The Fed is breaking the economy! What will pop first inflation or the economy???

surprising and interesting but today we're going to be talking about you know what's going to break first inflation or the economy it's going to be a really good topic first let's just get into our Twitter questions of the week I can you ask knowing what you know now what advice would you give your past self on investing and Norm said don't be afraid of debt take the free money while it's still available yeah if it's free so yeah you're right that's right Norm so you know when it was three percent that um and um the economy was or I guess inflation was too you were in a pretty good position now inflation's higher obviously out of you know five six percent let's say so now it looks free but you're right you know basically uh debt is OPM so I think a lot of times people don't realize the money in your wallet can be actually either Equity or debt depends on who you lend it and how you lend it yep and then our next comment came from Jerry's having some technical difficulties Joy she said don't rush to invest focus on understanding and the concept of money and practicing the skill of making money after that invest even if the first few Investments fail I know how to make more money quickly and reinvest that's a good one even you yeah she gets emotional on certain properties not as much anymore well a couple weeks ago she's like I'm going to invest in this deal and she goes what do you think thinking that I was gonna say do it I still think that would have cash flow no anyways be patient next comment um I am irie says invest in the knowledge of investment and get a mentor yeah mentors are good trustee you guys should not go it alone and find people that have done this fine get in those circles you know Limitless is going to be packed with those folks you know if you're gonna if you have money or you have access to money now it was funny I was having a conversation with somebody that has access they have some money and they have access to a lot of people with a lot of money and they were talking about coming into real estate and I'm like why would you do that just because you have money that makes no sense just because you now have access to it so you know you have to you have to come in at the right time right absolutely all right um before we get started speaking of Limitless you know make sure you go to Limitless expo.com and get your tickets it is in a less than a month I know I can't believe it so this morning um I had an hour call with Chris Voss who's in one of my heroes so you know he wrote the book never split the difference uh the number one leading hostage negotiator he works for the FBI he's taught at Harvard uh he is something else and he's got a master class and all the stuff he's um he's going to be one of our Keynotes I can't wait to hear his message and and uh what we talked about is it uh because he wanted to know the industry and what's happening and I said listen I think people are they you know they're going to hit some headwinds here and so he's going to talk about how to negotiate during turbulent times yeah which is I think where we're headed for lots of reasons absolutely all right so let's jump into the topic so it's been an interesting time here for a few different reasons you know as all of you know the government pumped a bunch of cash into the economy in 2020 and uh now obviously but clearly not obvious to them at the time it created inflation well they do two things one they you know the center already home and then they gave businesses the PPP money and the eidl money and then the stemi money so that was one but then they also if you remember they reduced the federal funds rate to zero right okay so those are two different things one is giving people a bunch of cash and the other one is making the um the interest rates uh basically zero not to say they didn't need it at the time right because the economy it was a lot of uncertainty yep absolutely so that's showing up now well and so what's interesting is it's the fed's job to balance the economy and inflation it's the only two things that they have to worry about unemployment yeah right I'm sorry employment and inflation which directly relates to the economy right so that's the only two things they have to worry about now what's interesting is we've never had high inflation going into a recession yeah ever I know that's why a lot of account a lot of people are throwing conspiracy things out there I don't know if you guys but I'm completely confused as to you know what's next that's why I Port that's why I flew out to Rebel capitalists I listened to half a dozen economists then the next day I flew to Nashville and met with CBRE National Conference and listen to more economists and then of course we had our Mastermind and of course we have a lot of really smart people there too so everybody's trying to figure this out yeah and it's interesting because usually the the job of the fed's pretty straightforward you know if we're heading into a recession low lower rates stimulate the economy right and if we're have typically when we've had inflation we the economy has been booming and we had inflation so it's higher the rates slow down the economy right now they're both happening at once so the FED is going to have to make a decision what the fed's hoping is that the inflation bubble pops before the economy because if the economy starts to break before inflation's under control it's going to be interesting what which one that they decide to do and I think it's important that people remember that this is really really a key thing in first quarter of 2022 so just about a year ago federal funds rate was Zero so that's important to understand so it's just been a little bit over a year that federal funds rate was zero and why is that important it's important because when money's cheap it creates asset bubbles it creates asset Bubbles and the stock market increased asset bubbles in real estate market and when when they start to crank that back up of course then you start to see those bubbles deflate and so that's what we're experiencing now right absolutely so you're starting to see you know you had um Easy Money free-flowing credit um and all that but now it's time where the FED is increasing rates to slow down inflation but the but the issue is it hasn't really affected inflation as much as you would imagine so I think at the height of inflation we were at 8.5 percent and now we're all the way we're only at 4.9 percent yeah well we actually hit 9.1 believe it or not in June 22. yeah but 885 was the the month right before so when they raised rates they actually went up a little bit so yes I I know to your point you know people are feeling it it's it's get they're getting squeezed and so the FED as they should um you know they've they've increased rates there's a lot of criticism that they they waited too long and and I think that that's fair because they lowered them during covid which I'm not saying they shouldn't have um you know that's the last thing you want is is people paying higher fees on on things but they they didn't they let that go for uh about two years yeah so they the FED didn't do anything for two years and that's what created if you guys remember that's what created these housing prices I'm going up and and all of those things so now the they're in a between a rock and a hard place here what do they let fall and well oh God I got to tell you one of the things that I've been researching lately is that that April had some of the highest bankruptcies for businesses on record in a long time so things are starting to show up now and of course if there's any kind of debt maturing or um you know like obviously on the commercial which you guys know I've done a couple videos on if you bought something a year ago at and it was three percent and um and it's gone up which is floating right Dad or variable data or whatever you want to call it you're in trouble whether it's a new construction project or whatever it is and then the worst part on the businesses as it's digging in a little bit more think about this think about if you own a manufacturing business and you have that float right where you're selling stuff and then you use a credit line well the credit lines are have gone up too so the cost of your credit line has gone up so so there's there's there are businesses that are that are a little bit in trouble right now with the with the higher uh the higher priced interest rate so there's there's other I mean on this show we focus we seem to tend to focus on real estate and if you're in residential real estate that's all you focus on but there's really so much more going on you know there there really is and that's what you got to pay attention to the other the other thing is is think about this weird this weekend people are asking me what should we invest in what should we invest in well before you can invest in stuff that had a four or five or six percent return in year one now you just put them into government t-bills so you know you can get five percent completely safe at the bank I mean at the government with the government so you know and so why is that important that's important because that's a liability if somebody's paying you four or five percent on your money it's a liability it's a liability for the bank so the bank has these three percent loans but they're paying for on savings let's say that's not good that math doesn't work so um so if they keep these rates High um it's we're going to see a lot more problems in the banking sector too yeah exactly so it's really hurting the banking sector and um you know it's such a balance between the inflation and the economy right because what we're also seeing with people because of inflation the inflation a lot to do with it is you know savings rates are at an all-time low credit card debt isn't an all-time high yeah hit one trillion yeah and so the average person owns fifty eight hundred dollars that's a lot at twenty percent yeah that's that's crazy that means that they're you know they're they're I mean they're getting whacked it's not good people are using the their their credit cards to live and that credit card balance keeps going up I mean this is the first time ever we've been in a trillion yeah that's a big number absolutely you know so so it's interesting because you know but then those same people because you have to think of the average person because that's what the fed's gonna weigh it's the average person so the average person if the economy starts to go sideways and they lose their job that's not good right for it for everything um if we have math unemployment and people aren't spending money and it's too expensive to buy a home and they're losing equity in their homes and they're you know none of that's good but then for them with inflation that's not good either because they can't keep up and they don't have assets that move with inflation and they're having bankruptcies and you know having a hard time buying necessities so what what will the FED do because we're we are starting to see cracks in the economy so they're trying to sugarcoat the economy and we got that jobs report back that was it seemed a little bit suspicious well I think everybody's questioning it you know the first quarter so let's talk about this real quick you know if you look there's a bunch of criticism as to the way the BLS or Bureau of Labor Statistics is actually reporting this there's and by the way low unemployment from a Fed standpoint is bad because low unemployment means wage growth which is inflationary so the FED doesn't want low unemployment um but and it's been in the mid threes let's call it you know for a year so but there's two kinds there's there's actually more than two there's six but there what the f what what what what what the media picks up is what's called u3 just Google this type in u3 unemployment and on you three unemployment you're going to find 3.4 percent on U6 which is what most people would consider to be the real unemployment rate believe it or not that doesn't ever get picked up it's 6.7 so it's almost double and and what that includes are part-time discouraged workers or you know underemployed so you you know so it's not really capturing the real you know what's really going on and there's a lot of people really digging into this and and so what I what I what it feels to me like is that you know there's there's more unemployment around than than is being reported and um and also we have this high unemployment and so what that means potentially is what you know the term that some of you guys have heard of is called stagflation so stagflation is high unemployment and high inflation and it's stagnating still stagflation stagnating so the economy is stagnating and that's like actually what a lot of people are talking about right now yeah they are and you know so that the fed's going to have a decision um if you guys are enjoying the content please make sure you hit the like button it really helps us out trying to get to 100 likes but anyway so that's what people are kind of saying is the Fed is going to have to do something and they may lower rates to try to stimulate the economy which is inflationary and then they would just accept higher inflation or they can keep pounding you know lowering you know the inflation but that's going to pound away at the economy you could have high unemployment could have almost like a recession depression situation and so it's going to be interesting to see you know what they decide to do and nobody really knows and something else Logan brought up that I think is interesting is you know also with these Banks being very unstable that you know the more they operate the more pressure it puts on these Banks that's right and then the bailout for these Banks is also inflationary so you know they're they're really fighting an uphill battle and a lot of the inflationary things are things that we're gonna have a hard time with like rents because there's a supply demand issue gas because they're not you know oil because they're not getting it from here and groceries you know food and and things like that so they're really fighting a big uphill battle on on prices of things that really aren't affected by rates necessarily yeah well so what are the reasons why we're you know we have 40 some speakers at Limitless next month and one of the debates is who you know how what order you put them in right and because they're all amazing folks and so we're starting off with Joseph Wang who wrote the book called Central Banking 101 and he is on the open market desks of the FED basically was in charge of the bond buying and and all the stuff that well one of the things that the FED does um for this so I can't wait to hear his presentation on this exact issue because you're right the FED has to make a choice and everybody wants rates to go down including me but the question is is you know if you if you were lower rates which first of all the fed's not going to lower rates right away the first thing that they'll do is not increase rates that's the first thing they're not going to go from all these increases to lowering they're gonna they're gonna say we're not gonna lower it at this time so the next meeting with fed's going to be very interesting because everybody thought even on the last meeting in May this this month that they that they were going to lower or or stay neutral but guess what they went up another 25 basis points so which is better than you know in the past but 25 is actually pretty normal that's actually what the fed's known for what they've what they've been doing is 70.75 and and a half percent so so now we're sitting on these higher rates I just think that the um if they do this then we're going to see inflation again and so it's very possible when I talk to Joseph Wang about what he was going to discuss at Limitless here's what he's told me which I thought was fascinating he said it's actually not that hard to get inflation from say nine down to six it's really hard to get it from six to two so so you know so you can make a good impact pretty quickly but then that next that that last piece is really really difficult so I can't wait to hear what he says but the interesting part is is that if they would decide you know we're gonna just focus on the economy we're gonna bring rates back down the inflation like we've gotten it to you know five but it'll just like fire just go way back up you know when they start stimulating the economy again and you went to an interesting uh meeting this week with CBRE and and why don't you let people know what the economist there said because I thought it was it doesn't mean he's right but I thought it was interesting well I talked to George Gammon about it too because George is the one of my partners in the collective so a couple things one it's funny because when you go to a real estate conference which is the first thing I went to you know especially when it's filled with owners and Brokers and landlords there's about 700 people there I think it was in Nashville it was cbre's National Conference so they're pretty optimistic obviously you know rates are going down and you know federal funds rate is going to be cut in half in a year that was basically their projection and I'm like well why you know um and the problem that that the commercial industry has and residential is that if rates don't go down then people are going to get further and further away from be able to buy a house and some of that commercial debt that's maturing is going to get is going to go through default so so their projection was that but then they brought in this economist who basically said it was looking at it from a geopolitical standpoint which I thought was fascinating so he was looking at it very differently and he believed that in inflation is going to be you know over nine percent yeah they're going to just accept higher inflation yeah they're going to keep printing because they have to support the the debt that that the government is already in you you know right now we've got this debt ceiling and all that stuff and that's been a big debate political debate for for years um but but uh he believes that they're just going to have to keep printing just like Japan had to do and um so he's he's looking at countries and what they're doing the ones with central banks at least the ones that can print and um so um you know it's interesting because then I I asked George I'm like George what do you think because he's looking at the inverted yield curve and short-term rates of course are more attractive than long-term rates which by the way is not supposed to be the case so um you know and and even Jeff Schneider who's brilliant who I listened to said that he you know he thinks that that rates are going to be down so um boy is my spinning too I hope they're down right I mean it's just interesting because and the other thing you do have to consider and it doesn't mean the fed's going to do this but you do have an election coming up so what the Democratic party is going to want is high employment low unemployment a good economy they're going to want that over but they're also going to want low inflation you know so it's going to be interesting um there's going to be a lot of pressure on the FED to lower rates though I do think and uh it'll just be interesting to see what they do we're just gonna have to wait and see but they are between a rock and a hard place and this is the first time they've ever been in this position I I yeah I think you think about like my mom obviously I'm gonna take care of my mom so before you guys jump all over me but my mom's on a fixed income okay so whatever she gets each month she's been getting for 10 years right yep it it is what it is so I this is who I think of I think of people on a fixed income and they start to they start to make changes in the way they eat and the things that they do as a result of things going up and we're hearing about it all the time and it's starting to show up people are starting to make different choices on you know maybe what what was once discretionary their savings rates are down so people on fixed incomes with high inflation are getting killed it's horrible and so I think that that's that's kind of the everyday person you know I mean if you're retired and you and you're relying on some type of fixed income it's this is a big big issue so I think if I were in their shoes I would let real estate cave a little more because that affects you know doesn't it affects less people than inflation yeah yeah I mean it's it's going to be interesting to see you know kind of what they do and but you have to remember though that these rates affect people's credit card balances these rates affect people's ability to get a car loan these rates of you know so it's not just people that own real estate it's just people that want to own anything and we are in a nation that not only do they rent houses they rent cars and they rent you know everything they live on credit cards that's why this I think that's why the business bankruptcy issue is so big if you're selling anything that's financed you have less customers that's actually a pretty interesting thing to say right so let me say that again if you're selling anything that's financed even a TV or whatever it might be it doesn't have to be a car I'm going to talk about these big things like houses and cars I'm talking about anything that's financed then it's become a problem right right so which is interesting I mean I you know it's they're they really are between either way that you look at it the person that the people that are getting the most hurt from either or honestly are the people that don't have athletes that move with inflation and are trying to live just on one Soul income fixed income that's why that's and that's why there's so much scrutiny on rent you know if you if you guys take a look I did a video Friday that talks about the difference between mortgage payment and rent it's never been higher to have I think it was 470 some dollars difference between the cost to to the cost to buy versus a cost to rent now the only reason I did that is because it's a snapshot in time I also believe that real estate investing and you know and having um all those into depreciation and those tax savings that you get is the right way to go but right now the cost of home plus the plus the cost of your payment is you know 450 to 500 more per month on the average and some markets are higher some are lower but that's the average so right now all that does is force people into rentals and so what does that do that puts more pressure on the demand for rentals which of course drives up the cost of rentals that's what it does it drives rent more Supply or more more demand I should say on the on the same Supply so we have a real problem here where people are displaced people forget sometimes that residential and and multi-family are not the same they're not even close so when most people that can rent want to typically Buy and when they can't buy they default into red that is the Stark reality yeah especially as they get a little bit older yeah at other 20s so now we are going to jump into the questions of the week if you guys want to become members go to Ken's innercircle.com we answer all of your questions some of them on here some of them by email um and Steve's going to put that in the show notes all right so our first question comes from Chad he's asking is there ever a time to sell an asset too many repairs neighborhood turns bad negative population Trend Etc all of those reasons yeah no it's a really I have yeah I don't like to but there are times where that does happen you know um for example I remember I used to have some stuff in the Tri-Cities which is Eastern Washington and the there was a plant there called the Hanford nuclear plant so it was a nuclear plant right and they they said there was all kinds of debate on this thing but it ended up closing but way before it closed everybody knew it was going to close so I'm like let's get the heck out of here right so so we had properties in the area because again it's a big employer so when you have people moving out of an area for whatever reason it could be a university shuts down it could be a military base that closes even though we haven't seen that in a while you know I have seen that before or they downsize or there's budget cuts in the military and those kinds of things affect rental markets yeah in UV event I mean especially nowadays you know if the neighborhood or the area is not you know crime for you know if it's crime friendly and that you're starting to have crime issues that's a reason to get out too well look at San Francisco you know I I pick on that all the time because it's it's actually should be there are I know plenty of people that um they don't want their employees they can't really walk to work there's there's things that go on there's safety issues and you know I don't want to get in too far down that road but the bottom line is there's a reason that San Francisco office buildings are over 30 percent vacant okay so so you do see that those kinds of things and and you know so by the way I don't know if you guys look just Google this in 2020 there was an office building in Downtown San Francisco that was valued at 250 million it just sold for was it 70 . just Google it you'll see it was on State Street so how does an asset go from 250 to 70 let's say well occupancy and and what happened with you know with with all the political nonsense you know that that's going on there so yes there's a time to sell yeah absolutely and if you're enjoying this content make sure you hit the like button we're nine away from 100 which is what I want to get all right so Michael who's usually on he's not on today he had a question and make sure too if you're listening on YouTube you ask some questions I'm going to try to answer as many as we can get to so Michael said if a commercial real estate office crash happens and the government purchases these assets and converts them to low-income housing thus knocking down rents in the next Domino for commercial residential what are your thoughts on this likelihood um so it's already started the governments I know um bought a number of micro hotels around the country I know New York specifically I I had somebody that told me that there was nine now believe it or not that didn't make a huge impact but it's basically converted into that low income and even actually they they bought it um um I might have been the city I don't know if it was a state but essentially that that could potentially happen I don't know exactly how you would move low income housing into Office Buildings because you have Plumbing issues and you have common area issues and there's there's a fair amount of retrofit so it's not just taking an asset over but it's it there's there's um a cost to convert so oh I'm not saying it can't happen but uh but it's definitely I I think I think you're going to start to see it's going to be a long long long time before we see a recovery in commercial office in fact we've never seen these vacancies nationally it's over 20 percent yeah but it's not going to be an easy task to just convert you know it sounds so easy right just take an office building make it rentals right but it's so hard because you you have you know typically in an office building you have one bathroom or one bathroom a floor or whatever and you don't have all the you know like kitchen like plumbing and bathroom plumbing and it's not as easy like sometimes it's just easier to demolish it and start growing up it's it we remember that we we went uh biking in Venice Beach and we we rode by that hotel you know two-story Hotel an old hotel an old brand that clearly the city of Venice had bought and had converted that and and you can tell from from the you know all the stuff that was happening there but that's easier right because everyone can get their own room and it's all set up it's got bathrooms and kitchen little kitchenettes and stuff like that so um it's a little more complicated when it comes to office building commercial office foreign absolutely so the next question comes from Ephraim he's asking as a new member with no funds to invest what would be your first piece of advice to get me started uh he's been looking and calculating deals on Craig c-r-e-x-i and he owns currently owns a law firm okay yeah I would not invest right now I would I would learn as much as you can I would watch as much as you can I would go to as many seminars as you can I would read as much as you can and and build your team and your network um and uh and and I would um I would I would start to save some cash so we're at the you know I I would say I think we're at the first few Innings of a nine inning game here and um you know you if a cash flows like Daniel's still looking like she looked at us on a property this morning right so now what a cash flow if it wasn't for the land lease there was a lesson there yeah you know she was online last night and she went and looked at it this morning and she made it she was a quick no so that's what I'm talking about an education standpoint but don't feel any pressure to to invest this year um you know just just watch the markets because even in I told her what two months ago I said I think we should wait till the fall it she hasn't stopped you know she's going to continue I just look at her you know I just love to look honestly and I do think there are you know there can be some deals out there um but realistically it's going to be hard to find one right now but that doesn't mean you shouldn't be looking and if anything looking and going and seeing properties and just looking on Zillow and saving search results to watch as they go down the ones I'm looking at are going down and also to get yourself familiar with the market like we had a member of the collective moving from Seattle to Arizona this weekend and he was looking at a house and Seattle prices are higher than Arizona just in general so he's like oh my gosh this property 1.2 I'm kind of looking and I knew that that property was super high because I understand the markets because I look at even though 1.2 is not even in my price range I'm looking at like six and seven hundred thousand dollar houses for rentals for rentals I know that 1.2 for that is not that much nicer than the six hundred thousand dollar rentals I've been looking at so I was able to give him some advice so if nothing else you'll understand the market because him just coming into the market is like you know in his Realtors telling him hey this is a good deal you know everybody wants the house to sell and it was priced high so you really take this time and really act like a buyer and and act like there's cash flowing deals and get really familiar with the market so when there are you understand it yeah I mean Danielle's still looking it it's tough she has a tough time having cash and she wants to invest it so she's looking online all the time and just in the last few months you've learned a lot just by going out like today she learned the lesson about land leases so there's always something to learn also the Realtors or the person the people that are helping you look you're going to get a different perspective from them too as you're out looking because they're the ones actually you know the hardcore you know showing units and listing units and and so you there's nothing wrong with that but just be careful on investing yeah and you don't want to rely too heavily on your realtor you know you just you want to know the market you you want to be you kind of want to know yourself and maybe get their opinion but realistically they get a commission they're sales people so you you really need to know it yourself you don't want to just be relying on them to tell you well they're not looking at it as investing because if they did they wouldn't be showing it to you true so you know so so just know that just know it's nothing wrong with that it's a great industry and a great business but their job is to sell you and get a commission and do it again your job is to make sure you buy something that cash flows I want to answer this question on YouTube I think it's a good question so Lydia's asking we need to expand our square feet we live in right now this is interesting we'll rent our current house and my guess is why they want to do that is they have a low interest rate on it and that's part of the problem we're seeing uh is it buying new property for long-term reasonable right now or do you think it's not a good time to buy whatsoever so like I guess we just kind of talked about this but I I I'm always looking God we looked at I think I told you guys we we underwrote 14 Deals we didn't make an offer on one of them you know my team is still active here we're still looking for deals I went to that conference we're still looking for deals um there's still a big difference between bid and ask well but also they want to live in it so it's like you know if they're gonna go live in it because they're trying to you know upsize and they're going to run out their place it really comes down to Lydia if you can afford it I mean if you find a house like we're all looking for rentals it's a little bit different if I was trying to move into a house and we are actually looking at houses too like you might want to wait till the fall kind of see what things how things go but at the same time if you can afford the payment and you want to live there yeah just do it yeah we look at that differently I've got my eye on about 20 houses under construction you know and these are right now they're listed you know north of 10 million and I just know that they're gonna be in big trouble when they're you know there's no buyers well running with altitude just said that Builders are also assisting with closing costs because are in trouble but if you have a big custom let's say you know what's the difference you know these are these are one-offs so you know but they're right so also when you be you know on a track stuff be careful because those those rate buy Downs are one year right they're not like for the whole term of the loan so be careful on that too because the the builders are doing that but really what they're doing is they're just trading dollars and buying down the rate for the first year it's just it's just math yep yep so Eric wants to know from the inner circle is there better asset protection to have a separate LLC to manage your properties from the one that holds the title so um this is a we get this question a fair amount so the you know the the the the loan and the title will be in your name um and what you're trying to do is you're trying to protect the asset from creditors that's it so there's not a lot you can do with the loan and what you're trying to do is protect the equity that you may have in that asset so what you would do is you would put that into an LLC so it's really asset protection if that makes sense right yeah so so let's say you have a tenant in there and you have a fire and somebody gets injured well they're going to sue who's ever on title and if they sue you personally then they have access to all your assets but if they sue an LLC they're actually suing a business and then they have to do what's called pierce the corporate veil and you so your stuff's inside of that and also your your your the biggest thing is is that you're making sure that that they can't have access to everything else because let's maybe you have a personal residence maybe you have some Investments and things like that you want to make sure that they're suing that asset and not you because you are the asset for everything that you hold so that's uh I just want to make that distinction yeah and he's also asking too would you need another LLC to manage the property no I don't think so I mean I think that just we're not experts at this so it consult you know whoever but but you just you just have an agreement with the LLC with the management company so that's all but doesn't have to be you know but um I think um you have to be careful on the accounting right so you want the tenants to pay rent to the LLC if that makes sense yeah absolutely and Nate is asking from the inner circle I feel like my money is burning a hole in my pocket don't we all what should I do with it I know I'm doing the one three year t-bill or three months one year or one month three month t-bill so if inflation truly is five let's say or five and a half what is it fed saying I'm saying it's like five four nine okay this one last one you can get you can get more than that in a government-backed t-bill so yeah you're not moving forward but you're not going backwards so that's uh I would just park your money right there make sure your money's not sitting at a bank at zero there's a lot of bank I don't know if you guys have looked but you should look at the M2 money supply of the banks there's a lot of money flying out of banks right now um you know after those four collapses four Bank collapses so um you know banks are starting to get really competitive and you know and and rates are going up so just make sure you might not be beating inflation but as long as you're hitting inflation I think you're gonna be fine for now and that way um you won't lose any sleep yeah absolutely um Michael said um you can't forget baseball cards no yes of course gosh I wish I would have had almost so anyways um so John and Moretta asked a question from the inner circle it says on one of your recent podcasts you mentioned how to fix your debt on your properties we own commercial properties that currently have no debt on them we may want to put debt on them in the future but so far none of the banks have offered fixed debt only 10 to 20 with a re-rate in five yeah so this is probably the worst time to go look for debt you got to do it when times are really really good first of all congratulations for not having any debt because you are probably in the one percent you know I would just stay right there for now let's let let things fall as they may we're actually in the middle of a credit crisis a little debt and credit crisis right now banks are changing their underwriting and and uh you know this is really just a a timing thing so you want to look at when things become more optimistic for the banks and and the economies going the right direction so I know they're out there we do it so um you know but right now they're um you know even even we're having problems with with getting specific kinds of debt and and uh I think that the the banks are pulling back right now yeah and and if you think about it why would if you were a bank why would you want to give somebody long-term debt knowing that you don't know what's going to happen with rates and borrowing so it makes sense um Dennis from YouTube has an interesting question he said what's your opinion on the 100 Finance deals for new construction property it doesn't cash flow but there are big tax benefits so a lot of this is going to depend on that um you know you said it doesn't cash flow so you really have to look at that if you're okay with that and you're saving a lot in tax then you know it might be worth it but man you know at 20 I think residential's 27.5 years so you really have to look at the the the the the trade-off but I personally just have a rule that if it doesn't cash flow I pass because I'd rather have a both I'd rather have something that cash flows and I get the tax write-offs well right because you you kind of told me that because I found a property that broke even and I was tempted because I'm like well when the rates go down I can refinance and you you said to me and it's always right and I say it to people too if you think it's going to break even you're going to be repairing it you're going to have vacancy you're going to be feeding it and you're going to be pissed and you don't know how long until rates do go back down and you're able to refinance it it could be years yeah and but you do have to he brings up a good point you have to really take a look at the whole picture so if you have a huge tax issue but you got to know if it's a new house and new construction you're probably not going to have as much Capital uh all that kind of stuff but you could have vacancy you could have damage on the inside you know your tenants and you could have Builders going out of business and the warranty issues and things like that so there are things that can come up but I just like to have that cushioned you know I personally I I personally would pass there are other ways to save on tax yeah absolutely I think sometimes I'm included in it and they all have money that we want to invest and we you almost want to justify something just because you want to buy something but you really need to wait for the right thing to come along and don't forget that um you know you want a bunch of dry powder and you might have a bunch but you you know this is a good time to be heavy in cash if you take a look at a lot of the experts are are um getting rid of toxic assets and building up their cash reserves right absolutely Brenda Brenda says don't catch a falling knife ah yep I need to get one of those Jerry we need to get that logo somehow yeah yeah all right so John is asking and this is always the question because you always I do feel like you always switch it a little bit but what entering are we in for residential I mean it is true guys but I'm looking you gotta understand I'm looking at retail industrial single family multi-family office they're all in different Innings so unfortunately everybody lumps real estate into one big category um so you know I if you're looking at multi-family I think it's early if you look at an office I think we're you know somewhere um you know a little bit a little a little little more and and also I don't see a huge huge crash on the residential side because of the inventory the lack of inventory but nobody can buy them well they they can but we're you know we're all-time lows and mortgage companies and everybody's scrambling so so I I think but it could be interesting to see I think we got to wait um but Office Buildings as I said in my video is going to be the first Domino fall and it's already starting to show up but you but you also even though you're saying you don't see a huge correction in a multi-family you still don't think somebody should buy something if it's not cash flowing correct right I always you got to start with cash flow and you know who the the the the cash flow comes from the tenant so who are who are you who's gonna who are you gonna who's gonna be your tenant that's the most important thing the tenant is going to become very very very important here well they already have been and they already are but now that's going to be in my opinion that's going to be your your deciding factor so even if you buy um a warehouse you know as we were talking with Shannon you know one of the members of the collective he just bought some warehouses in in Houston um the biggest issue is the credit of the tenant and how is their business doing so you know it's one thing to throw one in there but if their business is not doing well and their business is going to suffer from inflation then you're not going to do well so that's why the tenant is going to be really really really important moving forward the tenants that have jobs if it's single family or if it's Airbnb you know who's going to spend three four five hundred a night or 200 a night you know I don't know you know that's that that's what you need to be watching because that's the income right right right yeah and just not getting you know like we were saying for not getting desperate on trying to make things work you know like even with the landlase the um the other realtor was saying well you can Airbnb this property and you know you can make all this money so 675 is not a big deal because really the rents on that is probably about 3 500 to maybe four thousand so 675 is a big chunk but if you Airbnb it you can make 10 000 a month and everyone's doing that and I'm like well is that why there's five for sale and then yeah so block yeah and we do know that Airbnb is having some significant issues because obviously in a recession people aren't traveling and obviously the inventory has went up yeah it's gone up a lot and and you know I actually think that that would be an interesting play is to find people that are in trouble on airbnbs you know because they've been rehabbed they've been rented they've done pretty well but uh you know that would be a Target if I were you guys I would look at that point you can almost go on Airbnb see places that aren't rented that much because you can see how much what dates are rented and then reach out because I know for a fact in Scottsdale there's a lot of Airbnb people that are in trouble right now yeah there are and that's happening in a lot of places and some areas are doing fairly well but but uh that would be a great one because then you can go and snap something up it has to work long-term rents or you know it has to work but it's not a bad strategy yeah absolutely well make sure you guys get your Limitless tickets they are on sale Limitless is in about a month it's going to be a lot of fun here in Scottsdale and um yeah and we got a happy hour on the first yeah we're gonna sell out so yeah we got that and we got happy hour on the first of June so um you're going to want to join us for that but the Limitless tickets um Limitless expo.com and I want to sign up for that um we're we still have I just checked this morning when I had uh a call with Taro this morning and um so there are we're not quite sold out I know last year we sold out yep so there's still some available awesome well you guys have a good week and we will see you next Monday okay see you guys foreign

Channel: Ken McElroy

Views: 21,920

Keywords: 2023, federal reserve live, federal reserve explained, federal reserve bank, dollar, inflation, interest rates, housing market, commercial real estate, recession

Id: UxAQBNkq0jY

Length: 50min 19sec (3019 seconds)

Published: Mon May 22 2023