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Is Every Debt Worth Paying Off?
• 40 minIn this episode Keith shares the survey results on what the highest rising cost for landlords is and what to do about it. He challenges the conventional wisdom that all debts should be paid off. He talks about how the rising costs of homeowners insurance and property taxes are the most significant expenses for single family landlords 76% of single-family landlords plan to raise rents over the next 12 months, with 35% expecting increases over 4%. Learn about the concept of debt as leverage and its role in wealth building. The importance of liquidity, interest rate arbitrage, and the ability to outsource debt payments. How inflation impacts debt. Understand the benefits of debt in real estate investment, including the ability to own more properties and create arbitrage opportunities. Show Notes: GetRichEducation.com/516 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.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. You get paid first: Text FAMILY to 66866 For advertising inquiries, visit: GetRichEducation.com/ad Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” GRE Free Investment Coaching: GREmarketplace.com/Coach 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 Complete episode transcript: Automatically Transcribed With Otter.ai Keith Weinhold 00:00 Welcome to GRE. I'm your host. Keith Weinhold. The economy is affecting real estate in some interesting ways. Now, vital trends revealed from a survey of single family landlords. Then the heart of today's show is every debt that you have worth paying off. The answer is no, with some surprising reasons all today on Get Rich Education. When you want the best real estate and finance info, the modern Internet experience limits your free articles access, and it's replete with paywalls and you've got pop ups and push notifications and cookies, disclaimers. Oh, had no other time in history has it been more vital to place nice, clean, free content into your hands that actually adds no hype value to your life? See, this is the golden age of quality newsletters, and I write every word of ours myself, it's got a dash of humor, and it's to the point to get the letter. It couldn't be more simple. Text, GRE 66866 and when you start the free newsletter, you'll also get my one hour fast real estate course, completely free. It's called The Don't quit your Daydream letter and it wires your mind for wealth. Make sure you read it. Text GRE to 66866, text GRE to 66866. Corey Coates 01:34 You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education. Keith Weinhold 01:51 Welcome to GRE you are listening to the voice of real estate investing since 2014 I'm your host, Keith Weinhold back to help you build your wealth for another week. This is Get Rich Education. That's just one of many things that makes this show different from other shows, or just consuming news stories. Here, you stay updated on important real estate investing trends, but you learn specific strategies to actionably build your wealth. That's the difference, and it's with the most generationally proven medium of real estate, all without you having to be a flipper and often not a landlord either. Now, presidential candidates make lots of promises during their campaigns, that includes with real estate here recently, even if you're listening 10 years from now, I'll tell you how to put something like this into perspective. Kamala Harris unveiled her plan to spur the construction of 3 million more housing units. That's a good thing. America needs more housing. She also wants to give federal assistance, and by the way, that means your money. She wants to give federal assistance in the form of a $25,000 down payment help for first time home buyers. I see that as a bad thing, and see there's no partisan bias here at GRE a lot of media outlets, they will filter something like this is all good or all bad, because they get better ratings when they rile people up, and that results in a divided America. But the problem is that the 25k of down payment help that can be delivered faster than new homes can be built, and that risks pushing up home prices faster, sooner, which arose the very affordability that's trying to be helped here now a presidential candidate, be it Kamala Harris or anyone when they have this enthusiasm to also limit price gouging at grocery stores here, like this candidate does. I mean, that's the beginning of price controls, and when there are price controls, no farmer is going to want to produce cherry tomatoes or Fisher is going to want to produce wild caught salmon if they have a significant price ceiling limiting the supply of those things. Therefore, I mean, when we had price controls in the high inflation 70s, that created shortages. And it's important to keep in mind that presidential campaign promises, they often don't become policies that are enacted even if that person is elected president, and even if they are, much of this still requires congressional approval, and we still have a divided Congress, and any tax changes require the approval of Congress. So really, this stuff is just a presidential wish list, giving you some perspective here. Now on the topic of shortages, there still is not enough available supply of US homes, active listings, those seeking a starter home often get more worn out than your grandpa after two games of checkers. But inventory levels are not as bad as they used to be, we still got a ways to go to claw back close to a more normal, balanced pre pandemic housing supply level nationally, we are still 29% lower. There are now still 29% fewer active listings than there were in pre pandemic times and most individual states still have inventory levels lower than that, too, compared to five years ago, when we break it down by state, some have a more paltry supply than others, though, places with the scarcest inventory, they seem To be those states where maple syrup gets produced, as it turns out, and I sure hope that this doesn't mean people need to sleep in the sugar shack. Connecticut is down 75% that means they have 75% less inventory than five years ago, pre pandemic, Illinois down 66%, New Jersey down 57%, Virginia down 53%, Pennsylvania, Massachusetts and Michigan all with 51% less inventory than they had pre pandemic. Ohio down 43%, California and Missouri each down 31%. The main problem here is that the Northeast and Midwest have not had enough home building in order to keep up with housing demand. I guess what? There were too many snow days in the Northeast and Midwest, or were builders constantly distracted by potholes and cicadas? Conversely, there are three popular investor states where for sale inventory is just a tad higher now than it was five years ago. Texas is up 6%, Florida up 5%, Tennessee up 2% and this doesn't mean that these states are oversupplied with housing, it just means that they have a touch more than they did in 2019 so they're closer to balance. The important overall thing to remember here is, of course, that nationally, buyers still outnumber sellers. So between the lower mortgage rates that we've had in the past year and the low supply, this keeps the environment ripe. There will be more offers and more potential for home prices to increase faster than its current rate of 4.1%. That 4.1% year over year, as per the NAR, it's important for you to understand that there's virtually no way that prices can revert to their pre pandemic levels. Home prices are not going back to where they used to be five years ago. In fact, there is more pressure on them to rise from here not fall, and there are a few reasons why prices cannot go back to where they were. The rate of inflation has slowed. You've seen the price of lumber come down, but wider inflation has been indelibly baked into the pricing cake. Homes now have higher, permanently embedded costs of labor, materials and land that all have more stick-to-itiveness to them than Simone Biles on the balance beam. Prices are not coming down anytime in the near future. You might remember that right here on this show in in our newsletter, back in late December, eight months ago, I forecast that national home prices would rise 4% this year, and I still really like how that looks. I'll get back to the investment side here shortly, but real quick, in light of the new rules about how real estate agents are compensated if you're about to buy a primary residence, you may not have any experience negotiating with a broker. In last week's newsletter, I sent you a template you can use and that can help you simplify the process as a buyer and help you avoid being taken advantage of. I sent you that template last Thursday. Back here on the real estate investor side, after a high tide of inflation, you know, you and I, we have all surely enjoyed the splash of both higher property prices and rents. That looks to continue. But what about your higher property expenses, too? Let's talk about what you've got to do to avoid getting crunched by expenses. A survey of single family landlords was recently conducted by lending one in resi club, and they asked this question, what is your expense that increased the most the past 12 months? The number one answer is fast rising insurance premiums, with half of respondents citing that as their biggest expense increase item. And that's hardly a new development, not surprising. The next biggest expense was property tax, 27% of respondents cited that. That's mostly
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