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Real Estate Investing with Keith Weinhold
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Access Your Home Equity Without Refinancing or Monthly Payments | 628
• 37 minKeith examines the opportunity cost of paying off a mortgage early and why homeowners with substantial equity may still feel short on cash, alongside observations on Manhattan's distinctive residential towers. He speaks with Michael Gifford of Splitero, a mortgage and real estate executive, about home equity investments (HEIs) and how they exchange an upfront payment for a share of a home's future value. They compare HEIs with HELOCs and cash-out refinancing, including differences in qualification, monthly payments, fees, and repayment timelines. Keith and Michael discuss a practical look at how homeowners might weigh access to equity against the costs and trade-offs of sharing future appreciation. Episode Page: GetRichEducation.com/628 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com GRE Free Investment Coaching: GREinvestmentcoach.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. For predictable 10-12% quarterly returns, visit FreedomFamilyInvestments.com/GRE or text FAMILY to 66866 Build your real estate portfolio with cash-flowing, fully renovated rental properties from Mid South Home Buyers: https://www.midsouthhomebuyers.com/ Will you please leave a review for the show? I'd be grateful. Search "how to leave an Apple Podcasts review" For advertising inquiries, visit: GetRichEducation.com/ad Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— GREletter.com Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Complete episode transcript: Keith Weinhold 0:01 Welcome to GRE. I'm your host Keith Weinhold. The opportunity cost of owning a home free and clear. New York City has some of America's most interesting real estate. Then, with an HEI, you can access cash in your home without refinancing. You don't make any monthly payments or pay any interest. Does it sound too good to be true? We're learning about home equity investments today on Get Rich Education. For years, I've sent listeners to Mid South Home Buyers in Memphis, and for years, I've heard the same thing back. Keith, there's a wait list. Well, not anymore. Mid South has grown into three markets: Memphis, Little Rock, and Dallas, with its classic renovations and now brand new construction. For the first time in years, there's enough inventory to buy today, and they've picked now to roll out their best terms in their 25 years, it's called the triple five, 5% property management for five full years, half their standard fee, and Mid South buys your mortgage rate down as low as 5% for qualified buyers. If you're paying all cash, ask about the forever five. That's 5% management for as long as you own the property plus special cash pricing, with 6200 homes under management, Mid South is the place to turn for turnkey real estate. Book your free investment strategy session@midsouthhomebuyers.com. That's midsouthhomebuyers.com. Speaker 1 1:42 Your list. to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education. Keith Weinhold 1:58 Welcome to GRE from Manassas, Virginia, to Manhattan, New York, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education, and I'm in Manhattan today. More on that later. I've been well known for talking about how your rate of return from home equity is always zero, and how that fact can drive your investor decisions, even if you're a homeowner and don't own rental properties. So then, what are you going to do with your dead equity? And I practice what I preach. I own a lot of properties, and I could pay them all off, but I have mortgages on them all out of choice, and in fact, I have never owned a single property free and clear out of choice as well. Well, with what we're talking about later today on the show, for the first time in some detail here, home equity investments or HEIs, you can get access to part of your equity in the form of a lump sum payment, 10s or hundreds of 1000s of dollars, without paying any interest or having to make any monthly payments at all. This is because it is not a loan; it is an equity sharing agreement. This way, if you're one of those people with an ultra-low pandemic-era mortgage, well, you can keep those terms in place and get access to cash and have it all. Now, you know, last month a publication as mainstream as USA Today they published an article and it was titled "Why Paying Off a Mortgage Early Could Be the Wrong Move. At that time, I shared a link to that article with you in the "Don't Quit Your Daydream" letter that I write to you every week. That article let us know that, according to Rocket Mortgage, about one in four mortgage holders make extra payments on their loans. Well, you might not find that part surprising because Americans are not very well educated on financial matters. But here's the part you may very well find surprising: per the Rocket Mortgage Report, those that make extra payments are most prevalent among those with the lowest rates. I mean, those people then are really paying an opportunity cost if they're speeding up the retirement of a pandemic era three or 4% rate. For almost everyone that's doing that, it is probably a rather gross misallocation of capital. All at once, they're losing scale, leverage, arbitrage, liquidity, and rate of return. USA Today says older Americans-they're the ones that are really interested in. Idea of being debt free. Younger homeowners, when they come into money, they're more interested in investing it rather than paying down their mortgage. Okay, that is what they have found, and that's all for takeaways from the USA Today article on rethinking paying down your mortgage. I am telling you, it is one of the biggest financial lessons people once learned that they need to unlearn. Rushing to pay off your mortgage-that is financial malpractice. You're told it's the responsible thing to do. It is not. It is equity jail. Your cash gets trapped in 2008 during the global financial crisis. Banks foreclose first on the homes with the most equity because it was the easiest way to recover their money. Liquidity is protection. Don't lose it. You pay opportunity costs. That money could be creating cash flow. You don't want to pay another $400 in interest this month. Well, how about losing the opportunity to create another $1,000 this and every month? And with inflation, you lose the advantage of paying back the loan with cheaper dollars. Mortgage payoff and accelerated mortgage paydown is a wealth-killing trap, and now I recently had lunch with the CFO of a publicly traded communications company in Anchorage, Alaska. Sharp guy, we got into a discussion about this. He is in the free and clear camp. He likes a free and clear home for peace of mind. Although, because he is a chief financial officer, he knows that it is a poor allocation of capital. One thing he said to me is what I hear some other people say. Well, if you lose your job, then you're sure gonna be happy that you have a paid-off home? No, you won't be. You're making my point for me. In most cases, it's just the opposite. If you lose your job, you're going to need money. Keith Weinhold 7:11 You're sure not going to be able to get it if it's trapped in the home. And one thing is for sure: a bank is not going to give you another loan if you don't have a job, a paid-off home is one of the few places where you increase your risk while you simultaneously decrease your return. So keep your equity separated, liquid, and hopefully earning a return. Now, as we're talking about HEIs today. Don't confuse that with a loan, just because I've been discussing mortgage loans here. An HEI, again, home equity investment, is an equity sharing agreement, not a loan. Like I mentioned earlier, I am in terrific New York City this week as a real estate show, let me tell you about some of the interesting urban real estate that I'm interacting with this week. As I'm bringing you the show from Midtown Manhattan today, 31st Street between Fifth and Madison, about three blocks south of the Empire State Building. Besides the sights that everyone knows about, like the Statue of Liberty, the World Trade Center, Rockefeller Center, and the Brooklyn Bridge, I had the opportunity to do a collaboration with CNBC on Wall Street and in the financial district. Even though I'm more of a Main Street guy than a Wall Street guy, also did you know that some of America's tallest buildings were built here in just the past five or six years. Yeah, all the continent's 10 tallest buildings are in the U.s8. of the 10 are in Manhattan, and three of the 10 tallest buildings in North America are these new pencil towers. Keith Weinhold 8:58 And you might remember that we've had a guest here on the show, both this year and last year, the star of the A and E show, The Real Estate Commission, Todd Drowlette. Together, we've got a chance to check out what are known as the Pencil Towers. If you're not sure what they are, these are buildings about one 500 feet tall on the south end of Central Park, and they're called the Pencil Towers because they are extraordinarily tall and narrow. In fact, one of them, called the Steinway Tower, is so slender that its height is 24 times its width. It is, in fact, the world's most slender skyscraper, and much of the Pencil Towers area is residential condos now? As far as renting out those condos, I have yet to determine the rent-to-price ratios for you, but I tend to doubt it's as favorable as what you're going to find at GRE Marketplace with our investment coaches here. True. Some of America's most jaw-dropping real estate, with sweeping views of Central Park and int
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