Epic Real Estate Investing - Unmasking the Market - Where's it going? | 1092

Episode Date: October 21, 2020

In today's episode, Matt is unmasking the real estate market! Tune in and find out in which direction the current housing market is going and how you can turn the odds of this crazy year into your favor! If you want to learn more about current market conditions and how you can take the advantage of them, hurry up to save your seat at the upcoming Epic Intensive that is held virtually in Las Vegas, NV from October 22 – 24, 2020! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-A's.

Here's Matt. Hey, welcome to the epic real estate investing show. This is your first time here. Really glad that you found us. And if you like what you hear, make sure you hit the subscribe button before you go. If this is not your first time here, welcome back and thank you.

Thank you, thank you for sharing this with your friends and family. Going on our 11th year now in the running, and I just wouldn't be here if it weren't for you doing that. So thank you. As of right now, I am putting together the final touches on the presentation, the training that I'm going to be doing for the Epic Intensive this week. There's still a few tickets left if you'd like to join us.

If you haven't been able to register, go to epicintensive.com. If possible, if you wanted to and really be unreasonable and play all out, there are a couple of the VIP tickets available as well. So you could join us live. But you'd have to act fast, as if you'll be hearing this. We're only a few hours away from starting our Investor Lab Mastermind, which is Wednesday. That would be the 21st. And then Thursday, Friday, Saturday will be the actual Epic Intensive.

But if you like to join us and you hear it in time, not too late, go to Epicintensive.com and be our guests. All righty, so as I'm building this presentation, kind of run over what I have so far. And it has to do with the market update. because I think that's a big question on a lot of people's hands or on a lot of people's minds because the whole intensive is called unmasking the market and giving you certain strategies for uncertain times. And as I do the research and trying to bring the most up-to-date data as possible to this event, there's a lot of data to look at and a lot of stuff to look through.

And quite honestly, it's not helping a whole lot. And I'll show you what I mean. You know, the first part, you have to understand how the market works in cycles. It goes through four different phases. Phase one is recovery. Phase two is expansion. Phase one is obviously recovery. I mean, recovery is kind of self-explanatory as what I was trying to say.

You know, you're coming out of a low and you're kind of working your way up. There's really a high vacancy in the market. A lot of supply. Demand isn't strong. But as the population brings, grows, the demand grows. And so we've slowly come out of recovery from phase one into phase two into expansion. And that's where the vacancy starts to decline. It's where new home builds start to happen. All the big major companies start with their new construction. And that continues to

rise until we hit a point, our demand supply equilibrium point where they kind of match each other. That's where typically where a market will peak. Then we move into phase three of hyper-supply. when the new home builders and homes that have been on the market or coming on the market are exceeding the supply. And then we start to go down the other side of this cycle while vacancies increase and prices decrease and we've got all of this new construction being completed and it's all sitting there empty and that's phase four, what we call recession. So those are the four phases of the market and I'm trying to figure out looking at all the data,

where are we in this cycle? Because we've been in an increasing, I would say the expansion phase, phase two for a very long time, much longer than normal. And if we look at that, as of right now, just during the pandemic, we just hit the peak again finally of the peak that we had in January 6th. So we've been on this rise for a really long time. but we just hit this year actually in the middle of a pandemic. In the middle of quarantine is when rises rises, prices actually rose to a point where we hit that limit again. So it took like 14 years to get back here when it typically takes seven to eight years.

So I'm looking at that and it's kind of seen where we're at. So historically, we would, I mean, right now we're at a peak, but historically, our intuition or our data would tell us that we'd continue to rise a little bit if we're going to stay current with the historical graph. So I look at that, and much of it is being driven by supply. As of right now, the active houses that are for sale continue to drop this entire year, while new listings are coming on. Those are increasing, they started increasing in May, April, May, June through July,

August still, they're kind of flattened out in September, but they're all getting gobbled up. So the pendings are staying really strong. People are buying those houses. And so even though new listings are increasing, the overall supply is decreasing. So when you have a decreasing supply, typically that causes prices to go up. So we know what the supply is doing. Now, if we look at the demand, and I really just kind of base this on the population, right? If you've been watching or listening to the news over the last few years, you'll hear that the population growth,

continues to slow. It continues to slow down. And so people will interpret that because they won't tell you the whole story. I mean, there's what's factual, and that is factual. The growth of the population is slowing down. But what's actual, it's still growing really, really fast. And so that's the demand that's increasing. And when it comes to housing, people need shelter, right?

That demand isn't going anywhere. I mean, it's water, it's air. It's food and it's shelter. Those things don't, those are unwavering necessities for life. So that's a real, real good, real good reason that real estate makes such a great investment because the supply continues to get gobbled up. We have a fixed amount of supplies for it with regard to how much land we have, but the population continues to grow.

And it is growing and growing and growing. And let's see, it's 2020. We're approaching probably another five years or so. we'll hit the 350 million people in the United States. And that's a lot of people. We've been at the 300 mark for about, since, I don't know, early 2,000, 300 million. And we were going to add another 40 to 50 million 10 years after that.

So that's 22-ish, 23-ish. So that continues to grow. So that would tell you that, hey, prices are going to continue to go out. The market's going to continue to move forward and do really well. Then if we look at with the, that population, which makes it even more impactful, is that from the ages of 30 to 39, the most common age bracket where people buy their first and second houses, we've got a huge spike in that portion of the age demographic over the next 10 years.

So where people historically buy their first and their second house between the age of 30 and 39, that portion of the population is going to boom over the next decade. So it just kind of strengthens not only the, or strengthens demand, but not just from a population perspective, but from the actual demographic of that population is going to push the market forward. That's what the data would tell us. And then with regard to their ability to buy, we look at the mortgage rates. They are essentially at all-time low here in September of 2020.

It's an all-time low of 2.86%, which is absolutely ridiculous. And they're projected to go a little bit lower in October and November before they start to creep up a little bit. So the buying ability of that portion of the population is really, really strong. And if you look at the affordability index, this is the index that shows how much of the, where the median income meets the median price point of a house. And with that interest rate drop, it dropped it way down. So everybody has the ability and can afford a new house and continue to pay the rates or the prices that they're paying,

even though the prices just hit that new peak. Okay. So those are all different things that we look at with regard to where's the market going. That's the type of data we look at to review to try and make a different thing. a prediction, right? This is only a snapshot of what's going on right now. We don't know what's going to happen tomorrow, so we just kind of make an educated guess this way. Another thing to look at is investors like us, we're in our house. We're doing a couple deals maybe a month and when we're really rolling, right? Or even it's just a few deals a year. We're on that level investing.

And then there's people that do more than us, obviously, but then there's the big mega companies, the new home builders that do all kinds of research. Like what I'm sharing with you is just kind of a general conversation, but they'll dig deep into the numbers and see what's causing the interest rates to go down and what causes the population to go up and where's the supply going and where's it going to come from. And they'll just go much deeper, way into the minutiae. They'll go into the microeconomics. Stuff that's kind of, I mean, you've got to almost commit a life to it to really understand how it all works. I mean, that's their profession, that's their job.

And if you look what new home builders do and the type of research that they do, there's a, what do you call it, a builder confidence in that. And so we're always kind of hitching our wagon to them and trusting that their research is far better than ours just because they dig deeper. So you want to look at what the sentiment is of new home builders versus the actions that they're taking. And since 2008, it has been almost a straight up shot here to 2010 with builder sentiment. It's been a couple little bumps along the way, but it's pretty steadily up, up, up. up in their actions. They're pulling the new building permits. And that's a really good indicator of the future.

At least the best indicator that we have or one of the best. Because when someone pulls a permit today, they typically won't be able to start building for a couple months. And that's not going to be done for maybe a year. And so that's letting us know or getting us a nice idea based on the permits that are pulled today of what the inventory might look like, nine months to 12 months from now. So Builder Confidence just hit an all-time high on the index in September.

Hit if it means anything to you, an 83 on the index of the National Association of House Buying. It's the Builder Confidence Index. I don't know what the alphabet soup here stands for, but the NAHB housing market index. All right. So there's that. So when you kind of look at that, it really starts to appear that 2021 will prove to be the most challenging year for buyers, but not because of what they can afford, but rather than what they can't find because the demand is so high. The buying power of that demand is really high and the supply is really low. So the question is, will the market boom? Maybe. Based on all that information, it would kind of lead you to believe that. So is this a good? good time to buy real estate. That's the big question. Or is it a good time to be in real estate? And so we'll look at that. But then there's the other side of the coin. So let's look at the other

stuff because there's some other information here that's kind of compelling in the other direction. So if you look at the number of mortgages that are newly delinquent, so these are people that aren't making their mortgage payment. In April, those 3.4% of all mortgages were delinquent. and that exceeded the highest percentage in 2006, 2007, believe it or not. That was just a little over 2 something percent overall mortgages. So we're one and a half times above that in April. And then if we go to May, we're up to 7 percent. And then if we go to June, we're up to 10.3 percent.

The peak in 2007 was like two, just barely three. It was like two something percent, two and a half percent. Let's see, where it was it? Yeah, like 2.2 percent, not even three during the peak of the recession. So that was two something percent, and we are at 10.3 percent in June. That's a lot of people not paying their mortgages right now. So why is that? Well, when the stimulus package came out to the COVID relief package, we got this thing called the

forbearance and the moratorium on that and it ran for six months. And so if you look in June was 10.3 percent. And so most of those requests came in March. And so that would give us, if they came in March, they all expired in September. So if they wanted to maintain that forbearance and that relief from making their mortgage payments, they'd have to renew October 1st. And if we look at the data on October 1st, there's a significant drop in the number of mortgages that are delinquent, which means it could only mean one thing is people did not renew their forbearance. So they took the six months off and now they're coming back to make their payments.

So the pre-foreclosure thing we've been talking about when you looked at the data two months ago, three months ago, it looked like, oh my gosh, everyone's going. going bust and it looks like as soon as that moratorium, that first round of moratorium or forbearance ended, everyone, nobody renewed and everybody started to pay again. And if you look at the projection from, what is this, MBA, I don't even know what that stands for, but it's at, I think it's at MBA.com. It's just a great website of a bunch of statistics, but their weekly forbearance and call volume survey as of October 4th shows that huge decline and their projection is by the end of 2022 we will be right back to pre-COVID numbers. So they're thinking within two years, everyone will be right back on track.

So that's a good window though. All right. So that's everything kind of on market that we look at. And, you know, that's the retail market. That's retail data. That's realtor data. That's new home buyer data that are looking for their primary residence. That's not really investor data.

you're buying retail for your investments. So what we want to look at, though, because we play in the world of off-market real estate. And there's different things that cause us or allow us to get deals and buy a property at a discount than the retail data. But we could always look at the retail data. There's something to learn. It's certainly not information we want to ignore. But if you were to interpret this data, if you were to be listening to the news, mainstream media, if you were to be listening to the radio or reading the newspaper or talking to your hairstylist

or your nail salon person about it and just the or cocktail parties and talking to general population, that's all the type of stuff you're going to hear. You're going to hear like, oh my God, the market is booming. It's going crazy. There's no houses for sale. And every time the house comes up, you know, there's 50 offers on it and within the next three hours. And understand that that's retail conversation.

That's on market conversation. We play the off market. And what causes properties to come available at a discount for us off market is distress, personal distress, financial distress, property distress. It's the type of distress and the stuff that, I don't know, would you, if you really, I don't think you'd call it an intangible because it's certainly real. It's, but it's not like totally quantifiable. But I started looking at it because,

one of the things we look at, right? When we're looking for this type of distress, we're looking for death, we're looking for drugs, we're looking for disease, we're looking for divorce, we're looking for bankruptcy, unemployment. I mean, it's just overall financial distress

or property distress, even just frustration. Do you think there's a lot of frustrated landlords out there right now if they're owning a property where their tenant decided to take those six months off and they didn't receive anything for six months? So then it might not be experiencing

any sort of distress, but they might be frustrated. And those are all the different types of things that lead to discount real estate. That's the type of stuff we market for. You know, that one of the more common questions I ever get from both podcast listeners and students alike and even my private clients is what's the best list to send to? Who should I send my direct mail to?

Who should I send my postcards to? Who should I send my yellow letters to? You know, is it the probate list? Is it the divorce list? Is it the absentee owner list? Is it the vacancy list? Everyone's always asking about those. types of questions. And that's pre-COVID. That's when times are good. Well, as we're going through this

terrible year, a lot of those things are on the rise. So, for example, unemployment, we all know that spiked and it's come down significantly, but still it's kind of stuck at 8% unemployment. And that's kind of the highest it's been since 2012. So that's the highest it's been in eight years. I imagine that will continue to creep down, but probably not significantly anymore until the COVID restrictions start to lift, whether that's going to come by way of a vaccine, whether it's going to come by way of herd immunity, whether it's going to come by way of just really good therapeutics, I don't know. But as long as certain areas in markets and states and cities are keeping businesses locked down, we might have gotten as much recovery as we can expect to get until those jobs are allowed to open up again. And some of those jobs ain't ever coming back, so we're going to kind of have to wait for new jobs to be created. So I think unemployment is going to be stuck there for a minute.

And so that's one thing we look at. And then the other part is, and this is kind of sad. It's a little morbid. But I remember a while back, it was 2012-ish, and there was a guy I knew Chris Richter, maybe some of you know him. He deals in real estate investor data. he's super expensive, super exclusive, but he's worth it.

He's a total nerd when it comes to data. And he's the very first person that introduced me to list stacking or factor stacking. That was actually his expression, factor stacking, where you take multiple factors and compile those in a list, then you look for the names that have the most of those factors in common. Like you take your absentee owner list, you take your divorce list, you take your pre-foreclosure list, you take your tax lien list, and you just kind of combine them all, and then you look for the names that appear on more than one of those lists. And the more lists that those names appear on,

most likely the greater the motivation to sell at a discount, the greater signs that there is actual some distress there, and they've got some pretty big issues going on in their world where selling their house, even if it is at a discount, will probably alleviate some of that. And I remember him saying, I had asked him, what's the most common distress? Like I asked the same question of him, you know, what, eight years ago, nine years ago,

that everyone asked me all the time now, what's the best list to send to? And I had asked him, what's the common denominator of where people get the discount? And he says, you know what, it's sad, but it's drugs. You know, it's people that have checked into rehabs, even people that have checked out of rehabs because the return rate is like eight times before they're technically cured, before they technically kick the habit. So he's always looking for that type of data. Where do you get that list?

I don't know. But he does, and that's why he's so expensive because he's got access to it. Anyway, the point being is, if you look at the drug data, 72,000 people in 2019 died of drug overdose. 72,000. And this article from the New York Times,

in shadow of the pandemic, the U.S. drug overdose deaths resurged to a record. So it looks as if 2020 will be even worse. Drug deaths have risen and the average of 13% so far this year over last year, according to mortality data from local and state governments. So that's a huge sign of distress. And then if you look at something else I found over here at, where is this, BC Coroner Service. Okay. I did not recognize that. That was the source before, but this is from the actual coroner. Wherever the BC, I would imagine that probably means British Columbia. I don't know.

Anyway, if you look at their data in May, we hit 171 overdose deaths, which is triple just this time last year. So overdose deaths, overdose deaths in May tripled the 9th. number that we had last May. And so, and then they rose again in June to more than triple the number we had from June last year. So we're an all-time high with the drug overdose. Unintended consequences of lockdown, I'd have to think. So there's that. Then we look at the bankruptcy filings. Chapter 11 filings are at a eight-year high coming out of this. And then we're looking at, Domestic violence is up, child abuse is up. That's more and more on the news.

Suicides are at an all-time high. I just mentioned the drug overdoses of the back-to-back months of all-time highs. Bankruptcies at a seven-year high. And so the personal distress is skyrocketing, right? So the off-market stuff, the stuff that causes real estate to come for sale at a discount for us in our marketing efforts is absolutely skyrocketing. But why aren't these factors impacting the economy? How come nobody's talking about this?

I mean, is it time to be in real estate? Are we pointing towards a boom? We're pointing towards a bus, the bust. So as you can see, or as you can hear, that there's conflicting information. The off-market stuff says it's probably going to bust and there's going to be a lot of opportunity. And the on-market stuff says it's going to boom. So the reason the personal stuff, the personal distress and the off-market stuff hasn't really hit the media is because it's kind of all been falsely. supported via stimulus efforts via moratorium evictions or the eviction moratorium and via the foreclosure

forbearances. So that's why we haven't really experienced it. Plus, there's no shortage of news stories these days. Well, we got the election and that, you know, creates an even noisier environment when it comes to news. But that stuff is all happening. And that has all happened with basic Google searches as I was combing the internet and looking for stuff and looking for data and try to create a case of which way do we go? Are we going up or are we going down? And it's very conflicting information. But I've got answers, and I'll share with those at the epic intensive of how we can deal with this. But really, is it a good time to be in real estate? Is the big question? It always is. Right? It always is. There's always a relative low price to purchase that and a relative high

price to sell it, whether the market is up or down. In my opinion, there's no good or bad markets. there's up or down markets. But there's one other thing that you that you might want to consider, at least I'm considering. You know, when we talk about what's the investor's goal, our goal is to buy low, sell high, right? Or our goal is to make money. That's what we do. That's our job description. Buy low, sell high.

And that could be a quick sell, like with the wholesale type deal. It could be a fix and flip. Or it could be sell high very slowly over time selling the use of the property via a lease. So buy low, sell high. It doesn't matter if you're going to buy and hold or buy and sell, flip, or finance, whatever it may be, you just want to make sure however you're selling the property is you're making more money than it costs you to acquire it. So if that's the deal, when will prices be low again? That's the really kind of the big question. I think everyone's kind of trying to time the market the best they can.

And the answer to that question is when will prices be low again? I don't know. But I would ask you to consider, does it even matter? You know, as I mentioned, regardless of what the market does, there's always that relative low price to buy and a relative high price to sell. So whether the market is up or down, there's always opportunity off market. I read to you all of these different personal distress statistics that are going on right now. And it's just evidence that life kicks everybody in the teeth now and then, and it's kicking a lot of people in the teeth right now.

But it's all basic information, right? I gave you the off-market information and the on-market information, and that's the basic way to look at this. And all of it's absolutely true, and it's enough. There is no need to look any deeper. But if you wanted to, a much more sophisticated way, and there's another factor to figure in, right? We've got buy low, sell high, and there's another thing to look at. And that is to really kind of look at how do we buy houses? How do people buy houses?

And what I mean specifically is do that people buy houses based on the price or based on the payment, the price or the payment? Mostly the payment, right? Because as their interest rates go down, the payments come down, people go out and buy higher priced houses. But what about their buying ability per inflation? What does that look like? So I'm going to go a little bit deeper at the intensive into inflation. and this is a really complicated subject, and you can go really deep in this

before you actually understand what's going on. And I continue to learn about it, and I continue to get a little bit wiser and more enlightened. But I certainly don't know everything there is that you need to know about it. But I think I know enough, and I'll share with you what I know, and then you can kind of take that information

and make your own decisions. So if you're paying attention to what's going on right now, and it's really tough because there are a lot of different headlines and a lot of different subjects that concern the nation at the moment. But if you look at Jerome Powell, chairman of the Fed, he announced a major policy shift in August 2020. And what he said is the central bank will be more inclined to allow inflation to run higher

than the standard 2% target before hiking interest rates. So he's pushing for more inflation. And you can do a number of different Google searches to find all kinds of data supporting this along with his actions supporting it. He thinks we can push inflation pretty far to put. pull the economy out of its, it's a little slump right now. It's post-COVID hangover.

So there's that, Jerome Powell. So he's already announced just August a couple months ago. This is what I'm going to do. So inflation is going up. He said it. I'm going to do it. Okay. Next.

And this is the guy that controls inflation. This is the guy. And he's saying what he's giving you advanced warning. This is what I'm going to do. Then I read an article in Market Watch. in mid-September, September 18th, 2020, and they were interviewing Ray Dalio. And Ray is an American billionaire hedge fund manager.

And he had a couple of things. There's a long article. If you want to look it up, I highly recommend it. He's a really smart guy. Obviously, he knows a lot about money. He's been able to generate a billion dollars from scratch and become this amazing hedge fund manager. Got a great book called Principles as well.

But the headline, or one of the headlines that were in this article, he states that the world is going to change in shocking ways in the next five years. The world is going to change in shocking ways in the next five years. So shocking, that means significant to me. And in the next five years, that's a very, very narrow window. And it's going to change in these shocking ways, regardless of who wins the election. and one of his final pieces of the puzzle, or one of his final comments in this article, he says,

worry as much about the value of your money as you worry about the value of your investments. Worry about the value of your money as you worry about the value of your investments. He's talking about the value of your dollar, the purchasing power of your dollar, because the printing of money and the debt should make you aware of that.

We have all this stimulus that's falsely supporting the economy at the moment. And we're not hearing about all the personal and financial distress that are going on with individuals because of that stimulus. And Jerome Powell said he is going to continue printing money and pushing inflation. In just this stimulus package for COVID, we printed more money than we did in all of 2007, 2008, to pull us out of that huge giant tragedy that we experienced. Right. So why this is important? Because the more money they print, the less buying power your dollar has, the less value it has. And if I pull up this little graph, which obviously you can't see, I'll do my best to interpret it, we're at an all-time high of inflation.

But if you look at the graph and you'll hear about inflation just going up 2%, 3%, and it doesn't seem like too much. And you're just always like, okay, as long as my savings account is 3% or higher, which none of them are, at least I'm, sitting still. So if your money is sitting somewhere where it's earning less than 3%, you're actually losing money by saving it. The value of your dollar is diminishing. But it shows just like compound interest, compound inflation grows faster and faster. So the average annual inflation rate since 1913 is only 3.24%. But this chart shows that compounding something for almost 100 years at 3.24% will result in over 2,000. thousand percent inflation.

And it really kicked in in 1971 when President Nixon took the dollar off the gold standard. When the dollar was no longer backed by gold, there used to be a direct trade, like one dollars worth one dollar of gold. But when President Nixon took the dollar off of that, it gave them the government, the Fed, the ability to print money, regardless of how much gold they had in the bank. And so the value of the dollar has dropped really ever since. That's what the inflation is done. That dollar only has value to it now because we all agree that it does.

Then I went and looked at how home prices and gold have always been sort of known as a hedge against inflation. So if you had money in gold or if you had money in real estate, it preserved your dollar. Right? People thought that my house price just totally appreciated. and I made, look at all the money I made. No, you didn't make any money. It was just a hedge against the inflation. And the same thing with gold.

And those things have run neck and neck for a very long time, right with inflation, until about 2002-ish. And they started to separate where the housing prices continued to go up, and the cost of gold, the value of gold, dropped. They separated. And so that was significant. and people are kind of wondering why. So if you've been watching the news,

I don't know if this is exactly why, but from what I heard just through the headlines and some of the just overhearing the murmurs of conversation and on the news, J.P. Morgan pays the largest penalty ever and admits wrongdoing and market manipulation case. So J.P. Morgan just got busted by manipulating the gold market

and they have been doing for a very long time, and they just admitted to it in court. So another part, like even gold is really only worth what we agree it to be worth, but housing is essential to living. So it's always a good time to be in real estate. There's real value there. There's tangible value in real estate. I mean, even inflation as through market manipulation,

with some help of market manipulation, can ship away at the value of gold. So I'm looking at. at this inflation thing because we're talking about interest rates, we're talking about payments, we're talking about housing prices, but we have to factor in the inflation as well. So understanding inflation, and like I said, it's complicated. I'll give you a few bullet points that you're going to want to pay attention to. First, inflation, it just distinguishes the difference between price and value. For example, if I purchased a $100 suit a hundred years ago,

and I purchased that same suit today, and let's say it was $1,000 today. So most people will think that the price of the suit went up. Actually, it did not. The purchasing power of your dollar went down, but the value stayed the same. So the price went up or the value of your dollar, purchasing power of your dollar went down. However you want to look at it, it is a little bit somewhat semantics. But the value of the suit stayed the same. It's still got the same thread count, still made of the same material, still made to the same dimensions.

There's not more material in that same suit. I'm talking about the same suit. So that's the difference between price and value. The value of that suit is the same. It keeps you warm and you look good when you walk into your business meeting or you walk to a party or the wedding or whatever. Okay, so that's one. The second thing is understanding that inflation is a hidden tax that destroys your purchasing power. I kind of mentioned that already.

But it's a hidden tax. it creeps in and you pay into that tax every single year as the Fed continues to drive those inflation rates or that, yeah, the inflation rate, they're dipping right into your pocket and taking your money. And you don't even feel it. You don't even know it. You never have to write a check. And you don't even notice it because the bank balance might remain the same. But you just need more of those dollars in that bank to buy the same type of stuff. And the third thing is understanding that inflation, it destroys the value of your savings.

It destroys the value of your stocks, your bonds, your cash, your equity in your properties, and thankfully, the value of your debt. So it destroys all the good things, but it also destroys that one little bad thing called debt. So why thankfully the value of debt? I mean, what does that mean to you as a real estate investor if you know over time the value of your debt also diminishes? it means you are paying your debt down with today's dollar of yesterday's debt, right?

So it becomes more affordable. I don't know if I said that correctly, if you understood that. Let's see if I can articulate that a little bit better. So the debt I take out today will be worth less 10 years from now, but I'll be making more money. So because of inflation. So the purchasing power of your dollar drops, so the rise of what you generate per your own products and services or your jobs, product and services that they sell,

your salary or your income will continue to rise, but that debt stays the same. It actually starts to drop. So that's a really good case for leverage, right? So if we factor in, based on what does that mean to us as a real estate investor, if we factor in the diminishing purchasing power of your dollar, the low interest rates on borrowing, the rising prices of housing, and the fact that we don't buy houses based on price, but rather based on monthly payment, what does that say about whether or not it is a

good time to get into real estate? So I've got graphs, and I hope you're going to be at the epic intensive so I can show this to you because I think it's going to have a lot bigger impact and you'll be able to understand it better if you can actually see what I'm talking about, because I'm reading off of graphs right now. So there's a lot of visual aspects to this. But I'll do my best. and I'll wrap this up really quickly. But if we look at that, say, back in 19, let's see, what I picked here, 1985, median household value, the median value of the house was $80,000.

Back in 1985, across the country, the median price was $80,000. Then, so the monthly payment, or that interest rate was 13%. $80,000, $13, it gave us a monthly payment of $892. And if you adjusted that for inflation today, that $892, that would be equivalent to a $2, yeah, $2,000, yeah, $2,57 payment today. So that's nine times. So it's a little bit more than double is what you have to pay to buy that same house at that same interest rate today based and adjusted for inflation. Now, if we move forward to 20 years and go to 2005, where the price of real estate more than tripled, went from 80,000 to 235,000.

Interest rate dropped a little bit more than half, just slightly, down to 5.7%. So the monthly payment went up to 1370. So 20 years before that, it was 892. 20 years in advance, or in 2005, was 1370. So it went up about $400,500. But if you adjust the payment for inflation, the payment went to 1825. would be today. That would be equivalent to an 1825 payment.

So right there, that house in 2005 is cheaper for us to buy $300 a month cheaper than it was 20 years earlier. That's totally counterintuitive. That's totally like, no, the house tripled in price. It's got to be more expensive. No, based on inflation, it's actually cheaper. And then if we come in today, the median household value is, 320,000. So we've grown another 100 grand over the last, what would that be 15 years. But our interest rates have dropped 3.65%, just a couple points.

So we've added $100,000. So one third, a 30% increase, I guess, in value of the house. We've only dropped, let's see, yeah, about the same 30% in the interest rate. And that gives us a monthly payment of 1464. So as the house price continues to rise and the interest rates continue to drop and the inflation rate continues to rise, houses are getting cheaper and cheaper and more affordable for us to purchase. So the big question is, when would now be a good time to buy real estate, right? Is it a good time to be in real estate?

It is. It's the cheapest it's ever been. And so use the inflation calculation to your advantage. Use the low interest rates. If you have access to those, get as much of that 2%, 3% money as you can. And buy and hold. Buy for cash flow. If you have the ability to get those loans, I would, if you have the ability to qualify for a bank loan,

get as much money as you can and acquire as much as you can. Because it's cheaper now than it's ever been. And if you don't have the ability or you've maxed out your ability or you have a limited ability, partner, get a money partner or a credit partner. Have them come in. You do all the work. Maybe you come in with the cash even re-split it. But keep buying as cheapest as it's ever been. And you're going to go a lot further by buying and teaming up with a partner than you will by not getting it at all.

All righty. So if you can show up to the epic intensive, I really hope that you can. I've got some more data here. I'm almost finished with this. but there's a bunch of stuff that I kind of left out just because it wouldn't translate very well here via audio. So I can't wait to show it to you. And then we'll move from there on the strategies that are working and that will work in this type of environment. And we'll go from there.

All righty. But if I miss you, I will see you next Thursday. Same bat time, same bat channel. All righty. So if you found this episode valuable, who else do you know? There's a good chance you know someone else who would too. And if you think about it, when their name comes to mind, share it with them. And ask them to click the subscribe button.

when they get here and I'll take great care of them as well. All righty, that's it for today. God loves you, and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Live in the deal. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow.

Yeah, yeah, we got the cash flow. You didn't know, home, boy, we got the cash flow. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com. Thank you.