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The Deals Changed—Did You? Future Interest Rates and Inflation
• 40 minKeith explores how real estate strategies have shifted from the 1980s to today and explains why investors need to adapt deal structures to changing interest rates, lending conditions, and market cycles. He highlights current opportunities in new construction and builder rate buydowns, along with the long-term benefits of fixed-rate debt. Keith is joined by economic futurist and author Richard Vague, who challenges conventional beliefs about inflation and interest rates and explains how government intervention, war, and supply constraints shape asset prices and leverage decisions. Together, they provide a big-picture framework for understanding how today's macro environment affects real estate investing decisions. Episode Page: GetRichEducation.com/621 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 Join Mid South Home Buyers' one-time, free live webinar featuring Keith Weinhold on September 30 at GetRichEducation.com/MidSouth to learn how Memphis' economic expansion could create new real estate investment opportunities, and have your questions answered in real time. 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. Learn how dramatically real estate has changed from the 1980s through the late 2020s. We'll be sure that your approach is changing with it. Then a great guest and I discuss how war and future calamities will affect mortgage rates, inflation, and your real estate today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Home Buyers, the largest turnkey company in Memphis with more than 6,000 homes under management, for a free live webinar, the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth. Again, that September 30th. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth. Speaker 1 1:35 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 1:51 Welcome to GRE from Cambridge, England, to Cambridge, Massachusetts, and across 188 world nations. I'm Keith Weinhold. You're inside Get Rich Education. You could be doing anything with your time. I'm grateful that you choose to listen to me every week. You know, real estate investors sometimes say, "Ah, there aren't any deals anymore. What they usually mean is the deal structure that they learned five years ago stopped working. There are always opportunities in real estate, but your approach changes with interest rates, lending standards, inventory, construction, government policy, and just the overall economic cycle. The best investors don't wait for yesterday's market to return. That's like someone still hoping for Blockbuster Video Store to reopen. They identify what today's market is offering instead. Just consider this historic retrospective on real estate investing from the Reagan administration to today, in 1981, the 30-year mortgage rate peaked above 18.6%. I mean, just imagine proudly telling your friends that you locked in at 17% before rates went higher. That mortgage needed its own defibrillator. By 1984, rates were still near 16%. The strategy then, the approach, was for a buyer to assume the existing owner's lower rate mortgage that they locked in a few years earlier, perhaps in the late 70s, that's how you got a good deal, assuming that existing owners lower-rate mortgage. You can't do that so easily today. Keith Weinhold 3:50 By the late 80s and early 90s, the opportunity shifted from assuming attractive debt to buying distressed properties. The S and L crisis was upon us. Savings and loan failed lenders found themselves holding piles of distressed real estate, so investors bought foreclosures and REOs at discounts. They improved neglected buildings and then they repositioned them for income. You probably know that REO stands for real estate owned on a bank's balance sheet. All REO means is bank-owned property, but that's what you did. You found those, and then you scooped up a deal that way. As the 1990s progressed, interest rates declined, and loans also became really easy to obtain. We were tilting into the loosey-goosey easy lending environment. In the 90s, it was popular to buy an undervalued property, renovate it, raise the rent, and refinance it based on the improved value. That process later got a buzzy acronym and became known as the Burr strategy: buy, rehab, rent, refinance, repeat. By 2005, financing got more creative. This is when I was a new real estate investor. I remember obtaining what were known as 8015 five combo loans. This meant an 80% first mortgage, 15% second mortgage, and 5% down payment. You remember those? If you've been around for a while, you do. And see, this way you could avoid paying PMI, and you could control property with an astounding 20 to one leverage ratio due to that 5% down payment, but soon enough lending just got absolutely too creative and easy. The quiet lending party turned into a boisterous kegger, delivering the 2008 financial. crisis, and pretty soon I could no longer get any loans. From 2009 through the early 2010s, you could buy foreclosures and short sales at enormous discounts if you could find the loan. Keith Weinhold 6:20 Financing was tough, but prices were super low. It might have even made sense to pay cash at that time. Fear was everywhere right after the global financial crisis. I mean, it really took courage to act when others were hiding under the bed. By 2020 and 2021, the opportunity changed from cheap property to cheap money. Mortgage rates dropped below an absurd 3% as a result of the COVID pandemic. You could lock up extraordinarily cheap debt for less than the inflation rate, and then let inflation nibble away at it like Pac-Man. Of course, a lot of us are still benefiting from that today, but that opportunity is long gone now. But it doesn't mean that deals are gone today. Where's the opportunity? One of the best ones is often found in new construction, large build. have got to keep moving their inventory as they build these homes because they have got to keep their crews busy. An unsold house for a builder-I mean-that produces as much income as an unplugged Bitcoin miner. Rather than make conspicuous price reductions, builders use their financial muscle to buy down mortgage rates for you, often in the 5% range or even lower. Keith Weinhold 7:52 Builders might also offer you closing cost assistance, upgraded finishes, or other incentives that a single resale seller just can't match. So from the Reagan administration to today, over 45 years, the winning strategy just keeps morphing. It started out back then as assume the loan, over to buy distress, then to renovate and refi, then it was a creative financing wave, and then cheap debt, and today take the builders buy down. That's where we are. The mistake is deciding in advance what a deal is supposed to look like. The best deal structure changes, and of course, it's going to change again. The investor who keeps fighting the last war is always going to conclude that the opportunity has disappeared, but it hasn't. It's just changed clothing. Still, though, today's new purchases now-they're not as good as the deals that they were five years ago, but the best investors keep investing. They keep adding to their portfolio. It's what they've always done. Absolutely zero winning investors that are successful over time look back and say things like, "I didn't add anything to my portfolio during that 10-year span for this or that reason, the market changes, and you've got to adapt with it. That's a way to think about it. Take solace in knowing a few things. Deal structure changes over time are inevitable. And larger picture, you are investing in a product that is sustainable residential real estate in the form of long-term rentals. These entry-level properties are a scarce asset that people are going to continue to need. I mean, that's what we do here. Just compare. To the fads that we avoid around here, like NFTs, metaverse real estate, which we discussed on the show a few years ago, but said is highly dangerous, eye buying, value add apartment syndications, SPACs, or how about ICO funded altcoins? We don't chase the latest hot thing here at GRE. It is about what's sustainable, necessary, and cannot be easily disrupted by AI, and that's one reason that Get Rich Education is still standing strong after 52 episodes every year for almost 12 years now. Shortly, we're going to bring in a rather esteeme
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