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What If I Gave You $10M? Real Estate Pays 5 Ways Revisited, Why Everyone Wants to Live Alone
• 43 minGet a 4.75% mortgage rate or 100% financing on new-build Florida income property. Start here. If I gave you $10M, learn why that probably wouldn’t even help you. We revisit how “Real Estate Pays 5 Ways”, a concept that I coined right here on the show in May 2015. Some think real estate pays three, four, or six ways. I revisit why there are exactly five. Real estate has many paradoxical relationships. I explore. Americans are living in homes longer than ever, now a duration of 10 years, 8 months. The active supply of available housing dropped again. Get an update on the gambling industry. A major sports gambling platform has offered to advertise with us. Take my free real estate video course right here. Zillow expects US home values to rise 4.8% from April 2023 to April 2024. Months of available housing supply is currently 2.7 per Redfin. Resources mentioned: Show Notes: www.GetRichEducation.com/450 Active Supply of Available Homes: https://fred.stlouisfed.org/series/ACTLISCOUUS Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Find cash-flowing Jacksonville property at: www.JWBrealestate.com/GRE Invest with Freedom Family Investments. You get paid first: Text ‘FAMILY’ to 66866 Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: GREmarketplace.com Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free—text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold Complete transcript: Welcome to GRE! I’m your host, Keith Weinhold. If you were gifted $10M right now, why that very well wouldn’t help you at all. Learn a fresh take on how Real Estate Pays 5 Ways at the same time. A housing market update with perennially sagging inventory supply amounts and more outlooks for stronger home price appreciation than many expected. Today, on Get Rich Education. Welcome to GRE! From Montevideo, Uruguay to Montecito, CA and across 188 nations worldwide, you’re listening to one of the longest-running and most listened-to shows on real estate… the voice of real estate investing since 2014. I’m your host and my name is Keith Weinhold. How would you like it if I gave you $1M? You know what? That’s not enough to make my point. Make it $10M. I adjusted for inflation - ha! How much would you like it if I gave you $10M? How would that feel? But what if it comes with this one condition. What if I told you that I’ll give you the $10M, but you are not waking up tomorrow? Not waking up tomorrow? No way! Now you know that waking up tomorrow is worth more than $10M. This is how you know that your time and your life are worth infinitely more than any dollar amount. Hmmm… if your time is so valuable. Then why did you check Instagram 15 times yesterday to see who viewed your Stories? Ha! Why are you spending time with your AI girlfriend? Ha! Get Rich Education is ultimately about living a rich LIFE - whatever that means to you. And we do approach that from the financial perspective here. Money does matter… because leverage, cash flow, and inflation-profiting enable you to BUY time. We’re really one of the few investing platforms… this show is one of the few places with the audacity to tell you that - sure, a little delayed gratification is good… but the risk of too much delayed gratification is DENIED gratification. Denied gratification is a terrible investing risk that most people either don’t give enough weight to - or don’t factor in at all. And getting a $10M windfall is not as great as it sounds either. History shows that the $25M Lottery winner quickly loses their money. Why does that happen? Because it seemed like it was effortless to get the windfall, and because they don't know how to handle an amount like that. It’s really similar to a capital gains-centric investor that gets a windfall. See, cash flow investors like you & I - we can be more measured because your income stream is metered out over time. That’s why you are less likely to be irrational with your gains. Now, I touched on some of those ways that you’re paid in real estate investing. Real Estate Pays you 5 Ways™ simultaneously. That’s a concept that I coined right here on the GRE podcast. We since went on to have it trademarked. Do you know when I first introduced that concept right here on the show - the month & year? And I’ve since gone on to do a lot with “Real Estate Pays 5 Ways” to help other audiences understand real estate’s five distinct profit sources. Well, I had someone on Team GRE here do some digging into some of our legacy shows - our past episodes… because I wanted to know when I first said it… and it was apparently in May of 2015, so 8 years ago that I introduced it. Since then, many other thought leaders have gone on to cite the phrase. Someone other than me even wrote a book on it. And that doesn’t bother me at all. I’d rather that other people and readers get good ideas. That’s more important than getting the credit. Of course, c’mon, you can recite these 5 now like they’re the Pledge Of Allegiance or something. This is as automatic as the Lord’s Prayer is for Christians. The five are: Appreciation Cash Flow Your return on Amortization and Tax Benefits and finally Inflation-Profiting But now, let’s dissect this frog here a little. Why five ways? Why not another number, like real estate pays four ways or six ways? It is five. There are no more or less. Each of the five are a distinct benefit. A common flawed case that Real Estate Pays 4 Ways is that most real estate teachers omit the Inflation-Profiting benefit on the long-term fixed interest rate debt. Any GRE devotee knows that with 5% inflation on $1M in debt, you only owe the bank $950K of inflation-adjusted debt after year one, $900K after year two, etc. (And in the meantime, the tenant pays all of your mortgage interest.) Some that make the 4 Ways case question the Tax Benefit. Could the tax benefit really be considered a profit source, or is it just a deal sweetener? It's a profit source. Outside the real estate world, to obtain a tax write-off, you must have a real expense backed up with receipts, like building a new computer equipment or buying a new farm tractor. Instead, the magic of real estate tax depreciation says that you can just write off 3.6% of the improved property value each year just for doing... nothing all year. No improvements necessary. It's a phantom write-off, yet legitimate to the IRS. Then the 1031 Exchange means you can endlessly defer all of your federal capital gains tax for your... entire life. Yes, it's one of the few places in life where procrastination actually pays. I've even heard some say that they're a fan of GRE's Real Estate Pays 5 Ways™, but they've discovered a sixth. This often involves an event that's either unlikely or falls into one of the existing 5 Ways. For example, "My appraisal value exceeded the contract price. I’m buying it for $320K, but the appraisal is $340K. I got $20K in instant equity. See, I was paid a 6th way." No. I mean, good for you, $20K of instant equity is a nice sweetener - that’s a $20K credit in your net worth column that you received the moment you opened up that appraisal e-mail from your lender and saw it. Nice! But an appraised value that exceeds the purchase price is not COMMON enough to be expected… and the 5 Ways are. Also, you can make the case that "instant equity" is covered in the first way you're paid, Appreciation. The reason that we invest in real estate is because there's virtually no other vehicle in the world where you can expect to be paid five ways at the same time. That’s a foundational principle - it’s a core concept here at GRE. It’s why we do what we do. It answers the compelling “why” for real estate better than any answer there is… …and that’s why anything less than a 20 to 25% combined return when you add up all five ways is actually disappointing - and that’s done with low risk - which is paradoxical almost anywhere else in the entire investing world. If you haven’t yet, take my free “Real Estate Pays 5 Ways” course in order to really understand each of your five distinct profit sources, where they come from, and how that all fits together. It’s at GetRichEducation.com/Course. The free “Real Estate Pays 5 Ways” short course is free at GetRichEducation.com/Course Let’s talk about real estate trends. You know, real estate investing has a lot of relationships that you just wouldn’t expect. Part of that is because it intersects with the economy. Economies are complex and you get these relationships that are counterintuitive. For example, in a recession, mortgage rates and all interest rates tend to fall, not rise. Another exhibit is how debt BUILDS wealth with prudent leverage. Another one that I’ve explained extensively here and the show and elsewhere is that higher mortgage rates correlate with higher home prices - not lower ones. That throws nearly everyone off. Some physical real estate trends have been counterintuitive. About 30 years ago in America - the 1990s - a new trend was fueled that everyone wanted to have a big kitchen. New homes were often built with a big, fancy kitchen in the center of the home. Open floor concept - no galley kitchens anymore. That began back then. And this w
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