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Keith examines the shift toward a buyer's market, including seller concessions such as rate buydowns, closing-cost credits, and repair allowances. 
He welcomes returning guest Caeli Ridge, president and CEO of Ridge Lending Group, to discuss how DSCR and interest-only loans may change the cash-flow picture for rental-property investors. 
They also cover due diligence, appraisal gaps, and ways to access home equity without replacing a low-rate first mortgage. 
Together, they explore how investors can compare financing options and evaluate deals in a changing mortgage landscape.
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Complete episode transcript:
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. We're talking about today's mortgage landscape, including does it really make sense to have a traditional 30-year mortgage when instead you can substantially lower your payment with a 40-year interest-only loan on a rental property? What are its pros and cons, and more on how seller concessions are creating an improved buyer's market today on Get Rich Education.
 
Keith Weinhold  0:33  
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Speaker 1  1:42  
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  1:58  
Welcome to GRE from Secaucus, New Jersey to Seattle to Washington and across 188 nations worldwide. In fact, I'm Keith Weinhold, and you're listening to Get Rich Education, talking about how to build wealth through real estate without sacrificing your lifestyle. I mean, come on, what's more important than our fragile quality of life? This decade, the best time to sell a property was 2022. The best time to buy? Well, U.S. housing is tilting more and more toward a buyer's market, and really, it's this increased market normalization. Long term in American housing, that's really been somewhat traditional for a seller to help out a buyer in a lot of cases, and that's usually because the buyer is feeling pretty strapped after saving up for a down payment. Now, some of the most common concessions that sellers are giving buyers today are a closing cost credit. This means that the seller pays toward your loan fees and even toward your title charges. That is fair game. You can ask for that in a lot of cases. Also, the very well documented mortgage rate buydowns that we've talked about on this show a good bit, and that is for a lower permanent rate. The longer you hold the property, the more that this one matters because it helps you over time. If you won't hold the property for long, well, then a closing cost credit is probably going to help you more instead as a buyer more than a mortgage rate buydown would. Also, repairs or repair credit. The seller fixes inspection issues or provides an agreed credit to you at closing, and that way later you could decide upon what to repair. Another common seller concession is for appliances and upgrades like flooring, and this is especially prevalent with new construction, so they are some of the most common concessions that sellers are giving today. Now we talk about qualifying for financing. Now I've learned that increasingly more borrowers they want to get their loans sooner than later because they fear being laid off, and that might be due to AI-related layoff threats, but one thing is for sure: once you're laid off, your prospects of qualifying for a loan get really small because mortgage underwriting just loves seeing a steady income from a borrower. And of course, when you own more property, real estate is a diversification away from AI disruption because AI still can't help you download a three-bed, two-bath home onto a quarter-acre lot. It can't do that.
 
Keith Weinhold  4:53  
Now, if it does not come up in our interview, I'm going to give you the result later on this week's show about just exactly how. Much your cash flow will increase if you employ a 40-year interest-only DSCR loan versus the regular old 30-year fixed. But first, something a little heartwarming for a real estate story. Now I mentioned this before to you a few years ago, but the update is that it is still happening. A condition that persists. After my recent visit to New York City that I told you about, I drove five hours to see my parents in rural Pennsylvania, and I slept in the same bedroom where I slept as a baby. This is because mom and dad are still married, still happy, and still living in the home that they bought in March of 1974, they moved in when Richard Nixon was president, and they still live there. The Vietnam War was still underway. All four Beatles were in their early 30 s. Before real estate became my career, it was simply home in Countersport, Pennsylvania. My first real estate story is still being written by mom and dad. It is still going on, and my parents also listened to the show, so they just heard that along with you. Let's discuss the mortgage landscape. I'd like to welcome back to the show the person that leads the eponymous Ridge Lending Group. They're an industry leader for investor mortgage loans. It's Caeli Ridge.
 
Caeli Ridge  6:38  
Hi, Keith. So great to be back with you again.
 
Keith Weinhold  6:40  
Now I kept your intro brief since anything longer would probably have to be approved by underwriting. We kind of need to get going with it here, and yeah, I often like to ask how she's doing, but the way she hears about how I'm doing is that she usually just needs two years of tax returns from me first, because Ridge is where I get loans for my own property, and Caeli. Before we talk in more detail about mortgage rates, why don't you talk to us bigger picture about the Fed? Since we got a new leader there about six months ago.
 
Caeli Ridge  7:13  
Yes, Mr. Kevin Warsh. You know when he was confirmed, we didn't know what to expect, and I won't go down a political rabbit hole, I promise you, Keith. But you know, Trump has been clear on the people that he wants to surround himself with need to be yes men. Is that an appropriate? I think it's an exact thing to say too. Yeah. So I wasn't sure what to expect from this because you know the Federal Reserve is supposed to be independent, and by independent that means there is no outside influence. So I was a little concerned at first, thinking, "All right, well, what's this guy going to do? How are the foreign markets going to respond if he does end up being that kind of yes men guy?" That would have been bad news, I believe, for all of us. I was very pleasantly surprised. He seems to be very even keeled, steady, rational, reasonable. Everything that's come out of this guy's mouth, I have been a supporter of so far. Most importantly, though, early on he was talking about forward guidance and how he was going to limit some of that. His predecessor, and I think going back, I don't even know how long, that's kind of been a norm for the Fed Reserve and helping move those markets. He's really been staunch about not doing that, and I think that when you and I talked about this, I think what it is doing it's making Wall Street stand on its own two feet. They have to use the data points that are available to them to predict where things are going to go outside of what the Fed is responsible for. So that gives us some stability anyway. So I'm keen on that, and I'm fan so far. I mean, the jury is still out, but we'll see. So the Fed is doing a good job so far. They are saying that in the December meeting, we'll probably have one more Fed rate hike for the year. We'll see what happens.
 
Keith Weinhold  8:54  
The best thing I can say about Kevin Warsh's first move, which was a rate hike, is that that very act helped exhibit some of the independence that we all hope for, and the fact that he appears to want to give less forward guidance and show his hand less often than his predecessor is probably good because generally I think that supports free markets rather than everyone focusing on one central person and just how did he say that word? Did he say moderate or modest? And what does that mean? So yeah, more of a hands-off approach is something that I surely like. And we're talking about rates. It's not so much the rate that the Fed sets, but with mortgage rates above 7%, will you tell us about some of the most effective ways that investors are making deals work today, Caeli. 
 
Caeli Ridge  9:42  
I got the tea. I'm bringing the tea today. Okay, are you are you ready for this? So I've got some good nuggets. I think your listeners are going to appreciate. So yes, we are in an environment where interest rates are slightly higher than we have come to expect them to be. But let me just quickly preface for everyone, guys. We are far from where the. The average high has been over the let's say the last 30 years. Okay, so we continue to have that narrative. Interest rates are higher than they have been, but they are certainly not at the high point of what a 30-year average would be. That said, I would tell you that the two things that we are focused on most right now to support our investments and making sure that our cash flows are there appropriate to the returns, etc. Are a debt service coverage ratio. I've got a bombshell for you there, and interest only loans. Let me take DSCR first. So DSCR, everyone is debt service coverage ratio. If you've never heard of this before, it's just a different way to underwrite an investment property loan, and the calculation is very very simple. We're going to take the gross rents and we're going to divide those by the PITI: principal, interest, taxes, and insurance. Okay, that division gives us a ratio of what the debt is versus what the income is. And if it's 1.0 or above, 99.9% of the time you're going to have a loan. Now there are products that will let you go below a 1.0 ratio. Let me give you a quick example. Let's say the gross rents are 750, and the principal, interest, taxes, and insurance is 1000. That would equate a DSCR ratio of 0.75, right? Okay. There are loans that you can get that go below the even. Okay, the even being if the gross rents were 1000 and the PITI was 1000, you'd get a 1.0 ratio. All right. Generally speaking, the rule of thumb you want to have from a lending perspective is that the gross rents are equal to or greater than that PITI. Equal to or greater than is where you want the rents. Okay. So that's just a quick one-on-one on DSCR. Now here's the bombshell: interest rates. And I went and looked back, Keith, and I'm not sure I can pinpoint another time that I've been able to say this. Yeah, interest rates for DSCR products are posting better, aka lower than Fannie Freddie right now for non-owner-occupied mortgages,
 
Keith Weinhold  12:03  
that's great news. That's really good to hear. Why might one want to use a DSCR loan rather than a more conventional product, other than what you just told us about the potentially lower rates?
 
Speaker 2  12:15  
I think that the other shine on this is going to be the underwrite is easier, right? So the Fannie Freddie loans, right, are golden tickets. You've heard my joke 100 times. Vials of blood DNA samples, right? Fannie Freddie is about your individual qualifications, so your tax returns, your pay stubs, your W 2s, all of that mixed together with what your monthly liabilities are. A lot of extra paper pushing on that end of the spectrum, but it was worth it because generally you're going to get the better interest rate over there, right? The better terms. Well, the DSCR is still a 30-year fixed, folks. So the same fixed-rate mortgage, the same amortization that keeps the payment lower, but the DSCR underwrite is now about the property. We don't care about your tax returns. We don't care about your pay stubs and your W-2s. It's about the gross rents divided by the payment, and that's it. You still have to show good credit to get the best rate, you still have to show some liquidity, right? Your down payment, etc., your bank statements, but it's an easier lift in the paper pushing underwrite, and it provides the same 30-year fixed. And now the rates are better.
 
Keith Weinhold  13:14  
You can avoid rolling up the sleeve for that blood draw because the debt service coverage ratio loans, to your point, it looks more at the performance of the property than it does you and your individual credit worthiness. Although it's still going to take that into consideration. And you talked about 30-year fix with the DSCR. In order to lower payments, are there options with the DSCR, like for 40 years or for interest only for the first 10,
 
Speaker 2  13:41  
yes, and yes. So DSCR was the first bucket. The interest only is another one that we are really focused a lot of our attention on right now. And here's why. Okay, I'm going to walk you through this. Might take me a second to unpack. So I want you guys to imagine just the straight 30-year fixed mortgage. Okay, go back to the Fannie Freddie, those golden tickets. This is an amortized mortgage. Okay, and if anybody's ever looked at an amortization table, chances are you're familiar with this. The first 10 years of the 30 years, the portion of your monthly payment that is going toward the principal is this much, right? The vast majority of that principal and interest payment is front-loaded to cover the interest first. You are not going to even start plunking down or chopping down that principal until the back end of the loan. All right, that's piece number one. Piece number two is statistically speaking, y'all. Okay, look this up for yourselves. Don't take my word for this. Statistically speaking, the average shelf life of a 30-year fixed mortgage on an investment-type property is about five years before we as investors are refinancing to reduce an interest rate or pull cash out. We want to harvest our equity to rinse and repeat. Right, it's about five years. So you guys can connect that.if the average shelf life is five years before we're refinancing for whatever reason, but the first 10 years of that loan. Is 98% interest. An interest-only loan is going to, in my opinion, be more advantageous to weather the slightly higher interest rate storm, as some are psychologically attaching to it, and get us over the hump. So I'm a big fan of the interest-only. It is saving in the monthly so that the cash flow is more improved, etc. Always, however, my token thing: do the math.
 
Keith Weinhold  15:27  
Do the math, and the math will tell you what to do. You know, Caeli. Before I was a real estate investor, and even in the early years of doing so, I thought interest-only loans sounded terrible because I thought, oh well, how would you ever pay down the principal? That sounds awful. Later, I learned the point is not paying down the principal. It's about maintaining prudent leverage and it's about cash flow. The way equity is built in property is typically through price appreciation more so than mortgage loan pay down. You know, I've heard some say things like, "Oh, with an interest-only loan, you don't own the house; the house owns you." That sounds terrible. But when I think the house owns you, is when you're working hard or working overtime to make extra principal payments. That's when the house owns you. And as we know, every dollar that we convert from cash into equity, that dollar becomes unsafe, illiquid, and its rate of return is always zero. So interest-only loans provide a lower payment and increase your cash flow. And I think a lot of people don't realize that with an interest-only loan, you typically have the option of paying down principal if you like.
 
Speaker 2  16:36  
I'm so glad you said that because that was going to be my follow-up statement. So for those naysayers that have a problem with the interest only. The fact is, you could actually within an amortization table, okay, you could actually prepay the mortgage faster on an interest only basis in that first five to 10 years than you could with a 30-year fixed. So if you were going to do that anyway, right, apply additional principal with a regularly amortized 30-year fixed, you could probably make more headway on an interest only by doing the same thing. Now, you and I agree that that's not the best use of someone's capital and funds. I'm going to hold on to my cash for obvious reasons, because getting that locked in, right, that inflexible anything you're going to pay in addition, if it's that 30-year fixed and it's not an open-ended revolving HELOC is gone. You've lost all liquidity and flexibility, and I'm not sure that that's where most of us that kind of know this math are going to place our funds. A
 
Keith Weinhold  17:31  
lot of us have done conventional loans, typically a 30-year fixed. If someone's new to the DSCR world, what else should they know? Are there any mistakes to avoid.
 
Speaker 2  17:41  
Mistakes to avoid. Make sure that you do your due diligence on the front end. I mean, just some of the common sense stuff, Keith. I would say is make sure you get your inspections. I can't tell you how many times, as long as I've been doing this, people they decide not to get their own independent inspection and then come to find out after they've closed on this loan that you need a whole new roof, or there's a foundation issue, or whatever. So obviously, get your independent inspection. That is different than an appraisal. Everybody, the appraiser is looking for obviously major safety or hazard issues when they're doing an appraisal. They're looking for the market value for us lenders as well, but it's different than an inspection. Make sure you get your inspection, and do your due diligence on, let's say you're using a turnkey provider. Make sure that you're double checking their numbers. Right? Are the taxes up to date? Sometimes, you know, I'm not saying that this is routine, but just verify the data points. Are the taxes accurate to what they've got on their performance? Insurance as well, because some of these things, especially like the insurance or the interest rate largely depends on your qualifications. So they may be quoting $1,000 a year for insurance, but you've got a claim or whatever it may be. There could be something that your insurance is going to be 1500, right? The deductible may be different. The lender may not allow for such a high deductible. The interest rate they're using is based on an 800 credit score, and you've got a 720. So just do your due diligence on the front end, so that the math, as it exists before you close, is accurate, and you're not finding out when it's too late.
 
Keith Weinhold  19:08  
You know, Caeli, with these DSCRs, you and I might need to talk about this again when I buy more property for myself because I'm pretty interested. Can I get a DSCR with both a 40-year amortization and 10 years interest only fixed rate at the beginning.
 
Speaker 2  19:24  
You sure can. I just quoted one of those the other day. 40 year AM and a 10 year, so it's a 10 year interest only with a 30 year repay. Yeah, and it looked great.
 
Keith Weinhold  19:32  
That is super attractive. And then the rate is lower as well in the short term. Something that I wouldn't even need to have in order to be attracted to that, we're talking with Caeli Ridge here. She's the president and CEO of Ridge Lending Group. We're talking about how, in today's environment, at seven plus mortgage rates, how you can get some relief, how you can lower your payment, and for some perspective here, before we go on with this, one. I'd like to think through is that mortgage rates fell to 3% exactly once in history. That was for COVID, where we practically shut down the entire world. It took a global catastrophe to make that happen, so.
 
Caeli Ridge  20:16  
And we're still recovering from it.
 
Keith Weinhold  20:17  
Well, right? Yes, we really are, and so is the economy in a lot of ways. So now you certainly want to get the best terms you practically can, but you can't put your entire personal life and investing life on hold waiting for that to happen again because I wouldn't expect that it will. So grow your portfolio if it's something that makes sense to you. And Caeli, one way that a lot of builders and sellers are approaching this in order to help buyers, whether investors or whether they're looking to own their own home. Is we know it's pretty common for a builder to offer an investor say $20,000 as a concession. So as a way to get some relief, when is it smarter to take a price reduction of the overall price, and was it smarter instead to use say that 20k to buy down the mortgage rate? Can you weigh the pros and cons there?
 
Speaker 2  21:08  
Yeah, I think that, and I don't have a spreadsheet in front of me that I can plug those in for you really quickly. But it always ends up being that math problem. Okay, based on an interest rate today, say let's just use the 20,000 as an example. So 20,000 off the purchase price at prevailing interest rates. What's the principal and interest payment versus keeping the 20,000 in the deal? The purchase price is still going to be higher, and using that 20,000 to buy down the interest rate. The markets are going to dictate how much that 20,000 is going to yield in the buy down. Let's say that the baseline is seven and a half percent. Okay, seven and a half percent, and we've got $20,000 of a credit to buy that interest rate down. Secondary markets are dictating what that spread looks like. So, does seven and a half become six and a half with 20 grand? I mean, that could be the case. Does a one point on $300,000 justify what's the payment difference in that case versus if we simply just keep the seven and a half and we take the purchase price from 750 to 730, that math is going to tell that story and it's going to be specific to the day in which you're having the conversation because interest rates are a very fluid thing. So I hope that answers the question. I think that it's a case by case, and we should run the math every single time to determine what the true best outcome is.
 
Keith Weinhold  22:25  
In my experience, you would probably agree. In most cases, it's a better use of the 20k to buy down the rate than it is to lower the capital price of the asset. And we're talking about doing rate buy downs. Tell us more about what you're seeing because you do so many loans in there. This is interesting. Who is doing the buy down? Is it the seller or is it the buyer? Is the buyer getting into it and participating in it as well?
 
Speaker 2  22:51  
Ooh, good question. No, I'm really feeling like, and this has been, I think, a long time coming. That buyer's market is really starting to take hold. We've been seeing it for some time now, but it is the seller that is having to give up some skin in the game here. The buyers are the ones with more power, and the buyers are the ones that are going to continue to set the table. Right, they're the ones in charge of the narrative here. And I'll tell you something else. I've been having this conversation a lot lately. We are right on the precipice, you guys, of being in a place where investors, real estate investors specifically, not as much homeowners, it's a different animal. But real estate investors specifically are right on the edge of being able to make fundamental legacy wealth, that financial freedom through real estate. There is a window that is upon us that we should be taking advantage of. Stop fixating on the rate, you guys. Please, you are missing the boat, and you're missing the opportunities that are here for the taking and will be. I hope for the next coming months, maybe even couple of years.
 
Keith Weinhold  23:52  
Yes, we've seen this reversion to what's really market normalization, where you're getting more concessions as a buyer, and you can ask for more things that are on the home inspector's punch list, and you can get more coverage of your closing costs from the seller. One of the most common ones being that rate buy down. What other sorts of concessions are you seeing from sellers today, Caeli? Especially things that you would not have seen just five years ago.
 
Speaker 2  24:17  
I would say it's a good combination of reduction in purchase price and seller concessions. Both of those are happening regularly on a go forward. The other thing that I'm noticing, and I'm tracking this, I've been really tracking it closely for the last couple of years. We have a spreadsheet that can go back around 18 months now. Home values. So up until a couple of years ago, it was very uncommon for a seller to come down if an appraisal came in short. Example: if the purchase price is $100,000 and the appraisal came in at 95,000, just for easy math, the lender, for those that aren't aware, is always going to lend the loan that we are going to provide for the individual is always going to be calculated. On the lower of those two numbers. Okay, so if you're buying the house for 100 grand, but the appraised value comes in at 95, we are going to give you your loan to value is going to be based off that 95. So that spread, that $5,000 spread, you know, you got a couple options. Either the seller comes down the five grand, the buyer covers the spread, or maybe some combination of the two. Up until recently, the sellers would never come down. You're having to cover that spread as the buyer, right? If there's any shortage from the purchase price to the appraised value, it was very uncommon that a seller would negotiate that. The buyer was going to have to be the one to cover that difference. I think that's another concession that's been more prominent these days, the seller is absolutely negotiating to come down or at least meet halfway if the values are coming in or do come in low.
 
Keith Weinhold  25:49  
Talk with Caeli Ridge, president and leader at Ridge Lending Group, about investment property loans. More when we come back. I'm your host Keith Weinhold. Let me ask you something: If you've worked hard to build wealth is your money positioned to actually support your goals. A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866.
 
Keith Weinhold  27:00  
What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group, NMLS 42056. They provide GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequel and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com. This is author Jim Rickards. Listen to Get Rich Education with Keith Weinhold and Don't Quit Your Daydream. Welcome back to Get Rich Education, episode 630. I'm your host Keith Weinhold. We're talking with Caeli Ridge, one of the more familiar guests. We first spoke with her way back in 2015 here, and one of the things I've been trying to help you, the listener, with is for new purchases or existing ones. How you can get better loan terms, and not too long ago, I had asked Caeli about ARMs, adjustable rate mortgages. Is that an option? But it sounds like it's pretty unpalatable right now.
 
Caeli Ridge  28:15  
It really is not, and this has been going on for many, many years. It's called an inverted yield. So when we talk about mainstream institutional lending, an ARM typically, historically, has provided us with some relief that would make interest rates lower than a fixed rate, a 1530-year fixed, right, a half, a full percentage point lower on the ARM. The inverted yield is keeping us from that. So, in other words, it means that the fixed rate products are pricing better than the alternative ARM, so there is no incentive for an adjustable rate mortgage right now on the traditional 30-year AM type mortgages. So no arms. 
 
Keith Weinhold  28:52  
A lot of homeowners, as we know, they still have equity locked up behind this awesome three or 4% mortgage that they probably got in 2022 or earlier, and by the way, when we look at the numbers of that, I happen to know that of American homeowners, only six in 10 have a mortgage. About four in 10 do not have a mortgage, more or less. And among those that do have a mortgage loan, it's now down to 48% to 49% of borrowers that have a mortgage rate of 4% or lower. So for those people that might want to access that equity but yet keep that rate in place, what's the best thing for them to do without giving up that first mortgage?
 
Speaker 2  29:34  
Well, I might push back a little bit on that to start with and say, have they done the math? What is it that they're going to be using the cash for? You know, if you look at this country and statistically speaking, the overwhelming credit card debt that most people are carrying is a big, big number. If they're not looking at that equity as a means of trying to extinguish some of that debt, it's a problem because 4% means nothing if you're. Carrying 1020, $30,000 of 18 to 24%. So just make sure you're doing that math. And specifically, what I'm saying is, is that if you take a 4% interest rate and you increase it to a 7% interest rate to wipe out $20,000 at 18%, right? There's a math problem there that you must be doing. Otherwise, if that is not your scenario, and you just simply want to harvest equity for other investment purposes or whatever you want. Then you can always look at a HELOC, second lien, or first lien. You have options. You can do a second lien, do the math, and see if having an increase in interest rate actually makes a difference to your bottom line. There's plenty of options that you can access, and if that is all too confusing, then you just call me and I will walk you through it.
 
Keith Weinhold  30:43  
Before you get a second mortgage, check and be sure that you do not have a DraftKings or FanDuel app downloaded onto your code. But you know, Caeli, we when we talk about that, we talk about accessing equity. Talk to us about the CLTVs, the maximum combined loan to value ratios for both a primary residence and an investment property.
 
Speaker 2  31:05  
Yeah, let me just take you through the quick maths for ease of use here. So let's say that your home value is $100,000 and you owe $50,000 on your first lien mortgage, and the CLTV is 95%. Okay, that's going to be the highest anyone's going to be able to find. And keep in mind, at a 95% CLTV, the rate is going to be up there. So, if you had a 95% CLTV, $100,000 value property, and a $50,000 outstanding first lien mortgage, that means that you're going to have access to $45,000 as a second lien mortgage. Okay, you guys do this math with me really quick. So, 100,000 times 95% is 95,000. Okay, 50,000 stays in place. Then the difference there is going to be $45,000 that they would be able to access as a second lien HELOC. So the CLTV numbers are going to range between 75% and 95%, depending on occupancy, credit score, right? Some different variables like that.
 
Keith Weinhold  32:01  
Right. We're talking about how much equity you can access, and can you parse that by investment property versus owner occupied?
 
Speaker 2  32:08  
Yes, of course. So we have options that let us go to 80% CLTV for rentals, and the 95% is going to be reserved exclusively for the owner-occupied.
 
Keith Weinhold  32:18  
When one looks at a second mortgage, how do those rates compare with the headline rate that we see for the 30-year fixed mortgage?
 
Speaker 2  32:27  
You know, largely dependent on the CLTV number and credit score. So, with those two things, I mean, I've seen Prime is at what 675 right now. There are some deals that will go Prime minus a quarter. So, you could be at six and a half on a teaser or 599 on a teaser for three months or something like that. But I think in general we cap at 80% on the investment property with good credit. You're probably in the eights. Yeah.
 
Keith Weinhold  32:50  
Okay. And you know, Caeli, do you find this to be true as well? When I'm just out, you know, walking in the park or hiking on a trail, and I you know make conversation with somebody, a few minutes in, they learn I'm in real estate. I soon find out about them. They don't know that they can get a second mortgage. Just the layperson on the street doesn't seem to know that they don't want to give up their 4% rate. And a lot of times they just don't even know that they don't have to.
 
Speaker 2  33:13  
Especially investors. I think it's pretty common in my world too, where they're surprised that a non-owner occupied property can actually get a second lien HELOC,
 
Keith Weinhold  33:22  
and you've been talking about a HELOC, a home equity line of credit for the form of that second mortgage, where you're keeping your first fixed low rate one in place. Talk to us about the different forms that that can take, perhaps other than a HELOC, and some of those pros and cons.
 
Speaker 2  33:38  
Well, let's talk about the HELOC first. So you want to pay attention to if you're out there looking for a HELOC, pay attention to the term of that HELOC. The longer the draw period, the better, in my opinion. Oftentimes, HELOCs on rental properties will come with a shorter term draw, like a three-year draw. That means that you only have three years or 36 months to draw the funds, and then that draw period stops, and then it goes into interest only and repayment. Okay, so check out the draw. Ideally, you want at least 10 years draw or longer, and then figuring out what the repay looks like too, so that you're prepared for that. Chances are it'll have been extinguished or refinanced in the meantime anyway, but those are going to be important details. I like the HELOC option better because you're never paying interest on funds that aren't being used. So if you have $100,000 line of credit and you're only using 20,000, the interest accrual is only on that 20,000. So that gives me leave to pivot into a HE loan, which I think was your question, Keith. So HELOC is open-ended, revolving. You have access to draw from it and put back into it, et cetera, et cetera. A HE loan is when it's kind of like a first lien, where you're going to get all of that money up front at closing, and it's just an amortized payment over 1520, 30 years, paying interest immediately on the whole ball wax.
 
Keith Weinhold  34:59  
The home equity. Line of credit having more flexibility than the home equity loan. All right. Well, you gave us some great alternatives and strategies around 7% plus mortgage rates in today's market. Caeli, how can our audience best connect with you? Because you are the experts in investment property loans, since that's mostly what you do.
 
Caeli Ridge  35:19  
Yes, sir. There's a lot of ways you can find us on our website ridgelendinggroup.com. You can call us toll free at 85574 743-438-5574 ridge is the easy way to remember, or email us info at ridgelendinggroup.com. In any of those cases, we will be here on standby, ready to serve you.
 
Keith Weinhold  35:38  
85574 ridge. I don't really know if it makes it that much easier to remember, but I think we've got it. It's been great, Caeli, having you back on the show.
 
Speaker 2  35:48  
Thank you, Keith. Love being here.
 
Keith Weinhold  35:56  
Thanks again to Caeli. She's helped GRE listeners originate more investment property loans than any lender anywhere ever. More on the DSCRs. You would pay about 16% more in a monthly payment on a conventional 30-year fixed than you would with a DSCR. And here's how I did that. Now we're looking at principal and interest only. If a conventional payment is $1,000 at seven and a half percent interest, what would it be for a 40-year DSCR loan, 10 years interest only, and seven and a quarter? Since its rate is lower, so this means instead of $1,000, it would be about $864 a month for the first 10 years, and then after 10 years, when it starts amortizing, the payment would go up to $976 per month instead of 1000. So not as much savings then, but you may very well have refinanced out at that point. And DSCRs can be either as a new purchase or a cash out refi. You can typically close on those in 30 days or less because it's easier to qualify for that since it qualifies on the property more so than it does you, inducing less brain damage. 30-year fixed.
 
Keith Weinhold  37:17  
Those rates again one quarter to three eighths of a percent lower. I only used one quarter lower in the example. Note though that DSCRs have a five-year prepayment penalty, and also note that I'm not a mortgage loan professional. I am merely the shaved mammal that broke down these numbers for you. But you do know who the mortgage pro is and how to get a hold of her. Lots of terrific real estate wealth building material in future weeks here on the GRE podcast. It includes how we had a guest here previously that controls a $436 million real estate portfolio, and he predicted how AI would change his operations. Well, since his last appearance here, he's been putting AI to work. He's learned quite a bit about what actually works and what doesn't, and he will share it here. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 3  38:18  
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively. 
 
Keith Weinhold  38:46  
The preceding program was brought to you by your home for wealth building, getricheducation.com

Keith speaks with investor and The 80/20 Principle author Richard Koch about the strategy and decisions behind building wealth. 
They examine how Koch's "star business" framework (combining market growth with competitive strength) can inform real estate investing, from choosing markets to recognizing emerging niches such as luxury senior living. 
The conversation also explores the attitudes Koch associates with exceptional success, including self-belief, resilience, and developing intuition through experience. 
Richard discusses how beliefs can shape financial choices and the themes behind his book 80/20 Beliefs.
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold, the best-selling author of the 80/20 principle, is also an investor with a reported billion-dollar fortune. He joins us today, tells us how he built his wealth, and he's got plenty of insights on real estate 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 at mid southhomebuyers.com. That's mid southhomebuyers.com.
 
Speaker 1  1:31  
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  1:47  
Welcome to GRE, from the home of the Patriots, Gillette Stadium in Foxborough, Massachusetts, to Gillette, Wyoming, and across 188 nations worldwide. I'm Keith Weinhold, and you are listening to Get Rich Education. Wouldn't it be interesting to see how real estate investing looks through the eyes of a prominent billionaire, especially when he's the author of the landmark book, The 80/20 Principle? That's what we're doing today. When he talks, people listen. Richard Koch will join us shortly from Portugal. He and I talked beforehand outside of this interview, and he told me Keith just simply asked me how did you get rich. I'm gonna be okay with that, so that's exactly what I'll do because he's really open about sharing, and as a show host, I love that, and I think that you will too. But we won't go for his ATM pin or his Netflix password. Only everything else. In his books, just like a lot of other successful books, there are several sequel works to his original 8020 principle book. He challenges the idea that outstanding success even requires Genius, consistency, or even basic competence-that those things are not necessary for success. You're going to learn what success requires instead, and you can see the 80-20 principle in a lot of places in your life. 20% of your clothing is worn 80% of the time. 20% of your phone apps take 80% of your screen time. 20% of your advertising generates 80% of your quality tenant leads, and I'm thinking that 20% of your tenants generate 80% of your problems. You're also going to get the architecture of how to become a billionaire.
 
Keith Weinhold  3:43  
Now, Richard often talks about what he calls a star business, and that really means two things. A star business is the business that is the largest player in its market or niche, and that market is growing at least 10% annually. That's a star business, and we'll learn how to apply this to real estate, including apartment investing in London and elsewhere. Besides an author, he's a passionate investor and has plenty to say about real estate. This week's guest is the author of the mega popular book that sold over a million copies, The 80/20 Principle. In fact, GQ named it as one of the top 25 business books of all time. This is known as the Pareto principle. You might have heard of it, where 20% of your effort yields 80% of your results, and he since authored other popular books. Much of his life has been focused on investing. Oh, it's a warm Get Rich Education welcome to Richard Koch.
 
Richard Koch  4:54  
Thanks very much indeed, Keith. Very kind of you to give me that great introduction. That's fine.
 
Keith Weinhold  5:00  
Well, you're here on Get Rich Education. Tell us, how did you get rich?
 
Richard Koch  5:05  
Well, let me just go through a little bit of biography here. I came from a pretty lower middle class background in England. I went to Oxford University when I was 18 and finished when I was 21, I then took a variety of jobs, but left them to go and do a business degree at Wharton in Philadelphia, from which I learned nothing apart from probability theory, which was a very very minor part of the course in macroeconomics, the only course win which I didn't do very well, but I learned about probability, which I think is very very essential for any investor. Yeah, and it's not difficult. You can learn about that in probably about two or three hours at the very most. And then after that, I worked for I had yes absolutely. I then worked for the Boston Consulting Group for four years, and that was very fortunate because their theory of how you get rich is something I'm going to talk about. It is relevant to real estate investing. It's relevant to all investing, but we'll come on to that a little bit later on. And then they fired me, which was great because I wasn't very good at doing what they were particularly good at doing, which was heavy-duty quantitative analysis. I'm not a terrific numbers person. And then I got a job at Bain and Company, which was a an offshoot from Boston Consulting Group, as you probably know. Yeah, and they were much more my cup of tea because they were interested in how to make companies successful. BCG, which is a wonderful company, was interested in getting the best possible strategy for any business using quantitative analysis, which really boiled down to trying to make the costs as low as possible for their clients and their prices as high as possible.
 
Richard Koch  7:04  
That was sort of their objective, and trying to get a dominant market share in the most important businesses that they were in. The star business would also be one which is very high growth, and that's the formula which I have used and which I think is relevant for all investing. But how I got rich is generically possible for anybody. I think the origin of how I got rich was that I worked for 13 years in relatively high-paid jobs, and I saved a lot of money. I was helped by the fact that I didn't get married, partly because I'm gay. But anyway, whatever. By the age of 33, I had net assets of 250,000 pounds, which at that time I suppose would be about $300,000. I guess I then was the co-founder of another strategy consulting firm called Lek. I was the K in Le K, and in order to make sure that we had plenty of cash before we got clients, we all contributed a certain amount of money into the pot, and my share of that was 250,000 pounds, which was savings from all those years in the salt mines of working for other people. When I left L.E.k6. years later, that had grown to I took out 6 million pounds before tax or 4 million pounds after tax because we grew 100% a year. We were very profitable, and although I say so myself, we did very very good work. So there I was. I left ELK. Had no idea what to do. I hit upon doing two different things. One was I just started writing books because I'd always wanted to write books, and the second thing I started was making venture capital investments.
 
Richard Koch  8:56  
And the first 250,000 pounds had turned into 4 million pounds after tax, and then over the next few years, over the next two and a half decades, I invested the money firstly in one company, and then in another, and then in another. And every time the investment size went up, and the reason for that was I had more cash, because all of those investments were very successful, and they were all star businesses, which I will come onto in a minute. So by the end of 2014, that 250,000 pounds had turned into, and I can remember this because the number is easy to remember: 543 543 million pounds.
 
Keith Weinhold  9:44  
Wow!
 
Richard Koch  9:45  
So I was sort of like a half billionaire in sterling, but it was simply from making successful investment and then doing the same thing again with a larger capital base. So that I think is the first thing, which I think is genetic. But anybody can do that, but in order to do that, you have to be able to make investments which are going to be successful, which is not easy. But there is a method for doing that. I'm allowing you to ask a question, and I can just carry on and and tell you what the investment method is.
 
Keith Weinhold  10:17  
Well, that's an extraordinary amount of success, and yes, we're certainly interested in what that method is, and if that method includes having a substantial amount of capital to start with. So, tell us more about that.
 
Richard Koch  10:31  
Yes, I mean this is a method which can be used for any amount of capital. Actually, you don't have to have $250,000 or pounds or whatever currency you have, you do have to have some capital, obviously. So you know you could start with $50,000. I think that's probably about the minimum. Well, the Boston Consulting Group theory, which Bruce Henderson devised from taking all these huge tomes about corporate strategy and reducing it to one chart is a famous chart which has cash cows, question marks, dogs, and vegetable stars. And the idea is you do a two by two matrix. You have low growth on one side, high growth on there. And being perverse, Boston Consulting Group decided to put the businesses which had the highest relative market share on the left rather than on the right, and those were the star businesses. So, a star business, which is the objective, is one which is in a very high growth market and also has a dominant market share. So, it has a very large share of its particular market. Now, trying to apply that to real estate is not too difficult, because part of the secret any real estate investment has to be the growth rate of the market. If you had invested in the 1950s in the fastest growing states in America, which were Texas and California. You could not fail to make a huge return from that. Yeah. Well, many people go into making investments, whether they're in venture capital or in real estate, without contemplating the market growth rate. And I was guilty of that because one of the investments was I made once, which was not one of my most successful investments, was actually in real estate in a company in London, in West London, place called Ealing. And some friends of mine brought me a proposition which said, "Hey, we're doing really successfully. We're making an awful lot of money here, and what we're doing is taking over Victorian buildings from the 19 th late 19 th century, and we're turning these huge places into apartments, and there was a shortage of apartments in West London and London as a whole, and so this was quite a successful strategy. However, after about three years of very good profits, during which I'd invested a total of 30 million pounds, the profit started to evaporate, and what had happened was that the cycle had changed, and basically there were no more large Victorian buildings to take over.
 
Richard Koch  13:17  
I had interpreted as very profitable business, really wasn't, because it was all stock profit. In other words, the general price level was going up in earling, but it was not because we were fantastic at converting property into smaller units of property, which then made a lot of money. So it was essentially all stock profit, and once I realized, oh dear, I've made all this investment, and then to cut a long story short, after putting in 30 million pounds, I took out 15 million pounds. So I actually lost money on that investment, but that was quite interesting. And then I thought to myself, well, why, why did this happen? And it happened because the growth rate in Ely had slowed, because basically the the market had been very hot, and then it basically went cold. So, in terms of thinking about whether a market is growing or not, you have to think about it over a longer time horizon. Certainly, for I'm sure you know this more than I do. You know, certainly you need to think about things from a 10-year or longer perspective, rather than a very short-term perspective. But nevertheless, it is true that the star principle holds. You really want to invest in a very high-growth market. Now, that doesn't necessarily have to be a state; it could be a very localized neighborhood, which is growing very, very fast for particular reasons, or it could be a particular type of building, you know, a condominium, any kind of business. But you have to be sure that the way that you're segmenting and the investment you're making is actually in a very high-growth market. And that's happened in the Algarve, where I am in Portugal. You know, this Portugal has become a very, very popular destination for foreigners, particularly rich foreigners, and particularly actually rich Americans. And so, the real estate market around here has been quite hot.
 
Richard Koch  15:16  
And I have made successful investments on the west coast of Portugal in real estate now, so I've canceled out the losses which I've made, but only because the market is growing very, very fast. So that's the first rule I think. What about the dominance rule? Says you need a high relative market share. I don't really know, to be perfectly honest with you. I don't know how to apply that property, but what it means is for me when I decided to make an investment in a place called Porto Covo, which is a beautiful, beautiful port city on the west coast of Portugal, between the bottom bit where I live and the Algarve and Lisbon. This particular place had got fantastic beaches, but it was relatively small. And then we heard that there were rumors of other people making investments. A four-star hotel opened, and then two five-star hotels opened. And now Nvidia is making a big business center near there, and so on and so forth. So it looked as going to be this particular enclave, this particular town, not Portugal as a whole, not even the Alentejo, which is the area within Portugal that it is, but Porto Coburg itself would be a successful investment.
 
Richard Koch  16:35  
So, the definition of the market is hugely important. The other thing is, we didn't take small blocks of land. We got the two biggest blocks of land in Porto Cova, and so we were able to make you know quite successful. I don't exaggerate the return from it. It's probably been an annualized rate of 15 to 20% but when you consider that the risk in real estate, is certainly much lower than in venture capital because land can never go bust. It's always going to be worth something. Then I think 15 to 20% is a reasonable rate of return.
 
Keith Weinhold  17:14  
Well, there's a lot there. You know, as we say here at Get River Education, the market is often more important than the property. A palatial estate in the middle of nowhere doesn't have a very high value, but even a tiny studio apartment in Manhattan, where you almost have to sleep in a closet, that can actually bring a good rent. The market is more important than the property, and you touched on something really interesting when it comes to market research and where we think dollars are going and where we think that places are uptrending. You talked about resort development in one of the areas you looked at in investing in. When we see resort or hotel money or a lot of other business money come into a place, us as individual investors, I kind of think of it, Richard, as we get to leverage their research. You know, they've done a good bit of research and demographic analysis to make a decision to invest, say, hundreds of millions of dollars into an area. We can leverage that ourselves.
 
Richard Koch  18:15  
Yes, and another segment which I think is particularly interesting is luxury places for older people, and certainly in Portugal, that has been very, very successful. And in fact, it's quite segmented, Keith, because it segments by nationality. You find that, for example, a bunch of Swedish people around here decided to get together, rich, fairly rich, we're not mega rich, but fairly rich, Swedish people who had I don't know, were able to make an investment of approximately $10 million plus retirement homes for those people in a very attractive location. I haven't made that investment, but turned out to be very successful, and the idea of a a luxury retirement home. Yeah, it used to be an oxymoron. The retirement homes are horrible places, but actually, retirement homes for really rich people, and particularly people who are interested in remaining fit. So there's got to be a big swimming pool. There's got to be a big gym. There's got to be big facilities. There's going to be all kinds of social things going on. That is a segment which I think is particularly interesting if it's growing very fast and if you're the first person to find it.
 
Keith Weinhold  19:30  
That's a smart thing to say because oftentimes when we think about market, we think about geography, but you're talking about a use type in the trend in senior living. You're listening to Get Rich Education. We've been talking with 80/20 principle author Richard Cush about real estate. More when we come back, including the 80/20 principle and interesting things from one of his more recent books, Unreasonable Success. I'm your host, Keith Weinhold. Let me ask you something: If you've worked hard to build. Wealth is your money positioned to actually support your goals. A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation.
 
Keith Weinhold  20:25  
In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine. You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your pre-qual and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com.
 
Hal Elrod  21:31  
This is Hal Elrod, author of The Miracle Morning, and listen to Get It Rich Education with Keith Weinhold and Don't Quit Your Daydream.
 
Keith Weinhold  21:45  
Welcome back to Get Rich Education. I'm your host Keith Wine, who we're talking with 80/20 principle author Richard Cush, also known as the Pareto principle, where 20% of your effort yields 80% of your results. And Richard has been telling us about where to focus your time and energy in order to get those results, and Richard, one of your popular books is called Unreasonable Success. I found it so interesting that you challenge this idea that extraordinary success requires genius, consistency, all-round ability, or even basic competence, and now I would think that those things do matter. But instead, you identify nine key attitudes and strategies. So, tell us about those and what makes those important for an investor.
 
Richard Koch  22:35  
Yeah, I don't believe that people are successful because they are necessarily brilliant or much cleverer than other people. I think it's more a matter of personal psychology and the attitude which people have. I know a lot of rich people who are not very bright. I'm one of them, and honestly, it's much more important to know what was successful. My research actually looked at 20 people who were very very successful, but were not necessarily absolutely brilliant. In fact, they include Winston Churchill, who was a total failure throughout most of his life. But he did one thing which really made him successful, and thank God he did. Which was in the 1930 s, he decided that Hitler was a menace, and that Hitler had to be stopped, and that he was going to be the person to do that. Now he'd been very unsuccessful as a politician. He'd been rejected by the Conservative Party, that who's a member of. He was someone who drank a lot. You know, he was not highly respected, but he made it his mission to point out the danger that Hitler represented, and in 1940, when Britain was about to be invaded, he was the only possible selection as prime minister. So I tried to identify what it was that he and other people who had been very successful had, and the first one of those is self belief, and I think this is actually the most important one. Yeah, self belief, and this is not peculiar to real estate investing. It's actually common to all forms of investing and all forms of success. If you don't really believe in yourself, then you're probably not going to go anywhere. And that self belief doesn't have to be rational. In many cases, it can be completely irrational. So, in the case of Winston Churchill, he always thought that he was going to be prime minister, and that was because he'd been brought up by a father, having a father called Randolph Churchill, who had been the finance minister, Chancellor of Exchequer in British speech, back in the 1880s, and he had had dinner with current and future prime ministers when he was in his youth, and so he naturally thought he was part of the ruling class and that he would be successful. He then had a long period of failure of success, but he never. Stop believing himself. He never stopped believing that somehow he would become prime minister, and he did become prime minister. So, I think it's very important to be generous to yourself, and you know certainly almost to the stage of being delusional.
 
Richard Koch  25:14  
Self belief, I think, is important for real estate investor, indeed for all investors. And then the second thing in the picture there is Olympian expectations, which means being ultra ambitious. You know, sort of saying, I don't want to be a moderate success. I want to be a fantastic success. And how am I going to be able to to do that? And I think that's very important for real estate as well. I mean, we could think about a president of the United States that that applies to where he'd always been super ambitious and rarely been super competent. The third thing, and I think this is very important for everyone, and also for real estate investors, is to have a transforming experience, and that is usually going to work for someone or for a company where you are part of a company which knows something that nobody else knows, and that was true for the Boston Consulting Group. In my case, they knew about business strategy that no one else knew about. It's true for Bain and Company, which knew how to make companies more successful by having a long-term consulting relationship with them, it was true for almost any very very successful person that they had a period of time in their life when they learnt something that other people didn't know, and so I don't know if there are real estate companies that you would recommend going to work for. They're probably the best ones are ones that nobody else knows about, but people who found the focus, which has been very, very successful.
 
Keith Weinhold  26:44  
I'm glad you mentioned focus because a focused fool can outwork a distracted genius.
 
Richard Koch  26:49  
Indeed, that's true. I think there are two other of the nine things which are most important. One is to thrive on setbacks. You know, real estate investing, like most investing, is a cyclical business. I think you'd agree. Yeah. So part of your success is going to be whether you're in the right part of the cycle. And what you should be able to reckon with is that some stage you're going to, yeah, have a bad year. You're going to have a bad two years or bad three years, or whatever, but you have to be resilient, and being resilient is partly a matter of having a fairly secure capital base. So, whereas I was recommending earlier that you basically double up and then double up and then double up again, I think you have to be very cautious of that in real estate investing, and you need to have a buffer or a cushion, which means that you, you know, if the market goes down, you're not crucified. And then the last thing I draw attention to is acquire unique intuition. It's very difficult to describe exactly what intuition is, but it's the ability to differentiate when you can trust a person, when you can trust a market, when you can trust yourself is very important to have the intuition that says, actually, I know the difference between a bulleter and someone who's actually the real deal.
 
Richard Koch  28:17  
You know, it's very important to know that you actually can judge whether something is a good investment or not, and the only way that you can require that is through practice and through making a few mistakes and then analyzing mistakes that you've made. But saying, when I invest, I'm going to have a formula that nobody else has because I've got the intuition that that's going to be very successful, and therefore you're not going to overpay for the property or the land or whatever that you have to start with, and you're also going to know when the danger signals arrive.
 
Keith Weinhold  28:57  
Have a buy box, for example, and stick to it. And you know we're really talking here about now how perhaps 20% of an investor's decisions are likely to produce 80% of their long-term wealth. And when we think about making better decisions, Richard, where do most successful people waste their time? Are there things that they should stop doing immediately?
 
Richard Koch  29:23  
I think 80 is not an exaggeration. 80% of the stuff we do is useless or counterproductive.
 
Keith Weinhold  29:31  
Yeah.
 
Richard Koch  29:31  
So knowing what that is, I have no idea what that is in real estate investing. I think it's probably being driven exclusively by data, or it's probably being driven by the contacts that you have, or whatever. You have to work out in any business where you're trying to make money what are the things that you do very, very well that other people don't do well, and that isn't going to be everything. It may be something really esoteric, something very. Rare, etc. But you've got to discover what are the hot spots which actually work for you and don't work so well for other people. Yeah, it's impossible to specify what those are. But what you have to realize is that most of what we do is useless, and a lot of what we do is counterproductive. And just focus on the things which are uniquely played to the strengths that you have, and that is very difficult to work out. But once you've worked it out, you can't go wrong.
 
Keith Weinhold  30:32  
Well, I think you've just touched on something fascinating because you've written that unreasonable success it often comes from identifying and embracing our individuality, and most people, if they're good at something, they like doing that thing, and if they like doing a thing, they're also good at it. But how does someone distinguish a genuine strength of theirs from something that they merely enjoy doing?
 
Richard Koch  30:58  
Well, you have to look at the results, and you know what are the results relative to the effort that's gone into it? And the effort is not just capital; it's also time, it's also contacts that you have. So you have to say, okay, I've got this theory about what I'm uniquely good at doing, but is it true? And you do need to test that with data. So you might think you're uniquely good at identifying property in a particular area or a particular type of property, but what's the track record of that? And the track record never lies. It's it's a correction. But there is something that you do which is exceptionally clever, and the rest of the stuff that you do is mediocre or possibly worse than that.
 
Keith Weinhold  31:42  
Maybe I need to rethink some of this myself personally, Richard. I think I'm, you know, wired to be an academic, but I put an awful lot of effort into being an athlete, and I sure don't get very many good results from that. So this conversation is helping me reframe a few things, perhaps.
 
Richard Koch  31:59  
So I'm going to roll with a mediocre athlete, if that's good for your health, and if that's good for relaxation, and if you enjoy it, there's no absolutely nothing wrong with enjoyment, but you have to make a distinction between enjoyment and your professional life, and yeah, the two don't always go together.
 
Keith Weinhold  32:18  
You're right. That will help me justify doing it. It's for my health, even if my trophy case is completely empty. No,
 
Richard Koch  32:25  
I think I think being healthy and being fit are probably the two most important things for not only you know longevity and good health, but also for financial success as well. I certainly would not discourage you from going training.
 
Keith Weinhold  32:41  
Well, Richard, you are a prolific author. So before you go, please tell us about your latest book. It's called 8020 Beliefs.
 
Richard Koch  32:51  
Yes, and I'll brandish it at you. This is my best book. I've only just written it, and it's a different book from all the other books that I've written is based on introspection, and the theory behind it is there are certain beliefs which we have, which are really bad beliefs for us, and we're not aware of them. And I describe in the book how you know I had a disabling belief which I really, really was not very helpful, and that was actually related to investment, etc. I believed that the most important thing in my life was making money, and I discovered through a variety of different feedback mechanisms and through some traumas and unhappiness that that wasn't true, and I had to give up that belief before I actually started making a lot of money. It's all counterproductive. It's all about intuition. It's all about getting your friends and family to talk to you when you are unhappy, and work out you know what is the source of your unhappiness. And it's usually a belief that you have which is not true.
 
Richard Koch  34:00  
The other thing which the book does is talk about good beliefs, beliefs that make you very successful, and there are a few of those which are suggested. It's based on 51 very intensive discussions with people about their lives, people that I'd known for decades and knew very well, and they bare their souls anonymously in most cases, but they do bear their souls. And if you want a book which is about you rather than about investment, this is the one to have a look at. 8020 police. Thank you very much indeed, Keith. The plug commercial there, and thank you for inviting me onto the podcast, I very much enjoyed it. Thanks very much indeed.
 
Keith Weinhold  34:44  
It's been so good getting to know you. Really fascinating. Thanks, Richard. Keith insight from Richard Koch today. He emphasizes the growth. Story find a real estate growth market that can mean a lot of things: job growth, population growth, or demographic growth in a niche like senior living. From his view, he likes that real estate is generally safe. For example, its value essentially never goes to zero. Isn't it novel how he challenges the idea that outstanding success requires genius, consistency, or even basic competence. That's kind of amazing to think through. Instead, what success takes is self-belief. Self-belief can even be irrational, and he also adds to that Olympian ambition, focus, and acquiring unique intuition.
 
Keith Weinhold  35:47  
So really, his outlook is rather optimistic if you think about it, because it's more of an approach where anyone can do this. Anyone can have massive success or wealth without having to win some sort of hereditary lottery, and since the 8020 principle, also known as the Pareto principle, means that 80% of your results come from 20% of your efforts, well, now you know more about what to allocate your 20% to and what to avoid. Make your vital few trump your trivial many. Gratitude to Richard Kosh and his wisdom today. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 2  36:38  
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively. 
 
Keith Weinhold  37:06  
The preceding program was brought to you by your home for wealth building, getricheduceducation.com

Keith 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.
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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 into New Jersey and way beyond, and clear day views all the way to Connecticut. Some more cool real estate interaction here. Did you know that nightly, from 1150 7p.m. to midnight, a lot of the video boards in Times Square sync up for a special show. They are not just showing their normal ads during that special short three minutes. That ought to be cool. One of my days here, I'm going to take the subway from my hotel and temporary GRE studio here over to Brooklyn, and then when I'm done, I'm gonna walk the Brooklyn Bridge back to Manhattan.
 
Keith Weinhold  10:46  
So, did you know that the subway then goes under the river? Yes, the subway tunnel goes beneath the East River. The New York subway system has 14 underwater river crossings beneath various rivers, and by the way, that is not a phenomenon unique to New York City. There are also subterranean subway river crossings in D.C. beneath the Potomac, Montreal underneath the St. Lawrence River, and also in London, Paris, in Shanghai. Some really cool real estate here in New York City, there is just so much to do. I wonder if kids that grow up in New York City still say that there's nothing to do here, like I did growing up in my small hometown in Appalachian Pennsylvania. I hope they don't say that here in New York City. They can't possibly say that. Coming up straight ahead on the show, we're talking about how to access cash from your home. You don't need to refinance, and you won't pay any interest or make any monthly ongoing payments with HEIs.
 
Keith Weinhold  11:50  
And this is helpful because a lot of Americans at this time they feel cash poor due to the high cost of living, and yet at the same time they've got all this inaccessible equity locked in their home. This can help solve that. I'm Keith Weinhold. You're listening to Get Rich Education. Let me ask you something. If you've worked hard to build wealth, is your money positioned to actually support your goals?  A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate. It's a straightforward approach built on real assets, not speculation. And full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed. But with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage.
 
Keith Weinhold  13:31  
Start your pre-qual and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com. This is Rich Dad Sales Advisor Blair Singer. Listen to Get Rich Education with Keith Weinhold, and above all, don't quit your daydream. This waste guest is a career mortgage, real estate, and tech exec. He's acquired and sold over 1000 homes across the West Coast, holds a bachelor's degree in real estate, and he's a licensed broker in California. But he's doing something really interesting today that we'll discuss. Welcome to GRE, Michael Gifford.
 
Michael Gifford  14:21  
Thank you. Thank you for having me on.
 
Keith Weinhold  14:24  
Michael, Home equity investments (HEIs) I think they really make sense today for a few reasons. The average homeowner has about 300k in home equity. That's a record high, and about 200k of it is tapable. You've also got the fact that mortgage rates are historically normalized, but they're higher today than they were five and 10 years ago. So more people look for ways to access cash without refinancing, which is something we'll talk about. I brought up home equity investments and described them. To my audience last year, Michael and I basically let everyone know that it's not a loan. Instead, a company gives you a lump sum of cash up front in exchange for a share of your home's future value. A company like yours does that, and for the homeowner, there are no monthly payments and no interest, but you do have to pay back the company later. Did I summarize that about right? And what else should we know?
 
Michael Gifford  15:29  
Yeah, that's right. I would say it's a product that more and more homeowners are seeking, as you mentioned. Right, homeowners now really have two assets. They have their home, but they also have a low-rate mortgage that they want to keep in place. And exploring alternatives to access that equity, you know, you touched on the dollar amount, but most homeowners come to us, and 60% of their home's value is their home equity, right? And so that's a large, large savings account that they need help accessing. And you know, with the interest rate environment being high and qualification for a lot of traditional financial products being difficult, homeowners need alternatives, and that's why Splaterro exists.
 
Keith Weinhold  16:05  
Is this something that can be used only on primary residences or rentals?
 
Michael Gifford  16:09  
Can do both. The majority of folks are using it on their primary residence.
 
Keith Weinhold  16:15  
Okay, what's in it for you and your company? Because of course, you're giving a lump sum of cash to these homeowner borrowers without them having to pay any payments or interest.
 
Michael Gifford  16:29  
There's no monthly payment on product, but we're sharing in their home's future value, right? And so, where home values are today with this much equity, homeowners receive that lump sum of cash. Often, you know, a little less than the numbers you were talking about earlier. They don't usually tap all of their equity that they have available, but then when they refi or sell in the future, they'll pay us back, and we'll get a portion of the home's value at that time.
 
Keith Weinhold  16:53  
Okay, so are homeowners or investment property owners going for amounts more like 50k or 100k in a lump sum that you pay them.
 
Michael Gifford  17:02  
They're usually in that 100 to 150k mark. You know, we're in 17 states. Kind of the average home price that we're working with now is about 650 or so, and of that, people have over $300,000 of equity in that house that they need to access.
 
Keith Weinhold  17:17  
Yeah. Okay. Go ahead and give us an example. Perhaps if someone has a $500,000 home and it appreciates in value, and then the portion of that increase in value or equity amount that you would take.
 
Michael Gifford  17:30  
Yeah. So just say that $500,000 home for number sake. Let's say we gave them 50k, right? So that's 10% of the home value. When they sell a refi in the future, we'll take 20% of the home value, so two times the initial percentage, or we also have a homeowner safety cap. So they never pay more than 17 nine nine annually. So whichever one of those two is less, say in the future their home goes up in value, will take 20% subject to that safety cap. So the homeowner knows that the most they'll ever pay right now is 17 nine nine er year.
 
Keith Weinhold  18:02  
Okay. So if a 500k home goes up in value to 650k—
 
Michael Gifford  18:09  
That be the 20% of the 650 or 17 nine nine on the 50k, whichever one is less.
 
Keith Weinhold  18:15  
Oh, got it. It's 20% of the 650, not of the equity amount of the home's total value. 
 
Michael Gifford  18:21  
The home's future value. Yeah.
 
Keith Weinhold  18:23  
Oh, got it. Okay, so we're talking about homes in an appreciating environment, which is typical. What if the property goes down in value? What happens then, Michael?
 
Michael Gifford  18:34  
We still share in the same value, so 20% of the value of the home, whenever they choose to sell a refi or our 17 nine nine safety cap, whichever is less. So home goes down in value. Our investment could go down in value as well.
 
Keith Weinhold  18:47  
Who have you found that's using home equity investments there? Because you know, Michael, I imagine sometimes it might be a person that's trying to create arbitrage and be savvy. But I'm just going to guess that more often you get homeowners that are in trouble and need cash in the short term with the rising cost of living, and a lot of them bought homes with three or 4% mortgages five or more years ago that they probably couldn't even afford to buy if they tried to repurchase it today. So, who do you find that's using HEIs?
 
Michael Gifford  19:17  
Yeah, well, to comment on your last comment before I answer your question, is yeah, that's the case, right? A lot of homes have really appreciated in value and might have outpaced the income that the homeowner has. Maybe they've had some credit troubles. Maybe their debt to income ratio can't satisfy that actual home value, so they couldn't probably buy that house today. Right, but we're working with homeowners across the spectrum. You have the savvy homeowners with great credit scores and great income. They're using this product though still because it has no monthly payment. There are very few financial products where you can receive you know six figures of cash and not make a payment on it the next month. And so they're doing all sorts of things. They're repairing and renovating their house. They're doing the pool that they always wanted. You know, doing the kitchen renovate. They're paying for their kids' college. They're keeping up with cost of living, as you said, is expensive, and so people are looking at their homes now as a large savings account, and that number of home equity and that number in their savings account keep going up, and they want to be able to access it. We also see the other end of the spectrum, right, where you see the homeowner that can't qualify for a traditional product, right? They don't have the credit score. They don't have the income to actually use a traditional product, but they have a ton of equity in their house.
 
Michael Gifford  20:26  
And so, for them, they're often faced with: Do I sell this house or use a credit card? Which are both not great choices with our product and our qualification. You know, not being a bank, there's no income verification requirement. There's no DTI calc on this because you're not making a monthly payment, we can qualify a lot more homeowners, all the way down to a 500 FICO score. A lot of those homeowners are doing the same thing; they're keeping up with cost of living, they're paying off their credit cards. Right? We see people's FICO scores actually increase because they've paid off all their debt with the funds that we give them, and they are actually in a better financial picture. And often, a lot of times, the word that we hear is relieved. Right? They have now the opportunity to use that home where they've gained all this equity to pay off all their debts and give themselves a fresh start. And that's a that's a pretty unique proposition for a lot of homeowners.
 
Keith Weinhold  21:14  
So I don't think of this as a delayed gratification instrument, but sometimes it does not make sense to delay gratification, as I've shared with my audience. Sometimes the expense of delayed gratification is denied gratification. So you're certainly helping meet some short-term needs. And yes, HEIs, home equity investments, they really do occupy this interesting gap in the market. And for some of the reasons that I brought up earlier, it really is quite a timely period for using it here. Tell us more about the qualification and if there are any fees.
 
Michael Gifford  21:49  
Yeah, the qualification process is quite simple. So you can go to Splaterro.com, do our quick application. takes five six minutes. We're mostly qualifying on the home itself and the equity that's in that home, so the value currently, and then the first mortgage, right? We're often behind their first low-rate mortgage that they want to keep in place, so we need to understand that very little, but some borrower qualification actually adds. Where's their FICO score, right? We can go all the way down to a 500 FICO, and we want to make sure people don't have recent bankruptcies or recent foreclosures. But for the most part, it's about the home and the actual equity that's in the home.
 
Michael Gifford  22:24  
We charge an origination fee that's 4.99% and the homeowner pays that at closing, so that's paid at closing. Then they don't make any other payments until they're ready to repurchase their investment. Usually, that's when they are going to sell the house or refi the house. Most people think about this like a bridge product, knowing that in the next five to 10 years, I'm probably going to sell this house and upsize or downsize, and and or you know maybe the rate environmental change, and I'll refi out because often even after we extend funds, we're so low leverage with their first lien that these homeowners still have an incredible amount of home equity available to them after we've given them funds.
 
Keith Weinhold  23:02  
Yes, you need to understand that first mortgage pretty well, like you said, because I imagine if there's a lien on the property, I think you touched on it. The HEI position, which you have, occupies that second or even third mortgage position.
 
Michael Gifford  23:17  
Predominantly we're in second position, and that's because you know most homeowners refined eight to 10 years ago when rates were low, so they do have that three and a half 4% mortgage that they want to keep in place and not change. That's unique to the product that we can you know record behind that, and then they keep that in place.
 
Keith Weinhold  23:36  
So for the you, the listener, as you're weighing HEIs in your head, you probably want to ask yourself some questions, and maybe Michael can help us answer some here, including how long do I plan to stay in this home or own this investment property? How strong is my local housing market? Just how much appreciation could I be giving up? Am I willing to share future equity gains? And I think another germane question is now: Can I comfortably handle monthly HELOC payments instead, and the pros and cons with using a HELOC, a home equity line of credit? Can you talk to us some more about that and weigh those trade-offs, Michael?
 
Michael Gifford  24:18  
Yeah, we tell every homeowner to explore all their options, right? So it's not even just the monthly payment from HELOC, but also the qualification process, right? As we see in very public numbers for mortgages, the higher spectrum of the FICO scores are often the only ones getting originations these days, right? The qualification process for HELOC has gotten pretty strict, so that's certainly first and foremost, where to start. The next is, of course, yeah. How long are you going to stay in the property? The interesting part about our product, to go back to our prior example, is if we're owed say 20% in the future, that never changes. It's always 20% So you know, the home goes up, the home goes down. It doesn't actually change. It never goes to 25 or 30% It's just. Always 20% of that home value with that safety cap. So if you do feel like you're in a market that appreciates rapidly, right, or you could be having rapid appreciation in your home price, we have that safety cap in place. Let's just say your home quadrupled in a year, we have that safety cap in place of 17 nine nine. So you're never going to exceed that on an annual cost.
 
Keith Weinhold  25:20  
You know, Michael, I find it amazing how many homeowners-not so much income property owners, but homeowners-they don't realize that if they have a three and a half percent mortgage and they want to get cash out and refinance it at today, say, seven and a half percent rate, they don't realize that they don't have to refinance the entire thing, and they can even take a second mortgage as a HELOC and leave that majority three and a half percent interest rate portion in place as a first mortgage. But with that being said, some are aware that you can take out a HELOC second mortgage. Talk to us some more about the pros and cons specifically of using a HELOC versus a home equity investment.
 
Michael Gifford  26:00  
HELOC versus home equity investment, an HEI is much easier to qualify for, as the points we've already talked to, right? No income requirement, no income verification. You have a lot of homeowners that might have lower incomes or incomes that can support more debt, or maybe you're a small business owner, right? Maybe you're starting a business. The traditional financial institutions don't really like that as far as lending to you, and so makes qualification difficult. You also often, for many HELOC products, need a 700 plus FICO. A lot of homeowners are in the sixes, so that makes it difficult to understand. The biggest one though across the spectrum of homeowners is you have to make a monthly payment. So as soon as you get funds up from your HELOC, you're going to extract those funds. Some will even have restrictions, like you can't pay it off for six months, or there's prepayment penalties, or something else.
 
Keith Weinhold  26:47  
Right.
 
Michael Gifford  26:47  
ut you have to start making a monthly payment to them immediately. This is none of that. There's no prepayment penalties. You can pay it off whenever you want, and there's no monthly payments ever. So a lot of homeowners look at those two things: ease of qualification and no monthly payments as pretty big factors, no matter what their situation is, and that's why they're seeking alternatives to kind of the few traditional financial vehicles that people usually utilize in this situation.
 
Keith Weinhold  27:14  
It can be difficult to explain why someone would not want a HELOC second, even if they don't draw against it, that way it could be there for access in the case of emergencies. So it sort of has this checkbook ability for you to draw against your HELOC when you want to, or just leave it with a zero balance. Is there any flexibility like that with HEIs?
 
Michael Gifford  27:37  
We don't. You know, we extend the funds at closing, so the homeowner receives them. If they want to pay us back, they can pay it back in full. But that's not the same where it is, you know, a true line of credit as noted in HELOC.
 
Keith Weinhold  27:49  
No, no, you talked before about a disconnect between being house rich and having accessible financial flexibility. Tell us more about that.
 
Michael Gifford  27:59  
Yeah, you know, a lot in our financial system rewards very high income and very high credit score. And if you don't have one or both of those, it's very difficult. No matter how much equity you have in your house, to access it, even at lower leverage rates, right? If you have had some credit troubles, your options slim pretty quickly. No matter how much equity you have in that house, and that and that makes it difficult for a lot of homeowners, right? As costs increase, school tuition, whatever it is, increases. It's hard for a lot of people to make these monthly payments, and so you know, no matter how much equity you have in your house, qualification is still difficult for a lot of products. And as the interest rate environment ticks up, or if you believe it's going to be higher for longer, or even though it's you know not historic highs, it's still higher than it was a handful of years ago, and so that makes qualification even more difficult for folks.
 
Keith Weinhold  28:49  
We've compared HEIs to HELOCs. What about comparing them to home equity loans and cash out refinancing?
 
Michael Gifford  28:56  
Yeah, I mean the biggest one there for sure is a cash out refi. A lot of people want to keep that low rate mortgage in place. So if they have a three or a 4% rate, you know, I wish I had a crystal ball to be able to tell you when that's coming back. But a lot of people want to keep that in place, and so that included what you didn't ask about. But it includes reverse mortgage, right? A lot of people don't realize that you're going to get a reverse. You got to refi your first out. So that is really the big benefit of this as well as you're keeping that low rate mortgage in place, so your monthly payments aren't changing after you receive your funds.
 
Keith Weinhold  29:30  
Tell us more about home equity investments. Some of the pros, some of the risks. Maybe something I have not thought about asking you.
 
Michael Gifford  29:40  
Yeah, I think we've talked a lot about the pros. I think that you know we encourage all homeowners to explore all their options when they're looking to access the equity in the home, and then choose one that's right for them, their situation, and their timeline. Of course, the interesting part that we haven't talked about is our timeline. Right, we're making an investment that's as long as you're. First mortgage. So if you have 25 years left on it, we're going to give you funds for 25 years. Yeah, a lot of time when you use other products, you don't have that same term. If you have anywhere less than 10 years, we'll still give you the funds for 10 years and a max of 30 years. So we do what's called maturity match. We match the first liens maturity.
 
Michael Gifford  30:17  
So when you make your last mortgage payment, you also then will pay us back at whatever point in the future that is, that's definitely a pro, right? There's no sort of short term. Hey, this is you have this money for five years or 10 years, and you might be uncertain. I'm like, I don't know if I'm going to sell this house or move out of this house in the next 10 years. What if the mortgage environment's worse, right? I don't want to refi out into a very high rate in 10 years. We don't know what's going to happen, so that's definitely a pro. I'd say the cons. If you can qualify for a traditional financial product like a HELOC, oftentimes they're a little lower in cost than we're going to be, right? So it could be a cheaper route as far as APR, but there's trade-offs in that. You're making those payments that we talked about. You have to be able to qualify for that product. That's really the biggest con I would say about this product. Outside of that, most people once they understand it and hear about it, they can't believe it exists, and they can't believe they didn't know about it before.
 
Keith Weinhold  31:08  
We're talking with Michael Gifford of Splitero about HEI's home equity investments, where his company gives you a lump sum of cash upfront in exchange for a share of your home's future value, so it's not a loan. And for you, the homeowner or income property owner, there are no monthly payments and no interest. You pay back the company later. Tell us more.
 
Michael Gifford  31:37  
I think that you know in today's environment, and both the real estate and the interest rate environment, a lot of people are locked into their homes, right? They've accreted all this value. They don't want to move because if they move, they have to change their mortgage, and that changes their monthly payment, right? Some call it payment shock. So you have the lock-in effect where they're locked in their house, and then they also have payment shock. And you know, it seems like the weather forecast, where there's a new term for these things every sort of every few years, but because of that, people are exploring alternative options that they haven't looked at before. We're one of those. We've been around for a number of years now. We operate in 18 states, and so we're helping homeowners really see that there are more options to access their home equity than just another you know, traditional product.
 
Keith Weinhold  32:23  
Michael and I are doing a remote interview. He's in San Diego. Over Michael's shoulder on his desk, I can see a Los Angeles Chargers helmet. I was careful not to call it a San Diego Chargers helmet. That was the former home of that team. They have a really good quarterback, and the reason I'm bringing this up is because you have sports partnerships, which is really interesting. Tell us about that.
 
Michael Gifford  32:48  
Yeah, we have a few sports partnerships. The Los Angeles Chargers, as you mentioned, have been great partners for us. We help them build a beautiful content studio where they film a lot of their broadcasts throughout the week, talking to players, coaches, you know, talking to matchups for the coming weeks. Great show there on YouTube in stadium. You'll see all of our assets. A lot of this is because you know a lot of the work that Splatero does is still on homeowner education. People call us. They say I've you know a couple $100,000 of equity in my house. How can you help? You know, I've never heard of you. And so we've had a few partnerships. We also partner with the Los Angeles Kings, which has been just incredible for us. Great organization and AEG, their owner across their plethora of assets. I would say, and so the sports partnerships have really helped us help consumer realize that you know we're a real company with a great offering, and people should check it out. And they've been great partners for us. We're homed in Southern California. I'm in San Diego, as you mentioned. Southern California is a very important market. We want to be able to invest these dollars in our backyard and make sure that homeowners in Southern California have the best options when they're looking to access the equity in their home.
 
Keith Weinhold  33:55  
Whether you're personally helping Chargers quarterback Justin Herbert with his own home equity needs or not, Splitero is the official home equity partner of both the L.A. Chargers and the L.A. Kings. Well, Michael, it's really been interesting learning about this product because it's timely for a lot of people. If someone wants to learn more, what's the best way for them to do that?
 
Michael Gifford  34:18  
splitero.com is the easiest way for them to do that, they can go through our application process. Only takes a couple minutes, or call us. We have our licensed homeowner advisors on the phones. They're willing to and able to explain our product, but also alternatives that we've discussed on this show. All of them have a ton of experience in the mortgage world, and so any homeowner situation, they're able to talk through and help them guide them to the right decision.
 
Keith Weinhold  34:43  
Before I ask you if you have any final thoughts, that is sp l i t e r o splitero.com. Any last things that we should know, Michael?
 
Michael Gifford  34:55  
That's it. I appreciate the time. You know, we're here trying to educate homeowners and help them access. The equity to really better their lives. We talked about relief earlier. We hear a lot of really unique stories from homeowners who came to us because they didn't have any other option, right? Or they're in a really difficult time, and us being able to give them that lump sum of cash allows them to do pretty powerful things. And so we hear a lot of great stories, and we're excited to help more homeowners in our markets.
 
Keith Weinhold  35:22  
This should be able to help a lot of people. Thanks so much for coming on to get rich education.
 
Michael Gifford  35:27  
Thank you, appreciate it. 
 
Keith Weinhold  35:34  
Oh, it was interesting to learn more about HEIs. When you initiate one, the lump sum cash windfall that you receive is generally not taxable. Don't expect to pay any tax up front, though you aren't making loan payments since it's not a loan. You still have a financial obligation secured by your home. Splitero records a lien against the property, typically subordinated in a second position, like we touched on there. If you think that an HEI is of interest to you, you'll easily see that you can get pre-qualified in minutes. Or if you just want to check it out further, again, it's there at Splaterro.com. Next week on the show, we expect to hear from a billionaire who is also the best-selling author of the 80/20 principle, also known as the Pareto principle, that ought to be deeply interesting. You've been listening to episode 628 of Get Rich Education. Keep growing your means with me every week to make sure that you hear me again, tap, follow, or subscribe either of those buttons wherever you're listening. It's free, and it helps you catch the next episode of the show. I'm Keith Weinhold. Don't quit your daydream.
 
Speaker 2  36:57  
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively. 
 
Keith Weinhold  37:25  
The preceding program was brought to you by your home for wealth building, getricheducation.com

Keith explores U-Haul's truck-to-storage marketing strategy before turning to the shifting housing market. 
Housing intelligence analyst Rick Sharga joins him to discuss rising mortgage rates, affordability, regional home-price trends, and how inventory is shaping sales. 
They also explore builder incentives on new construction and what delinquency and foreclosure data may signal for investors. 
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. Fannie Mae creates a housing market assessment of 100 economists and market analysts. We're talking to one of those 100 today. How much are home prices really increasing? Also, supply level, housing demand, and are there threatening cracks in the delinquency numbers and more 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  1:36  
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  1:53  
Welcome to GRE from Lebanon, Pennsylvania, to Lebanon, Oregon, and across 188 nations worldwide. I'm your host Keith Weinhold, and you're listening to Get Rich Education. Before we analyze today's market with our housing intelligence analyst guest, you know there's a new super interesting real estate strategy out there that seems to be getting traction. What makes it fascinating is that it starts out as a customer looking to rent a moving truck, and then they end up renting real estate from a landlord. Now, do you think that this is manipulative, or is it just a crafty and savvy marketing strategy? Here's how it works. U-Haul uses a truck rental as a gateway to a longer-term self-storage customer. It's a natural cross sell. Someone moving belongings. Well, they might also need somewhere to put them. That's part of the reason that really I think this is more about savvy and less about manipulation. Here's how this U-Haul strategy works.
 
Keith Weinhold  3:05  
All right, first you attract someone with an immediate need. Okay, a person that's searching for a moving truck from a place like U-Haul. That's a customer who is already in the middle of a move. When that customer is reserving the moving truck. They're offered a free month of storage with any qualifying one-way truck or trailer rental. Just one, only one free month of storage, and you could probably see where this is going. This is what U-Haul's doing. They're solving a related problem at the right moment, for the person that's moving, their new home might not be ready. That customer might be downsizing, or everything might not fit. Free storage makes saying yes easier when moving expenses are already piling up. Whether the customer wants the free one month of storage near the location they're moving from, or near the location they're moving to. Either way, we know human nature. Come on.
 
Keith Weinhold  4:09  
Once belongings are in that storage unit, customers who still need the storage space are going to continue paying monthly, month after month. In a lot of cases, this might go on for years because moving everything out of that storage space now that would require time, effort, and potentially having to rent another truck from U-Haul too. So, what U-Haul did is that they turned a short one-time transaction of a truck rental into recurring revenue. The business logic is that the truck brings in the customer, and then the one free month that transitions them into storage, and that ongoing need keeps them renting. It starts out with a person saying, "I only need a truck this weekend, and then it becomes, "I'll use the free storage until I get settled, and that need that they thought would be temporary can last for months. And that is the U-Haul storage conversion strategy-pretty savvy stuff. Now, when it comes to charging people rent or being a savvy business person, do you think that Donald Trump has ever slept in a tent? Let's see.
 
Rick Sharga  5:30  
Ever slept in a tent?
 
Donald Trump  5:31  
Yes, I did in camp when I went to camp.
 
Rick Sharga  5:37  
Where did you go to camp?
 
Donald Trump  5:38  
I went to a camp hilltop up in Binghamton, New York, and it was okay. Does anybody know?
 
Rick Sharga  5:46  
 I'll be darned! Is that Bill? Great. Yeah. Did you charge the other kids rent?
 
Donald Trump  5:50  
I know. I started looking. I started thinking about it. Started thinking about it.
 
Keith Weinhold  5:55  
Hahaha. That is from the David Letterman show back in 2007. So this is when Trump's show, The Apprentice, was popular, and well before Donald John Trump became president. Thank you. I am grateful for you attending GRE's last live properties webinar recently. I hosted it along with the provider Mid South Homebuyers in Memphis. It was almost like a party. We had 410 registrants. So much involvement from you, and so many questions. People writing in the chat box how this show means so much to them. You know, seeing that, reading that during the event, like that was almost enough to make me cry. I didn't bring this up during the event because I didn't want to put the attention on myself, but I did see that appreciation you have for the show here, and I want to sincerely thank you for that. We crossed the 12-year mark here. Yes, episode one of the Get Rich Education podcast was released on october 10, 2014. This is 12 years of delivering a new show every week, 52 weeks a year, and never replaying an old episode. Always fresh real estate content.
 
Keith Weinhold  7:01  
You definitely know where to find me, and when it comes to reliability, gosh, don't you wish that a mortgage lender first like understood investors? How about if a credible lender were built by an investor for investors with real humans and no call centers ever, and this lender actually taught you the math and even ran it with you. Education first. I just described Ridge Lending Group. That's why it's where I get my own loans. You can do that too for your next investment property. Start at RidgeLendingGroup.com. That's how they operate there at Ridge Lending Group. Now, back in May, you remember that I released an episode, and its title was "Our Most Important Message in Years, and that message sure is coming true. That was episode 606. Back then, you remember how I articulated basically the effects of the Iran War and the wave of inflation that it will bring, and how that's going to change the bond market and supply and the replacement costs of homes and the mortgage rates. Our guest and I will touch on those themes and more about both the good and the bad of today's housing market. We'll also spotlight where some investor opportunities are. I'd like to welcome back to the show a returning guest who I first learned about through a mutual real estate friend three years ago, and he's really become quite a regular here because he is so knowledgeable. He's a longtime housing intelligence analyst, and he's the president and CEO of the C.J. Patrick Company. Oh, it's a warm welcome back to, like me, a native Pennsylvanian, Rick Sharga.
 
Rick Sharga  9:24  
Thanks for having me back, Keith. Always a pleasure to be here and share thoughts of our old home state,
 
Keith Weinhold  9:30  
the Keystone State. And you know, Rick, you look at a lot of the same parts of the housing market that I do, but you also look at some parts that I don't look at very often. For example, delinquencies and foreclosures, which is something that we can get into. Just overall, what are your thoughts about the housing market as it stands today?
 
Rick Sharga  9:50  
Well, as we speak today, the market is sort of in shock because we've seen mortgage rates jump up as high as seven and a half percent. In a year when most forecasts were expecting mortgage rates to go into the low sixes and maybe even the high fives, I think the market is kind of going through a transitional period trying to figure out who can afford what, whether people can actually afford to sell their homes, and how we adjust to a seven handle after we we had just gotten used to sixes not too long ago, so a little bit of frustration in the housing market right now. I think we've seen things slow down a bit, and there are implications for the path forward and for things that you wouldn't think about, like the impact of higher mortgage rates on on foreclosures. So there's all sorts of things going on right now.
 
Keith Weinhold  10:42  
Right before the war in Iran began, Mortgage News Daily tells us that mortgage rates fell to 5.98% They've been up about one and a half percent just since that time, about seven months ago. And yeah, you use the word shock, Rick. I've been thinking the same thing, you know, people are going through an adjustment period with today's normalized interest rates-not historically high, but normalized interest rates amidst the somewhat healthy economy. 30 years ago, the economy was booming amidst the advent of everybody starting to use the internet, and now it's AI. Back then, 30 years ago, the federal funds rate was one and a half percent higher than than it is today, and mortgage rates were 7.8% back then. So I'm talking about 1996. This is four years before the.com bust and five years before a recession occurred, and back at that time, both home prices and rents grew substantially during that period. Even though affordability was better then than it is now, in fact, from 1996 to 2000, cumulatively, home prices grew 21 percent, and rents grew 14%. Now, pretty normal historic clip. So really, my point is that today's economy is fairly healthy. Rates have normalized, and now rather than the internet boom, we've got the AI boom. You use the word shock. Yeah, people need to adjust.
 
Rick Sharga  12:17  
Yeah, and I think it's important when we talk about affordability, which is what you're getting at there right now. If you factor everything in, we're probably in the second least affordable period on record in terms of home prices. If you go back to the the least affordable time, that was probably in 1983, and the culprit there was mortgage rates that were 1819, 20, 21% The people were doing celebratory dances if they got a mortgage rate at 12%.
 
Keith Weinhold  12:48  
Right.
 
Rick Sharga  12:48  
And so you look at things historically, and you've pointed out correctly that you know at even at seven and a half percent mortgage rates, you know we're below the long-term average, which was 7.7, 7.8%
 
Keith Weinhold  13:01  
Yes.
 
Rick Sharga  13:01  
However, home price growth has outpaced wage growth significantly over that period of time, and we're coming off a very unusual set of circumstances in the housing market. Something that's really never happened before. When we got into COVID, and so we can we can blame a lot of this on COVID, and for the conspiracy theorists, we can blame a lot of this on the Federal Reserve. But the Federal Reserve took extreme measures to try and prevent a depression in the economy because nobody knew how bad things were really going to get, and we were in that zero interest rate period for some period of time, which drove mortgage rates down into the twos and threes. That pulled a lot of demand forward. People came out of everywhere to buy houses at historically low mortgage rates, and so home prices went up about 47% in the space of two years. And at the end of that, the Federal Reserve, in order to get inflation back under control, started raising the Fed funds rate, which drove mortgage rates up into the really as high as 8% at one point. So we saw property values go up by 45 to 50% Then we saw mortgage rates double. And if you look at at historical numbers from Freddie Mac, what you'll find is that in the history of the United States, we'd never experienced a period where mortgage rates doubled during a calendar year, and in 2022 they doubled not in a calendar year, but in a matter of a few weeks, and that sort of shock to the ecosystem. That one-two punch, extremely high price appreciation, followed by a doubling of mortgage rates, even though the mortgage rates aren't out of that long-term historical norm, was enough to kind of knock the stilts out of the housing market. So we've had a very different house market crash this time. It's not that prices fell 20, 3040, 50% It's that we went from 6 million sales to. 5 million, and then to 4 million, and we've been stuck in this 4 million range now for the last really three and a half years. There was a lot of hope that we'd start to feel more like a recovery in 2026, until the war in Iran started. Oil prices went up, took bond yields up, and took mortgage rates up with them, and so we're in a very unusual market in terms of housing right now, and it's a difficult scenario, particularly for first-time homebuyers who didn't experience that growth in home equity that people who owned homes back prior to 2022 did.
 
Keith Weinhold  15:36  
I characterize it as we had a supply crash around 2020 or 2021, and that was followed by a transaction volume crash. And you know, it's funny, Rick. Actually, when mortgage rates started their sharp increase in 2022, my early reaction was like, you know, this is not so bad. A return to normalcy. You know what's with all this artificial intervention? There should be a cost to money. I mean, this is good, but you know, after three years of this slow transaction market, I don't really feel that way anymore.
 
Rick Sharga  16:13  
People ask me a lot of times what's going to fix the housing market, and I give them the same answer, which bothers them because it's a boring answer, not something they can impact. It's time, and when 2022 happened and mortgage rates doubled, one of two things was likely to follow: either one, home prices would crater in order to fix affordability, or two, and this has happened before historically, we would go through an extended period of time where things would just slow down to a crawl, where sales volume would slow down, where home price appreciation would slow down, and it would give wage growth a chance to catch up. And during that period of time, what hope was was that mortgage rates would not necessarily go back into the threes and fours, but would come down at least a little bit. And over time, those three legs of the affordability stool, if you will-home price appreciation slowing down, wage growth continuing, and mortgage rates kind of flattening out-would improve affordability enough that people would start to come back into the market, and we started to see that. If we got into numbers last year, you found that there were actually more people who had a mortgage rate above 6% than below 3% and that's the first time that had happened since 2022.
 
Rick Sharga  17:37  
So things were starting to get back to normal. We ended the year with quite a bit of momentum in terms of home sales, the last five months of the year we had higher year-over-year home sales, and price appreciation was slowing down. Everything was in place the way we were hoping, so that 2026 could be sort of an inflection point and lead the way to a recovery. Then Mother Nature weighed in in January and February, we had unusually severe weather in the Northeast and Midwest. I think home sales were down in the Northeast about 8% in those first two months because of bad weather. And as we started to recover in March, the war in Iran broke out and mortgage rates jumped. And surprisingly, with all that bad stuff happening, with inflation getting higher, with gas prices going higher, consumer confidence being at an all-time low, with all of that, if you go through the end of August, home sales are actually up 1.6% year over year. So there is a lot of pent up demand out there. We have a population that's aging rapidly into home buying age, and would like to become home buyers, just waiting for market conditions to allow them to do so. And unfortunately, now with mortgage rates up a full point higher than they were a year ago at this time, it's tough for people to at least get through the psychological barrier, if not the economical barrier.
 
Keith Weinhold  19:01  
Yes, and I think the fastest way to relieve pent-up demand is with a drop in mortgage rates because wages aren't expected to increase as sharply and as quickly as mortgage rates can decline, and home prices continue to stay pretty stable. But Rick's got some slides prepared for us, and Rick, why don't you go ahead with your housing market detail? And for those of you in the audio only, Rick is really good at describing things for those that don't have the visual aid.
 
Rick Sharga  19:32  
Thanks, Keith. Yeah, we'll jump in, and this is kind of a recap of some of the things we've already talked about to start with. Higher mortgage rates, you and I have been talking about quite a bit already, really have contributed to worsening affordability. So the market was starting to feel at least marginally more affordable. So things weren't affordable for everybody, but more homes were more affordable for more people, particularly those, and I'm sure you've talked about. In sort of the upper leg of the K-shaped economic recovery, if you break that K into two parts, the upper half is doing pretty well, and actually is where most homeowners reside. If you look at the lower half of that K, it's predominantly renters, and those renters need whatever breaks they can get to become homeowners, and these higher mortgage rates certainly aren't helping. For your listeners who are wondering about when rates will go down, the short answer is they're unlikely to go down at all until we get oil prices back under control, which means not until the war in Iran comes to a conclusion.
 
Rick Sharga  20:38  
Very likely, because that drove bond yields up, and bond yields drive mortgage rates, but the bond markets are also concerned about the $40 trillion federal deficit, which leads the Treasury to print more bonds and sell more bonds in order to pay down the debt, and so they're now competing, and it also is a little bit concerned about the massive investment in data centers to support the growing AI business. So all of that is kind of in this big competitive scrum, if you will, which is causing the bond sellers to increase yields in order to sell these things off. So even once we get oil prices back under control, the likelihood of a huge drop in mortgage rates isn't great, but anything even back in the sixes right now would probably be appreciated by buyers.
 
Keith Weinhold  21:29  
My audience knows that I personally don't make mortgage rate predictions. I think it's a fantastic way to be wrong, but I recently found it noteworthy, Rick, when Cotality's chief economist Selma Hep, to paraphrase her, she said that mortgage rates are not going to get down to levels where mass buyers want them for at least three years.
 
Rick Sharga  21:49  
I think she's probably spot on. If you look at recent revised forecasts from the Mortgage Bankers Association, from the economics team at Fannie Mae, they've all raised their mortgage forecast for 2027 to be no better than the high sixes, and the likelihood of us being in the low fives or high fours, absent a huge recession or another global pandemic, really isn't particularly strong for the next few years. So I think Selma's probably spot on. We have seen home prices continue to increase, according to the National Association of Realtors. Sales prices increased on a year-over-year basis for the 38 th consecutive month. But it's important to note where these price increases are landing. So, the NAR said the prices went up by about 1.6% year over year. In the same month, the rate of inflation was 3.4%. So, if you look at a home price in adjusted dollars, if it went up 1.6 percent year over year, it's actually cheaper than it was a year ago. And so, home price appreciation is not keeping pace with either the rate of inflation or wage growth, and wage growth hasn't been exciting. But even at 3.1% which was the most recent number, wages are going up faster than home prices. So over time, this does have a little bit of a mitigating effect on affordability, and this is true no matter whose price appreciation numbers you're looking at. NAR had it at 1.6 percent. The FHFA, which is the government body that controls Fannie Mae and Freddie Mac, had it at about 2.3% in their most recent mark. And there's a report that Fannie Mae puts out that's based on the assessments from 100 different market analysts and economists, I'm honored to be one of those 100. But our collective number for the year is probably between 2.1% and 2.2% annual growth. So, for all intensive purposes, home prices have flattened out. And what's important to note for anybody who's looking to invest, anybody who's looking to buy a home, is these national numbers are useful, but in your local market they're useless. If you look at the top 300 metro areas, for example, across the country, what you would find is that about 54 of those markets are seeing home prices actually fall year over year, and a lot of those markets are concentrated in in Florida and Texas, that Gulf Coast region in particular.
 
Rick Sharga  24:27  
There are a handful of markets where prices accelerated rapidly in the post-COVID era. Markets like Austin and Denver, Phoenix, Las Vegas, Seattle, Atlanta, and we're seeing some clawbacks, some some price corrections in those markets because they accelerated too high and too quickly, but if 54 of the top 300 metros are seeing price declines, that means that 246 are seeing prices go up, and a lot of the markets where prices are going up the most rapidly are in the. Northeast and Midwest, because there's a very strong correlation between inventory levels of homes available for sale and price trends. And by the way, those price declines for people who continue to be promoting the coming devastation of home prices in the country. I think this is one of the first things you and I ever talked about on your podcast. The markets with the biggest year-over-year price declines right now were Austin and Myrtle Beach, South Carolina, and in both cases, that enormous year-over-year decline was 4% On the other hand, you have markets like Wausau and Hartford, and and places in the Midwest and Northeast where prices are going up 567, 8% year over year. So really important to know what's going on in your local market or whatever local market you're looking to transact in, because the prices and the price trends vary pretty significantly across the country.
 
Keith Weinhold  25:58  
And Rick, we're talking about home price change. It's interesting. There are so many different ways to divide up the market. A lot of our listeners and viewers buy entry-level homes, oftentimes single-family homes in the 300 something Ks and less. Do you have any sense for how much home price growth there is in entry-level homes versus the national number?
 
Rick Sharga  26:20  
You know, you would expect that entry-level homes would see prices going up at a higher rate than, say, luxury homes. It's actually not the case right now, and one of the reasons I believe is not the case is because there's very little entry-level inventory available anywhere, and a lot of the inventory that is available is in a pretty sad state of disrepair, so really can't capture significant price increases. What we're seeing right now is that a lot of people in entry-level homes locked in at lower mortgage rates and simply can't afford to move up, so they're keeping these homes off the market, and for whatever reason, the again the the limited number of homes that are available and usually supply and demand would work to drive those prices up isn't working as much as you'd expect, at least in the data that I'm seeing. And again, I think it's partly because these the homes that are available tend to be older homes that need a lot of work.
 
Keith Weinhold  27:24  
Yes, and with affordability for everything being difficult, yes, you can see how perhaps some of these people that have lived in these entry level homes for a long time, locked into low mortgage rates, might not have that much discretionary income for renovations and such. And boy, this really makes it valuable for a lot of the providers that we deal with that build new construction single-family homes, often in the three hundreds or less. That's what America really needs.
 
Rick Sharga  27:52  
Yeah, I'm seeing the same thing you are when I look at investor data, Keith. The sweet spot is in the three hundreds, probably. Interestingly, the big institutional investors buy even cheaper when they're still buying, and they they really are focused on less expensive markets and smaller, less expensive properties that do need some work. But a lot of those big investors are actually redeploying their capital now into ground up construction, and partly that's because of the new legislation that was passed recently, the 21st Century Road to housing bill. One of the other interesting things, and this looks like a contradiction to what we just talked about, was while sales prices continue to go up, list prices are actually down for the 10th straight month, and so there's a difference between the final sales price, which is up year over year, and the list price, which is down just a smidge, about 1.3% year over year as well. What that suggests to me is that the sellers are getting a little more rational about their list prices today.
 
Rick Sharga  28:56  
We do still see that a very significant number of properties that are sold are taking a price reduction. Depending on whose numbers you follow, data from Realtor.com that says about 20% of listings are taking a price reduction. They're probably talking about all listings, whereas some other groups are showing 40% list price reduction number. Like 40% of all homes are taking a list price reduction. I believe that refers strictly to properties that have been sold. And again, these aren't huge price reductions, but the fact that we're starting to see people get a little bit more rational with their list prices, the fact that we're seeing a continually high number of list price reductions also tells me that buyers realize they have a little bit more room to negotiate, and are probably negotiating a little harder before they close that transaction.
 
Keith Weinhold  29:48  
You're listening to Get Rich Education. We're talking with housing intelligence analyst Rick Sharga with the C.J. Patrick Company with detail about today's housing market. More when we come back.
 
Keith Weinhold  29:58  
I'm your host Keith Weinhold. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals? A lot of accredited investors leave capital sitting in cash because it feels safe, but inflation and missed income opportunities can quietly erode its value. Freedom Family Investments offers freedom notes for investors seeking structured income backed by real estate-it's a straightforward approach built on real assets, not speculation. In full disclosure, I'm an investor myself. What I like is that their team walks you through how it all works, so you can decide if it aligns with your portfolio and income goals. Every investment carries risk, and nothing is guaranteed, but with a track record of consistent, on-time investor payouts, they built real credibility. Go to freedomfamilyinvestments.com to book a clarity call, or text family to 66866. That's family to 66866. What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your pre-qual and even chat directly with President Caeli Ridge while it's on your mind. Start at RidgeLendingGroup.com. That's RidgeLendingGroup.com. s
 
Todd Drowlette  31:34  
This is the star of the A and E show, The Real Estate Commission, Todd Drowlette. Listen to Get Rich Education with my friend Keith Weinhold, and don't quit your daydream.
 
Keith Weinhold  31:54  
Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're going deep on the state of the housing market with housing intelligence analyst Rick Sharga, and Rick, I know you've pointed out a strong correlation between inventory and prices. It's like economics one on one is supply demand, and so much of price change has had to do with supply in today's market.
 
Rick Sharga  32:17  
Yeah, it's really interesting, Keith. When you start to take a look around the country at inventory levels of homes that are available for sale, there's about a 4.6 month overall supply of homes available for sale, and that's a combination of how many homes are listed and how quickly they're going through that sales transaction. So it's not just raw numbers; it's kind of a calculation. But if you look at just the kind of raw numbers of inventory, we've been going up since 2021 at double digit inventory growth every year 15 20% more homes available for sale until late last year, and if we're looking at this year, inventory levels are up probably less than 2% year over year, so we're seeing fewer properties listed for sale. And in fact, the only reason inventory numbers are up is because it's taking a little longer to sell them once they're on the market nationally. The median number of days on market is about 60 days, but that varies wildly. If you're in a market like Denver, it might be taking you 90 days if you're in coastal California. It might be taking you 14. So it really depends on where you are in the country. But if you look at where we are compared to a year ago, almost every state in the union has seen at least a modest increase in inventory.
 
Rick Sharga  33:40  
There are a couple of markets where prices have been falling. Markets like Florida, parts of Colorado, areas like Boise, Idaho, where there's been a retrenchment. So we had too much inventory. Prices started to fall, and so we're seeing inventory pulled back a little bit off the market. And if you go back as far as you know prior to COVID, when we had that buying boom, probably only about 19 or 20 states have more inventory available today than they did prior to Covid, and a lot of those markets are markets that we talked about earlier: southern markets, Gulf Coast states, some markets in the southeast where prices have weakened, whereas you got a state like Illinois, which is 62% less inventory available for sale. Parts of the Northeast similar numbers, and that's again where we're seeing home prices go up the most because people have to compete for the available properties.
 
Keith Weinhold  34:36  
If you, the listener and viewer, remember the last time Rick was here, we had an episode about is there really a housing shortage? The short answer is yes. We continue to heal. We continue to build more and try to provide more available inventory to get ourselves back up to pre-pandemic levels.
 
Rick Sharga  34:54  
Yeah, and two of the metrics that I look at, Keith, in terms of where the market is going. Are something called pending sales, which is a report that's put out that shows contracts that have been entered into, but the transaction hasn't been recorded yet. And the other is the mortgage purchase application index, people applying for a loan to buy a house, and both of those have been doing fairly well year to date until we cross that 7% mortgage threshold, at which point both of them dropped pretty significantly. So the mortgage purchase applications index dropped to about 13% lower number than it was a year ago, and in in September we had about 6000 fewer pending sales than we had the same time in September a year ago, so these two metrics are usually an indicator of what to expect in the months ahead. And what they're suggesting to me is that September and October home sales are probably not going to be terribly exciting as people adjust to these new higher rates. That said, we had been coming out of a period four consecutive months, starting back in April, where we sold more homes than we'd sold the prior year.
 
Rick Sharga  36:07  
August broke that streak. We actually sold fewer homes than we did in July, and fewer homes than we did August a year ago. And we're coming up to a time in the year where 2025 sales actually were pretty strong for the last four months of the year, so I'm afraid that our our sales comps, if you go year versus year, are going to be challenged for the rest of this year. So the good news is, I mentioned a few minutes ago that at the end of August we were still 1.6 percent ahead of where we were a year ago in terms of home sales. The bad news is, in a best case scenario, I think we're probably going to be flat year over year by the time we get to the end of December. New home sales, interestingly, had a really good month of August. They had dipped down to about 607,000 annual sales in July, but zoomed up to about 684,000 in August. 
 
Keith Weinhold  37:02  
Okay, we're talking about brand new construction here as brand new resale. Yeah.
 
Rick Sharga  37:06  
While the resale numbers look like they're flatlining at about 4 million a year, if we were to hold this 684,000 number through the end of the year for new home sales, we would actually surpass a lot of the forecasts for 2026. So, in a lot of cases, Keith, I'm seeing investors buying closeout properties from new home sellers and converting them into rental properties. I was recently speaking at an event in Northern California where I saw a builder advertising 2.9% mortgage rates. So the builders are buying down these mortgage rates in order to entice buyers. They're making price concessions. They're making concessions on fixtures and upgrades to the properties. So you know, for people looking not for a fix and flip investment, but for a rental property investment, don't look away from new home builders because they are looking for opportunities to move some of their assets, and the majority of them are making price concessions. In fact, there's a really unusual thing happening right now, Keith, in that the median sales price of a new home nationally is lower than the median price of an existing home.
 
Keith Weinhold  38:15  
Right.
 
Rick Sharga  38:16  
You mentioned building. I don't want to walk away from that. Housing starts are actually a little bit down year over year. That's true for both multifamily and single-family homes. The most recent numbers in August, we had about 1.27 5 million housing starts. Again, down year over year and month over month. On the other hand, though, building permits are actually up year over year. Almost 1.4 million building permits were issued. So, I believe builders have a good, positive long-term view of the housing market. But in the short term, the reality is they're trying to work through a bit of a backlog. There are 483,000 new homes available for sale at current sales rates. That's about an 8.5 month supply.
 
Keith Weinhold  39:01  
That's a lie.
 
Rick Sharga  39:02  
And normally with new homes, you're looking at a six to seven month supply. So right now, I really do believe what builders are doing is being circumspect about starting too many new projects and trying to work through the inventory they have, so they don't get caught in a position like they were right before the housing market crashed back in 2006, 2007, when they were sitting on about a 13 month supply of homes,
 
Keith Weinhold  39:28  
I'm so glad that you spotlighted this, Rick, as new build homes being a potential opportunity for investors. It's the same thing that I've been telling my audience for over a year, because for more than two years now, builders have commonly offered generous concessions. For example, 12 days ago, I hosted a webinar with our provider in Memphis called Mid South Homebuyers, where they are buying down your mortgage rate to about five and three quarters percent on a 30-year fixed-rate loan, and they're also having their. Property management fee from the normal 10% down to 5% as new build incentives.
 
Rick Sharga  40:06  
That's pretty generous, but it's not out of the ordinary for what we're seeing across the country, particularly from builders trying to wrap up a project. Keep in mind, they want to recapitalize so they can move on to the next build, and so it is an opportunity that is a little bit unusual for investors, historically speaking. Just a few words I wanted to share with you, Keith. You mentioned foreclosures. Right now, interestingly, mortgage delinquency rates are relatively low. If you look at all mortgages across the country, about 4.37% of those, just below 4.4% are in some stage of delinquency. That's lower than the long-term average, which is about five and a quarter percent, and lower than the numbers were prior to the pandemic. The outlier here is the FHA. So FHA loans are running at about a 12% delinquency rate.
 
Keith Weinhold  40:57  
Wow!
 
Rick Sharga  40:58  
And if you look at seriously delinquent mortgages, loans that are 90 days past due or foreclosure, about 6% of FHA loans find themselves there. So, over a half of all seriously delinquent mortgages are FHA loans, and that's despite the fact that FHA mortgages only account for about 15% of the market. So, a very disproportionate share. We talked about markets earlier where home prices have been declining, and if you look at where the FHA loans. So for your listeners looking for potentially distressed properties to buy, what I'm suggesting is the bulk of them in the next 12 to 18 months are probably going to be on FHA properties, and if you're looking for where those are, they have a disproportionately high share of market, starting in Denver, going down to Las Vegas and Phoenix, and then across the southern band of the country. 10% of all FHA loans are in Texas. 10% of all FHA loans are in Florida. 20% of all Oklahoma mortgages or FHA loans, so that's where you're going to see a lot of these FHA loans. They're in markets where property values have been declining year over year, not dramatically, but if you took out an FHA loan with a three and a half percent in Austin and property values are down 4% you're effectively underwater a year later, and if you also look at where insurance premiums have gone up the most for homeowners, it's the same markets. And if you were to look at where student loan delinquencies are the highest, it's also the same markets. So it's almost this perfect storm for FHA borrowers in that southern band across the country, and I suspect if I were to predict where we would see the most foreclosure activity in the next couple of years, that's really where I would be looking. 
 
Keith Weinhold  42:53  
Okay, so foreclosure activity a little low overall historically, but heavily concentrated with FHA borrowers, and I mean, there are some reasons for that. FHA versus conventional. I mean, with FHA, typically a smaller down payments used. Oftentimes, that borrower has a lower credit score and a higher debt to income ratio. Consequently, that's why more of them have gotten into trouble.
 
Rick Sharga  43:16  
Yeah, they have less wiggle when they do get into trouble too. So, if you're an FHA borrower and you lost your job temporarily. You may never be able to catch up on your mortgage once you've missed a couple payments. It's in the industry we talk about being, you know, one broken water heater away from a pretty nasty delinquency cycle. The VA portfolio is also experiencing slightly higher than usual delinquency rates. Something for your listeners to think about, by the way, in this relatively high mortgage rate environment, is virtually all FHA loans and VA loans are assumable. Meaning, if you bought that property, you could, generally speaking, take over the loan from the original homeowner and get a second loan to make up whatever difference was required to buy that house, and that's one way to get a mortgage with a lower rate than what you would get on the open market today. Need to be working with somebody who can walk you through how assumable loans work. Not always something you might be able to use necessarily for an investment property, but certainly something worth looking into if you're looking for ways to save some money. We were talking about foreclosure activity. The first legal notice you get that you're in default on your loan is called a foreclosure start.
 
Rick Sharga  44:34  
They're up about 10% year over year, and they're up to about 85% of where we were right before the pandemic hit. My suspicion is that we will be back to pre-pandemic levels by the end of this year. So that's the first stage of foreclosure. We're seeing foreclosure sales up about 6% year over year, but they're nowhere near where they were prior to the pandemic. So something is happening between that initial. Notice of foreclosure and a potential foreclosure sale, where either people are getting their loans modified and making payments, or increasingly a lot of these folks, when they get that foreclosure notice, are selling the property on the open market because they do have some equity and they'd rather protect that equity than risk losing it all to a foreclosure sale. So, again, a point for your investors out there: if you're looking at foreclosure activity, look at those early stages of foreclosures and reach out to the homeowner, because this could be a win-win scenario where you get a property below market value that's not in terrible shape, and you actually help that homeowner avoid a foreclosure and walk away with some money in their pocket, and foreclosure inventory not back to where we're seeing it normally. Prior to the pandemic, we were around maybe 350,000 homes in some stage of foreclosure.
 
Rick Sharga  45:54  
Now we're at about 250,000, but it's the highest number we've seen since the government put all those restrictions in place back in 2020. So net net of all of this, Keith is that for the first time, really in the last seven years, we are on pace to see foreclosure activity to finally surpass 2019 levels. And I don't say that gleefully, and I don't say that dismissively. But even in 2019, we were looking at an unusually low number of foreclosures because the economy was strong. There was a lot of equity, and lending standards were so high. So it's been a long slog since then because of COVID, because of the government protocols that were put in place, and again because there was equity and lending standards. But if your buyers are out there looking at foreclosures, we're probably going to be back to those pre-pandemic levels by the end of this year.
 
Keith Weinhold  46:46  
Okay, perhaps some more opportunity there,
 
Rick Sharga  46:49  
And that's really all I had prepared in terms of prepared comments today, Keith. But there's a lot that we've already covered in terms of what to expect in the housing market. Now, what to expect in the distressed market? Foreclosures, distressed properties in general, still going to make up a very small percentage of overall sales. And for anybody expecting to see a boom in bank-owned properties coming to market or a huge number of short sales coming to market, neither of those appears to be in the cards for any time in the near future,
 
Keith Weinhold  47:23  
and it sounds like everybody sure should get used to this normalized interest rate environment. Well, Rick, this has been great. How can our audience engage with you and what you do?
 
Rick Sharga  47:36  
Well, I'm easy enough to find on social media, Rick Sharga at either LinkedIn or on what used to be called Twitter, you can also visit my website cjpatrick.com. But if you reach out to connect with me on either X or LinkedIn, just mention that you saw the podcast with Keith, so that I know you're not some Russian bot coming to Hackney. And you'd be surprised some of the the invitations I get on social media, Keith, or or maybe you wouldn't, but always happy to connect with people who are looking for information on real estate and mortgages.
 
Keith Weinhold  48:07  
That is spelled S H A R G A. Rick, it's been great having you here.
 
Rick Sharga  48:12  
Always a pleasure, Keith.
 
Keith Weinhold  48:20  
Nice assessment from Rick. Both being native Pennsylvanians, he and I have the same favorite football team, and I've since talked to Rick about it. And wow, he really knows how to break down the NFL X's and O's stuff. One of the opportunities Rick brought to light is particularly interesting: new build home supply at eight and a half months, where six to seven is normal. That's part of what provides the motivation for builders to buy down your rate for you. They want to clear some of that supply. One thing that has not changed is that just regular buy and hold real estate still pays five ways simultaneously when you buy right, such that a total rate of return of at least 20 to 25% each year is not out of the ordinary at all. If you're new to this show, that might sound impossible or high flying or like you're taking some big risk, it is none of those things. This is why real estate has made more ordinary people wealthy than anything else. That's exactly why. And if you're uninitiated on that, I provided five videos for free. That is course level instruction. Me teaching you, and at the end of each video, with a typical property, I add up your rate of return, and it culminates in the grand total at the end of the fifth video. I can't recommend the series more. It's free, and it is wide open available. You don't even need to leave your email address. You can access. That course level video series called Real Estate Pays Five Ways at getricheducation.com/fiveways. You can land there and start watching immediately. Again, it's getricheducation.com/fiveways. That's with the number five. Now you know how I've discussed that waiting for lower mortgage rates is a losing strategy, and you just cannot count on that happening. And I haven't just said that for months; I have said it for years. If you've been waiting for mortgage rates to come down before owning investment property, maybe you think that next I'm going to say you'll be waiting a long time. Yes, you would be, but you might be waiting for something that is already available, and here's what I mean: in select markets, home builders are offering substantial incentives to move new inventory, and one of the most valuable incentives is that aforementioned mortgage rate buydown. With the way the numbers work. That is better than an overall price cut. And some of these providers are doing multiple incentives. They're both buying down your mortgage rate and cutting your property management fee in half, or giving you some other incentive. So while you might see these prevailing mortgage rates quoted a lot higher in the mainstream financial media. Some new build investment properties can come with builder-paid financing incentives that bring your rate meaningfully lower, still into the fives. And it's not always new build; sometimes it's resale property as well. That can change the entire deal and help ensure that you're paid up to five ways at the same time. A lower rate, of course, means a lower monthly payment, better cash flow, and a property that makes sense today, not someday if rates happen to fall someday. But you need to know where these opportunities are, which providers are offering them, and whether the property itself still makes sense after you look at rents, expenses, management, and the local market. This is exactly where we can help you with our GRE investment coaching. Our investment coach can help connect you with investor-friendly properties and providers in markets where the numbers make sense, including a lot of new builds with those rate buy downs and when and where they're available, and they sure are now in Florida, Tennessee, Georgia, Arkansas, Alabama, Ohio, Indiana, Kansas, and more. And see, because we deal nationally, and we do this for a lot of buyers. We have the scoop. We know what kind of offer sellers will accept because we've seen what other buyers have tried and what has worked and what hasn't, and it is actually free to meet with a GRE investment coach if you even wanted to buy something from us, you cannot because we don't have anything to sell. So build your wealth.
 
Keith Weinhold  49:25  
This is why real estate has made more ordinary people wealthy than anything else. That's exactly why. And if you're uninitiated on that, I provided five videos for free. That is course level instruction. Me teaching you, and at the end of each video, with a typical property, I add up your rate of return, and it culminates in the grand total at the end of the fifth video. I can't recommend the series more. It's free, and it is wide open available. You don't even need to leave your email address. You can access. That course level video series called Real Estate Pays Five Ways at getricheducation.com/fiveways. You can land there and start watching immediately. Again, it's getricheducation.com/fiveways. That's with the number five. Now you know how I've discussed that waiting for lower mortgage rates is a losing strategy, and you just cannot count on that happening. And I haven't just said that for months; I have said it for years. If you've been waiting for mortgage rates to come down before owning investment property, maybe you think that next I'm going to say you'll be waiting a long time. Yes, you would be, but you might be waiting for something that is already available, and here's what I mean: in select markets, home builders are offering substantial incentives to move new inventory, and one of the most valuable incentives is that aforementioned mortgage rate buydown. With the way the numbers work. That is better than an overall price cut. And some of these providers are doing multiple incentives. They're both buying down your mortgage rate and cutting your property management fee in half, or giving you some other incentive.
 
Keith Weinhold  51:16  
So while you might see these prevailing mortgage rates quoted a lot higher in the mainstream financial media. Some new build investment properties can come with builder-paid financing incentives that bring your rate meaningfully lower, still into the fives. And it's not always new build; sometimes it's resale property as well. That can change the entire deal and help ensure that you're paid up to five ways at the same time. A lower rate, of course, means a lower monthly payment, better cash flow, and a property that makes sense today, not someday if rates happen to fall someday. But you need to know where these opportunities are, which providers are offering them, and whether the property itself still makes sense after you look at rents, expenses, management, and the local market.
 
Keith Weinhold  52:10  
This is exactly where we can help you with our GRE investment coaching. Our investment coach can help connect you with investor-friendly properties and providers in markets where the numbers make sense, including a lot of new builds with those rate buy downs and when and where they're available, and they sure are now in Florida, Tennessee, Georgia, Arkansas, Alabama, Ohio, Indiana, Kansas, and more. And see, because we deal nationally, and we do this for a lot of buyers. We have the scoop. We know what kind of offer sellers will accept because we've seen what other buyers have tried and what has worked and what hasn't, and it is actually free to meet with a GRE investment coach if you even wanted to buy something from us, you cannot because we don't have anything to sell. So build your wealth.
 
Keith Weinhold  53:10  
You can book a time with a GRE investment coach at a time convenient for you to simply get clarity, look at real opportunities, and decide whether any of them fit your goals, you can open a calendar and set that right now at greinvestmentcoach.com. We can help you build your wealth. It's truly free at greinvestmentcoach.com. Next week, here on the show, a new way to build your wealth through real estate, and it's possible that you've never heard about it before. Until then, I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 2  53:51  
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively. 
 
Keith Weinhold  54:19  
The preceding program was brought to you by your home for wealth building, getricheduceducation.com

Keith examines the shift toward a buyer-friendly real estate market and the concessions investors may be able to negotiate. 
He speaks with Sharon Lechter, co-author of Rich Dad Poor Dad and a financial education author, about scarcity versus abundance, building income-producing assets, and why action matters as much as access to information. 
They also explore women's investing groups, evaluating mentors and AI-generated advice, and doing careful due diligence in today's market. 
Sharon shares how her book Old Wealth, New Wealth, True Wealth broadens the conversation beyond money to include family, health, and lasting connections.
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. Don't live below your means. Expand your means. And other timeless wealth-building quotes are attributed to the landmark book Rich Dad Poor Dad. We had its co-author Robert Kiyosaki on the show earlier this year. Today, it's the other co-author of the original book. It is mindset and motivation 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 at MidSouthHomeBuyers.com. That's MidSouthHomeBuyers.com.
 
Speaker 1  1:38  
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  1:54  
Welcome to GRE from Montrose, Colorado, to Monterey, California, and across 188 nations worldwide. I'm Keith Weinhold, and you are inside Get Rich Education. Before we bring in this week's guest, Robert Kiyosaki's Rich Dad Poor Dad co-author, where you'll learn about the way women's investing differs from men's, the money relationship between parents and kids, and a whole lot more about how the 1997 book changed the world. I've got some real estate commentary first. Over the past month, that has turned into more of a buyer's market. Yeah, this environment has turned a little worse for sellers and a little better for buyers. A big part of the reason for this is that mortgage rates, although they're historically at normal levels, they have hit a two and a half year high. Now that part doesn't sound very buyer market friendly, but the reason it is in what's happened is that we already know that mortgage rate buydowns are perhaps the most common concession, especially among home builder sellers, but today, since fewer buyers qualify, you can ask for more concessions than just that. Along with the rate buydown, consider asking for closing cost help too. As a buyer, you can more aggressively negotiate repairs than you could a few years ago, as well. That's more appropriate that you ask. Now I don't know that you want to go as far as to ask the seller to throw in the fridge or the patio furniture, but you can request more concessions than you could previously, and yet it's not so bad for sellers because, depending on the measure that you use, home prices are still up one to 3% over the past year.
 
Keith Weinhold  3:53  
And like I discussed last week on the show, I dug into numbers and I pointed out why concessions like a rate buydown are better for buyers than a discounted price is. If conditions are right, make a move. If they aren't, don't. I know that today's esteemed guest talks about the importance of taking action. You need to have some risk capital in your life-it's the only way that you're going to make it big. All wealthy people have this. It doesn't need to be reckless risk, but you do need a bucket so that you can invest aggressively. Risk capital. Now Warren Buffett, though I don't know if he really said it, Buffett purportedly once asked somebody to show him a billionaire economist. Buffett is still waiting. He has never met a billionaire economist, and the point is that. That's because economists-they just build models. You need to do. You don't get paid for the model. You get paid for the move. With that in mind, let's meet this week's esteemed guest. If you're even a little familiar with the financial education world, this week's guest needs little intro because you know it's really hard to think of anyone more influential in this genre. She is a five-time New York Times best-selling author and has advised 2u.S. presidents on the topic of financial literacy. She was tapped by the Napoleon Hill Foundation to re-energize the Think and Grow Rich books. I happen to know that she was just serving Cardone Ventures shortly before we sat down to speak here. And you know, some people don't actually know that she co-authored the international bestseller Rich Dad Poor Dad, and 14 other books in the Rich Dad series. And you know, frankly, her accolades are too numerous to mention, or else we wouldn't have time for a conversation with her. It includes that she is the only woman ever inducted into the Personal Growth Hall of Fame because she's such a motivator. And today, she's quite an active philanthropist and the CEO of Pay Your Family First. Maybe we'll find out what that is. She has not been with us since 2015. Welcome back to GRE, the incomparable Sharon Lecter.
 
Sharon Lechter  6:35  
Thank you, Keith. I'm delighted to be with you, and I'm just as I said before we even started. I'm so proud of you and the success and the generosity you have in helping people understand the power of real estate. So thank you.
 
Keith Weinhold  6:47  
That's kind of you to say. And you know, Sharon, nearly 30 years after Rich Dad Poor Dad, Americans have more financial content available than they ever have. So why do so many seem less financially prepared.
 
Sharon Lechter  7:03  
Well, I think it comes back to financial mindset, and and I know you agree with this. What happens is we're raised with these old ideas of pinch your pennies, save for a rainy day. Yeah, money doesn't grow on trees, so we we grow up hearing this money negative, money negative, and so we develop a scarcity mindset, and we have to really acknowledge it, and then start shedding it. Because if you think about, we can't afford it. That's a negative, right? So it really reinforces scarcity. And when people start getting successful and they have some money, they start worrying about losing it. And so we have to really, along with financial education, we actually have to help with the mindset change from scarcity to abundance. You know, the whole concept of go to school, get a job, and retire is a thing of the past. And so, there's nothing wrong with being an employee, but you have to realize it's not what you do for your paycheck that determines your financial future is what you do with your paycheck that determines your financial future.
 
Keith Weinhold  8:07  
Well said. You know, even if someone does get some formal financial education, their first teachers are usually their parents, and their parents do tend to reinforce that scarcity mindset. Money doesn't grow on trees, so even if you do get financial education later, you know it's during your formative years when you're impressionable that that scarce stuff sticks with you,
 
Sharon Lechter  8:29  
and you sit back and you watch other people. So all of a sudden you get FOMO, fear of missing out, and yet you still are too fearful to take action. And I think that's why what you do through Get Rich Education is such an incredible gift to people because you are who you hang out with, and if you're hanging out with entrepreneurs and successful people, you're going to have probably it's going to feed your drive and your desire to succeed. But if you're hanging out with people that are just like well, whatever, you know, as Napoleon Hill and outwitting the devil, I share drifting concept. If you're just kind of drifting through life, that's where you're going to stay. You're not going to achieve the goals you set for yourself because you're not paying attention to it and you're not driving towards them.
 
Keith Weinhold  9:14  
Yeah, and I think where scarcity might manifest itself once one grows up into an adult is a lot of times a person thinks they're doing the right financial thing, but it's often misdirected. People don't understand concepts like arbitrage and leverage, and they're concepts that we discuss a lot here. But those things are not complex or arcane. For example, a man will skip a family vacation and work overtime at, say, his medical job in order to make extra principal payments on a mortgage loan with a 4% interest rate. Well, now he and his whole family just lost leverage, arbitrage, and most importantly, lifestyle.
 
Sharon Lechter  9:58  
Time. It's all about time. You know, I talk about you're financially free when the income from your assets exceeds your monthly expenses, and what does that mean? You have your time back, and so you have the opportunity to either spend more time with your family or contribute to society, and that's what has been a lost element. I mean, rich dad, poor dad. When we built the rich dad brand globally. We kind of redefined how people looked at money, and then when I started teaching through the Pullman Hill Foundation and Pay Your Family First, I really wanted to focus people's mindset and start implanting the word asset, asset, asset, asset.
 
Keith Weinhold  10:35  
Yeah.
 
Sharon Lechter  10:35  
You know, and I say assets are sexy to get people to understand that instead of getting asking for overtime or looking for a second job, less buy, build, or create an income-producing asset because then it becomes this 24-hour economic engine working for you, and you don't have to be there. And the more of those you can get, the more that you'll get your time back, and that's the goal. The differential, if you think about the cash flow quadrant, our second book, the left side, employee self-employed. That's you exchanging time for money, and there's only so many hours in the day and so many days in the week. The right side of the quadrant, as a business owner and investor, you have businesses, systems, people working for you. You have your investments, your real estate investments working for you, and so the amount of money you can make on the left side is limited because of the time. The amount of money you can make on the right side is unlimited because we can always get more assets that are generating income to us, and that allows us to have that lifestyle that we deserve,
 
Keith Weinhold  11:42  
sort of assets that pay you versus work that drains you a lot of times, and with this wave of inflation, you know it seems Sharon like this has become even more relevant amidst the K-shaped economy, where I've often reinforced with people, boy, it's rarely been more apparent that capital compounds and labor doesn't.
 
Sharon Lechter  12:06  
Oh, you're so true, Keith. And I think one of the other issues that's really been talking a lot about lately, trying to open people's eyes. There's a difference between being frugal mindset and a scarcity mindset. All right, a frugal mindset is a choice. You're choosing to spend less and keep more. Factual, right? Frugal. I'm just going to fly coach instead of first, so I don't have to spend so much money, right? Scarcity is all fear. It's all fear based. Is I'm never going to have enough, right? And that fear, high emotion, low intelligence. That fear just feeds in us and creates that first step is even harder to take because you're afraid. And so there's nothing wrong with being frugal, if you align yourself with what you keep, how you invest it. Are you investing it in your future? Are you putting in a savings account so you're actually walking backwards instead of forward, and you're investing? And so that's what so many people are doing, particularly women. I had a stat last week: 70% of the holdings for women investors are held in cash.
 
Keith Weinhold  13:18  
I'm not surprised. Women are better than men at some things that might even include investing. But in my experience, I think with what you're touching on is women do tend to be more conservative. They don't think about the opportunity cost of maybe their purchasing power diminishing by 5% annually with money in a quote-unquote safe savings account.
 
Sharon Lechter  13:39  
Yeah, women investing groups actually outperform men investing groups, but that's because the power of the group. Okay, again, your environment, and I think alone, women that fear base comes up, and they're afraid to pull the trigger. They're afraid they're going to lose it, and we find that in every aspect in the business world. Woman makes a mistake and she takes it as a definition of herself, and she carries that mistake around with her forever. Men, oh, that happened. Okay, let's move on. So it's really important to look in in the mirror and say, you know, we each have all the tools we need to be successful. God created us to be perfectly who we are, not someone else, and you have to make the decision. There are three things we can control, Keith, and I know you agree with this: your thoughts, your words, your actions. And when you start with a negative mindset, it impacts what you say, and it impacts what happens to you. Particularly when you're worrying about something, you are causing a physical onslaught to your body. Your negative thoughts you start losing your health, and so when you think about I can't afford it per se, that's a negative statement. Yeah, you just want to go to bed and turn off the lights.
 
Sharon Lechter  14:57  
But instead, if you change the philosophy. And instead, say, "How can I afford it? Do you feel the difference? It opens your mind. It triggers your subconscious mind to go to work figuring out how you can afford it. So, by just changing the thought and how you express it, you change the results. My mother was the queen of worry, so I got a lot of practice, and I still have what I call my little worry storms. But I stop myself, and I go, "Okay, Sharon, instead of focusing on what I'm afraid is going to happen, what I'm worrying about, let's change my thought process, put on a different perspective, and say, I want to focus on what I do want to have happen? It changes everything. It makes you optimistic. It shows you brightness of future. And the world we're living in right now, we all need a little brightness of future. So,
 
Keith Weinhold  15:51  
Don't say I can't afford it. It turns off your mind. Instead, ask how can I afford it. That activates the mind, and that's how something good can happen. You said something so interesting there. I think Sharon that women's investing groups outperform the results from men. Tell us more, including why do you think that is?
 
Sharon Lechter  16:12  
Well, they don't pull the trigger as fast as men do, but because they're together, they do a group analysis and they've got somebody doing the deep dive, somebody who likes to look at the facts and the history, and so because together they feel more powerful, they feel more confident because they're not doing it alone, and the fact that they're looking at that, they're making decisions based on knowledge and information, they tend to outperform. So
 
Keith Weinhold  16:42  
why don't men do that? Do men take on the mindset of more like, "Hey, I'm a rugged individual. I don't need anyone else.
 
Sharon Lechter  16:48  
There's a lot fewer men investment groups. Men tend to invest more individually, or have somebody do it for them, and that you know it's really an issue more as from a women's lens than anything else, but they do outperform typical men's investments.
 
Keith Weinhold  17:06  
Well, Cher, we're talking about a scarcity mindset versus an abundance mindset. I've got to bring up something. Don't live below your means; expand your means. That is a quote attributed to the rich dad world, and I absolutely love it. Tell us more about what is meant by "don't live below your means, expand your means. Because to me, Sharon, it seems like that articulates what people think but don't know how to say.
 
Sharon Lechter  17:32  
And don't know how to do. That's the problem.
 
Keith Weinhold  17:34  
Yeah.
 
Sharon Lechter  17:35  
You know, I was given an incredibly precious gift. I had parents who talked about money at the dinner table? You know, they didn't have a lot, but they built a lot because I often share that I've been a real estate investor since the age of 10. Because my dad had real estate investments, I had to go scrub out bathrooms between tenants. He never learned the power of outside management. He always did it himself. But he also had orange groves, and he said, "Sharon, the oranges give me cash flow every year, but that property will increase in value. And today, that property is part of Sea World in Florida, so he was proven right. He had his own business; he was retired Navy, and so we talked about building assets. And it's interesting because my husband and I we just celebrated 46 years of marriage and our parents. That's actually, yeah. Thank you. We're similar ages. His parents had that scarcity mindset and frugality. You know, his father I think had every penny he ever saw when he passed. He would not spend any money. Now my parents, my father's would you know if he wanted something, he figured out a way to buy it, right? He didn't go into debt except for real estate. He was of the mindset that if I want something, I'm going to figure out a way to get it, and that concept we carried over into rich dad poor dad, and we actually carried that into our business relationship when we first started cash flow, I mean, we needed to buy a printer, and it was $300 or $400 at the time. We said, "Well, how are we going to make extra money? What kind of product are we going to sell to get that money? Because it's a matter of really understanding the power of creation, and if you want something, create a way to get it. Figure it out. Figure out how. When I talk about I can't afford it versus how I can afford it, it's so important for you parents out there to understand.
 
Sharon Lechter  19:31  
When you say to your kids, "We can't afford it, you're continuing a generational impact of scarcity mindset. And so, if your kids ask for something, you say, "Johnny, Mary, how can you afford it? Because I can tell you, kids get very creative about ways to make money. You know, and as long as it's legal, let them do it and let them earn it, reach their goal, buy what they want, celebrate it with them. Because that's not the greatest dividend you have. The greatest dividend from that process is you see their self confidence grow, because they did it on their own. And once a child knows how to make money on their own, there's no stopping them. Financial education is the gift of a lifetime. It doesn't go away once you learn it. And you made the comment about the words arbitration or leverage, people don't understand those words because they've never heard them. They've never heard it, right? Yeah, they've never heard them. They don't know what it means. Leverage. Oh, that's like a rock and a board, right? That's leverage. You know, you have to say, well, if you turn that into money, yeah, that's what it is. That's what we're talking about. That's the problem, and that's when we wrote Rich Dad Poor Dad. I wrote it at the fifth grade level because I did not want it to be intimidating. Because when it comes to money, money and fear are together, and so by the time you understand more about money, all of a sudden that fear is going down, and your self confidence grows.
 
Keith Weinhold  21:00  
Wrote Rich Dad Poor Dad at the fifth grade level. Hey, maybe that's pretty close to the average adult educational level. You know, you probably were on the right track there with that one. But yes, how valuable! If you're a parent and your child wants that Matchbox toy or that Star Wars action figure, don't say we can't afford it. Ask your child, okay, how could we afford this? And sure, they might want to start mowing the lawn or what have you. And yeah, when it comes to living below your means versus expanding your means, I'm thinking about the mindset of instead of moving into a cheaper apartment to save 300 bucks a month, how about trying to acquire a rental property again? How can we afford this that produces an additional $300 in monthly cash flow, and then that asset probably pays you in additional ways as well. You listen to Get Rich Education. We're talking to Pay Your Family Firsts, Sharon Lecter. More when we come back, including Rich Dad Poor Dad in an AI world. I'm your host Keith Weinhold. Let me ask you something: If you've worked hard to build wealth, is your money positioned to actually support your goals?
 
Keith Weinhold  22:08  
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Robert Kiyosaki  23:36  
This is our Rich Dad Poor Dad author Robert Kiyosaki. Listen to Get Rich Education with Keith Weinhold. Don't quit your daydream.
 
Keith Weinhold  23:53  
Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're talking with Sharon Lechter, one of the most influential memes in the financial education space, anywhere and ever today, she runs Pay Your Family First, and she's still an active author. We'll learn about that before we're done today. But Sharon, talk to us about what might have changed over time, if anything, and if these sort of rich dad poor dad principles are really holding up in today's world of AI in the modern era.
 
Sharon Lechter  24:25  
Access is the biggest issue. I mean, when we released Rich Dad Poor Dad, and as you said, we're coming up on our 30th anniversary. There was no internet. There was no Amazon. I know that's hard to believe. And so we literally had to get books into stores, and I would wake up in the morning and have faxes from bookstores all over the country, and have to ship out books to bookstores. But we did it because we knew we wanted to get the information out, and so now access to the information is easy-a stroke of a key on your laptop or on your computer or in ChatGPT. You can ask them a financial situation and get all kinds of information. The issue is taking action, so that hasn't changed. You know, taking action back in the early days of rich dad poor dad meant reading the materials, understanding it, attending a seminar, and actually going out and applying it. And today, you still have to take the action. I have something called your personal success equation that I have available. is an ebook that I give away. So you go to personalsuccessequation.com. But it really talks about your passion and your talent. So your passion could you've heard do what you love, love what you do. Well, I actually my passion came from the fact that we weren't teaching our kids about money. So my passion came from anger, and I still that way. When I get mad about something, I start another company.
 
Sharon Lechter  25:45  
But your passion and your talent—I had years as a CPA, years in publishing, and so I could combine that. And that's where most of us stop. We try to do everything on our own. But true success is having that P plus T, and then times A, the power of association. You know, I really value our association, Keith. But do you have people on your team who are strong where you are weak? Do you have the right mentors in today's world? If we compare it to 29 years ago, it's more important than ever to have mentors because speed market is everything. Have someone there that can help you open doors and help you speed away and be there to be counsel for you. And then times a taking action. Again, you know a lot of people have read the book but not done anything. You have to take action. You have to apply it. And then all of it you wrap with a plus F: faith, faith in yourself, faith in what you want to do, faith that you can do it, and faith that you will succeed. And where most of us fail is that F is actually fear, and that fear paralyzes us because fear either paralyzes you or motivates you. And 98% of people are paralyzed by that fear. And so I talk about that, how each element and how you can find your roadblock? What's keeping you back from creating success?
 
Sharon Lechter  27:05  
Power of association. Again, who are you hanging out with? You know, in Cashflow Quadrant, we talked about what quadrant are the people that hang out with you in. But really, think about: Are the people around you supporting you, encouraging you, pushing you, or are they trying to pull you back from doing what you know that you need to do? And that advice is such an incredible issue today, even more so than ever, and because of social media, which was not there 29 years ago. And so that's the difference. Yes, the information is accessible, but you have to take the action to put yourself in the right room, in the right opportunity, in the right environment to find the information you need. Because because it's so accessible, you need to take another step, and you need to make sure that the person you're watching or listening to has earned the right to talk to you. There's so many people that are making lots of money teaching something that they've never done.
 
Keith Weinhold  28:06  
Right?
 
Sharon Lechter  28:06  
And so it's very important to validate the teacher, validate the source, even more so in AI, right? Because AI can make things up. Make sure you're getting the right information to help you make that decision. But above all else, take action because you are the CEO of your life. Nobody else. It's up to you to make the decision and to take that first step.
 
Keith Weinhold  28:29  
I'm hearing a lot there as far as the company you keep elevating your standards, and then there's something about the Dan Sullivan quote in there as well. When you're trying to get a task done, you know sometimes you want to ask who, not how, and understand that that is taking action as well, outsourcing it, and realize you're not going to be the best at absolutely everything out there. Are there anything else that have changed with foundational principles from Rich Dad Poor Dad or Napoleon Hill in today's environment? You touched on AI, of course. More expensive housing is a concern for some people. More persistent inflation, higher government debt than we've ever had. Is there anything else that that's changed, or any principles that you apply to those modern day issues?
 
Sharon Lechter  29:13  
Well, I think it's really so much more important today to do really diligent due diligence. Right, I'm using that word twice because I mean it as it relates to interest rate, the inflation. And back in the you know teens, high inflation was very high, but you could still find a cash flowing deal. And the biggest issue for people today is understanding you want to make sure the numbers work. You got to do the numbers. You got to put your pen to the paper and make sure the real estate deal you want to acquire is going to cash flow in the right direction. Let your tenant pay the debt. You know, with inflation, where we've you know we've just seen rates go up again, been going down now they're up again. We have to take into account what that's going to. Impact on us, and there may be a dip in the value of the property, but if it's still positive cash flow, you'll lose the money only if you sell, because the value of real estate goes down and up, and over time it goes up, and so it's really important to make sure that the underlying asset is still generating a positive cash flow, so that you can continue building wealth from that perspective, and so today it's harder because so many factors have to be assigned to that. As far as inflation, as far as the price of homes, we've seen right now. You know, we've seen that tension between sellers and buyers for the last few years because the interest rate was high and the home values were high, so we had frustrated buyers and we had frustrated sellers. They couldn't find that piece, and so we look at where that margin is coming during that time. If you had complexes, you were you know in like Flint because you could actually increase your rents because the demand was higher, and so understanding the market variations that happen based if this happens, this is going to happen, and creating your real estate portfolio so that you can benefit from those changes. And I think that's even more important today than it was 29 years ago.
 
Keith Weinhold  31:17  
Diligence is the opposite of negligence, and yeah, to your earlier point, Sharon, you know, don't say I can't afford it or I can't get a cash flowing property. Ask how can I, and we've been talking here about how there are a few strategies, something called the Burr strategy, where it's a great time to buy new build property because these builders are motivated to buy down your mortgage rate, often into the fives, to make that property cash flow for you. Answering that question, how can I do it? Well, Sharon, you're so prolific with everything that you're involved in, and despite all these initiatives that you undertake, you are still quite an author. Tell us about the book you're working on now.
 
Sharon Lechter  31:57  
Well, I just in January released my 29th book, and it's called Old Wealth, New Wealth, True Wealth. And as you indicated, after the 15 rich dad books I wrote, I did four books with the Napoleon Hill Foundation. I did a book with Ink Magazine called Exit Rich, which I'm very proud of. And of course, with Napoleon Hill, I released Outwitting the Devil, Thinking Girish for Women, Three Feet from goal, and success is something greater. And then I also wrote a book called "How Money Works for Women, which I'm very proud of. It was with WealthWave, a company that does personal financial support. But it really, we took women from every decade of life and talked about the financial issues they face. It's just wonderful, and it's like a comic book. It's a four-color graphic novel, basically, and we talk about a woman that is in her 30s with two children, and she has to leave an abusive marriage and start over again, or another woman that has a very high-profile career, and she has to change her career because she has a special needs child. Somebody else that has wants to get married, wants to start a business. Another woman that was married 25 years, looking forward to a beautiful retirement, and her husband trades her in for a younger wife, and she hasn't taken the steps to create her own credit, and nothing's in her name, and that happens so often it just breaks my heart. Or you've been married 40 years, and your husband passes away suddenly, and nothing was prepared for it to transfer to you, and so you again you're left with no credit. So these are things that you know through stories we share the power of stories that help people open their eyes to things that could possibly happen to them, and how to find the resources and the support to handle with them, and so then my latest book, Old Wealth, New Wealth, True Wealth.
 
Sharon Lechter  33:49  
After really changing how the world talks about money, you know, my runway is a little shorter ahead of me than it has been behind me, and I realize we have to talk about true wealth. We have so many Type eight personalities out there. We're striving to be a billionaire or multimillionaire, and along the way we lose our family, or we have our third or fourth spouse, right? Or we lose our health because we are working so hard we're not taking care of ourselves, and that's something that I experienced. It's so important for all of us to realize that true wealth is yes, having the financial resources to have the lifestyle you want, but who are you going to share that lifestyle with? Hopefully, my spouse of 46 years, my children who just celebrated 22 years. So where you have the depth of spirituality and love and connection, so your relationships, but also I have a nine-year-old granddaughter, and I want to be around them, and she gets married while I'm 72, so I better do something about taking care of my health, and so all of these aspects I talk about in old wealth, new wealth, true wealth, because old wealth is really the slow and steady. Accumulation of money, right?
 
Sharon Lechter  35:02  
New wealth is understanding alternative investments, understanding, and a lot of that is like this quick, fast new money that people can't keep because they haven't learned the old wealth concepts. But then, true wealth is understanding how to apply that to build generational wealth, and true wealth is generational wealth and having family to leave it to, having the family that's close to you, and being able to have longevity by making sure that you have true wealth in your health as well. I'm very proud of it. I co-authored it with a client of mine who, at the age of 16, he was a nationally ranked cyclist, and everybody anticipated he would be at the Olympics. He was within the top one or two in the country, and he was practicing in New Mexico. Got hit by a car going 60 miles an hour. He actually was pronounced dead on impact. In fact, his mother got the phone call that he died. Luckily, they were able to revive him. But so many people, young and old, that experience something like that, they lose the drive to live and give up.
 
Sharon Lechter  36:10  
But this young man was basically in a coma for a while. Took him a long time to learn to eat and walk. While he was in the hospital, he read Rich Dad Poor Dad, and so he took that same drive and discipline and started investing in real estate. So at age 25, he was a multimillionaire in real estate. And so he reached out to me. Didn't think he actually get to me. He talked to my office, and they said, "You want to talk to this guy? And he wanted to become a spokesperson to help other people in his generation because he sees them seizing opportunities for themselves, really doing the drifting, whatever. And I'm always looking for those younger generation spokespeople that can help encourage and inspire their generation to take the action to create that wealth, and that's why I'm so proud of what you're doing. My husband and I own a ranch here in Arizona called Cherry Creek Lodge, and go to cherrycreeklodge.com. It's out in the middle of the Tonto National Forest. It is a survival property. It's all solar powered. We have our own lake. We raise 500 head of cattle.
 
Sharon Lechter  37:18  
We've got 42,000 acres of grazing rights, and so we have a beautiful retreat center that we built there, and we have business retreats a couple times a year. And he came to one of those, and we started talking about him writing this book, and he asked me if I would co-author it because he wanted my name on it, and I said, of course. When he sent me the first draft, I was like bowled over because it's set as a parable of three brothers: old wealth, new wealth, true wealth, and is set in the exercises and the things that we do at our ranch for our mentoring clients, talking about understanding leverage, understanding assets, understanding. You know, I show a picture of my ranch and the cows are walking along. I go. You see cows. I see assets, right? So getting that concept of cash flow and building multiple streams of income, and so I'm really proud of the book. It's all about the importance of mentorship and understanding buying, building, creating income-producing assets. And I'm known kind of worldwide with my line, assets are sexy, and the older you get, the sexier they become, so.
 
Keith Weinhold  38:28  
Old wealth, new wealth, true wealth from Sharon Lechter. Check that out. Oh, it's been such a pleasure and valuable to have you back on the show.
 
Sharon Lechter  38:39  
Well, it has been an absolute honor, and if they come to my website sharonlechter.com, anything you buy, I will autograph before we send it.
 
Keith Weinhold  38:53  
Oh, so good to talk to Sharon, and on her website sharonlechter.com, there's a section that's prominently shown where you'll see why not take the road less traveled. I happen to know that Sharon has paid one-on-one mentoring there. She takes 15 mentees max. Like we were saying, knowing is not the same as doing. Some people don't take action, and you know, I really first learned this right before I started this show back around 2014 when I still had a day job. My coworkers at the State Department of Transportation, you know, they would often ask me like how I'm taking another vacation that they deemed as lavish. Back then, it seemed like I was always going to Hawaii. I told them that I owned rental properties, and at that time I had rental single-family homes, fourplexes, and apartment buildings. And it wasn't just that these things produced residual income for me, but I could also take a. Cash out refi on a property totally tax-free, and spend that money on a vacation to Hawaii or as a down payment on another rental property. And you know, as fascinated as those former coworkers seemed to be, virtually nobody took action. Now, maybe part of that, just a small part, is because they had a pension, not a 401k. So a lot of those state DOT workers just felt like it was worthwhile to allocate 30 years of their lives there. They were not willing to take the path less traveled, and shortcut that down to five or 10 years in real estate. I told you before that it took me 12 years because it took me a few years to really devote myself to it. But yes, you've got to act. To Warren Buffett's point, I have still never met a billionaire economist. Big thanks to the terrific educator and motivator Sharon Lechter today. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
 
Unknown Speaker  41:16  
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively. 
 
Keith Weinhold  41:44  
The preceding program was brought to you by your home for wealth building, getricheducation.com