the notes. I'm like, hey, here's what we got to sell. Here's what we want to sell it for. You know, go find a supplier. Okay. I can find out. I can ask. All right.

And I was, you know, I looked at these, and I kind of asked you before I even put the offer in on those, there's a bunch of comps upon that rode a McDonald that was really justified in making it look juicy, but apparently that four to five blocks difference makes a difference. Yeah, down there, it's definitely, like I said, a couple blocks in any direction, you know, you're going to get, I run my, I run my, I run my comps really tight. I'm at about a quarter mile radius typically in the city. Yeah. super safe.

Yeah. Because I get a quarter mile, I mean, as the crew flies, I mean, that's obviously several blocks in any direction. Mm-hmm. Mm-hmm. Yep. Got it. But you can't dial in less than that on the MLS, so that's usually about what I

used to get the most justifiable comes. Got it. Okay, Joe. I didn't want to waste your time, so I wanted to get back to you right away. No, it means fair enough. I'm like I said, this is all just a matter of, like, due diligence and making sure to work for you monetarily. Yep.

In this particular case, you know, we may not have a lot of. We may not have a lot of leg room to maneuver. Okay. Well, you know, I could stick with the price if he'd be willing to carry it subject to what he's got. I'm not going to just, like, not signed in, but like, let's take over payment. Yeah, just take over payment. And then we can put like a performance guarantee in there and everything. I'm going to put about 40 grand into it to fix it up.

Can you send me an email with any details? That way I can at least try to represent you correctly. For sure. If it's something we can do, we can try to figure it out. Okay. Cool. I will send it over. Yep.

I'll send it over. I just want to make sure I convey what you're trying to get across and, you know, show him what numbers you need to make it work. For sure. Okay. Awesome. Okay. Thanks, By now.

Okay. Thanks, man. Bye. So here's the email that I sent to my agent. I did some tinkering with the numbers, and this would depend on the monthly payment of the current debt. But I could take over the payments and bring 10,000, to close. Looks like the rough budget for rehab would be right around 40,000, still need to see the

garage and inspect the roof. I'll test the waters to sell at 159,000, but I'm not super optimistic of that price, and I'll likely keep it as a rental. So that's the tentative plan. So that's the email that I said. And this is where it ended up. It turned out that the seller didn't have the property on the multiple listing service. It was actually a wholesaler who had the property under contract. And fortunately, for me, they didn't know how to do a subject to deal. So after a few conversations, he just gave it to me, along with a few other subject two deals. Now, I'm still looking at those, but I definitely made a move on this one. So I had the wholesaler, cancel the contract, and they let me step in and directly contract with the seller. He had had a change in his financial

position, and he just wanted to walk away from the thing and said, as long as you take over the payments, you can have it. So once in contract, I called my transaction coordinator, handed it over to her, and she kind of just took it over and did the rest, even the subject two part. She's my secret weapon, by the way. She's got special powers. But if you'd like to use her as well, I'm more than happy to share. You can find her at creative closers.net. She took care of the whole thing, and I got the house for free. All I had to do is just take care of the closing cost. So we start the rehab this week, and when it's all done, I'll go ahead and I'll post an update. So this pretty thing, I'm continuing to use it with my clients and we're making more and more progress with

each session that we have together. But what really attracted me to this software, so to speak, I guess it's a software, is when Mercedes and I got started, we had a formula that we would write 10 offers a day. And we knew that we'd get at least one deal out of every 100 offers that we wrote. So if we wrote 10 offers a day, that would give us three deals a month. And that's how we started. That's how we got into this whole thing. And we weren't doing a lot of off-market marketing. We were doing all of this on the multiple listing service.

And at the time, I had my real estate license, and I would set up all of these different types of searches and all these different configurations. It was really time-consuming, and you really had to comb through and go through the MLS. You have to look at every single detail. It's very, very, very tedious. But that's what we did, and that's how we got started. But when I saw this pretty thing, it does a lot of that for you. It pulls out the investor activity in each market, shows you where all the buyers are, and it shows you what they paid for their properties.

So now you know what type of discount you have to get in that market in order to go ahead and have a successful fix and flip, or how much further below that number you you have to go because if you wanted to wholesale the property, you have a market rich with as many buyers as you need. So my past experience has me seeing the opportunity here, maybe more than most people, and sometimes I even think maybe more than the people that created it. But it's brilliant. And it's why I'm probably going to stick with it. I'm absorbing it as a permanent fixture inside of my business because it's a way that I'm seeing right now, once you have it all set up, is, you know, you could do two deals a month working two hours a day. That's kind of the formula

that I'm seeing right now, and I'm seeing my students starting to get the same type of results, too. So if you want to check it out, go to epic privy.com, take it for a test run. If you don't like it, then just tell them I didn't like it. But there's a lot of opportunity there, and that's with the on-market stuff. And now my students and I are starting to dive into the off-market opportunities that it presents as well. It's not just on market. It's got an amazing access to the off-market stuff also.

So when you get those under contract, you know you're in the right place, you know what to buy it for, and you've got massive extra strategies of events. able to you. So that's at epicprivy.com. Go check it out. I think you'll enjoy it. Thanks for sitting tight while we pay our light bill. We'll be back right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. What? Sounds like Ojo time. Play Ojo? Great idea. Feel the fun with all the latest slots in live casino games and with no wagering requirements.

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Let's get you some more. Back to the show. When emotions rise, intelligence falls. And the housing market is playing with people's emotions right now. and it's causing many to make misinformed, ill-informed decisions. It's making people dumb, and they're letting opportunities just go up in flames. The insanity that's going on is taking people out of their game, because most don't have solutions for the problems that we're dealing with right now.

And it's going to require some different thinking, some different positioning, doing normal, that's a risky endeavor at the moment. And from my experience and my estimates, I've been doing this a long time. I'd say four out of five real estate investors don't really have the foggiest idea of how to do anything, even remotely creative to help them take down all of the hot deals that are starting to appear in the market. All of the one-trick ponies are going to have to start learning some more tricks. And one of the problems real estate investors are dealing with right now is the surging mortgage

rates. And this is causing them to miss opportunities that we haven't seen for years in the marketplace. And I've been preparing my clients here for these opportunities for quite a while. And I recorded a call with a private client recently. So you can listen in on some of the opportunities that you may be. missing. This could be a total game changer for you, and it's my hope that it is. And I'll play that for you in just a second, but I understand that the rising mortgage rates, that's not the only issue that we're dealing with. I actually gave a talk this week to a group of real estate investors

on seven specific things that are really impacting what we're all up to. And while I was there, I gave away a new report that I just wrapped up, and I had no idea that Chapter 1 itself was going to be such a hit. Anyway, if you'd like a copy, I made it really easy and uploaded it for you over at Epicfreedombook.com. Okay, this mortgage rate issue that everyone's dealing with. It's not really an issue for us over here. I call it more of a moment of good fortune. And one of these moments came up recently for a private client of mine, Christina. And one of the ways that I help my clients, I invite them to go ahead and bring me on to a call, a three-way call with the motivated sellers that they're talking to. And a couple Saturdays

ago, I was in my house. I was watching some preseason football. And Mercedes had just made some mimosas and my boxer notification went off. I give my clients 24-7 access to me via boxes, the free app on your phone. And it was Christina. And she needed some help explaining seller financing to a seller. And I have my laptop nearby. So I grab it real quick. I hit the report button and I have that for you so you can listen in to hear how this goes down in real life. And if you think you don't have the money needed to invest in real estate, stay with me to the end here and wait for that aha moment in case you don't pick up on it yourself during the call. So here it is. And no frills, by the way. This is just me sitting on the couch at home having this talk with with Christina and her

out. It's Christina. How you doing? Hey, how you doing? I'm good. I have Matt on the line. It's my colleague. Is this a good time for you that we can chat about seller financing?

Yeah, yeah, yeah, for sure. Okay. Matt, please meet you. Nice to meet you. How you doing, man? Very good. So, yeah, Christine was telling me about what you guys had talked about and it sounds okay to me, but she said you might have some questions.

So I guess bring me up to speed and let me know what your concerns are. I mean, I don't really have any concerns, just have more questions. Just curiosity is because it's all new to me. I think it's new to Christina too. But obviously, I just want us both protected on both of our sides. I've been talking to a lot of people, even just the course of last night, trying to get more information on it all. So it's all, I guess, just there'll be in how Adriana types up the contract

and how the terms look and what happens if the payments stops and what happens with the deed. So I guess it really comes down to how she types it up. Got it. Well, just to clarify, and the type of questions that you're asking and those thoughts that you have are the exact same that almost every single person has it, the first time they do a seller finance deal. Right. Probably normal. So just it'll be a very, very traditional, above board, everything on the up and up,

and the normal way that any real estate transaction will be processed. Right. The only difference is that Christina would be giving you the down payment just as she would if she was going to go to a bank for a loan. Right. So you'll still get the down payment. And then instead of Christina making payments to the bank for the loan, she's going to make those payments to you.

Yes. Right? So that's the only difference. So Christina will become the owner of record, so she'll get the deed. And then the note that references the payments that she's going to be making to you, that will be recorded against the property, just as the same thing that the bank would do to protect themselves. Okay. So we go through the title.

Yeah. So we go through the title company. Yeah. And then they would do all that. And Dary and so you know, my credit is 820. So you're dealing with someone who pays their bills. That's, I appreciate it. So the one thing that I've heard, and I've actually,

a couple people have told me this, and I look for on Google and different YouTube and blah, blah, blah, blah. Just research. Yep. A lot of them say that you don't transfer the deed and the title until the loan is paid off just simply because, And mind you, I don't have a loan on this house. So, you know, not getting into the things or anything like that.

So that's what I've been. And mind you, like I said, this is just what I've been researching. Sure. And I still want to, I still have a call scheduled in about an hour and a half talking to more people. So I'm still getting information for more experienced people. Got it. But yeah, they did say.

That was one thing that they did say. And like I said, the case that, you know, I know that the credit is excellent. But in the case that you do, the fall of the. don't make payments for whatever. You do me. No, I mean, I'm saying, you know, things happen. But like I said, in that case, obviously, and you're obviously going to be incentivized to obviously make the payments,

simply because you've already paid money for it up front. So, but like I said, that was one thing that they kept telling me to do with some promissory note or something like that and make sure that their deed is transferred into the buyers. name at the end of the term. There's two ways that we can do this. One would be the way that I had mentioned. So a conventional way, the exact same way the bank would do it.

And you'd be protected just the same way that a bank is protected. And you're absolutely right. You'd get to keep the down payment. If she happened to default for some reason, you'd get to keep the down payment. Say again? That's with your first suggestion way, right? Yeah, I'm going to give you two different ways that we can go about it. And they both accomplish the same thing.

Okay? Right. So the first way that we're discussing is, you're right. If she happened to default, you would have the ability to take the house back. You get to keep the down payment, any payments that she's made up to that point, plus all the improvements that she would make to the property. So all that would come back to you and then you get to sell it all over again. Right.

So when you start understanding that, you start to get really clear as to why banks are in the business of lending money and not buying houses. Of course. Because it's a safer position to be in. so that's that's one way and that's the way we would like to do it but if it made you more comfortable we could also do what you are referencing which is called a contract for deed yes that's what i was exactly right yeah so that would be everything would play out the exact same the only difference is that once the contract is fulfilled then title would be transferred right so one the first option is a real estate transaction.

The second option is what we call it. It's more of a business transaction. It works very much in how you would buy a car. You go to the dealership, you buy the car, you make all the payments, and when you make the last payment, then they send you the pink slip. Right.

So we would pay a lot. We prefer to do the first one. Only reason is because Christina would like to get the depreciation on the property. And when you have a contract for deed, the depreciation goes to the person that's on title. So that's the big benefit to us. But as far as security goes for you, they're the exact same on both scenarios. And what we could do, the reason people will prefer the, like a seller like yourself,

might opt for the contract for deed is because theoretically, because it's a business transaction, they don't have to go through the foreclosure process. They could just say it's breach of contract. I'm taking my property back. Yeah. And that theoretically, that's how it works. In the, when you, if that ever escalated and went into court, it's not so clear cut as far as like landlord laws and occupancy, not occupancy, possession laws go. And so it gets a little blurry. So it's not as clear cut as you might hear or read. Like it look, legally, it's absolutely correct. But when it actually goes into real practice in the real world, it doesn't always play out that way. So what they say it takes months? Yeah, it could take months. Yeah, it could take much. So what we could do is we could put in the seller finance contract. We could put a performance guarantee.

And we do this sometimes as buyers. We do it as lenders. We call it the atomic bomb clause. And what that means is, and this would be in your favor, that if we could set some parameters that if Christina was unable to perform, the deed would automatically transfer to you and you wouldn't even have to go through the foreclosure process. Yeah, that would be, that would make me more comfortable.

And look, I want to make it clear. Christine, I like you. And I think you're a reason. It's like I told you in here. I think you're a reasonable, nice, trustworthy person. But I don't know a thing. You know, I don't know a thing. I pride myself on, you know,

study in real estate and all this cool stuff. But it's plenty of, it's going to be always things that you don't know about. And seller financing. ends and outs of it at the minimal. I knew what it was, obviously, but, you know, just like what you're telling me all this stuff is on news.

So I don't want you guys to think that, you know, I'm trying to, I don't trust you guys or anything like that. It's business, Dary. I just don't know, thank you,

but you know, I got my stuff being heard. I don't have any people around me, so I want to make sure I'm covering it on my basis so I'm the only person that's going to, you know,

do that. Right. So. Well, Daryon, we weren't, I'm not even perceiving it is that, I've been doing this for, what, 13, 14 years. Yeah, yeah.

And so it's not even whether you trust me or not. I want you to be 100% clear because if you are not 100% clear, it only causes issues for us down the road. And so I want you to be totally clear. I mean, I'm talking about us. So, like, there's a risk to us if you don't understand. And it will cause B.SD, because I don't want to, you know, I don't want to end up in court or end up in, I don't want to end up in anything,

but my damn money. So, you know, that's all. That's all. And especially, like I said, I want everybody to make money. What, you know, I want Christina to come in here and cash flow and do earth things. So, you know, I want everybody to win. For sure. So, but yeah, like I said, as long, and sorry, which is your name again? Matt.

Chris. Matt. M-A-T-T-T. Matt, okay, sorry. And what are you? Are you a lawyer? Are you a realtor? I'm just a real estate investor, and I'm helping Christina get started.

Yeah, yeah, yeah. Okay, cool. So I think, Christine, I'll text you literally a few dollars. It's a super concrete what we're going to do

or sell it fine. And I'm pretty sure I'm going to choose the sell and finance option. I know we've been going back and forth about it. I know you had the hard money option, but I'm pretty...

I'm not either option at my disposal. Right. But I'd like to do those since we have math because it's hard to get math. Right. Let's just say

you're going to say yes now and let's talk the numbers and the years and things like that so that Matt and I can write up the contract because it's not going to go through Adriana but you and I will pay Adriana a thousand dollars that we both agreed to do but he can't go through her brokerage because they'll take half her money and so yeah so I'm all about making people whole

as you've seen in less than 24 hours but you know that's how I play and Matt can vouch for me as well so if we sell for 107 is the price and then out of that you would give Adriana a thousand and I would come out of pocket another thousand to give her her money

and then you want 50,000 up front yes okay so I think the only place where you know we were a little off where you wanted it paid back in six years and I was trying to get the payment more down to 600 in eight years. It came up like 7.9 years. Would you be okay with that to go eight years? The 700 sounds much nicer.

And like I said, I'm keeping in mind what I'm going to do when I leave this place. In terms of my daughter, her schooling, I got to get a new apartment. So that little 700 would do me pretty well. And I said to myself, like, you know, I don't know your numbers precisely, but just a rough in my head. Like, I'm pretty sure you can just go cash for on at least $600 on that. Well, here's the thing, though. I have to pay taxes. I have to pay insurance.

I have to pay the closing costs, which I've agreed to pay all the closing costs, which will save you. another $3,000. And so that for me, it only works out if I'm in the 600 area. Otherwise, I'd have to, you know, kind of... You want to meet the middle at 650? 650 could work.

Yeah, let me see, hold on. 650. Let me see. So 50,000. We're working off 106,000 because you're going to give Aegeana a thousand. Okay. So... Matt, what are your numbers, Sean? Are you clicking

or am I clicking? Oh, I'm just listening. I'm set up in my house on a Saturday, watching preseason football, having a mimosa. Keep watching, keep watching. Hold on. I want to do this with you here.

Okay, 100, and you know what? I'm not taking out those 50,000. Exactly. That's just about to say. You got to take out the, you got to what? 60,000. That's more better. Equals 56,000 as the balance,

divided by 650. divided by 12 comes out to seven years. There you go. So we're right at you know. Yeah. That sounds good to me. I'm cool with that. Christina got that deal, and I got her thinking differently.

I showed her how to do a few new things, and I repositioned her for the shifting market, but she did all the work. She deserves all the credit. But there are three things in that call that might not have been so obvious to you, and I want to point those out, particularly when it comes

to the money involved, the $50,000 that Christina is going to be putting down on this deal. She was able to tap into our network, here at Epic to get it. Membership has its benefits. So that's first. The second thing was the payments that she was negotiating were principal-only payments. Who cares that the mortgage rates are surging when you can negotiate a 0% loan? And the third thing that you might be starting to understand now is that she's putting no money into this deal.

I mean, between the money that she was able to access through the Epic Network and the seller financing, this is a no money down deal. This is 100% financing. So what does that do to your ROI? Well, it creates an infinite return. That's the trick. And so when you know how to do tricks like that, are you really concerned what the economy is doing?

I hope that was helpful. And I hope that gave you some ideas that you can actually work with. If you like to hop on the phone and brainstorm some ideas about what your next steps as a real estate investor look like, R-E-I-A-A-S dot com is probably the best place for that. But the easiest and fastest way is probably through a quick training that I just finished. And you can find that at matsclass.com. Please stand by.

We've got overhead to pay. We'll be right back. This episode is brought to you by Peloton. Breakthrough the busiest time of year with the brand new Peloton Cross Training Tread Plus, powered by Peloton IQ. With real-time guidance and endless ways to move, you can personalize your workouts and train with confidence, helping you reach your goals in less time.

Let yourself run, lift, sculpt, push, and go. Explore the new Peloton Cross Training Treadplus at OnePeloton.ca. Remember that person that gave up on their real estate investing dreams? Neither do I. Let's keep going. Back to the show. I'm not buying real estate anymore because the rates are too high. And the market, it's about to...

That is a message that we just got from a cash flow savvy buyer yesterday. And cash flow savvy is the service that we've been operating for more than a decade now where we show busy professionals how to build a real estate portfolio in their spare time so they can retire early. So they can't escape that daily grind. That was a message we got. And it was based off of the news that we're seeing in the market, very much like this. This was just yesterday. Mortgage rates reached highest since August 2007. that can be concerning, particularly when it is called cash flow savvy, and we pride ourselves

on producing cash flow, which we are still doing. But the more and more that they raise the interest rates, it gets a little bit more difficult because that payment rises, right? So let's see what I had right here. Mortgage rates moved higher again this week with the 30-year fixed rate averaging 6.29% up from 6.02% last week. And a year ago this time, the 30-year rate was 2.88%. So that's like a little bit more than doubled.

And then the housing market continues to face head as mortgage rates increase again this week. Higher rates, housing prices are softening and home sales have decreased. However, the number of homes for sale remains well below normal. So certainly there's a lot of cause for alarm, so to speak, inside of the market is doing as far as it pertains to mortgage rates. But there's this here. We're going to get back to that in a second about the number of homes for sale, however remains low. Next is where is it going, though? So we know where it's at.

So should we wait or should we continue? Is the market going to crash? What's going to happen? So the Fed is dead set on bringing down inflation. Markets be damned, they say. So what happens next? The median end-2023 projection was lifted by 80 basis points to 4.6% while the end-2020 projection was increased 50 basis points.

So basically that means we're expecting rates to continue to rise through 2024. Those are the projections. And in his press conference, Powell emphasized that he wanted to see positive real interest rates that is above the rate of inflation. If you don't know what that means, that's very important you should be factoring into your decision making. And I'll talk about that in just a second. But this cash flow savvy buyer, this is a very understandable position, right? But consider it might be a naive and losing position when considering really the big picture. And in the big picture, it's going to require you to think differently than you probably

thought in the past. We're headed into uncharted waters. And I'll explain the market. It's indeed shifting. We all see it. We can all feel it, right? And it is prudent to take these mortgage rates and this type of stuff into consideration regarding your investment decisions, particularly if you're cash flow investors like we are here.

Yet the entire economy is shifting. And that's something that we want to look at a little bit more closely because it's becoming more and more of an emotional thing for people. And they're making emotional decisions. And we have to try to be very careful when our emotions are involved in our investment decision process, especially when it comes to things like investing. Right. There's no room for emotions and investing. It's just based on supply, demand, and basic math.

And they say when emotions rise, intelligence falls. and we're seeing that right now in the marketplace. And I'm going to show you some intelligent options here in a minute. And I'm going to show you a house that I just picked up for free. Those are coming more and more available, that opportunity of presenting itself more frequently right now. And then I'm going to show you another house that I own. I've owned it for a while.

And a tenant just moved out and they completely wrecked it. And that would typically be a bad thing by most people's standards. But I'm going to share with you why this is quite the opposite for me. So I'm going to show you the lesson I learned. But your decisions right now should not be based on just the housing market, but on the economy overall. Because in a rigged system that is designed to steal your money, if you are positioned correctly, you can actually use it against itself to make you very, very wealthy. But you just got to think different than you're probably used to.

And it really all just boils down to understanding how money really works. And I just finished a new report here on this very thing. It's the seven imminent threats to your American dream and the single action that you can take to neutralize them all before. I would recommend that everybody read this before making that next investment because it's going to give you the insight to what there is to think about. And if you like a copy, I made it really easy for you and I uploaded it over there at epic freedombook.com. So let's take a look at our intelligent options because we could go into the stock market, right? We could do that. But we know what that's doing.

It's not doing great. It's down. And then we know if you're into crypto, which I am. I upset some of my friends, but I am. But it's down, right? So there's the deer what that looks like. And then, you know what everyone wants to buy during inflation is gold, right? Well, believe it or not, gold is down.

And then if you're listening to the news at all, you know that the existing home sales are down as well. So that's what it looks like for this year, not too encouraging. I would like bad news. Then if we look at those are existing home sales, the new home sales, what do those look like? Not too much differently than the existing home sales, right? Home sales are down and this is kind of what the news is really focusing on. Now, then they're also focusing on housing inventory,

how it's starting to rise a little bit. And that has people concerned for a crash, understandably because if there's more supply than demand, that could be a precondition for a crash. And the housing bubble is about to pop is what people are thinking. And historically, during tough economic times, that would be reasonable logic. However, historically, inventory didn't look like this. So if we just have this narrow snapshot of what the ear looks like. So this goes back from 2016, where inventory was extremely high.

And here we are, you know, what's that six years later, still very, very, very, low, not necessarily a precondition for a crash. Okay. But here's the other thing that's in play right now. Historically, we haven't had inflation look like this. I mean, look at this. This is just inflation going up and up and up. And this has got everybody's attention.

We see it at the gas pump. We see it in the grocery store and our energy bills. We just haven't had it like this. So we have kind of some different things that are playing right now that give us different things to think about other than just rising more. mortgage rates, and we'll get back to that in a second. So if all of your traditional investments are suffering and inflation is eating up the value of your money, what do you do? What do you turn to? So the avid person that's on either a fixed income or living off a single salary, they're in

trouble. They're in a lot of trouble unless they reposition themselves and quickly. And for many more reasons than I've stated here so far, they're all in that report, by the way. But the position that I'm talking about despite what you may be feeling is the right thing to do, it begins with using other people's money to purchase income producing real estate. That is something that we can all do that can put us on the right side of this thing. And for many more reasons or many reasons of which I'm going to give you, but one of the more important reasons is what the media is not focusing on. So although the sales are dropping, but the prices are not, right? We go the housing appreciation rate and the inflation rate look very, very similar. And that would be one of the reasons

that you'd want to be involved in real estate, right, is the hedge against inflation. The money that you have invested in real estate is protected from inflation. Most people are in the most aggressive inflationary times of their lives. A lot of us have never seen anything like this, which reinforces the case for real estate. Then reason number two would be when you borrow someone's money, when you borrow someone else's money to purchase your real estate, you multiply your return by a factor of five. Most people will put down 20% to buy 100% of the asset. And so that multiplies your return by five.

And that really doesn't exist in any other asset class. That's really available to the average person. A lot of people, they say, yeah, we can leverage stocks and stuff like that. But that takes a very skilled person to do it safely. And even if it is safe there. The other thing that leverage allows you to do is it allows you to take full benefit of the entire use of the asset. So you get benefit of the depreciation. You get benefit of the appreciation, of course.

You get benefit of the income. You get benefit of the amortization. You get benefit of the use of the property. So it leverages a lot more than just maximizing your ROI. It's maximizing your use of it as well. Third thing would be when you borrow someone else's money is inflation. It destroys the debt. We call it debt destruction,

and I'll always give credit to Mr. Jason Hartman, who kind of turned me onto this a few years ago. And it's so true because the inflation, it's an equal opportunity destroyer. It destroys your money as much as it destroys the bank's money. So if that's the case, do you want it to destroy your money, or would you rather have to destroy the bank's money? So use the bank's money to purchase your income-producing asset,

meaning your debt payment is going to remain the same over time. But because of inflation, you're going to be paid more dollars in the future, whether that's through your job or your business. And what that's going to allow you to do is you're getting paid more and more in the future because of inflation. It makes it easier and easier for you to manage the debt that was basically had a snapshot in the past. Reason number four, the mortgage rates are low. And I know some people might be going, what? I just thought the mortgage rates went,

up and up and up. And this is better directly address our cash flow savvy clients concern that mortgage rates are low from three perspectives. First, historically speaking. Yeah, so this is what it looks like this year. So it looks like it's really, really high, right? Like, wow, look at the mortgage rates are going way up. But if we do it and kind of zoom out and look at the entire history of it, we're still

extremely, extremely low. Okay. So the mortgage rates are low from that perspective. There are a second reason they're low. It's a very rare occasion that interest rates are lower than the inflation rate. So the CPI right now is things at 8.5 percent, and the mortgage rates are right around six-ish. And that's an effective interest rate of a negative 2.5 percent. So despite what the economy is doing, and it all seems bad, the economy is still paying you to borrow money.

you are getting paid to use that somebody else of money because of inflation, that inflation number being higher than the mortgage rate right now. And the third reason is that rates are low. And the consensus is that rates will continue to rise for a while. And whether that happens fast or slow, I don't know. But they will go up for a while before they come down or before they even settle. So you want to kind of consider like the time wise, if you want to wait to buy real estate, you might be waiting a couple years.

And I mean, just think about right now, don't you wish you would have bought some just six months ago when the rates were really low? And then six months before that. So the thing you ought to think about is when it's already essentially guaranteed or projected by those in the know that we're going to continue raising rates. So what are you going to say six months from now? Are you going to wish you bought today? Okay. So think about all those. There's three reasons that the rates are still very, very low.

Reason number five here, the tax benefits. Now, it's no secret that the Biden administration is. making a big push toward tax reform and tax collection enforcement. We all heard about the big number. I think it was 86,000 new IRS agents. They are hiring. And they say they're only coming after the rich. But you know, there's only 600 billionaires in the United States.

And they don't need 87,000 agents to go over after 600 people, right? And I don't know if you saw, but Republicans, and this is not a political conversation. This is just what's going on. As investors, we've got to pay attention to what the numbers and what the policy is doing. But the Republicans asked the Democrats to sign an amendment ensuring that those enforcement agents wouldn't bow after people making less than $400,000 a year. Because that was the big push. It was Biden themselves says this is only going to impact people that earn over $400,000 a year. And they sold the Republicans.

And we're like, okay, well, that's fine. We'll go after the big people. We're on board with that. But let's go ahead and add an amendment that we won't go after the little guy. And the Democrats unanimously would not sign it. So I'm just kind of putting those things together that maybe they're not going after just the rich. Maybe they got their eye on the upper middle class, the middle class, and everybody else. Right.

So just consider that. But real estate, it's the most tax favored asset class available to the average person. And you get those tax benefits through business ownership. Because once you own an income property, you classify as a business so you can go ahead and write off all your normal bills that you're already paying, like your phone bill and your internet, maybe your home office, stuff like that. And then you also get tax deductions from the property depreciation.

The IRS code gives you an allowance for the normal wear and tear on your property. And then the other area where it's really big is the interest rate, right? is the mortgage interest deduction. And effectively, so if you are paying, say, $1,000 in interest, because of the tax benefits, you're really only paying maybe, I don't know, $6 or $700 in interest depending on your tax bracket. So there's a big benefit there as well. All right. And then so reason number six is move fast to the taxes.

I'm not a tax attorney. That's kind of a boring topic because you don't really see money coming in. And I think people kind of ignore that and they don't give it much attention. but tax planning can go so far for you. It's not money that's necessarily going to come into you, but it's money that's not, you're not going to have to write that check to Uncle Sam, and that always feels good when that check is smaller,

smaller, smaller, but we never really feel it because, you know, that money doesn't seem real. It's like, well, with my money anyway, so I get to keep it. So it doesn't feel like a profit center of real estate, but it absolutely is. It's a huge one.

Okay, so don't discredit that. Number six, appreciation. I always consider that it's the icing on the cake for real estate. And that's what most people focus on is the appreciation. Like, is this a good time to get real estate? Am I buying low enough? It's going to be worked more next year. That's what everyone's always kind of focused on. But it could be now, though, this could be the cake here into the long and foreseeable future. And that's based on something that the rigged system can't manipulate,

nor really can the Fed of the monetary policy. And what I'm talking about is the natural, organic supply and demand. Now, I already showed you how the housing supply is very, very low, right? And then here they are for the housing starts. So this is just this year. It's kind of up and down, mostly down right now. But it looks like it took a little tip uptick for the upside here in August. But let's look at historically speaking, why this is a really big deal. So these are the housing starts.

So this is the new home builders, how. many new homes they're building. There's right about here at the peak of 2006, right, 2007, when the market crashed, we entered the Great Recession, and then builders, they got knocked out, and they just stopped building houses all the way down here. A lot of them left the business.

And then those that stayed in the business, you can see they really entered the market very gingerly and cautiously. And so here we are all the way up here, and we came up a little bit, we got a little excited, and then we're back down here. And this is a big deal because we really needed with the number of people that we have,

we needed to stay right here at this peak. We needed to maintain this all the way along to have enough houses for the number of people that we have today. So we have this huge deficit. I'll show you, let me look this up real quick. So this chart right here, this represents where our population is, how they're distributed amongst age. So if we look this orange-yellow section here, is the millennials. And right here, here's the peak, age 28, 29, 30 of the millennials. The average age of the first time home buyer is 34 years old.

So what that says is over the next three, six, maybe eight years at least, we might see, I mean, we might see some bumps in the road, but this demand for housing, it can't be held back forever. The demand is coming. People need a place to live. And when this economy settles, this demand is got to snap like. a rubber band. So you want to be owning some real estate when that happens. Obviously, I think the more that you own, the better off you're going to be. We might have some bumps in the road

and it might be kind of crazy for a little while. So I'm not going to say overindulge and be irresponsible about it. But this thing is going to stat back unless, you know, people stop wanting to live in houses, right? I mean, that's really all it is. And so this might be a really good time to buy real estate. Now, we are seeing some homeowners, experiencing some difficulty like with this house right here. I just got this one. Right. So I just got this house. And I got this one for free. And it doesn't look great. It's on a very nice street. You can't really tell by that picture. But the owner was like, I can't make the payments anymore. You just take over the payments and you can have it. So I'm going to be fixing it up and it's going to be

great. And I'll show you why. And it's just a little one bedroom place. It doesn't look like much. It looks like it needs a lot of work. But I'm going to show you a little bit of why I'm excited about this one. And then there's this house. that actually bought this at the beginning of the pandemic. But I bought this with seller financing. And this place where recently was just trashed by the tenant when they moved out earlier this year, enough so that it might cause the average person to sell it, to throw in the towel and say, I don't want to do this anymore and move on from real estate investments

altogether. But here's why that's not even remotely a consideration for me. First, because of everything that I've already mentioned, right? I mean, real estate is where you've got to be positioned right now. second with inventory so low, you don't want to bail on good properties like this that are in great neighborhoods just because of one bad experience. You don't want to walk away with the wrong lesson and give up the most stable position that you could be in right now.

And third, that would bring me to number seven, the purchasing of the income producing real estate is that the rents are surging. Rents are up. Let me show you. So August 22 makes the first month in the past 13. In months where rent Grove has slowed to a single digit rate for zero to two bedroom properties. Okay. But it's slowed to a rate of 9.8%.

Keep that number in mind right there, that 9.8%. But here's why I'm excited right now. Studios continue to catch up with double-digit rent increases, whereas one to two-bedroom units experienced single-digit growth. So this property that has showed you, it's effectively a studio and rents are surging for that right now because people already can't. even afford the one to two, three bedrooms. So those are slowing down the demand. The demand is shifted from the housing buying market over to the housing renting market. So this 9.8% if we look at the actual year over year on home sales, appreciation is 6.9%.

So this is going to be something very significant. So this house that I purchased, then I'm repairing, I borrowed the money to get it repaired. It's about 25 grand, and that raised my debt service on this property by just five. But six new tenant applications came in this week for a rent increase of 21%. So my debt service will raise 6%, but my rent increase was 21%. See, the home value is pacing inflation, and rents are now outpacing it. So that's the question to ask yourself, especially if you have any reluctance to be a landlord. You know, you can either choose to figure it out and collect rising rents or not, and

pay rising rents, right? Housing prices are up, but not as fast as the rents are, as I just showed you. So this isn't greedy landlord stuff, right? There's a lot of people that say it is. We see this in the news, in the media, we're seeing out everywhere that these greedy landlords are they're stealing from their tenants that are being really mean. But it's an economy thing. The market is doing what the market does. And so it's no more complicated than supply and demand. What's causing rents to climb is the same thing that's causing. in gas, food, and energy decline. Anyway, two things going on in the housing market right now that are very rare in present an

opportunity and even more rare to be happening at the same time. And it's an opportunity here with the interest rates being lower than the inflation rate, the inflation rate higher than the interest rate, which creates a negative interest rate. The economy is paying you to borrow money. And if you borrow that money to buy an asset that only appreciates with inflation, that we're not only in the value, but also in the income of producers, that's a huge opportunity.

And now the rents are now rising faster than housing prices. I went back and looked, and I don't know if I couldn't find it anywhere in history where rents actually outpaced the value of the houses. So before you make any hasty decisions about investing or not to, remove your emotions from it and just consider the bigger picture at play right now. We're dealing with an entirely different animal than a lot of us have ever experienced. Do yourself a favor.

This is really, really important right now. Do yourself a favor and just to see what you're up against. And I put it all down in great detail and made it available for you. I uploaded advice and conveniently for you over at epic freedombook.com. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them.

And ask them to click the subscribe button when you, they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for the C-suite. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.