The Science of Flipping - Best Investment Strategy in 2022 for Beginners

Starting point is 00:00:00 The interest rates are rising. The stock market is plummeting. Crypto has crashed big time. And what are we going to do about all this? Alright, so we are in the thick of it. We have inflation going up real time. The Fed is going to do a quarterly increase in interest rates. We have crypto, which a lot of people thought was like inflation hedge, absolutely plummeting real time right now. It is all happening live. We are kind of in the beginning of what I think will be this storm. Now, here's what I would also say about the real estate market. Ironically enough, it is still booming. There is still no inventory. It is still very hard to get properties. So first, let me address

Starting point is 00:00:58 one simple thing. Many of you know that I invest in cryptocurrency. I also invest in real estate. I'm much heavier into real estate than I am crypto. But I also invest in real estate. I'm much heavier into real estate than I am crypto. But I will tell you one thing. Many people thought crypto was an inflation hedge. As you just saw, many people, most people, if they've been in the game long enough, lost roughly 50% of their crypto portfolio in the last seven days. I mean, it plummeted, myself included. And so while I, to some extent, thought it was an inflation hedge, to this very moment, it is nowhere near

Starting point is 00:01:35 the type of inflation hedge as residential real estate. My residential real estate portfolio, oh, it's actually still appreciating during this very time I'm shooting this video. So for those of you out there that are thinking about where they should be investing their money, I will always stick true to this one point. It's always going to be real estate first. Invest in real estate. Now here's what happens in real estate. Do you have ebbs and flows in the market cycle? 100%. Is there a crash pending? I would argue no, there is not. Even though I just told you that the Fed plans on increasing interest rates by a quarter of 1% every quarter, I don't

Starting point is 00:02:23 believe there's a crash coming by any stretch. Could there be some rollback or at least some correction? Maybe. But there is still the simple economics of supply and demand. On top of that, rent is at an all-time high. And depending upon what market you are in, it may be even cheaper to buy a home than to rent a home. So for example, me and my friends were talking this weekend and I just bought this million plus dollar home in Miami. To rent this home in Miami would have been almost double to 2.5 what my mortgage payment is.

Starting point is 00:03:01 Now the difference is I also had the capital to put down the down payment to buy this home. Many people don't. So again, it just depends on the market that you're going to be in. In many markets, it's going to be more viable financially for you to actually own your home than to rent. Now, what does this mean for us real estate investors? We are talking about the Fed increasing interest rates. So for you fix and flippers, it might give you a little like, oh man, because you are, you know, obviously projecting that your buyer is going to be able to qualify for loans. Now, here's what I would suggest you do if you really want to know the difference. Many people, you know, have been getting 3% as a pretty typical interest

Starting point is 00:03:46 rate over the last year or two. And so you can use that as the benchmark. If we look at increasing a quarter of 1% every quarter, let's even go on the high side and say it's going to be a 4% interest rate instead of a 3% by the end of the year. And that might be high. Can your buyer still afford that mortgage payment? Just go to Google, look at mortgage calculator and put in the numbers, right? Put in 3% versus 4%. The shocking thing I think you will come to realize is it's not that big of a difference. You're not going to be swaying a buyer because they can't afford, depending upon price point, they can't afford an extra $100 or $200 a month. That's not usually going to make or break a buyer. Now, if you've listened to any of my

Starting point is 00:04:37 previous episodes here, you would obviously realize I also am very adamant about most people, most people shouldn't be buying a home because I believe they don't take in the idea, concept, or fact that the maintenance and taxes on that home every year are typically something they can't afford. Most people are not entrepreneurs. Most people cannot go out and make more money. Most people are on a salary. And while you might be able to pay for the monthly monthly mortgage, what happens when your roof is 30 years old and you need to replace it? What happens when your AC goes out? What happens when your pool needs to be resurfaced. All of those things are just maintenance. And although many people can afford their monthly mortgage

Starting point is 00:05:31 based around a 3% interest rate or even a 4%, they're not taking into account this idea of maintenance and taxes. Now, what is going on with stock market? What is going on with crypto market, obviously two major impactful situations here, and obviously the interest rate increasing. I will tell you, it's my view of all this is a little bit of a, I would say a reckoning, like just kind of, there was, there's so much money going around. There's so much inflation,

Starting point is 00:06:06 by the way, I haven't even mentioned inflation, right? Um, there's too much. And so the fed increasing the interest rate is their ability to try to, uh, limit the inflation increase. Um, the speed of inflation, they definitely don't want it to get up to like 3% or higher. They don't want that. And so their way to do that is to increase interest rates, to kind of try to keep it back down to the 2%. I think there's great opportunity. I mean, great opportunity for smart investors who dollar cost average. So I'm an investor, and I hope you guys are a very similar investor. I'm more of a long-term type of investor. Yes, I wholesale for quick cash. Yes, I flip homes for quick cash. I look at it almost as an ATM of sorts. However,

Starting point is 00:06:59 when it comes to what I'm doing with my money, that is very much more with a long term play. So for example, I'm buying and holding residential real estate. I'm looking to make some more plays going into this year. I'm looking to get into the Airbnb space. I'm looking to acquire more residential real estate, but it is much more for the long term than it is for the immediate, which would be the wholesaling. Cryptocurrency, I am heavily invested in cryptocurrency. And as it is crashing right now, I would tell you I am buying more. I am dollar cost averaging. So for example, if I was willing to buy Ethereum at $5,000 per token, then it's $2,300 right now. So don't you think it would make sense that I'd be willing to buy it now? Because now I will take that one token at $5,000 and the one token at

Starting point is 00:07:55 $2,300 and I'll say I'll have two tokens and they would average out around $3,500 or so. Seems to make sense, right? Well, that is the strategy I would look at all of my assets. I would do the same thing with my stock market portfolio, which I don't have a lot of stocks as a person who's an investor. I do bet on the big blue chip stocks, which everything is being affected right now from Tesla to Facebook to Amazon, but I do bet more on the blue chip. So when I'm an investor, my thought here is to make sure I'm playing it safer than I am riskier. Now, most people would say crypto is risky, and I'm not going to totally disagree with them, but I don't play it in a way of quick cash. I play it because I believe in the model. I have the big domino

Starting point is 00:08:45 theory that I believe crypto is here to stay. Most of these coins are going to make it through the other side. Most. There are obviously coins that were just there to, you know, pump and dump and the influencers did their whole thing. That's not the game I'm playing. I'm playing in the game for the long term. I think there's a lot of viability with blockchain technology. And so again, all of this goes back to say, I'm not panicking. I don't want you to panic. I want you to be aware. I want you to realize interest rates are going up. I want you to realize inflation is real time happening for us right now. But if you do have extra cash, I have extra cash, I am putting it into, you know, crypto, and I'm putting it into real estate. And it's because,

Starting point is 00:09:33 you know, real estate still an all time I still appreciating, but there's still great returns on real estate. In terms of crypto, this is a dollar cost averaging time. And for those that are rehab flipping, as I mentioned, I wouldn't be overly worried right now. I think you're still in a great position that, you know, there's just nothing out there. So if you are finding deals at a discount, I wouldn't be projecting too far down the road. I wouldn't be, you know, saying, hey, I think I can sell it at X amount of dollars because as interest rates go up, people are going to get a little bit more, I don't know, tight with the

Starting point is 00:10:14 opportunity to buy homes. But I also believe it's going to cause a buying frenzy, meaning people are going to try to keep getting loans while they are still low. So, you know, even in this first quarter, even in the, um, you know, first round of these increases, I believe is going to increase people trying to get it now, rather than at the end of the year, where it could be up to 4% interest instead of three and a quarter or whatnot. So, uh, I would say we remain calm. This is a this is it's bound to happen. We needed a correction somewhere. This is happening real time. I don't think I don't think this is going to be a very major, huge, catastrophic play for the stock market.

Starting point is 00:10:59 I think real estate, as I said, is going to keep going. And I think cryptos is here to stay. You know, the blockchain technology is here to stay. The blockchain technology is here to stay. So hopefully you guys are liking this. If you are not yet over on YouTube, go to youtube.com forward slash Justin Colby, subscribe to my channel, and make sure if you are listening to these on iTunes that you give me a five star review. If you are on YouTube, by the way, I would encourage you to, first of all, give me a thumbs up because the YouTube gods like that, but also make comments, write questions. I'm happy to engage with you right there on YouTube as a platform for me to give you my

Starting point is 00:11:38 two cents, give you my thoughts, encourage you, give my tips, give you some advice regarding your real estate investing business. And if you're looking to get to the next level, just look me up anywhere on social media, go to the website, The Science of Flipping. I'm happy to help you in the real estate space. All right, guys, that is it for this episode. Let's go crush it today. Have an awesome day. See you on the next episode. Peace.

The Science of Flipping - Best Investment Strategy in 2022 for Beginners

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