You’ll own nothing and be happy….the attack on the middle class

[Music] seven hours driving on the highway far away far away far away every moment I was spending on regrets was such a waste saturate saturated [Music] hello and welcome to the Ken mcquarie show I'm your host danil here with Ken what's up everybody so um for those of you listening in I'm going to be trying to create my um my sign in it won't let me sign in and chat with everyone so you will all right let's jump into the topic though I think well no we're not gonna jump on the topic yet we have some things we need to go over um how was your weekend it's good what did you do I I just worked yeah what did you uh as far as um why don't you tell them about Belize how you're going to believe going to Belize Wednesday um speaking at the real estate guys conference bringing my two boys also so that should be fun yeah we love Robert and Robert and Russ yep so anyways and then don't forget about Limitless yep we have always coming up can you tell people about that while I'm trying to figure out my device here sure sure so Limitless uh the schedules out it's on the uh web uh limitlessexpo.com and uh we've got 40 plus speakers it's gonna be good we've got mostly entrepreneurs people that are trying to figure out what to do in this pending craziness this recession um I think a lot of people are going to be really excited with uh Joseph Wang who as you guys know might um he he he's uh was on the open markets desk at the FED in New York so he was one of the lever pullers on whether you buy bonds and um and also we got clay ack Lindsay coming on and Clay's um uh the head of capital markets for Acadia if you guys don't know brocadia burketti is owned by Buffett and um clay has uh it's going to give us a good perspective on where the capital flows are going across the country because I think this is really important there's a lot going on behind the scenes guys with the lenders as you know with these Banks Banks are having problems and um you know what cities um they're deciding to invest in and what not to invest in So based on you know public policy so like you can imagine you would probably not want to do an office building deal in San Francisco right now right because of all the things that are going on there so there are some things happening with money flows and so that's posed another challenge for um the Capital Market so I can't wait to have Clay on he's coming on today uh well you're filming today we're filming today it's going to be released this week it's a timely timely topic uh and we got John Rosenberg talking about the office building Market yep he had a I talked to him over the weekend he has a very different perspective as to what's going to be going on there um so I think that's going to be an exciting one as well so where's the money going and what's happening with real estate what's the first domino in the fall yep absolutely and it it's definitely an interesting time that we're stepping into right now so you know we're hearing a lot of Rumblings about um you know different syndicators um having some issues on raising capital and also on you know getting uh some financing on their some fixed financing on their debt there's a lot of capital calls happening right now all over the place and there's there's some there's some shifts on uh boy this video we did Friday did pretty well Jerry um you know that that was a a video that's talking about retail industrial office multi-family single family you know there's a lot going on uh in the real estate space specifically due to these inflation the interest rates work from home and then just the migration patterns as people moved around things of you know some areas are deflated and some areas are inflating so that's what's happening with a lot of prices too yeah absolutely and make sure if you're listening to hit the like button it always helps us out when we get people liking it it makes YouTube promos which is what we want um and I think today's topic is going to be interesting uh those watching make sure you ask questions we'll try to get to some of your questions today but the topic today is you'll own nothing and be happy which is an attack on the middle class so I think we all heard this from Charles schwa or Charles oh my gosh there could not be more different one's a financial advisor and what is a financial Miser I keep doing that but that's funny you know what's so funny Klaus Schwab he like looks like a little like um like in a movie like a made-up movie like that it's unbelievable guy if you go to their website you you'll see what's the website again Jerry it's a yeah World economic Forum this is on their website guys it's like there's a whole agenda going on um and I'll tell you you know you guys I don't know if you're how well traveled you are but as you travel around to different countries especially ones that are getting older or I should say getting older the US is quite young as compared to a lot of countries in in a lot of these old season countries you know let's just pick on Europe there's a lot of people don't rent there's a lot of people that don't own anything they don't own cars they don't own any real estate uh and uh it's interesting because it feels like in many ways that the US might be might be heading that way so I I think that's that's where a lot of this has come from yeah you know and I think part of it is you know own nothing and be happy so in our culture especially younger people right now they don't really own anything so if you look at like our grandparents they owned everything they own their house they own their car they own they didn't have they wrote checks you know and then you know our generation was kind of this middle in between but this younger generation you know they put everything on a credit card everything's a payment plan they rent and they even lease their cars and well they really don't really own anything right well you got to unpack a whole bunch of stuff that you just said there by the way I completely agree with you but my parents grew up in a time where the there was a gold you know the the dollar was backed by gold you know as a kid I remember goal you know Fort Knox right and all that so so that got unpacked uh in in this early 70s through the Bretton Woods agreement and all of a sudden then if you take a look at you know there's a there's a really good website called you know what happened in 1971 actually that's the name of the website um take a look at it and you'll see everything started to spike from that point everything started to go up from that point because the dollar was tied to something and once that happened then they were people you know we were able to print dollars basically devalue the dollar so you just type in the valuation of the dollar you'll see because it's not actually tied to anything and this is why this is why the bricks you know uh uh Brazil Russia uh India China south Saudi South Africa South Africa um this is why they're upset because they're they think there are dollars being weaponized you know because the world's Reserve currency is US dollars so I think that kind of underpins all of this and you know you as you as you guys start to dollars just real physical dollars um I'll tell you something crazy that happened to me today on the way to the gym I was listening to the radio just some mindless station and they that somebody won five million dollars locally in the lottery right so the two people were talking the two you know DJs what would you rather do would you rather take five million or would you rather take 250 000 over 20 years and there was this whole thing people are calling in and all this stuff I was laughing my butt off because I was like that and by the way everyone wanted the 250. they wanted the guarantee of 250. for 20 years and I was thinking to myself let me get this if we're at five percent inflation which we are and we are at a high inflation for the next 20 years that means that that 250 is going to be you know devalued to zero right I mean not technical zero but technically you're going to need 500 to pay what 250 used to be able to pay based on inflation so you have an inflationary component over 20 years using five percent at 20. uh 20 years I understand inflation might be lower I understand it might be higher but that's the way I was thinking the other thing is I was like well why wouldn't you just take five million dollars and put it in a one month uh treasury right now which is over five so a one-month treasury would produce 250 000 a year in cash an investment over the you know and your principal would never be reduced so you you'd have five million still and you'd be making five percent well they usually one with the lottery they usually give you less if you take the lumps that's true but it would be that would be the case in either one yeah so but the point is now all things being equal you know not including tax 5 million lumps on 250 over 20 over 20 years and I thought man that's how disconnected people are they just don't understand that inflation is robbing you like a Mugger it's literally robbing you from your bank account and you know if if you're on that's why these like my mom you guys always jump on me about my mom my mom's on a fixed income okay she's been on a fixed income for a long time because she's 90. so you can imagine how long she's been on a fixed income X means fixed so what do you think things cost 30 years ago when it was still fixed it's all things are more that's the point so if you're on some kind of 250 250 000 a year uh for 20 years imagine what that's going to buy you in 20 years and so that's the same point and I think that's kind of what this is this is an attack on the middle class it's it's you know we're going to have to print our way out of these problems that we have right well and not just inflation but just the fact of like owning nothing right so you know when I worked at my dad's retail my dad had a sports store growing up and I worked there and it would have been 20 years ago you were Rich you were one of the Rich Kids I was one of the rich kids but not really but for my town um my dad owned a sports store and you know most people would bring in checks and cash like if you really think about it we occasionally would have a credit card right like you know and so most everything was checks and cash and uh it really wasn't that long ago it's like 20 years ago now everything is credit card and part of that is the convenience right I mean it is partially convenient but you do wonder how many people actually pay off their credit card bill every month or how many people let that stack up you know and that's just goes part of this owning nothing and and being happy and you know we know from traveling to other countries and a lot of other countries people don't own things either they don't have credit cards but they rent and they don't have a car or maybe they lease the car or like we are in Bali they work for a company that lets them use the car you know but they don't really own anything and you're just not happy when you don't own anything because it ties back to what you were talking about with inflation so if you don't own anything then all of your payments move with inflation your rent goes up your car payment goes up your credit card bill like the interest on that goes up everything goes up and so if your income goes up it doesn't really matter because everything else is going up too so you're either going to be just as strapped as you are now or maybe more strapped if your income doesn't keep up where if you buy a car and you have a fixed rate on your mortgage then these pay increases actually really help you and the inflation can actually help you because you'll start to make more at work but then have these set payments versus these fluctuating payments throughout your lifetime and if it sounds complicated then all you got to do is focus on one word debt that's it credit card debt Auto debt loans on your house is dead so why is that important because that's actually the issue that the U.S is having they just got into a big battle over the debt ceiling you know and and you know also what else is debt to the to the government Social Security you know that those that's debt Medicaid debt those are liabilities owned to owed I should say uh to the people you know so when you when your paycheck gets scooped you know your Social Security that goes somewhere and of course it's sitting on somebody else's bank account is a liability back to you it's a debt to them um and so you know though you start getting into a society like that like I remember back in the day you you would you weren't able to to borrow money on your building like in Mexico like I remember going to Mexico was always so fun so I have friends there that just bought in Mexico all cash because the banks don't loan down there and there's not a lot of credit cards down there there are by you know tourism but to your point that's why you don't see these big boom and busts right is you know what's what's busting is debt and I think that's important you know student loan debt credit card debt so when people are living beyond their means there's nothing wrong with financing your college education using debt if it produces money to be able to pay that debt back and uh and I think that's probably the biggest issue you yeah and you know the thing too is you know we're teaching this group of people that you'll own nothing and be happy but the truth of the matter is owning real estate is the number one way to get to a different asset or different wealth class you know than than you're kind of Born Into so you know in a lot of countries it's really hard to go from being poor to being wealthy and it's because they don't own anything so what so what do you do to go from poor to wealthy well I guess you can try to educate yourself and work your way out of poverty but that's really hard when you can't own anything where in the U.S you know if you start collecting assets and even owning your own home that can take you out of poverty straight into the middle class and then from the middle class to the upper class if you keep accumulating properties and getting rent money from tenants like those are ways to make up for this class divide and that's what makes the US so great is you can go from having nothing to being wealthy and in fact we're going to have somebody our podcast in the next couple weeks that was homeless and literally has 105 units now right so you know you can't do that elsewhere because you don't own anything yeah I I think that you know there's there's a there's good debt and there's bad debt so when you know and I think you have to look at the difference between the two so bad debt is is when you buy something that depreciates in value like a new car so there's no question the minute you buy a brand new boat a brand new car or a TV that that has depreciated you're not going to get what you got out of that generally um if you try to sell that thing so so if you're if you're financing that and it's worth less which is exactly what's happening to this commercial Office Buildings you know so debt can get you into big big big trouble and then there's debt that could be used as an advantage so I as I say to everybody if you have a two to three percent loan right now on a single family house or a multi-family building or a commercial office building you're in pretty darn good shape maybe not on office because of the occupancy and work from home stuff but you get the point you know at least you don't have to be subject to the six and seven percent rates that we're starting to see so you know so again debt can be used as an incredible tool if done correctly because if you're at three percent loan let's say and if inflation is at five you're actually beating inflation so so I I just think that it's the it's just not taught right so it's it goes back to that Lottery thing you know I was it's it's such a simple example but if you're taking 250 it might seem like 250 today and it is at five percent inflation but just after 20 years you've now you've got a hundred percent inflation so what was today's a 250 uh is 20 years from now it's five hundred thousand dollars so and you know so as long as you can take that money and invest it at higher than inflation you're going to be in a good position and in those other countries like if you look at Venezuela or Mexico or whatever In Our Lifetime we've watched some of these dollars you know their pesos collapse or whatever their currency is and this rapid inflation the people that hold hard assets are the winners the hard assets so you know so that's where your head needs to be and that's really the purpose of this channel is is to get yourself into hard assets the thing about real estate is it gives you passive income in the form of rent but it also gives you tax benefits no matter where you are in the world well and um somebody on here I can't find the comment was saying exactly if you start to make more money like with inflation you also pay more taxes because it moves your tax bracket even if that same you know 75 grand is buying you less is buying you what you know 60 Grand bought you a couple years ago it doesn't matter you're paying higher taxes on it and then like you were saying with the debt you can actually offset some of that tax burden too well think about with real estate there's multiple things that are going on at once first of all is if you're borrowing three percent you've hedged inflation two your tenants are paying off your mortgage for you three they're paying rent which is also giving you passive income four you actually can offset all of that passive income with tax in the form of depreciation so there's a lot of reasons that you should be doing this because now you're hedging inflation moving forward because as inflation hits let's say and it's hitting the cost of lumber the cost of roof tile the cost of a house the cost of all that stuff is going to go up as well what might not go up are your wages and that's it really kind of gets back to the you'll own nothing and be happy the the real issue is that the middle class there's almost they're almost gone uh you you know when I when I was growing up my my dad worked and my mom could be a stay-at-home then all of a sudden you needed two people to support that household and now you need two people to do multiple things and now you need lots of side hustles just to keep up so this is all happening right before our eyes so it's harder and harder and harder to stay on top of this and there it's it's it's tough to watch to be honest um you know these kids um you know they rack up all this debt and it's just because they don't understand it well and they're just grown it's not even they don't understand it I mean you know on top of college being you know a complete ripoff in my opinion um they sell you credit cards there you know they get kids into debt and be okay being in debt you know when they take those student loans and take those credit cards and it's very hard to dig out from and I I think what happened to you yeah yeah I got about nine grand a credit card debt but that was actually not in college that was when I was a school teacher but I actually made more money bartending in college than I made as a school teacher a whole nother thing but her degree paid less than bartending yeah exactly um but then the other thing I was going to say is that um yeah everything's always your fault always but uh anyways I don't know where were you I don't know you interrupted you're talking about the cost of debt all right well let's keep going it's this awkward silence So Daniel said imagine taking 30 of everyone's money and still being 31 trillion worth of debt can you imagine that I I I haven't looked I I don't want to look but if you take a look guys at the at how much money we need uh to pay for what we have to pay for it's it's scary like you could not run your home that way yeah they're not making budget cuts that's for sure so even with inflation you know and I do remember what I was gonna say I basically I basically was gonna say um I think that part of the reason the government is telling people you'll own nothing and be happy and they're kind of going with this is because they realize what the thing way things are going most people aren't going to be able to own things so they're trying to put a positive spin on it it's not good guys like in my opinion people I'm in a rental business as you guys know we have thousands of rentals but the reality is that real wealth is grown when you own real estate not when you're renting from people like me so a balanced housing policy is what's needed people need to get into single-family homes because they'll they pay down their mortgage in most cases most people's wealth are in their home okay so okay so if that's the case why don't more people do it because it just blows my mind it's almost like people don't realize that when they retire the home equity if not being the most it's one of the most the biggest pieces of their wealth yeah and it's just slow and methodical over time if you take a look at the home that you grew up in the first home that you owned whatever it might be it's definitely worth less yeah you know if it was some time ago so over a long period of time inflation even at two percent where the FED wants us over time that is growing by two percent inflationary I understand you know and not equally of course through the whole thing but um it is interesting to me how it's just right before our eyes but what happens is people they turn their money over to Wall Street instead of actually keeping it right on Main Street I think it should be kept on Main Street I think people should understand that on their own and you know the the it and and I've seen lots of people do it on on teacher salaries as an example where they buy a rental every four or five years and by the time they retire they've got four or five or six of them and they're paid off the tenants pay them off and you know and now they're sitting with this nice retirement my sister did that right she she was a she was in an accounting department at a medical clinic in Everett Washington and once you have 25 or something yep um you can do it I'm telling you you can do it just you have to be patient you can't do one a year maybe because you might not save that much but you get the point well that's what Arturo said he said that's what my dad did right now at 67 uh he's counting on the equity that he got from selling his house basically you know and he bought another house that's less but you know the difference in equity is what he's counting on for part of his retirement and so that was I was faced with that with my mom yeah you know so um my mom um we had to uh she got uh she broke her hip during covet of all things in three places and so obviously dancing around all those things and and then we had to have some care for her so we had to put her in this active senior home with lots of people and I was a little against it to be honest because it was a home I grew up in but my brother and sister convinced me that was the best thing for her and it was true it was because there's all these people there and food and she's eating better and she's enjoying it all that the point is we rented her house and it covers it covers the whole cost of where she is and she can always go back if she wants right so but it's still hers and the point is if I would have sold the house which is what um some of the people in the family wanted I was like okay so let's take a look at that you know it was like a mat it would have we would have lost like 40 percent or something of of the total equity in the house which of course has been paid off a long time ago but the point is it's still sitting there it's hers that Equity is hers but now the renter is actually covering everything she wants and now gives her more choices so you know and this is my mom who was a hairdresser right my mom was a hairdresser her whole life 50 years and um and they bought that house for almost nothing I know I remember I look at the dude it was like it was like 12 Grand or something um so yeah they were in it the whole time it's literally the home I grew up in and uh we still own it my mom still owns it yeah yeah exactly and you were able to then rent it out which takes care of her expenses now and that's how I look at you know the things that I own and rent like that is what will take care of you later and so many people you know they're afraid to be a landlord or they're afraid to buy a home because they want the flexibility but truthfully like even if you buy a home and you live in it and then you want to move to a different state you can still run it out you know what I mean and so you can still own it it doesn't mean you have to be tired remember when you were going to do that you were going to sell a lot of people sell one home to have the money for the second home and that's easy because you know what your Equity is generally and you could yeah but I remember challenging you to say well why don't you see if you can buy the next one without selling the first one right remember that I do we want you to tell everybody yeah I mean I you know and I was going to just you know sell my condo and buy this patio home I was looking at and I thought well if I roll the money from the sale of the the condo at the time I probably could have got about 170 for the condo the home I was buying was 230. I'm like that'll give me a small mortgage and you said no no no why don't you just try to run it and then and then take a 230 000 mortgage like a 200 after the down payment 200 000 mortgage and I'm like never had a 200 000 mortgage that seemed like a lot to me at the time by the way at 2.8 or three percent no no no this was a long time ago so it would have been higher it'll probably be about five percent but anyway so I was like I don't know you know but uh how you convinced me was I at the time I could have got like 900 a month for my condo and that did cover most of the 200 000 like you know the new version of it on the new place and I was like well I could probably afford three or four hundred more monthly for the new place and I could always sell it later well now that condo that was gonna sell for 170 would probably sell for about 350 and that rent that was 900 is now 1900. okay so let's sum up you know so you would have paid a capital gain on the condo so you wouldn't go well no because I lived there so I wouldn't have well if you sell something not if you live there not if it's your primary you got to roll it Forward right you get cash it's a sale yeah but you don't have to pay a capital gain on your primary interesting okay so so you wouldn't have that at all nope okay well and so it went up 170 000 Plus another thousand per month probably I probably went up about 200 Grand plus another the current the current tenant um paid for your new house yeah right that's the most of it yeah because you don't forget you had paid off the condo I think if I remember yeah you didn't have a mortgage there right so the rent from the current condo uh or from the condo you moved out of paid for your home yep right and and since then you've I guess you're a Believer now yeah you've done that since then I've done it a few times last week yep so now now she's a mogul no but so um the Bohemian is asking are most Americans just optimistic or delusional nice I asked because it's only a matter of time before your dollar is going to tank although I pray not because it'll affect my country as well I know well I love this perspective because it's from out of when when remember when we went to we went to Thailand we went to uh where else Indonesia uh Singapore and everybody's like would you guys stop printing the dollar remember that yeah and they're like you know uh I remember oh we went to London we went to the UK and uh our dollar went so far right you know and so you know the rest of the world is not happy with us uh for what we're doing you know if you just Google you'll see there they're weaponizing the dollar and that's why they're starting to trade and oil and and different kinds of currency and there's a lot going on right now but I I don't think I don't think it's going anywhere soon but a lot of countries do depend on the dollar so what the Bohemian said as well though is I I hope not because it'll affect my country and that's a big deal too because a lot of countries depend on the dollar and you know you attended um a conference in Nashville a couple weeks ago and essentially what they were saying there and I'm not saying that they're right but another opinion on this is you know there's no better alternative to the dollar so people are just going to deal with it and it's not gonna crash and I don't know the right answer because I just I'm not that smart about this yeah here's what he said they convinced me because I actually got to ask the questions there's 700 people in the audience I said so tell me what you think about the US dollar he said the biggest issue is is around rule of law most of the other countries like nobody really trusts the ruble nobody really trusts Yuan you know in China Russia let's say or or you know and so they're not going to to roll that over because of the rule of law and um and I heard one guy call it the clean we're the cleanest dirty shirt you know the dollar uh but let's go back to the Bohemia question if if I if if I'm buying a hundred thousand dollars worth of goods and I give them US Dollars um there they have US Dollars and then if we continue to print um they're going to be frustrated because those US Dollars now are going to buy less so that's the real issue is that we're transactioning in US dollars yet we're manipulating the Dollar by printing more of it yeah we're inflating it um Jewel says we bought a home two years ago when interest rates were super low we found out we were moving a month after we bought it but we ended up renting it out and it's been cash flowing a little bit every month I told her I would never get rid of that yeah just start stacking them you know do what my sister did you know she started slow by the time she was 50 I think she only had one or two um then it started the momentum started coming because she had a lot of equity in him and she started doing a little cash out repos on them and buying more and uh you know so it starts slow and then it just started to accelerate you know like yours with the rent like imagine what that condo is gonna be worth um you know this is right downtown Scottsdale which is uh really uh very expensive now um and uh you know just in time just let inflation do its thing I know it's not good for most people but it is if you're on the right side of it yep yep um and I think you know it's interesting you know um Mike said on here that um he would he's renting uh but he would buy right now if he could find a good deal but there aren't any and I said I just closed on I'm gonna be closing on one at the end of the month so there are some it was skinny but it was but she made it work but I made it work and there are some you just have to and if you're renting to like you know you're you're throwing money away every month so if you're seriously just running and it's moving with inflation you need to see what you can afford and try to not be renting but let's talk about how you did that because I think it's important the first thing is is you know when when this girl has cash all she does is complain that she's in cash so it's basically she views cash as a liability and I think that that's important to understand when you're sitting at four five six seven eight nine percent uh inflation so that's the first thing the second thing is you knew your numbers yeah now they moved because interest rates went up but so in rent so what I'm saying is when you looked at that property you knew exactly it wasn't you knew exactly what you could pay for it to cash for what you wanted exactly you backed into everything I backed in everything and that's when why when the agent came to me and said hey you know there's seven offers this was day one this is underpriced there are seven offers what's your best and I just looked at Ken and I told the agent I'm like my best is what I offered like that is it was the asking price but it was and then she got emotionally drained and she's like oh I didn't get it and I'm like well they had you know they had three cash offers I know okay all cash offers and everything else and essentially the woman didn't want to close with all cash because she didn't want pressure she wanted the time for the loan so whatever you think of that yeah that was an interesting thing but also I I've been there before you got to be able to walk away and I don't think a lot of people do and the fact the reason why you were able to do that is because you knew your number you knew you knew that was the maximum you were going to offer so we do that with our deals I know there's my offer and then I know what I can go up to if I have to but that my cut off and I think a lot of people just get emotional in it and years is yours is all based on math when I could see that right it's like what's 20 grand more if I'm already spending x amount of money right like it's so easy to be like I really want this place I love it I've been waiting for it and I had those feelings but it was just like yeah that's my best and final it sure it certainly makes things a lot more clear yeah if you know the math yeah if you know the math and even if you're you know buying your own property to live in you should actually do the same thing with the math on your payment so if you know you can only afford a 2500 payment you should know your max because I think you're going to have a lot of buyer regret in this next phase and you're probably already having it you know people that waived inspections people that overpaid people that were in bidding wars and they just threw out numbers and they they got it because you know they might not be able to afford the payment or it might not cash flow if it's a rental so I think whether you're buying for yourself or buying as a rental you need to know your max you just need to know what it is because and you need to know you won't go over it because it'll make it so much easier to just walk away you know I know my brother and sister-in-law they just got they just got outbid for a house but they were in this bidding war right and I think that they were just they weren't prepared for it and they were just throwing out numbers and they ended up not getting it but I think that they never actually sat down before and had a number in mind before of this is my maximum and I think that you know when people do that it's it's such a quick like exciting process right but then you overpay and you might not be able to afford that and I think there's just a lot going on good point the other thing is I think that you know if you're playing the long game it's really not a big deal so like I bought an 05 in Austin Texas and two years later the property is worth less so okay so now I have a property that's worth less but you know why it didn't bother me because I wasn't selling I wasn't trying to cash out refi or do anything like that so my my renters it was 230 units my renters were were covering me so the value was less for sure but my my rent because a cash flowed was paying all the expenses and then some and so so I just waited I just waited it out so if you have a long-term approach on whatever it is like like if you're buying I always say this with people with their personal residence too I always say just buy it like you know be where you want to be as long as you can afford it yeah of course right yeah and hopefully um yeah you you've considered that um but just be where you want to be and and and then you know just play the long game like the house uh we're in I built 15 years ago it's worth a lot more but I'm it was my home you know it's the home and you know and that was 2008 so that was when everything was like yeah overpriced today yeah and it's been a great house and uh you know and I'm like hey it's been awesome so the point is is you know just you're playing the long game it doesn't matter right yeah it's uh now I look at it I'm like my mortgage is so cheap well yeah you got that it's like 2.8 yeah so I was like and and yes I have a mortgage on there because uh it's the only thing I actually have a mortgage on believe it or not I pay cash for almost everything but um it's because it's at 2.8 why would I pay that off it's free money Logan from YouTube says you know that's why auctions are dangerous pride comes in and I do feel like when you start bidding for these houses it is like an auction you know you're You're In the Heat of it you're so excited you just you know you get crushed if you don't get it those kind of emotions and pride and everything else and um so that is why you really need to have that in mind you know that's a good point um Taylor brings up well Taylor I'm gonna get your question in a minute but first let's hop over to our um questions of the week from uh kenzennercircle.com um Jerry are you gonna put that up thank you by the way yeah our members have great questions um so our first question comes from Alvin Alvin wants to know can I buy real estate if I have no ordinary income like a job where I'm working for money well I've met some pretty creative Warriors guys we have a guy mowing it he was telling me this story the other day oh it's a crazy story where you know there there are some ways to be creative um uh to be able to show income legally creative oh of course yeah yeah yeah yeah but you don't necessarily have to have that pay stub I think that check the box thing is what everybody wants but it's hard for like a small business that that just takes distributions yeah um or even one that's like newer or maybe you don't have a consistent income maybe you make a lot here and a little bit there and so somebody who you know loan officers a lot of times especially at a bank all they understand is like a paycheck yeah and so if you don't have that like if you're a small business owner and you just scoop some money out here and there um you know and you're scrapping it and you're trying to grow a business or something and that's what you live on it's hard for them to wrap their head around and that's what I'm saying so you know you got to get somebody who's creative and understands it understands that that you do have sources of money coming in they're unconventional I guess but they're really not they're conventional but they're unconventional in them in the mortgage world yeah I mean you're you're you don't want to go to a bank you know you're going to need to have to find like an independent mortgage broker that's really good and really creative but you do need to show something you can't just like have no income and you're just like randomly depositing money and you don't know where it's coming from like you know they they question everything like like if you have money come in over the last three months like a big chunk of money they want to know where it's from they want to trace it like you all right that's fair you know so you do need that so William from the inner circle wants to know what are the best tactics for figuring out appraisals I'm just getting started and I want to buy foreclosures and share sales but I'm having trouble figuring out how to evaluate what they are worth so um appraisals in my opinion are not the way to go yeah they're not worthless but you know you typically you need an appraisal to justify a value after you have something or when you're buying something right so um they're used a lot in the commercial space um as an example we have a 330 unit property under construction right now and when we go to put a permanent loan on there the bank will get an appraisal based on there's the cost approach the income approach as an example of just a couple different variations so there are there are different ways the appraisals um there's actually a third one there's a cost um a new construction uh no I'm sorry I'll income approach and there's one more oh the sales sales approach that's it so so the sales approach would be the house to the left or right of me was 500 grand um therefore that's a that's a good comp then there's an income approach which would be based on the actual math so if if it's a an office building or maybe a four Plex or an aplex or something they would look at the math what are the expenses you know utilities and property taxes all that and one of the what are the well you know what are the rents and then the income or the replacement cost approach which is the insurance company what they look at which is this thing burned to the ground what would it cost today new construction to build it so those are three different kinds of approaches that you'll see in an appraisal um so I don't know what situation that you're in but typically if it's if it's what you were talking about it's in some kind of distress it's not going to be worth in a appraisal you know you have to look at what you can pay and I always do it based on math well and why did it cash flows right it just comes back to cash flow or what I'll give you a great example I think I told you guys a story I was uh oh I was a I had a wrestling meeting this morning by the way I was at the ncaa's uh meeting with a guy in Tulsa which is where the NCAA Wrestling Championships were this year and there's a beautiful building there in Tulsa that um I met the owner of and he's a wrestling fan and um and I'm like and he's like this is a great story he knew I was in real estate and uh we had him on actually by the way um uh John Snyder and he was on a podcast so check this out I I said and he said I got this building for a dollar okay all right now it's like a 50-story building and he bought it for a dollar okay so now do you think an appraisal would have come in more than that probably the point is what he really stepped into was a liability he stepped into the property tax situation stepped into the insurance situation he stepped into what kind of capital needs were required in the in the you know did you know what kind of fired uh issues and fire code issues all these things building codes and fire codes so so it's not that the building's worth something because it might be negative um so that's why when you're looking at distress it's exactly like you know people are talking about converting these Office Buildings into residential because Office Buildings are probably the first Domino to drop in my opinion and I'm like well okay but you know what's that gonna cost you so yes if even if you get the building for free is it really worth it you know if you get it for a dollar is it really worth it in John's case he made it worth it and he turned that thing around and uh what a success story that was but the point is is it you know we'll get back to the appraisal yeah you have to wonder if it's uh you got to understand your numbers and what you where you can make your money right um Michael it said I lost two properties to a fire over the weekend oh wow we weren't at fault our insurance company believes it was a complete loss our coverage limits are much higher than the value of the homes now I am receiving calls from Public Adjusters asking to represent me to ensure the insurance company pays the limit when do you recommend working with public insurance adjusters I've done this um so for those of you might not know um first of all be careful with that so we've had good experiences and bad so I don't know particularly so what this is guys as you know when when you have a loss like this your insurance company just like oh your car they're like I'll take it to this auto repair place or take it to that auto repair place and then they're going to use aftermarket parts sometimes even used parts same thing with a total loss so you're going to be in a battle with the insurance company on coverages and with the adjuster and the adjuster's job is to pay as low as possible that's the bottom line so you know you may or may not need a public adjuster um you know and typically they're gonna not gonna they're gonna be paid on a percentage sometimes they can get in the way I would wait at this point and and let your insurance company know that you could you perhaps might be engaging in a public adjuster I would definitely interview them but really what what they're gonna do is they're going to dig deep into that policy that's what in public adjuster does and the cases for us they were attorneys so they did understand but they also complicated the process a little bit it turned into a battle which took took took a lot longer the big things are this if hopefully you have rental um or um it's called rent loss or income loss some kind of if you had renters in there for example um you know you make sure you have those leases you're you're going to be fine um you're going to get paid for a certain period of time you're going to want to know how long and the second thing is is around codes so I got into a couple scenarios where I had a I had a hurricane and a tornado hit a property and then the the city of uh Houston uh Baytown actually they made us put in Sprinklers and do handicap accessible and some things like that because their codes had changed so there are some things that you might be um tackling that are going to be gray areas inside of the policy so um you don't necessarily need a public adjuster but you probably need somebody who can understand a policy so basically you know see what the insurance company offers if you're not happy with it and you feel like you can't battle it out then hire the public address yeah and make sure you get a very detailed breakdown of what the adjuster thinks because I've had a situation once was a fire on a property and the the the the pub the plumbing leaked or leak melted and went into the ground so they had to dig like a foot or two down and replace the foundations and so there's all these all these little things that you don't think about that could potentially you know you still want to be out of pocket for anything that's the bottom line yep you got to keep it buttoned up that's a good question it's good you're overly insured though a lot of people are underly insured we talk about that so it's good that you know your policies were up to car I want to get to YouTube here if you're listening please hit the like button really helps us out like to get to 150 likes or at 112 right now all right Taylor is asking Robert Kiyosaki talks about getting four greenhouses and trading them for a red hotel in Monopoly terms when do you know when it's time to cash out to invest in bigger projects well so I've been around Robert enough to know I used to say that and then he changed to four greenhouses 1031 into a red Hotel so the 1031 is a tax code that allows you to roll your Equity forward without paying tax into the hotel then what you would want to do is you would want to do a cash out refi so you know so typically just know that if you sell you're going to pay Capital Gains you know there's because if you do if you do a a new loan on something it's not taxable because it's not a sale so typically the IRS wants their pound to flash when you sell something like a business or you know or a bunch of real estate and so there are ways to roll that forward and then just do a cash out refi but right now it's gonna be hard because the interest rates are high so but you kind of Dodge the question a little bit okay what is it um when do you know it's the right time oh well it's time when the the place is full it's running as maximum efficiency and the rates are um at a rate that um you can you can pull cash out so so there's two things going on right now well I don't think she meant on the cash out part I just meant I think she just meant like when is it like say I had four single-family homes when's it time to go buy a multi-fam like sell those and buy a multi-family unit oh oh well so you are taking four different things that are probably there are you know four locations four different tenants for you know whatever and rolling into one so there's risk with rolling four things that are diverse into one but it's also easier to manage um you know if you know how so um for me I'm always trying to upgrade I'm always trying to and like in um you know in Daniel's case you know if you can if you can harvest the debt tax free from what you own already and roll it into something more that is the model the model is to you know to grow the value of something Harvest it and move it into something else you don't have to sell one uh necessarily either so you could also refinance the four keep them and then still buy the hotel and now you got five so you know it's just a this matter it's it's all math based yeah and I you know you have to be really careful too you know if you have four assets that are cash flowing that's a good thing it is if you run them all into one asset that potentially maybe doesn't do as well as you think it's gonna do there is a risk to that that's right and especially if it's a if it is a hotel and you don't know how to run a hotel like me like I bought a hotel um I did this I actually 1031 um in from an apartment building into a hotel um it's a 68 69 unit apartment building that uh was kind of small was hard to run harder I should say it takes two and a half people that half person was hard to find to run and so I rolled it Forward into a resort that I own today and um and then now I had to learn that how does Food Service work how does you know all the individual things that it takes to run something like that and um you know it was a learning curve so you know you have to be prepared for that it's a very different business and then jamming a tenant into one house running a hotel got it uh so Johnny is asking you when do you know Communication business if you're already cashed you know you're it's a good question you don't need any more money but you're just kind of addicted to the game when's enough well I you know here's the thing like you can call it quits at any time like I mean I could have done that 20 years ago but um it I find that my it's fun like if if when when real estate values crashed in eight let's seven eight nine let's say um you know when and all of a sudden you have now all this knowledge and you have assets and you have investors and you're buying these properties at 40 30 40 50 cents on the dollar which is exactly what I was doing and using Bank debt which is exactly what I was doing and some you know syndicated uh that's actually when it starts to become really fun because you know you're now going into this next period of time you know with with wisdom and and experience and um so I think right now I totally understand you know as you guys know we haven't really bought a lot um you know the markets uh you know the cap rates are up and then interest rates are up and expenses are up and you know there's all kinds of things happening so right now I get it you know it looks like there's a tremendous amount of risk moving forward especially because people can they can put money into a one month CD at over five percent or they can give it to you in a form of a pref which preferred return which means you're you're your property has to produce at least that so that's risk so but when you start to see you know the tide go out and you start to see Banks now owning assets that are liabilities to the banks and you start to see deals being done when you come with that kind of knowledge that's actually when it becomes really fun well then you don't like I know with you know you and Ross you guys don't have to do any deals you don't feel very comfortable in because there's no real pressure yeah yeah we have six construction projects um we we side do two and put four on the Shelf we already own the land and we have God's over 6 000 investors 6 000 in our database that want to write us check so 100 to 250 000 each and uh we haven't bought anything in a year yeah okay so so you know but what are we focusing on we're focusing on operations and we're focusing on tightening up all the things that we have control over we don't have control over the market yep absolutely um and then another question comes from Andy from our Inner Circle he said I'm adding units to a parcel I would like to divide the parcels so that each portion can have its own building structure we did this on our house there are some easements related to the shared driveway can you advise on who I need to accomplish this task also are there any specific precautions or important factors I should be aware of yeah so so let's just talk about what an easement is an easement is a the ability to cross so let's say there's two pieces of land and you need a driveway to get to the back one so then you would have to have an easement there's also utility easement so utility easement would be for power lines or sewer lines or something like that where you know the city's not going to have to call you and say hey can we you know go across your land so those are that's what an easement is for those need to be set up and should be set up by an attorney so I think I told you guys my my billboard story where I bought a billboard on a couple acres and Ross and I did and it was right in the middle of the property and then I moved it and I created a little easement around it so there's a little easement around the billboard so that I can have access to it but I didn't really want the land I moved the billboard put an easement around it sold the land for for more than I actually bought the whole thing for so I have a billboard for free with an easement so now I have access to this billboard anytime I need it so the that all has to be done by a by you know an attorney who knows how to do that because this is all uh has to be recorded and all that stuff we have to deal with the city it becomes part of the property moving forward but obviously this happens a lot with any landlock any or think about a common Road a common road going into a subdivision you know obviously the road going through um you know all of that stuff you think about all those things and so easements are very common absolutely um Michael that's listening is in quite a predicament so I want to chat about it so it's not necessarily bad so he bought a property that's sixty seven thousand dollars and he put the whole thing on a home equity line of credit and he actually did 77 000 just in case and um he's paying the money back he's already paid half of it back but is he he wants to know is he doing this the right way or is there a better way to do this and the home equity line is adjustable yeah I see that so the risk of course is that the risk is the interest rate um it's not necessarily a bad thing you did that you know I've done that with down payments you know I've never put the whole thing on but I've done it with down payments the good part is Michael it sounds like you're paying it off really quickly so the interest you know it might make more sense than doing a fixed mortgage if you think you can pay this other half back in the next year or two you got one and you paid it off quick the down payment yeah I still got a mortgage but the down payment but you have a HELOC is the point you paid off the HELOC quick yep absolutely um you could look on my HELOC I was able to lock in a heat loan and I had to pay an extra one and a half percent uh essentially what it was I had to pay the extra one and a half percent to lock in the helon for 10 years I am able to drop that he loan two times for free in this 10-year period if rates go back down that's cool now everybody said I was crazy because rates were at like four and I locked in my hay loan for 5.5 you look like a now I look like a genius but um my point to you is a couple things one if you don't think you're gonna be able to pay it off in the next year or two or if you would just like to pay it off over 10 years you know if you would like to take some of that extra money and save it for another property versus putting it on a Hilo and you you can look and see if you can do something like that for for your home equity line um but if you're gonna you know want to just hustle and pay it off in a year or two you should be fine I we do think rates are going to continue to go up I know most home equity lines are eight to ten percent right now um so you're paying high you're paying that's pretty high interest on it but if you lock it in as a key loan if you even have that option it's probably going to be 11 or 12 so it's going to be high to do that at this point um or you can look at getting a traditional mortgage on it too there 30-year mortgage and you know I used to have a thing where I felt like I needed to pay off all my debt and I'm starting to I finally gotta reevaluate that I'm still not like Ken where you know I want to max out the debt but I I do get it you know like if you put that debt over 15 or 30 years and yeah your tenant is paying sure you're gonna pay more interest right but your tenants paying that and then you could take your money and save it for something else like a different property I just want to thank all of you out there for visiting her because uh I certainly able to she had the Dave Ramsey method I've learned a few things I now I'm a blend between the Ken McElroy method and the daily thing that's good methods depending on what you want correct and yes yep nothing wrong with the day Matt Ramsey method at all if if it's your personal home and you know and you have are you on a fix when you're in debt and correct well thanks everyone for joining make sure you smash that like button and we will see you next Monday see you guys bye foreign [Music]

Channel: Ken McElroy

Views: 18,403

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

Id: nAoyDpYrVT8

Length: 61min 28sec (3688 seconds)

Published: Mon Jun 05 2023