Get Rich Education

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

Keith asks why so many people end up competing in the "Grind Olympics" of the traditional day job, and explains why separating income from time is key to building real wealth. 
He then counts down the top five ways to give a rental property a raise by increasing its net operating income, and points to the lever investors most often overlook. 
Keith also looks at what has happened to home prices during every major stock market crash since 1980, and shows why negotiating better financing terms can beat simply getting a lower purchase price. 
He offers practical strategies for building cash flow, creating value and investing with more confidence in any market.
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. Does your day job have you competing in the Grind Olympics? It's something that you never signed up for, and the top five ways to increase your rental property's income. Then, when stocks crash, what happens to real estate? You'll see historically today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.
 
Speaker 1  1:34  
You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
 
Keith Weinhold  1:50  
Welcome to GRE from Wheeling, West Virginia, to Whiting, Indiana, and across 188 nations worldwide. I'm Keith Weinhold, and you're listening to Get Rich Education. Before I get into basically giving your rental property a raise with the top five ways to increase its income, first let's get the context of pulling back and understanding your compelling why for all of this. You may or may not like investment property itself-it's more likely rather that you love what it does for you. That's how it is for me. What do most people do? It's like they're training for the Grind Olympics. Are you doing this too? But you don't remember signing up? I mean, that's kind of what the day job is, society's vortex gradually pulls you into it. The investment property is what gradually tilts you out of it, or it gives you that option. For so many, the day job, it's sort of like this competition that really no one officially announces it yet. Millions enter it. Who can work the longest hours? Who can answer the most emails? Who can miss the most family dinners? Who can delay their life the longest? And at the end of it all, something we call retirement. If you're a winner, not a loser. The winner, you receive a gold-colored watch, lukewarm sheet cake, and a little party at age 65, and that's assuming that the finish line hasn't been moved to 70.
 
Keith Weinhold  3:40  
This is especially bad and prevalent in the United States, where you start out with just two weeks vacation. That's about the worst grind in the developed world. I really myself started questioning this lifestyle when I was a teenager, and this is because my older friends, sort of those that were getting into their late teens, they were relatable to me, and they started going down this path and telling me about it. And suddenly, they couldn't play baseball or tennis with me during the day because they started working during their summers. Now that's not so bad in itself, but stay with me. I also looked at the adults around me and noticed that most traded the majority of their waking hours for work that they didn't even like. Now, my dad was a good worker. He worked 7 a.m. to 3 p.m. faithfully Monday to Friday, and despite being a good worker, he certainly didn't love his job. As a teen, then I found it confounding that so many people were working Monday through Friday, primarily why, primarily to reach the weekend. Wednesday was celebrated as. Day, this sort of strange admission that the work week was something to climb over and survive. You're surrendering 50 weeks to earn two weeks of vacation. You're repeating that very bargain for 40 years and hoping you still have enough money, energy, and health to enjoy retirement. And what puzzled me most was where this was happening. We are not some impoverished nation with paltry resources and limited opportunity. This is the United States, the most powerful and perhaps the most prosperous nation in the world.
 
Keith Weinhold  5:40  
This is the part that I still can't work out in my head. Almost everybody falls into a narrow, rigid groove and grinds. Eventually, the groove becomes a rut. Then the rut gets a job title and a dental plan. Many even form their identity around this. Fear is the number one motivator that gets employees to show up at work. So then, do most people lead fear-based lives? It's almost insane. Sheesh! We have skyscrapers, interstate highways, world-class universities, abundant natural resources, advantageous geography, rule of law. We've got vast capital markets. We've got technology that sent people to the moon before I was born. Endless possibilities, but yet the standard life plan is to spend our most vivacious years doing something that we didn't even want to do. What a paradox! How could a nation create so much wealth while so many people have such little control over their own time? Even then, as a teenager, I remember thinking, "Gosh, there has got to be a better way than this system somehow. I didn't yet know the way, so I started going to college at age 18.
 
Keith Weinhold  7:16  
But this path put me on that same trajectory of get good grades, land a job, max up my 401k, which would reduce my salary, and work for four decades, and then cross my fingers and just somehow hope that promotions, inflation, taxes, a stock market that I couldn't control, and life itself would cooperate. I mean, that plan could kind of work, but your time is still doing most of the work. Your employer rents your time usually one hour at a time, and if you stop supplying the hours, then soon enough your income stops too. Capital compound. labor doesn't. The better path is to gradually separate your income from your time. That's what I began doing when, while I was working full time, I bought my first income-producing rental property a few years later, a few years after college, in fact, doing that on the side, divergent, black sheep. I was stepping out of the groove. Now I own an asset that created leverage and income, whether I'm working, sleeping, camping, climbing a mountain, or spending time with my family. So the goal then it's not to avoid hard work entirely. I mean, meaningful work that can even provide some purpose and achievement and pride. But what provides wealth? What are you going to do for that? Wealth is what happens when you're not working. Wealth is what happens when you're sleeping. Labor produces income. Assets create wealth. Grinding should be a season, even your contribution to society, but not your primarily financial strategy. So the bottom line is that we don't want to win the grind Olympics, income-producing assets help us build a life that we don't have to postpone. The entire conventional life plan, the whole thing, just never felt right to me. Intuitively and rationally, deep down, you know, think to yourself: Doesn't at least some part of you feel that way too? Thank God that I found real estate. I don't love it. I love what it does for me. You've got to love what it does for you.
 
Keith Weinhold  9:54  
One attribute that your income property gives you is control. So. With that in mind, I put together the top five ways to increase your rental property income countdown style from number five to number one. Since you do own an asset that you can control, so we're talking about giving your rental property a raise here, and you know your property does not even need to appreciate in order for you to make it more valuable, your property doesn't need to sit around waiting for the market to appreciate like it's waiting for a promotion from corporate or something, which always takes too long. You can manufacture more income yourself. So net operating income or NOI, it only has two moving parts. It is property income minus operating expenses. Push income up or pull expenses down, and you've effectively given yourself a raise. Better yet, on an income-valued property like a five-plus unit apartment building, every additional dollar of NOI can create far more than $1 of property value. So here are the top five ways to increase your property's income.
 
Keith Weinhold  11:10  
The fifth best way is to add ancillary income, because monthly rent it's not the only asset inside your property. Now, depending on what property type you have and what the local laws are, you can charge for pets, parking, storage, laundry, furnishings. You can charge for internet packages, utility reimbursement, reserved garages, upgraded amenities, or you can even charge in some cases for application, administrative, or lease break fees. The best ancillary income it provides something that the resident genuinely values. We're here to serve and give value to others. Importantly, it should feel like an option for your tenant with these things, not some toll booth placed between the tenant and their front door. We know how annoying it is to have a tip screen swung around and placed in your face. Even an additional 25 or $50 per unit each month that can become meaningful across several properties. The fourth best way is to cut your controllable operating expenses, and you know what most investors do, and it is easy to fall into this, and I certainly have too at times. You know, most investors they carefully negotiate the property's purchase price at the beginning, and then they spend years casually accepting every recurring bill, audit your expenses rather than just accepting last year's cost plus inflation.
 
Keith Weinhold  12:49  
So closely look at your property management fees, landscaping and snow removal, pest control, cleaning, trash service, water consumption, and any leaks that you might have. Common area electricity, repair labor and material markups, service contracts, and preventive maintenance. Gosh, I really lost a lot of money in pest control one time when the pest would just move from one apartment unit to the other, and we just couldn't get it trapped or stopped. Loyalty is admirable in marriage. It is less compelling when your landscaping company raises its price 14% every year. So solicit competing bids, consolidate your vendors where you can, install efficient fixtures where the payback period makes sense and where the break-even math works. But now, don't confuse expense reduction with maintenance neglect.
 
Keith Weinhold  13:53  
That is one danger. So you know, if you delay a $300 repair until it becomes a $3,000 emergency, well, that really doesn't increase your NOI. It merely makes this month's numbers lie. Now, as I tell you about this list, you might think sometimes, "Oh, I've heard of that one before. Okay, but yeah, are you actually doing it? The third best way to increase your property's income is to challenge taxes and shop insurance because property taxes and insurance they are really among your property's largest operating expenses. So therefore, if you get good at this, you can both increase your net income and you will have gained a new skill that you can apply later and elsewhere. Yet you know a lot of owners they treat property tax and insurance sort of like the weather. They complain about them and then they just assume that nothing can be done. Possible moves that you can make are appealing in excessive property tax assessment, correct inaccurate property records. You can compare insurance carriers as often as annually. Adjust your deductibles when it's appropriate. Be sure you remove redundant coverage. Make sure that there's no overlap there. You can add safety or resilience improvements that qualify for insurance discounts, and then at the same time, sometimes that improves your property's value. You can check the property's classification and claims history for any errors there. So you know every legitimate dollar saved that flows directly into your NOI, your net operating income. Remember, mortgage payments though they do not factor into NOI. Neither do major capital expenditures. Refinancing can improve your cash flow, but that does not increase the property's NOI, and that's what we're talking about today. But when it comes to property tax appeals, you remember a while back on the show, perhaps a year ago, I went into detail on just how you can do that.
 
Keith Weinhold  16:00  
Now we're up to number two. The second best way to increase your NOI is to raise rents intelligently, and really this is the most obvious strategy. But it isn't as simple as typing a larger number into your renewal letter and then just sort of hoping that your tenant doesn't notice. Bring rents closer to market without automatically chasing the absolute maximum. That can include gradual increases at renewal, premiums for upgraded units. How about a premium for the unit with the best view? If you have one of those, higher rent for furnished units, appropriate charges for garages or shorter lease terms. I mean, shorter lease terms, like a six month instead of a 12 month, that can get you a bump up in the rent. Be sure to eliminate any unnecessary concessions, like the first month's rent is free. Do you really have to continue to do that? And use better listing photos and copy to support higher rents. It's easy to have AI write some good snappy copy for you today. So the objective here is economic occupancy, not merely the highest advertised rent, because raising the rent $100, if that's going to create an extra month of vacancy that is stepping over dollars to pick up dimes. Know the market, understand the tenant, and make increases that improve NOI rather than merely improving the asking price for the REM. And the top way, the number one way to increase NOI is reduce vacancy and turnover. Yes, you might have heard that before, but it is still the most overlooked NOI lever, even though it's number one. An occupied unit at a sensible rent that often produces more income than an overpriced empty one.
 
Keith Weinhold  17:58  
The way to improve your occupancy is by you starting renewal conversations 60 to 90 days before that lease comes due. Respond quickly to maintenance requests. I mean, few things frustrate a tenant more than a ceiling that is leaked for a month. Pre-market an upcoming vacancy that you have. Start that process early. Complete your turns faster, screen residents carefully, and unless you're in an especially hot market, consider offering renewal incentives when turnover would cost you substantially more than doing that. So there are a bunch of ideas for reducing vacancy and turnover. Another one, more of a modern-day one, is for you to buy and operate new build property because tenants tend to stay in new builds longer. They love that feeling that no one has ever lived there before. Suppose a unit rents for $1,800 a month. All right. Well, then one vacant month costs you $1,800 before cleaning, repairs, utilities, advertising, and leasing expenses. So the true cost of that turnover could easily be three or $4,000. And when you consider that, then giving a good resident a $250 one time renewal incentive that doesn't look generous that looks profitable for you. Keeping a responsible tenant, you know that might be the biggest quote unquote rent increase available. Just simply keeping a responsible tenant because occupied properties produce income, and empty properties produce invoices.
 
Keith Weinhold  19:48  
Now that I've told you about the five ways to increase your property's income, let me give you some more motivation for this. It's about how $250 can become 50. $1,000. Suppose you select just a few of these five improvements, and say that that increases your NOI by just $250 per month. Okay, that's nice. That's cash in your pocket, and if you happen to apply it to a five-plus unit apartment building, since it's also valued on NOI. You take 250 bucks times 12. That is $3,000 a year at a 6% capitalization rate. Take 3000 divided by point 06. That is $50,000. You just created 50k of additional property value from only $250 of monthly NOI creation. Yeah, you are up 50k now, and here's the thing: you did not do anything that substantial. It's not like you added another story to a property, or you discovered oil underneath your parking lot, or you convinced a celebrity to move in. Okay, these are practical things that you can do in control. You simply operated the property better, and this forced appreciation relationship that applies most directly, though, to commercial and larger multifamily properties because those are the types that are valued based upon their income. A single-family rental or a duplex or a fourplex that is generally appraised primarily through comparable sales. So its higher NOI might not immediately produce the same increase in appraised value, but in either case, higher NOI it still means more cash flow for you, a stronger financial cushion, and a better performing investment. The bottom line here is that you can wait for the market to increase your property's value, or you can operate the property better and create value yourself, raise income, control expenses, and keep good residents. That is how you improve NOI without increasing your blood pressure.
 
Keith Weinhold  22:10  
Coming up on the next few shows, we're going to speak with the original co-author of the book Rich Dad Poor Dad. Yes, we had Robert Kiyosaki on here earlier this year, but we're going to talk with the co-author alongside Robert Kiyosaki. A lot of people don't know who that is. That is going to be interesting on another upcoming episode. The man that wrote the book on the 8020 rule called the Pareto principle, he will be here. That's where 80% of the results come from. 20% of the effort. So here on GRE, there's a lot of education, strategy, and mindset coming up straight ahead today. When stocks crash, what happens to real estate? That's next. 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. In full disclosure, I'm an investor myself.
 
Keith Weinhold  23:27  
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 prequal and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com.
 
Kirsten Tate  24:31  
This is author Kristen Tate. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.
 
Keith Weinhold  24:49  
Welcome back to Get Rich Education. I'm your host Keith Weinhold, and this is episode 625. AI songs are becoming more popular. Fortunately. AI podcast hosts-they really aren't that much of a thing yet, or else I might not be here. Thank goodness that listeners still want to hear from a real person. When stocks crash, what happens to home prices? Since 1980, there have been 10 or more major stock downturns. Guess how many of those cause national home prices to crash? Exactly zero. Now there was one pretty enormous housing decline, but that one started in housing. And what happens next? It reveals something that every real estate investor should understand a lot like real estate right now. Stocks are hovering near their all-time highs. Okay, both major assets, real estate and stocks, bumping up against all-time highs. There is a predictable rhythm about what happens to real estate when stocks crash. Now, when we look at stocks' seven big downturns that occurred just this century, as measured by the S&P 500, you know, first a lot of people think that stocks are overvalued here in the late 2020s. That is based on measures like the historic P/E ratio, the Shiller cape ratio, and the Buffett indicator. I mean, some investors are just disillusioned by how stocks' movement makes so little sense anymore. For example, when the latest labor number showed that 162,000 jobs were added in a month. That tripled expectations. I mean, people should have been like, "Hey, go USA! This is great. People are employed. All that. Nope. The stock market fell specifically in response to that. Why? Because strong employment increases the chances of higher interest rates, and sure enough, the Fed did then raise rates.
 
Keith Weinhold  27:09  
Oh, geez, what? So a labor market collapse is then bad for America, and that's good for stocks. Yes, that is how it works. That is just stupid. So, with that context in mind, let's see what actually happened to national home prices this century during all the major stock market downturns that were not caused by housing, and then we'll get back to housings. Okay, during the dot-com bust in 9/11, that whole period about 25 years ago, stocks again. This is all per the S and p5 100 crashed 49% Home prices were up 23% during that time. We'll get back to the global financial crisis shortly. During the 2011 debt ceiling crisis, do you even remember that stocks went down 19 percent. Home prices went down just slightly, 1 percent. During the 2018 Fed tightening and trade war sell-off, stocks were down 20 percent, a classic bear market. Home prices were up 1 percent. Then came COVID. In barely a month, stocks plunged a jaw-dropping 34% This was in 2020. It was like a flash crash. What happened to home prices then? They were up 1% just a little. So, are you beginning to see a pattern, or perhaps a lack of one here during 2022's inflation peak and Fed tightening bear market stocks fell 25 percent. Home prices they were up 4% during that time period, and then during the 2025 tariff sell-off, you might remember Trump called that Liberation Day. Stocks were down 19 percent. Home prices. were essentially unchanged.
 
Keith Weinhold  29:06  
All right, so there they were: six major stock market downturns this century, not one housing crash. All right, now let's turn the telescope around because 2008 was different since the crash was real estate induced, and it is the only time in the life of you or I or anyone alive today, even a 90-year-old, where national home prices took a significant fall. In fact, they were down 27 percent, and it took them a few years to fall that much. All right. Well, what did stocks do during this period? They fell even more, down 57% more than twice as much, 57% I mean, just imagine having a million-dollar stock portfolio and seeing its value cave in, down to 430k from a million. Okay, that's what really happened march 6, 2009, when the S and P hit its global financial crisis low, and that happened over a 17 month stock collapse. Okay, so what's really the summary? It is that in the six times that stocks led a price crash this century. Real estate held up, or it rose, and the one time real estate led the crash, stocks fell more than twice as much.
 
Keith Weinhold  30:31  
It was 27 %versus 57%. All right. Well, that is what's happened this century. But you know this cause and effect relationship or lack thereof, that didn't just begin happening in 2000. When we stretch the history back to 1980, which is Jimmy Carter, almost Ronald Reagan era days, stocks had four more big downturns. We had the Volcker Bear Market, the famous 1987 Black Monday stock market crash, the Gulf War sell-off, and the LTCM crisis. During those four stock crashes, home prices also either stayed resilient or they rose. All right. Well, all of this is because homes and stocks, you know, they just aren't connected by some push and pull relationship. Stocks reprice in seconds. Fear spreads. Algorithms sell, and billions of dollars can disappear before lunch. Instead, housing moves more like a cargo ship that you're trying to turn around in the Mississippi River, it can take a long time. Housing transactions take months. Prices depend on local supply and local incomes, and mortgage availability, and whether homeowners are actually forced to sell. Housing provides something that every human actually needs and cannot be easily disrupted by AI. I mean, AI still cannot download a three-bedroom house onto a vacant lot. And of course, during any stock crash, what else happens with real estate? Your rent just keeps coming in as well. So the bottom line here is we're learning from history rather than having a hunch again. Home prices don't react to stock market crashes. Stock crashes and housing downturns are different events.
 
Keith Weinhold  32:32  
A falling stock market it can eventually weaken consumer confidence. In in a severe recession, some of that can trickle in and affect housing, but history shows that a stock crash alone has not caused national home prices to fall. When stocks scream, real estate just kind of shrugs. Now, as we get back to talking about today, with real estate being cash flow challenged, you usually need a deal in order to make the numbers work. And as we know, for more than two years now, it has been wise to buy new build property and have that home builder buy down your mortgage rate rather than getting a property price discount. And do you realize that it actually works out better for you in almost every case for you to get your rate bought down than it is to get a discount. Yeah, it is often substantially better. Let's just think about an example. Say you're putting a 20% down payment on a 300k property at a seven and a half percent mortgage rate. Okay, let's compare your seller discounting the purchase price by 20k versus them instead using 20k to buy down your mortgage rate. All right, in the first scenario, let's call it then a purchase price reduction. The seller reduces it from 300k down to 280k. Your monthly payment would be 1566 $1,566. All right. Well, then your monthly savings from the price discount would be $112. You would also need 4k less for the down payment. Okay, 112 bucks a month is helpful to you.
 
Keith Weinhold  34:18  
That might buy you dinner for two at the Olive Garden or something, at a wildly overpriced airport convenience store. By the way, this is a bottle of water and one almond, 112 bucks. Okay, but now let's compare it with the second option. If instead of a price discount, you pay the full 300k and use the 20k as a seller credit, a credit from the seller, and you use that to permanently buy the mortgage rate from seven and a half down to five and a half percent. In this case, even though it's a larger amount financed, your monthly payment is no longer 1566. It's just 1363, so your monthly savings is no longer 112 bucks. That Olive Garden dinner for two, it is 315 bucks. So therefore, using the seller credit instead of reducing the purchase price that ups your monthly cash flow by about 203 bucks. All right, and this was just an illustration. It's not a universal lender rate sheet carved into a stone tablet. But the larger lesson remains. Okay, terms are often more important than price. Negotiate the financing. That is the lesson. And of course, you can try to use this most anywhere with any seller, but it's been especially popular with American home builders for two plus years now.
 
Keith Weinhold  35:47  
The bottom line is that the best deal isn't always the property with the lowest price; it is the one with the best financing, and it's one of the strategies that Mid South Homebuyers is going to offer on Wednesday night's webinar just two days away, and there's no negotiation needed. They are offering this, and it's where I'm going to be appearing live, and you're invited to join us from the comfort of your home or a coffee shop or wherever you are. So we're talking about properties in Memphis, Little Rock, and North Texas. New build properties for as little as about 200k, and some fully renovated resale properties for as little as 150k, and even less than that. Now, low price isn't reason enough to own an income property, but it's the fact that you get a strong rent in a stable market to support that, and they're offering what they call their triple five terms. They'll buy your mortgage rate down into the fives and provide property management for just a 5% fee for five years. And I just learned that for attendees of Wednesday night's event, they will even announce a promo code there, and you will get triple five terms for life on both financed and cash deals.
 
Keith Weinhold  37:12  
And you know, I've got to say that when I began in real estate investing, I wish that any of this would have existed. Like when I began, I wish there even would have been new build property available. They just didn't even have that for income property when I started out. And the fact that it's managed for you from day one, I didn't know about that when I started out. I thought I had to invest only in my home market and then manage it myself. And here you get investor advantaged geographic markets, and then if that's not enough, you get that rate buy down into the fives and property management costs. It's basically cut in half to help improve your property's cash flow, and you can almost think of this as lifetime cash flow. You get to control a sustainable business model that's resistant to AI disruption, and yeah, it's sustainable. I mean, people will pay you to live there. That has happened for centuries. It's sort of the opposite of a cryptocurrency that will not exist in two years. It happens Wednesday night. You'll get to see me live along with the renowned providers from Mid South Homebuyers and their properties and their generous incentives and all the new AI investment that's acting as a tailwind coming into Memphis. Registration is free at getricheducation.com/midsouth. It's 8p.m. Eastern on Wednesday night. I'll see you there, getricheduceducation.com/midsouth. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 2  38:57  
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  39:25  
The preceding program was brought to you by your home for wealth building. Getricheduceducation.com

Keith examines why renters made up nearly 80% of U.S. net household growth last year, and how housing supply explains the gap between rents falling 8% in Austin and rising 17% in San Francisco and Chicago. 
Terry Kerr and Matthew Van Horn of Mid South Homebuyers join to discuss new-build rentals under $200K in Memphis, Little Rock, and North Texas, in-house property management, duplex deals, and financing incentives with rates bought down into the fives.
The episode closes on the AI buildout reshaping Memphis, where xAI's Colossus, Anthropic, and Google are driving billions in investment and a share of the new tax revenue back into surrounding neighborhoods. 
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Join Mid South Home Buyers' one-time, free live webinar featuring Keith Weinhold on September 30 at GetRichEducation.com/MidSouth to learn how Memphis' economic expansion could create new real estate investment opportunities, and have your questions answered in real time.
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. U.S. rent growth is led by cities with AI investment and those with a lack of new housing supply. Then we're talking about new build properties for under 200k that cash flow and with mortgage rates that are bought down into the fives today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again, that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/mid south.
 
Speaker 1  1:33  
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  1:49  
Welcome to GRE from Davenport, Iowa, to Smethport, Pennsylvania, and across 188 nations worldwide. I'm Keith Weinhold. You're listening to Get Rich Education. Hey, near the end of today's episode, I'll announce where I'll be appearing live and inviting you to join me. But first, most real estate headlines that you see out there for quite a while now, they tend to focus on just how difficult buying a home has become amidst higher prices and mortgage rates-it's kind of an old story by now. But for investors, the other side of that story is what matters. When fewer people can buy homes, well, more people have to continue renting them. Only 6 million of America's 50 million renters can afford to buy the median home. In fact, so that means then that only 12 percent of America's renter households can afford the median home. That is just remarkable, and that's exactly why they have to keep renting, but you know what's more remarkable is the growth of this group of people itself. Last year, the U.S. added an estimated 898,000 renter households, but only 234,000 homeowner households. That's per the Census Bureau. All right. So then, renters accounted for nearly 80% of the nation's net household growth. Gosh, that is staggering. Well, let's look at the rent change and their factors in some of America's largest cities over the past three years, in Austin rents down 8% over the past three years, lowest anywhere. San Antonio minus 4% Denver minus 1% and then you got a couple cities, Phoenix and Dallas that are even no rent change the past three years because they've had some overbuilding. Raleigh, North Carolina, up 1% Nashville, Orlando, and Houston all with rents up 2% over the last three years. Still pretty modest. Jacksonville, Tampa, and Charlotte each up 3% Atlanta up 4% Miami also up 4% Los Angeles and Memphis both up 6% Seattle has had rent growth of 8% the past three years. Boston really with a lot of growth in tech jobs and not much new supply added. So Boston, Massachusetts, 10% rent growth. Philadelphia, 11% rent growth. New York City, famously not adding much supply. Rents are up 14% since 2023. San Francisco and Chicago leading the charge rents up 17% in both San Francisco and Chicago over the past three years. Now the biggest reason for the variability in rent change since this time it's largely the same reason for capital price change, for appreciation level, and that is the factor of supply. You know, remarkably, the eight cities that have built the least, they have the eight highest rent growth stories, and most of those are higher cost coastal markets that have high building regulation. I mean, sheesh. That's where approving new housing can take longer than choosing a speaker of the house, and that's how already expensive markets remained resilient.
 
Keith Weinhold  5:57  
Namely, I'm talking about places like New York, Boston, Chicago, and San Francisco, and then you've got these pandemic-era magnets like Austin, Phoenix, Dallas, and Nashville. What these places did is they attracted residents and developers along with them, but yet they've all got really slow rent growth stories, like I just outlined. So what really happened here in these pandemic-era magnet places, again, Austin, Phoenix, Dallas, and Nashville, is that builders showed up like food trucks at a music carnival, and eventually the construction wave caught up with demand. Then you know we got to look at the Sun Belt. A lot of people talk about the Sun Belt like it's just one market or one place, and of course that's not true because I just told you about how Atlanta and Miami rents rose 4% the past three years. Well, a number of other places in the Sun Belt just stayed about even, but it's really the tech hubs like Boston and San Francisco, that are just surging, really soaring with rent growth amidst the AI boom, because they've really been the beneficiaries of that. So yes, apparently even the people building our robot replacements then need a place to live. The robots themselves don't pay rent yet. It's rarely been more apparent that real estate is local when there's this 25% Grand Canyon between Chicago and San Francisco's 17% rent growth, and then Austin's 8% loss. And again, I'm talking about that period just over the past three years. Now rent declines-that's something that really doesn't happen very often.
 
Keith Weinhold  7:48  
They tend to be even more rare than a loss in overall home prices. But you know, rent declines-they can create buying opportunities. What happens is that softer rents-they pressure your current cash flows for sure, and that hurts, no doubt about it. But over the longer term, what that does is that discourages new construction, and then that sets the stage for tighter supply down the road. So that is really the rent growth story the past few years in the United States. We're going to discuss rents and prices some more, and then the excitement of the profound amount of new AI investment into a place where you might not be thinking about it in, and that is Memphis. Listen to what SpaceX, Anthropic, and Google are all in the process of doing there, and what that could do to rents. We'll talk to the premier provider of Memphis rental property, and they also place your tenant and they manage it for you, so that all you do is little more than collect the monthly rent check, and they also offer this in Little Rock, Arkansas, and more recently in North Texas, founded in 2002, Mid South Homebuyers they are one of America's original turnkey real estate providers, and you know they're quite possibly the oldest major provider that still operates today. We're going to talk to the man that actually sets the rents there, and in fact, Mid South is so renowned and respected that for a long time, if you wanted to own rental property from them, there was a waiting list that once reached 24 months, and frankly, in that scenario, investors would just kind of settle for the first property that became available-that doesn't happen anymore. There is no waiting list, and you actually have a choice now. Let's talk to this week's guests. Back on the show today, the Memphis-based team that has provided more. More income property to GRE listeners than anyone in history. They were first on the show with us almost 12 years ago on episode nine. It is Mid South Homebuyers founder Terry Kerr and director Matthew Vanhorn. It's a warm welcome back to the show.
 
Terry Kerr  10:18  
Thank you so much, Keith. Always love being on your show, man.
 
Matthew Vanhorn  10:22  
Yeah, so glad to be back, Keith.
 
Keith Weinhold  10:24  
You know, I was talking with you earlier, and you had brought up something that struck me as interesting, and yet it could be true that when it comes to cash flow in real estate, we are living in the good old days. Now, nationally, cash flow has been challenged because purchase prices and mortgage rates are both up, and rents haven't quite kept up proportionally. But there, in the markets that you deal in, you can still get it with a small down payment because you do have a high ratio of rents in proportion to a low purchase price. Some of them still under 200k for a good rental single-family home, and incentives that get your mortgage rate into the fives. So tell us more about how we could be living in the good old days now.
 
Terry Kerr  11:09  
Well, you know we're very fortunate to be working in some towns where the price to rent ratios are still super favorable comparatively. You know you mentioned that you can get into a house for under 200,000, we even have new construction houses that folks can get into for under 200,000. Yes, one of the other ways that we're able to make the deals pencil out and make it to where these are definitely the good old days is through a promotion that we've had going on for a bit called the Triple Five, where we buy the rate down into the fives and have a 5% management for five years. So these are definitely the good old days here at Mid South.
 
Matthew Vanhorn  11:51  
One thing that you preach on your show, Keith, is about looking at history over hunches. Right, and when I look at the history, everyone. who comes to me now says, "Man, I wish I had bought 10 years ago. I've yet to hear anyone say, "Man, I wish I'd bought less 10 years ago. Never happens, you know. And 10 years ago, well, 10 years ago was 2016, and a lot of people say, "I wish I had bought more then, and the reality is, a lot of people were scared to buy then. You know, their times were uncertain then. We were unsure where things were headed then. Always, and maybe people looked at our prices back then as they started to hit $75,000 for a home, and thought, man, things are getting expensive. But my belief is truly, Keith, that 10 years from now, people will look back and say, man, I wish I had bought more 10 years ago. I mean, we're living at an incredible inflection point. I believe in history, you know, where we know that the world is changing with AI and with various factors that are happening. We're on very much the cutting edge of all of that. You know, I don't have a crystal ball, but I just believe that 10 years from now, people will say, "Man, you guys were so lucky to be able to invest in a time when AI was in its infancy, and like before prices had skyrocketed, like they are now in 2036. That's just my belief, Keith. Looking at history over hunches, there,
 
Keith Weinhold  13:31  
I very well believe that could be true. The truth is, for you as an investor, when you buy a property, it's pretty likely you've paid more for that property than anyone has in history, and it's also pretty likely that when you sell that property down the road, you are going to sell it for more than anyone ever has in history. People always think that times are uncertain, and they're going to continue to feel that way because nobody can know the future, of course. And Terry, you talked about your incentives with the triple five. That's for someone that makes a small down payment where they can get their mortgage rate bought down into the fives. They get five years of property management at 5% and we're big fans of leverage here. However, if someone wants to pay all cash, you also have an incentive known as the Forever Five. Tell us about that.
 
Terry Kerr  14:26  
Yeah, so the Forever Five for somebody who pays cash, they will get 5% property management forever because they are not getting the benefit of the interest rate buydown. So we want to treat our cash buyers fairly as well, and that's been very popular.
 
Keith Weinhold  14:43  
And if you, as a cash buyer, participate in the Forever Five, and then you go on to refinance the property, maybe to pull cash out after you've closed, you still get those incentives for the duration of your ownership of the property.
 
Terry Kerr  14:56  
Absolutely.
 
Keith Weinhold  14:58  
Now, Matthew, interestingly. You talked about an inflection point. We'll get into that later. There is a clear inflection point with Memphis and with AI. But before we do that, why don't you talk about your core business and some of the markets that you serve and what the drivers are there?
 
Matthew Vanhorn  15:18  
Yeah. Right now, when you invest in Memphis, you are investing in stability. We still have great cash-flowing assets in Memphis for as low as $100,000. We have great cash-flowing assets in Little Rock for as low as $120,000, and even Texas, we have assets there for as low as 215,000, which I don't expect you to see those kind of prices in the future. I think we're at a very lucky point where you can get into Texas for as low as 215. We're still seeing strong cash flow in our markets, especially with our triple five promotion. I mean, we've looked and listen. We realize it's harder to find cash flow than it used to be. That is true, and that is why we've rolled out this triple five promotion, where it really helps these deals pencil for our investors. It gives you five years of reduced property management. It gives you 30 years of a fantastic fixed rate on your interest, and my belief is that your rents will continue to grow faster than your expenses. So that five years from now, even if there is a property management adjustment in year six, which that would adjust to the normal rate of 10% or for investors who have more than six homes with us to 8% I believe that you're going to be in a much better place six years down the road because of the factors we know that rents increase, your resident pays down the mortgage, and I believe that this happens at a rate that's faster than your expenses grow.
 
Keith Weinhold  17:02  
Talk to us about what you're doing as far as new build versus resale properties, because so many providers today are finding that they're doing more volume of new build than they are of resale properties, and this is really a good, important, fundamental thing that people like you are doing because amidst the national housing shortage, there's an even greater shortage of those entry-level properties. So now that you've been doing new build for a little while, tell us about that and what kind of effects that makes. How good that is for the investor. How much longer tenants are being retained for a longer duration in the new build property versus resale, and just more about that new build versus resale.
 
Terry Kerr  17:46  
Sure, man. So we got into doing new construction, you know, out of necessity, and also because our investors were asking for it, our renters were asking for it, and so also we couldn't find as many rehabs, and you can't force a good deal to come onto the market to find for rehab. And so we went on a absolute tear for dirt. So within the last 12 months, we picked up over 400 vacant lots, and so we kind of have the dirt stacked up for the next while, and we're doing that in both Little Rock and in Memphis. And so, what we've seen on the leasing and on the acquisitions for our investor side is that our residents absolutely love it. We could ask more in rent than we're getting for these new construction properties, but we're tempering ourselves because we know that what makes a property cash flow for the long term is lease renewals for the residents. So in Memphis, as an example, our average rent for a brand new three-bedroom, two-bath, 1400 square foot house is 1450. And Matthew, what's the price point on that? Is it like 198,000 bucks? Is that it? That's right. And so they're just flying off the shelves from a rental standpoint. And like I said, we could get more in rent and still sell them at that 198 or maybe more. But we're wanting to make sure that we're leaving enough meat on the bone all the way around the horn, and to your question, Keith, about additional length of resident stay, we haven't been doing new construction long enough to really have good data points on that. But if the interest in the new construction product by our residents is an indicator of length of resident stay, it's going to be longer than our rehabs.
 
Matthew Vanhorn  19:42  
Yeah, and another thing that I think that's interesting is that we are often building these new construction homes in the same neighborhoods where we have done our newly renovated homes, and so that continues to bring up the value of our renovated properties. Which I think is a beautiful thing that not all investors have connected the dots on yet with what we're doing in these neighborhoods. I think it's a beautiful thing because some residents are going to prefer that four-two new construction, like Terry mentioned, and other residents are going to prefer to pay a little bit less and get that three-one ranch-style home that we love so much here at Mid South,
 
Keith Weinhold  20:24  
and you, the listener, you might be wondering about really properties, including new build income properties for under 200k. But I can attest to you that I have walked inside these properties myself with Mid South home buyers, several of them, so we're not just talking about the glossy brochure version of how a property looks. This is real with the low purchase prices in Memphis due to them being the transportation hub of the nation and an awful lot of other reasons. But the whole thing that makes this stick together for you, the investor is the property management, and you you never hear anyone rave about their property manager, seemingly. But with your management and making this hands-free for the investor, I have got to say I don't think I have ever heard one complaint about you guys's property management. So tell us about that. When someone gets sort of enamored with owning in one of your markets, Memphis, Little Rock, or with what you're doing in Texas, tell us about that handoff to the property manager and how important it is to have that in-house management. Because if there ends up being some construction or rehab problem, you know the manager isn't pointing fingers at somebody else because the renovation and the management is all done in house.
 
Terry Kerr  21:46  
Yeah, absolutely. It's super important to have it all in one house, so no one's pointing fingers at someone else. And really, Keith, it all boils down to value. It's the biggest piece, and just how I mentioned a few minutes ago about how we could get more in rent for the properties than we do, but we know that the properties need to continue to stay occupied, and reducing turnover is the main thing that's going to make an asset perform. And so that's kind of the foundation of where we start as a turnkey outfit, and then it's just treating our residents, treating them with the respect that they deserve, answering the phone when the you know heating element goes out on a water heater and getting it fixed quick, and so delivering value from a rent to property ratio, if you will, and then also just giving really good customer service to the resident because if you do that, the property is going to perform.
 
Matthew Vanhorn  22:42  
I was blessed to work on the management side of the business for 14 years before jumping into the sales seat. So I know firsthand, you know how important it is to make this work for the resident. So it's not like the residents have interests and the investors have interests that are misaligned. We have to make this work for the resident to make it work for the investors. And like Terry's saying, when we provide ultimate value to the resident, our investors thrive. And so, at its core, it's it's some very basic things that we do here, Keith. That I think make all the difference. And it's just spending the time is one of the biggest thing. It's literally just answering the phone when residents call. It's just the basics that I think we do so well. And to spend that time and to answer the phone, you have to have an actual staff, you know. And here, just down the street at our central office, you can walk right in, right up to Gabby's desk, and she can help you with any of your concerns if you're a resident. And I think that's becoming so rare today, Keith, to see that level of service on the property management side. So many property managers want to do just the bare minimum, and they're really just looking to extract value and to just move on. We, the most of the people who work here, Keith, we have, I think, about 120 employees, and a lot of them aren't necessarily thinking about sort of the sales side like I do. They're simply thinking about the mission they have for taking care of the residents of Memphis and Little Rock and Dallas, and that's really all they think about, and that's why this is successful.
 
Keith Weinhold  24:23  
I was laughing earlier. I just find it funny how you put that. Like the bar is so low for property management that oh my gosh, this manager picked up the phone on the first try. I can't believe it. Like that's how low the bar is for property management, and your management there has been superb. We're going to talk more, including how Memphis could be on the precipice of being both the brains and brawn behind AI, including why data centers can be good for communities. More on that when we come back. You're listening to Get Rich Education. Our guests are Terry Kerr and Matthew Van Horn. Of Mid South Homebuyers, I'm your host Keith Weinhold.
 
Keith Weinhold  25:03  
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Naresh Vissa  26:36  
This is GRE Real Estate Investment Coach Naresh Vissa. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.
 
Keith Weinhold  26:53  
Welcome back to Get Rich Education. We're talking with founder Terry Kerr and director Matthew Van Horn of Mid South Homebuyers, the provider that's provided our listeners with more income property than anyone else in history for years. That popularity created a wait list that was often several months long. I'm pleased to tell you that there is no longer a wait list, so you, the investor, can get a deal done in a pretty short period of time. One reason for that, to Terry's point, is the fact that more new construction has been brought on since they weren't able to buy rehabs at the pace that they wanted to. Since we are in a housing shortage, how do you stop the shortage? You build new. One thing that you're building new are duplexes as well. So tell us more about the duplexes that you offer because sometimes that interests investors to buy one income property and have one loan with two doors.
 
Terry Kerr  27:53  
Sure, absolutely. And you know, Keith, actually, we just bought a whole street of duplexes. We bought 18 duplexes, and talk about forced depreciation brought the whole street up, and it's actually located. We have other duplexes besides these, but it's actually located just three minutes from here on the Green Line. Really coveted place to live. You can just hop on the Green Line and ride your bike all you know all the way. Well, goodness, about 100 miles or more. Yeah, duplexes are rare here in Memphis, and we've been fortunate to stumble across a good chunk of them.
 
Matthew Vanhorn  28:30  
Actually, in Memphis, there was a moratorium on building duplexes for over 40 years, and so that's part of why they're rare. Wow, is that you just weren't allowed to build them for a long time, so when we're able to come across them, it's a great thing because we know investors love them. And the fact that we're able to grab 18 right here in Midtown on the Green Line, right by our huge library, which is is an awesome place, we're really excited for those as well as the other duplexes. Like Terry said, we have others available, but be looking out for those Waynoka duplexes. Yes,
 
Keith Weinhold  29:04  
amidst the housing shortage, I have seen many U.S. cities these past few years with zoning changes allowing duplexes to exist where only single-family residential properties could previously. Tell us more about the duplex rents and prices.
 
Matthew Vanhorn  29:21  
Yes. So Waynoka duplexes, as an example, these are 2121, so a two one on each side of the duplex. They're compact, so I think they're about 700 square feet on each side. They are priced on the rent side at 925 a month per side, so 1850 in total rent, and so those are going to be selling for around the 220 mark.
 
Keith Weinhold  29:50  
Okay, those are some really attractive numbers. They are ratios that work. There inside Mid South, you've done an awful lot. More to help grow your team and help better serve investors on the investor side. Now, you know, frankly, I really never look at how you're marketing yourselves to buy rehab properties over there on that side with what you're doing. But actually, sat down and had lunch in person with your marketing director a few months ago. You've got a new website now, and so much of that is the interface with the investor in the white glove service that you offer them in order to make it easy for investors. Tell us more about that.
 
Matthew Vanhorn  30:34  
Yes, we're really proud of the new website that we've rolled out. It really is designed to make buying as easy as possible for investors, and not just buying easy, but to understand the process as well as you can, to understand and do your due diligence as well as possible from the website. And so, one thing that you'll notice is that with each property now, you can click a run profit projection is a button on each property, and it brings out a detailed pro forma. You can get downright nerdy in there. Adjust different inputs on different down payments, different interest rates, different loan products. You can toggle back and forth to see the cap rates on cash versus leveraged, and like I said, you can get downright nerdy with it, which is nice. It's something we did not have before. The pictures are really crisp on our new website now. We have available homes on our website, which is a fantastic thing for investors. Previously, with the waitlist system. We would show our website, and investors would go on there, and they would say, "Hey, there's nothing available. Right, and so that was the biggest problem. We have different markets, different products. Texas, as an example, it's going to be more high growth. Memphis is going to be more high cash flow, and so different investors have different parameters. We can actually match you to what you need now.
 
Keith Weinhold  32:02  
You guys have such a good reputation, and also you've been offering turnkey rental properties longer than any other provider I know of in all of the United States. But because your reputation preceded you in the past, I think some people would stay on your wait list for a few months, and then as soon as one property came available, they would just take it, regardless of what it was, and they still tended to rave about your service. But today, you actually have some choice.
 
Terry Kerr  32:31  
We do, we do. In addition to providing extra properties through new construction, we've also been fortunate to, you know, continue to develop our banking relationship. So we would not have been able to to do what we've done by ramping up volume if it weren't for our good lender partners. So, cheers to that!
 
Keith Weinhold  32:49  
Right, and these banking relationships are what allow you to offer interest rates in the fives to investors. Well, Matthew mentioned it earlier that we really are on this tipping point, this likely pivot point where AI has really-you could have long called it the brawn behind a lot of what moves America-that being Memphis, being that transportation hub that you are-but it's also now positioned to be the brains of AI as well. I mean, perhaps the biggest infrastructure story in America is now happening there in Memphis, the most affordable major castle market in America, and I don't know that anyone has connected these dots. So it's an exciting time. Tell us about that.
 
Matthew Vanhorn  33:37  
It is an exciting time, and I think you're right. I think investors at large have not connected those dots, like you said, Keith. Right now, if you've ever used Grok, if you've ever used Claude from Anthropic, it's being powered right here in Memphis, Tennessee. I don't know if everyone knows that of how much money that Google is pouring in to Memphis, how much Anthropic is pouring into Memphis? How much SpaceX is pouring into Memphis? It's really phenomenal. It's dramatically raised the amount of tax revenue that we've been able to generate, and that tax revenue benefits the city. And so we're already an advantaged market when it comes to investors, and this AI infrastructure I think poises us to be even stronger of a play, especially for those who get in sooner rather than later. While it's the good old days, Keith.
 
Keith Weinhold  34:36  
We have seen what AI can do to a rental market. Now, I'm certainly not projecting this on Memphis, but San Francisco has seen two-bedroom rents up 26% year over year due to this influx of AI money that you're talking about.
 
Matthew Vanhorn  34:56  
Absolutely, and we have been seeing rent growth in. In Memphis, and I think that's interesting because I've heard investors as I go to different conferences, and they say, "Yeah, rent in Memphis has been kind of flat. And what a lot of people tend to do is they look at reports that talk about what has happened over the past, let's say, two years. And so a lot of investors they want to invest when they get that report, and it says, "Hey, rents are up 26%. Well, once you get the report, it may not be the most optimal time. I'm blessed to be on the cutting edge of the knowledge here, you know, because I'm part of the property management company. In fact, I set the rents personally still on these homes, and so I see them ticking up, Keith. I'm not saying it's necessarily San Francisco style here, but I do see the rents ticking up here after a little bit of a period where it was a little bit flat in 24 and 25.
 
Keith Weinhold  35:57  
Yes, we are talking to the man that sets the rents on this huge collection of properties that we have here. Memphis is now home to the world's largest AI supercomputer. That's XAI's Colossus, the biggest single-site AI facility on the planet. You touched on it. Anthropic is paying 1.25 billion a month to run Claude on it. Google just signed a deal worth up to $30 billion starting october 1 in one year. Therefore, XAI became the second largest taxpayer in the city after FedEx. And sometimes you might wonder, okay, but will that translate to that community, to that local neighborhood, well, the city has committed 25% of the property tax revenue from those sites to infrastructure in the surrounding neighborhood. So this is a multiplier effect that we're talking about in Memphis.
 
Matthew Vanhorn  36:54  
That's it exactly. So the neighborhood where SpaceX has built these facilities, and so they built Colossus, which alone was the largest supercomputer in the world. Then they built Colossus Two, which was even larger than the first one. And by the way, they're prospecting a third facility. Guess the Colossus Three. So already the biggest. Then they built a second. They're about to build a third. And these are in the communities where we're already investing, Keith. So these are communities that are already great neighborhoods where we have great blue-collar working-class renters who love their homes from mid south, take great care of them, and now they're going to get the benefit of that 25% of a huge number in tax revenue going into improve the infrastructure in their community. So you're talking better streets, you're talking water treatment, you're talking money going into schools, which is super important. It even goes into just cleaning up the community, which is directly helpful to our property values here, and so I'm really excited that we're seeing this growth here in areas where we already were investing, Keith. So we were lucky enough to already be ahead of this even before we recognized this growth headed to Memphis.
 
Terry Kerr  38:19  
And one of the nice things about that is, is we've already got hundreds of houses that we're managing in these neighborhoods, and so all this new growth is just benefiting the investors who've owned in these neighborhoods for many, many years.
 
Keith Weinhold  38:33  
There is clearly some momentum here, and at worst, it provides some real ballast under the greater Memphis economy. Before I ask you two, if you have any last thoughts, I would like to cordially invite you, the listener, to an exclusive free virtual event with all three of us live. It is next Wednesday, the 30th. The event is called Memphis: The New Brains and Brawn Behind AI. Why the smart money is moving now. Sign up is open now and is complimentary at getricheducation.com/midsouth. So therefore, the webinar takes place the night before the new Google money starts flowing in to Memphis on October 1, and at the event you'll see actual properties, real cost flow numbers, and Mid South's best deal terms ever. Like we touched on earlier, with those rates in the fives and five years of property management at just a 5% rate, and these incentives are all available exclusively to live attendees. It ought to be really cool. Again, it is next Wednesday the 30th. Sign up at getricheducation.com/midsouth. Any last thoughts, fellas?
 
Matthew Vanhorn  39:52  
We run regular tours here in Memphis. You can come visit us on site, and most people don't come. Visit us on site, but we love it when you do. So, if you are interested in seeing us firsthand, want to put your boots on the ground here, please sign up for a investor tour where we'll show you the facility here where we're sitting, show you the warehouse, we'll show you the process of renovations, we'll show you a junker home that we just bought, we'll show you one midway. We'll show you the final product. We'll show you renovated homes. We'll show you new construction, and give you a great grasp on what we're doing here at Mid South.
 
Keith Weinhold  40:30  
That website is midsouthhomebuyers.com. Yes, I have done that tour with you guys. Yeah, it's interesting that you take us into the Junker home first, and that way we can see chronologically how you go through the process until we're in a newly renovated one near the end that's beautifully done. I still remember how much those hardwood floors shined in your product there. Yes, you, the listener, are cordially invited to join us September of 30th, a live event, all three of us. That is getresuceducation.com/midsouth fellas. It's been great having you back on the show.
 
Terry Kerr  41:07  
Thanks so much. Thank you.
 
Keith Weinhold  41:14  
Earlier in the show, I mentioned Memphis's 6% rent growth over the past three years. When you break it down per Zillow, that's just up 2% for Memphis multifamily, and it's up 9% for Memphis single-family rentals. Besides all the good stuff happening in Memphis, it has excited some people when they recently extrapolated their mega successful model out to the Dallas-Fort Worth metro and surroundings. For example, in Princeton, Texas, where they offer brand new construction, a two-bed, two-bath single-family home renting for 1675 a month and selling for under 200k. It's 192k. In fact, next week on the show, I will discuss what happens to real estate when stocks crash, and I'll talk about a lot more. But September 30th-that is the day of our event. It's also the day before substantially more AI investment dollars start pouring into Memphis, and the good old days could very well be investing here before that happens. Join the three of us for an inside look at why billions in new investment might be creating a pretty rare window in Memphis real estate. You're going to see actual properties, real cash flow numbers in Mid South's best deal terms ever, followed by a live Q and A, and it's available exclusively to attendees. Again, you can sign up at getricheducation.com/midsouth. Until next week, I'm your host Keith Weinhold. Don't quit your daydream. daydream.
 
Speaker 3  43:04  
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  43:32  
The preceding program was brought to you by your home for wealth building, getricheducation.com

Keith welcomes back macroeconomist Richard Duncan of Macro Watch to examine where mortgage rates are headed and what's driving them there. 
Duncan explains how the U.S. shifted from capitalism to what he calls "creditism" after the dollar left gold in 1971, and why today's AI investment boom, rising defense spending, and a $40 trillion national debt are all pointing inflation and interest rates in the same direction. 
He also makes the case for rental property on land as a long-term inflation hedge, and answers a question many have asked: if the government can print currency, why does it collect taxes? 
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. You're going to get a good idea of where future mortgage rates are headed as we're talking to one of the world's most brilliant macroeconomists today. Will AI be more inflationary or deflationary? And the profundity of how we're on the brink of moving into a completely new economic system today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Home Buyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth.
 
Speaker 1  1:34  
You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
 
Keith Weinhold  1:50  
Welcome to GRE from Lancaster, Pennsylvania, to Lancaster, California, and across 188 nations worldwide. I'm Keith Weinhold. You're listening to Get Rich Education, and I really appreciate that you're here. Yes, those two cities, though spelled the same, are pronounced differently. Framing this entire episode today with our brilliant guest, you'll learn which direction future mortgage rates are probably going to move, and it's decidedly either going to be higher or lower. You'll get a clear answer. Now I've said that trying to predict mortgage rates definitively is foolish. We're only talking about probabilities today. Look, have you ever wondered if the government can just print its own currency? Then why do they have to collect taxes from us. We're going to get that answer today. Back in 1971, the U.S. economy left a system of capitalism, in fact, and embarked on a journey of creditism as defined by today's guest. Well, now we're about to leave creditism. You'll learn what is poised to replace it, and it is an AI-fueled answer. You know, to prep you with some context today, I've said it here before. But when you start talking about the enormity of a national economy, the words billion and trillion start to get thrown around a lot. A trillion seconds ago, you know how long ago that was. That takes you further back than the Roman Empire, because a trillion seconds is 31,700 years. Well, 31,700 years ago, that is just about as far back as when the plains of Europe were being roamed by Neanderthals. Yeah, that was a trillion seconds ago. Coming up on the show here, the man who wrote the book on the Pareto principle 30 years ago. That's the 80-20 principle, where 20% of your effort yields 80% of the results. We'll talk to him and learn how those insights can improve your life on a different upcoming episode.
 
Keith Weinhold  4:08  
Here, the book Rich Dad Poor Dad was originally written by two authors. One of those two was Robert Kiyosaki. We had Kiyosaki on the show here with us in June, and by the way, the New York Post recently wrote an article, and they cited the Get Rich Education podcast in how Kiyosaki revealed on the show here that he is 1.2 billion dollars in debt. You can find that in the September 1st edition of the New York Post. That's the June 1st episode of the Get Rich Education podcast that they're citing. Well, a lot of people they don't know who the other author of Rich Dad Poor Dad is, but we're going to have her here with us on the show soon. So some really fascinating episodes coming up. Let's meet today's guest. Returning this week is one of the foremost macroeconomic minds in the world. He was this show's first ever guest nearly 12 years ago on episode seven. A prolific author, he publishes the popular video series Macro Watch at RichardDuncaneconomics.com, and he's really influential. For example, not long ago, he presented his economic policy proposals to congressional members of the House Ways and Means Committee. Hey, it's a warm Get Rich Education. Welcome back to the incomparable Richard Duncan.
 
Richard Duncan  5:39  
Thank you, Keith. Thank you for having me back on.
 
Keith Weinhold  5:42  
I don't know if you and the audience are ready for this. This is some perspective. It recently made news when the U.S. hit its national public debt milestone of $40 trillion. When Richard made his GRE debut here in November of 2014, it was $18 trillion. That national debt has more than doubled since you were first here, Richard.
 
Richard Duncan  6:07  
That's right. The government has been playing probably the leading role in keeping the economy growing, and a couple of times since then has played the sole role in preventing a new Great Depression in the aftermath of the crisis of 2008 and during COVID, it's the massive government budget deficits, often more than a trillion dollars a year. Last couple of years, it's been 1.8 trillion dollars. That's been driving the economy, and whenever it needs some additional support, the Fed steps in and creates a few trillion dollars here and there, and combined they've been keeping the economy growing and, in fact, booming. And wealth has absolutely exploded as a result of the government spending and the Fed money creation. In 2008, the total wealth of all the Americans net worth $60 trillion. Now, it's tripled to $180 trillion. That that is a direct result of the government's intervention through budget deficits and paper money creation by the Fed.
 
Keith Weinhold  7:14  
I will call that the world's least desirable investment portfolio minus 40 t. That is one way to think about it, but when you bring up interventionism, you know something I shared with the audience about a month ago, Richard. It is just remarkable to think about all the crises we've had just since 2020. We had COVID, we had Russia's invasion of Ukraine, we had Israel, Gaza. We had tariffs. Now we've got the war in Iran, and what is the result of all this? Largely due to government interventionism. Oh, both the stock market and real estate market in the U.S. are near all-time highs.
 
Richard Duncan  7:54  
Who would have imagined? But things work very differently now than they did in the old days when money was backed by gold, and the Fed and the government played a much smaller role in the economy. It's a different world now. That was capitalism. This is creditism. Our new economic system is driven by credit growth, and whenever necessary, the government steps in with massive budget deficits, and the Fed steps in with massive money creation to make sure that credit keeps expanding and the economy keeps growing, because if credit doesn't keep expanding, if it even dips a little bit like it started to in 2009, then the whole bubble implodes and we repeat the 1930s Great Depression, probably followed by what happened in the 1940s.
 
Keith Weinhold  8:39  
This is interesting. When you were first here 12 years ago. You talked about how society isn't so much capitalism that it's creditism, and you expounded on that. And before we're done, I know that we have now morphed into a new ism, post-creditism that Richard is going to share with us, it's fascinating. But Richard, since you were last here, the Iran War is new. It's been going on for over six months now. So I'd like to get your thoughts on that, and principally, if the Iran War is going to create lasting inflation or only a temporary energy spike. What are your thoughts?
 
Richard Duncan  9:20  
Let's broaden this out. I know that your listeners are very interested in in real estate, and of course that's very impacted by interest rates. And interest rates are impacted, of course, primarily by inflation. So it is true that the Iran war is pushing up energy prices, and that's pushing up inflation. It's not just Iran alone. Before that, we had trade tariffs, and that's pushing up inflation. And on top of that, we've simultaneously got this extraordinary AI investment boom, and the investment by the hyperscalers is just mind-boggling. The four biggest hyperscalers-Amazon, Alphabet, Microsoft, and Meta-they're expected just the four of them to invest something close to $750 billion this year. 750 billion, just four of them. Now, to put that into perspective, the U.S. military, in one year, the most recent year, only spends half that much on procurement and research and development, roughly 320 billion. You've got these four hyperscalers spending twice as much as the U.S. military does on procurement and research and development. That is just hard to wrap your mind around, and of course, that's pushing up everything from the cost of memory chips to electrical equipment, the cost of electricity itself, power generation equipment, and all the kinds of materials that go into building data centers. So that's another source of inflation. And then there is this wealth effect that I just referred to a minute ago. Wealth has tripled from $60 trillion to $180 trillion since 2008. All that wealth is giving a lot of rich people a lot of money to spend on a very large scale, and that also is inflationary. So all of those things are inflationary, and none of them seem to be going away in the immediate future. Now, on top of that, the inflation is not the only thing that is affecting the interest rates. Other things are affecting the interest rates as well. For instance, the budget deficit this year looks like the U.S. budget deficit is going to be quite close to $2 trillion. So that will be $2 trillion of government borrowing, and this doesn't look like it's going to go down anytime soon either. President Trump is requesting $1.5 trillion for the total defense budget in fiscal year 2027, which starts in October. That's up from just $900 billion in fiscal year 2025, so that's a huge increase in military spending, which makes the percent-
 
Keith Weinhold  9:20  
Increase plus, y
 
Richard Duncan  10:52  
Going to keep growing, and that spending will be inflationary as well. But so the government is going to have to borrow, so the demand for money from the government is enormous, and as I've just mentioned, because of the AI boon, the hyperscalers and many of the other companies in the AI industry or related to the AI industry, they're also tapping the bond market on a very large scale. So demand for borrowing from these AI-related companies, the demand is pushing up interest rates. This is not directly related to inflation, so you've got a lot of demand for borrowing from the government and from the private sector related to artificial intelligence primarily. So that's on the demand side for money, and on the supply side, well, the United States is not making a lot of new friends these days. We seem to be losing friends pretty quickly, and many of the people who were very enthusiastic about buying American government bonds in the past are becoming increasingly reluctant to do so. Most of them still are. Most of them don't really have any viable options, but on the margin, there are fewer friendly buyers of our debt, and so fewer people willing to buy the debt also puts upward pressure on U.S. interest rates. So recently, the 30-year U.S. government bond hit a 19-year high at 5.33% That's a very high number, and this has spooked the Treasury Department. Treasury Secretary Besant has begun doing some very unusual things that suggest that he's very concerned. He has helped stop the yen from weakening by selling some euros that the U.S. government owned and buying yen. He did this to make the yen stronger, and this meant that Japan wouldn't have to sell its U.S. government bonds in order to have dollars to use to buy yen to make the yen stronger. So that was a strange move.
 
Richard Duncan  9:20  
And then more recently, he's announced that the Treasury Department is going to start buying twice as many long-dated bonds as it has been doing. Each operation now, the Treasury Department has been buying $2 billion worth of bonds at the long end and financing it with short-term borrowing. So borrowing at the short end, the say two-year bonds, which have a much lower interest rate, and using that money to buy 10 or 30-year bonds that have a higher interest rate, in order to push up the bond prices and push down the bond yields at the long end, to try to hold down the 30-year bond yield and the 10-year bond yield, which of course directly affects the mortgage. This is beginning to seem like there's some degree of, well, let's call it perhaps not panic, but deep concern in the Treasury about how high interest rates in the U.S. are going, and just moving forward with this idea, all of these pressures, the inflationary pressures are not likely to go away anytime soon. The demand for borrowing is not going to go away anytime soon. So there's going to continue to be this upward pressure on interest rates. And I think ultimately, what we are going to see is another big round of quantitative easing from the Fed. The Fed is going to have to step back in and announce that it's going to create a great deal of money one more time, and use that money that it creates to buy government bonds to push up their price and to drive down their yield. And we shouldn't forget that already the Fed is currently printing, creating money. It launched a new program. What is it called? Reserve management purchases. This was a program they announced in December last year, where they were just going to create some money and inject bank reserves into the financial system, so that they could manage reserves at a good level, so everyone would have plenty of liquidity. Just since December, they have created $210 billion. This is kind of going under the radar, but $210 billion since December is not an insignificant amount of money.
 
Richard Duncan  14:49  
If the budget deficit this year turns out to be 2 trillion, then that's financing 10% of the government's budget deficit, right? More than 10% So we've already got a significant amount of money creation by the Fed going on currently, and that's not enough to prevent the yields from moving sharply higher. So I think what we're going to get is another much bigger round of quantitative easing in the not too distant future, and that's going to have a lot of ramifications.
 
Keith Weinhold  17:00  
That's a really interesting insight, and Richard, one word keeps popping into my head as we have this discussion. Okay, inflationary pressure correlates with higher interest rates, sure, but how much are these high bond yields, which flow right over to our mortgage rates, a result of an erosion in trust. I'm thinking about trust
 
Richard Duncan  17:24  
to some degree, yes, but not overwhelmingly. The reality is, at the end of the day, there is a certain amount of money in the world that has to be invested somewhere, and that is the most important fact to understand. There is a pool of money; it keeps getting larger, and it has to go somewhere. And U.S. government bonds are considered the safest place for it to go. For instance, the United States has a very large trade deficit with the rest of the world. For the last two years, the current account deficit, which is more or less the trade deficit, has been 1.2 trillion dollars a year. It's easier to understand it as a trade deficit. That's been throwing off 1.2 trillion dollars into the surplus countries. The surplus countries sell things in the United States, countries like China and Vietnam and all the others. They sell things in the United States that they make at home. They get paid in dollars. They take their dollars back home to China and Vietnam and all the other countries, and what do they do with the dollars? They own dollars. They've got to do something with those dollars. They're getting 1.2 trillion more dollars every year. Now, the thing they do with it primarily is they buy treasury bonds with it, and so there is an inherent and growing demand for treasury bonds. You may be thinking, okay, they could take those dollars and they could convert them into euros. That's true, they could, but whoever they buy the euros from, they then own dollars, and they would need to buy U.S. dollar-denominated assets with them. The main driver behind the buying of Treasury bonds is just the fact that there are so many dollars in the world, an increasing amount of dollars outside the United States that need to be invested in U.S. dollar-denominated assets. People can lose confidence in "quote unquote, but what are they going to do with their dollars? It has to go somewhere, and so it ultimately ends up going round and round, and an enormous amount of it ends up in U.S. Treasury bonds, and that's not going to change so long as the U.S. has a very large trade deficit with the rest of the world. The rest of the world is going to keep accumulating dollars for that reason, and they're going to keep accumulating Treasury bonds for that reason.
 
Keith Weinhold  19:44  
Well, what do these effects mean for real estate, Richard? I mean, which force you think will ultimately win for housing here with this increased inflationary pressure? Is it more of a damaged affordability problem, or do we see rising? Placement costs that continue to help float real estate values up.
 
Richard Duncan  20:05  
Real estate prices, home prices, have not been performing very well over the last year to two. Pretty flat, unlike in prior years, immediately after COVID when they were booming. I suppose that's what we're going to continue to see for some time. If interest rates remain high, the affordability is not there. But if we do get this new round of quantitative easing, which I think is a real possibility, then that will effectively push down the interest rates, making home affordability better. And at the same time, by creating more money, that does push up asset prices across the board. So over the long run, I do believe that real estate is a very good investment, and also it can be a very good investment from the point of view of providing diversity in your portfolio. I'd like to focus in particular on it can be an inflation hedge. So, if you buy a house and use a say a 30-year fixed mortgage, and then we or a 15-year fixed mortgage to pay for a significant part of that purchase, and then we do get inflation, then the inflation eats away your mortgage. Your mortgage evaporates because of the inflation, so in that way you're somewhat protected from the risk of future inflation by having inflation destroys your debt. In other words, so that helps. So I do believe that buying houses, I think rental income is a very good investment, particularly houses on a piece of land buy the house with a fixed rate mortgage. You rent out the house, and over 10 to 15 years, the house pays for itself, and it keeps appreciating in value over time. Decade after decade, it will become increasingly valuable over the long run, and you'll have also a supply cash flow, and you'll have this inflation hedge that I just described. So I think owning rental property that is on land, I'm not so keen on buying condos. There's no limit as to how many condos can be built in the air, but there is a limited amount of land in the world, and so land is as good as gold because if gold goes up; the land will also go up for the same reasons. So I think owning rental property is a very important part of having a broadly diversified portfolio, which is usually the best thing for most people to do to have a broadly diversified investment portfolio. 
 
Keith Weinhold  22:37  
Yeah, in this era of both war and increased interventionism, yeah, we still have a resource here, real estate that is scarce, that is necessary, and is built with this basket of goods and commodities constituting that replacement cost.
 
Richard Duncan  22:53  
I agree.
 
Keith Weinhold  22:55  
Well, Richard and I have a lot more to talk about when we come back, including what phase of the economy that we're in post-creditism and a lot more. You're listening to Get Rich Education. Our guest is the publisher of Macro Watch, Richard Duncan. I'm your host, Keith Weinhold.
 
Keith Weinhold  23:12  
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Robert Helms  24:44  
Hey everybody, it's Robert Helms of the Real Estate Guys Radio Program. So glad you found Keith Weinhold and Get Rich Education. Don't play your daydream.
 
Keith Weinhold  25:04  
Welcome back to Get Rich Education. I'm your host Keith Weinhold. We're talking with Richard Duncan. Check out him and his work at RichardDuncanEconomics.com. So much interesting stuff has happened in the macroeconomic world since we last had him here with the Iran War, with the AI arms race heating up, and with hitting that milestone of $40 trillion in total public national debt. Which, by the way, that $40 trillion-that is more than the combined debt of Germany, Japan, France, Italy, the UK, and Canada. That's basically the entire rest of the G7 just to try to get your head wrapped around that $40 trillion number, and you know, Richard, when it comes to the government, their income and their expenses and their assets in their debt, some wonder, including me, if the government can just print its own currency, then why must they collect taxes from us?
 
Richard Duncan  26:04  
Okay, well, to understand the answer to that question, it's necessary to understand that it wasn't always possible for the government to print its own currency. Up until 1968, 1971, the Fed was legally required to back the dollars it created with gold, and the United States had the obligation to allow other countries to convert the dollars they accumulated into U.S. gold. So up until then, that wasn't a possibility for the government to finance its spending by money printing. And so, over the centuries that preceded, the government would tax the people to obtain the money that it needs for spending. So imagine today: here we are. The government now is spending about $7 trillion a year, and its tax revenues are about $5 trillion a year. So if it suddenly said, "Okay, we're not going to tax anyone anymore, that would mean that people would have an extra $5 trillion to spend, and if the people started spending $5 trillion, we would have hyperinflation, because there's only a limited amount of industrial capacity in the United States, or even in the world for that matter. It couldn't absorb a $5 trillion of additional spending from households and businesses, so it's not that they can't technically create the money as much money as they want to pay for everything they want. The constraint is not money creation technically; it's the inflation that it would produce if they just stopped taxing everyone and just created money instead. So that's the reason they can't.
 
Keith Weinhold  27:46  
Just slowly taper it away and give people some income tax relief. Why can't they do that?
 
Richard Duncan  27:52  
Well, that's what they've been doing. Taxes are far lower now than they were under when President Reagan took office, and that's one of the reasons we have $40 trillion in debt.
 
Keith Weinhold  28:03  
Okay, but that is how the income and expenses look on an annual basis, right, Richard? This is how I think of it. Like the United States basically has 5 trillion in annual income, much of it from personal tax collection, and 7 trillion in annual expenses. That's how we get to the annual deficit of about 2 trillion, which rolls into that $40 trillion of overall debt.
 
Richard Duncan  28:30  
That's right. What you said is correct. But we would have much more than $5 trillion income from taxes had the government not reduced the tax rate so often and so radically, starting in the early 1980s under President Reagan, if taxes hadn't been cut so sharply, we wouldn't have a two-trillion-dollar budget deficit, $40 trillion of government debt. So they've already been tapering the amount that they tax by cutting tax rates very sharply over the last decades,
 
Keith Weinhold  29:02  
I guess a lot of people, admittedly me included, haven't been thinking about it that way. Maybe because it's painful, and I do write checks to the IRS. But when we talk about this propensity for continued inflation, one component of this is what's happening with the AI arms race, and I know you've looked at this closely. You know, because one thing I think about is, well, wait, will the AI arms race actually be deflationary over time because it lowers production costs and makes us more efficient, or is it going to be inflationary because it requires enormous capital and electricity and infrastructure in the building of these data centers. So you know I can see it going either way with the AI arms race, inflationary or deflationary. But since you studied it a lot, including talking about it on macrowatch, tell us more about the AI arms race and what this all means, Richard.
 
Richard Duncan  29:59  
So yes. On your point that you just made, in the short term, it looks like the AI boom is going to be inflationary. Yeah, it's driving up electricity prices, land prices, and all of the things that we discussed before. Everything that goes into making artificial intelligence intelligence, including memory chips, which drive up the cost of your iPhone and iPad. So it's inflationary in the short run, but over the long run, it could probably and probably will be quite disinflationary or even deflationary. I think that's several years away. Now, moving on to the next question, the AI arms race. I think it's very helpful to understand the world around us by putting it in the context of how our economic system has evolved since dollars ceased to be backed by gold. 1968, the Fed was no longer required to back dollars with gold. 1971, President Nixon said, "Sorry, Europe, we we said we would let you convert your dollars into gold, but we changed our mind and you can't. So after that, there was no longer any gold backing for the dollar, and here are a list of things that have happened as a result of that change. Our huge trade deficits couldn't have happened if the dollars were backed by gold. The huge budget deficits that we have couldn't have happened. The Fed couldn't have created trillions of dollars through quantitative easing. Inflation rate has fallen from the 1980s, from the the mid teens to well below the Fed's 2% inflation target for most of the last 20 years, and wealth in the United States has exploded, as I mentioned, from 60 trillion to 180 trillion. That wouldn't have happened if dollars had remained backed by gold because credit has exploded. Total debt or total credit, two sides of the same coin. Total debt in the U.S. It's government debt, household debt, corporate debt, Fannie Mae, Freddie Mac debt, all the debt. It first went through $1 trillion in 1960. Now it's 110 trillion. So 110 times increase in my lifetime in total debt. That wouldn't have happened if dollars had remained backed by gold, and because of all of that credit expansion and the massive trade deficits we had with the rest of the world through globalization occurred, and that allowed Asia to industrialize, and Asia wouldn't be industrialized as it is now. China wouldn't be an economic superpower as it is now had dollars remained backed by gold, because it wouldn't have been able to grow through export-led growth. And so, China, instead of looking like it does today, it would look like it did in 1970, basically being a very poor third world country, and globalization has pulled hundreds of millions of people out of poverty.
 
Richard Duncan  32:47  
They would still be in poverty had dollars remained backed by gold. The Soviet Union probably would still be around because the U.S. under President Reagan wouldn't have been able to to spend so much on the military that it bankrupted the Soviet Union trying to keep up with us, and finally, China wouldn't be the national security threat that it's become now because it wouldn't have had a trade surplus and it wouldn't have had any economic growth to speak of for the last 50 years. That's the world that we're living in now. The world we live in now is the direct result of dollars no longer being backed by gold, and to understand the world around us, you have to understand that that's the starting point. Now, coming to your question, this explosion of wealth that has been created under the system that I call creditism-we did have capitalism. It was driven by saving and investment, Capital accumulation, hence capitalism and investment that drove capitalism. That's not how our system works. Our system is driven by credit creation and consumption, and more credit creation and more consumption. That's creditism. It used to be driven by private sector credit growth, but the private sector became too heavily indebted in 2008, and they blew up, and that almost resulted in the complete collapse and bankruptcy of every bank in the United States and probably most of the banks around the world as well. So the government had to step in, and since that time, it's been government borrowing primarily.
 
Richard Duncan  34:17  
This driven creditism and kept credit expanding with the help of the Fed, so this has been the evolution of creditism and has produced extraordinary amounts of wealth. So it's had two consequences that we need to focus in on now. For one, I've mentioned already, it turned China into an economic superpower, which is now on the verge of overtaking us, not just economically, but also technologically and militarily, it's become an extreme national security threat to the United States. But the second thing that has occurred, the creation of all of this wealth has provided the funds that have allowed a. Technological revolution to occur so quickly, this AI revolution that we're now living through, that is the direct result of the ample liquidity that has been created and flowing around the world, originating largely from the Fed's printing press and the government's budget deficits. That's created trillions and trillions and trillions of dollars of wealth that wouldn't have existed otherwise, and that wealth has gone into funding this development of data centers and the technology that's created the artificial intelligence. Now we are experiencing this AI revolution, and it's become quite apparent to everyone that whoever wins the AI arms race is going to rule the world. We're on the verge of machines becoming more intelligent than humans, and then after that point, through self-training and self-improvement, going on 24 hours a day, they're going to become exponentially more intelligent than humans very quickly, so whoever wins this race is going to have dominance of every other country in the world. So, as creditism has evolved, it has created a national security threat in China and has created artificial intelligence. And as a result of the two combined, we now have this artificial intelligence arms race with the United States that must win. That's why President Trump is calling for a 1.5 trillion dollar defense budget.
 
Richard Duncan  36:30  
So this is one of the main themes that MacroWatch has been focused on this year. I've done a series of videos on the new defense spending boom, looking in one video at the traditional titans of defense like Lockheed Martin, RTX, Boeing, in another video looking at the new up-and-coming Silicon Valley challengers in the defense industry, companies like Andrel, Palantir, and most important of all, SpaceX. This is now the driving force in the economy. the The absolute necessity of winning this AI arms race is going to require much greater government spending on the military, and it's going to require what we're seeing extraordinary amounts of money being invested in developing artificial intelligence because whoever gets there first wins, and whoever doesn't is going to be subjugated by the winner. So that's where we are. So that brings us up to we've been discussing the change from capitalism into creditism, and we've seen how creditism has evolved from being first driven by private sector credit to later being driven by government sector borrowing and spending, now leading to this AI arms race, which I think we're now moving toward a different kind of economic system beyond creditism. So let me back up just a minute and say that economic systems are best defined by the constraints that limit what they can do. So we've been talking about capitalism. Capitalism's main constraint was the requirement that money be backed by gold, and when that constraint, when that gold-backed money constraint was removed, the constraint was gone. The economic system evolved into a different kind of economic system. Creditism has created extraordinary amounts of wealth and growth since early 1970s. This is not the first time economic systems have evolved. If you look back through history, there have been many different kinds of economic systems. They've all been defined by the constraints that binded what they could do. If you go back to hunter-gatherer economic system, that economic system was constrained because the people didn't have tools for cultivation or any way to store the food that they created for long-term storage, but once they developed that those tools and the ability to store food, those constraints were removed and they evolved into a different kind of economic system. Ultimately, into feudalism. Feudalism was an economic system that was constrained by very poor roads, so there was very little transportation. There were no banks, so no banking system or credit, and there was very limited legal social mobility.
 
Richard Duncan  39:28  
But eventually, cities developed, and because of cities, trade flourished, and that removed the constraints that had defined feudalism. Okay, so fast forward, capitalism was constrained by gold-backed money. When gold was removed, we moved into creditism. Now here we are in creditism, late-stage creditism, and we're seeing this phenomenal expansion of artificial intelligence. So every economic system throughout history has. Had two constraints in common. There have been labor constraints, a limited labor supply, and there has been the constraint of limited human intelligence. We're now, thanks to artificial intelligence, on the verge of removing those two constraints that have limited every economic system up until today, when artificial intelligence is embedded in humanoid robots, that's going to remove the labor constraint. We will no longer have any labor constraint. Robots will be able to produce all the labor and then some that's required. So there goes the labor constraint, and when we hit superintelligence, that's going to remove the constraint of human intelligence that has bound economic systems. So those have been the two primary binding constraints on every economic system so far, and they're just now about to be removed by artificial intelligence. We're moving into a new era without intelligence constraints and without labor constraints, and this is going to radically change everything. When those constraints are removed, creditism is going to evolve into an economic system that's no longer driven by credit creation. It's going to be driven by intelligence creation, knowledge creation, or an explosion of cognition. So I call the new system that we're moving toward cognitism, because rather than being driven by credit as creditism is, it's going to be driven by exponential expansion of intelligence or cognition, and it's probably going to create undreamt of wealth, but it's going to completely change from bottom to top everything about the world and society and social relations that exist today, and that is what we're very quickly moving into over the next 10 to 20 years. That that's where we're going to go, and I believe it deserves a new name. So I've coined the term cognitism to describe this new economic system. The post-creditism world is cognitivism.
 
Keith Weinhold  42:12  
Wow, this is massive. Ever since we met, you talked about creditism, and really, that's the economic system that we live in, not capitalism, so we're on the brink again of moving from creditism into cognitivism, because oftentimes these forces and their change are defined by having the constraints removed, and we're on the brink of removing the labor constraint and the human intelligence restraint from creditism to move us into cognitivism over the next 10 or 20 years. I'm just reviewing what you said as I'm thinking this through, Richard. Talk to us at least a little about what the ramifications are for us, just everyday people and investors with this cognitimism economic system.
 
Richard Duncan  43:02  
It's very difficult to guess what the consequences are going to be. They're going to be not only economic, but they're going to very quickly become political, and the political consequences are difficult to guess how they will play out. But it does look like when robots can do all the manual labor, and machines can do all of the intellectual work on a much more accurately, much more rapidly, much more flawlessly than humans can. There won't be any need for humans to have work unless legislation is in place to ensure that they do, and if they don't have work, then they're going to not have any income. And if they don't have any income, they're going to start being very unhappy, and they're going to start rioting, and governments are going to begin to fall, and we don't know how that's going to play out. So there's going to have to be arrangements made to ensure that people do have enough income to benefit from all of the extraordinary wealth that could be created through limitless labor and limitless intelligence, but to work in a way that can satisfy our wildest dreams and beyond our wildest dreams is going to be a matter of restructuring the political economy, if you will, to ensure that people benefit from this technological revolution that is now speeding up.
 
Keith Weinhold  44:30  
Yeah, I would say all we do know is we don't know and how it's going to turn out. But you know whether it's been tractors replacing horses or whether it's been the advent of the assembly line, or whether it's been the advent of the internet, people always say it's going to destroy net jobs, and historically, it really hasn't.
 
Richard Duncan  44:53  
You're right, but the replacement of horses with automobiles didn't really work out so well for the horses.
 
Keith Weinhold  45:00  
So, is there any way we can think about this in order to stay nimble as investors and everyday people, Richard? As we move into cognitism.
 
Richard Duncan  45:10  
Absolutely, everyone needs to subscribe to Macro Watch, and they'll be able to follow it very closely there as I map it out as it unfolds from month to month.
 
Keith Weinhold  45:22  
They should, and it's fascinating, and you've really been on the cutting edge of that. Tell us more about subscribing to Macro Watch, something that a lot of listeners should be interested in.
 
Richard Duncan  45:33  
So my background is has been in finance. I started working in Hong Kong in 1986 as a securities analyst, I later on became an economist and then a strategist. I worked for the World Bank for a couple of years in Washington. I was the head of global investment strategy in London for ABN AMRO Asset Management. So my background is in finance, and I have spent most of my career living in Asia for the last 40 years, primarily in Asia. Along the way, I've written four books. The first one was the Dollar Crisis back in 2003. The most recent one was The Money Revolution in 2023. So my background is in finance. But 13 years ago, I launched Macro Watch. Macro Watch is a video newsletter. Every couple of weeks, I upload a new video. It's essentially me making a PowerPoint presentation discussing something important happening in the global economy and how that's likely to impact asset prices. So it's essentially become a compendium of the global economy. Essentially, everything that has happened in the last 13 years at the macro level that matters is discussed in these macro watch videos. For instance, there is a complete history of everything the Federal Reserve has done since it was founded in 1913. There is a complete description of government debt from the beginning, the increase in government debt and budget deficits. It explains things like how the Fed actually creates money, what are bank reserves, what is Japanese monetary policy, what is European monetary policy. All the major macroeconomic developments are described there and are available to subscribers every two weeks. They upload a new video, and so if your listeners would like to check it out, my website is richarddunkeneconomics.com. That's richarduneconomics.com, and if they'd like to subscribe, hit the subscribe button. And I'd like to offer everyone a 50% subscription discount.
 
Keith Weinhold  47:36  
Thank you.
 
Richard Duncan  47:36  
They'll be prompted to put in a discount coupon code if they use the discount code GRE, like Get Rich Education, they can subscribe at a 50% discount. They'll find it very affordable, and at the very least, they can sign up for my free blog while they're there, and they can follow my work that way. 
 
Keith Weinhold  47:57  
It is fascinating the AI arms race poised to have us completely change economic systems from criticism to cognitism. Richard, is there any last thing that you would like to leave us with? Whether it has something else to do with AI, maybe I didn't think about asking you, or something with the Iran war and the inflation, or anything else in the economy. Any last thought for what we should do or be aware of?
 
Richard Duncan  48:24  
One thing, of course, I think is very important is for everyone to learn to use AI as much as they possibly can. It's easy to use, and it will teach you how to use it. And as we evolve into this new world is going to be crucial to make use of this most important tool humanity has ever had-the ability to use AI. This suddenly gives you access to all the world's knowledge. All you have to do is ask, and it will tell you in a very friendly way. So, by being able to use AI, you'll be in a much better position to survive the transition and prosper in the decade ahead.
 
Keith Weinhold  49:09  
That is an actionable way to stay on top of it, Richard. It's been valuable as always. Thanks so much for coming back onto the show.
 
Richard Duncan  49:16  
Thank you, Keith. I've enjoyed it.
 
Keith Weinhold  49:24  
Yeah, keen insights from Richard as always. Yeah, the U.S. sure has been making enemies the past couple years. That could make other nations less likely to buy our debt, and then in turn, it takes higher interest rates in order to attract bond buyers. Well, that in turn increases mortgage rates. But to some extent, other nations have to buy our debt. Richard says that a bigger round of future QE is a distinct possibility. That is code for money printing. That's clearly. Inflationary, but few seem to know we've already been involved in liquidity operations since last December. Whether that's called QE or something else, it is taking more government spending to keep up with the AI race. That's inflationary too. What about that? When horses were replaced with cars. How did it work out for the horse? I don't know if that made it better or worse for the horse. Maybe horses were out of work, but then they got to live free. Will AI make that very predicament apply to humans? Nobody knows. The economic system will have moved from creditism to cognitism when the economy is no longer driven by credit creation but intelligence creation, from RichardDuncanEconomics.com, you can hit the subscribe to MacroWatch button and enter the discount code GRE for a 50% discount. Just about everything that you heard today is poised to drive mortgage rates higher, not lower. Big thanks to Macro Watch Mastermind Richard Duncan today. Next week it's a more real estate centered show. I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 2  51:21  
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  51:49  
The preceding program was brought to you by your home for wealth building, getricheduceducation.com

Keith breaks down the "baseline trap" in investor psychology, showing how rising income and lifestyle creep can quietly undermine the feeling of financial freedom. 
He then shares a grounded outlook for U.S. home prices, outlining how inflation, AI-driven job growth, limited inventory, and strong homeowner equity are shaping the market. 
He closes with a data-driven look at where population growth is heading through 2040, especially in Texas and Florida, and what that could mean for long-term real estate demand and investing strategy.
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Complete episode transcript:
 
Keith Weinhold  0:01  
Welcome to GRE. I'm your host Keith Weinhold. Investor psychology often falls into the baseline trap. Learn what's going to happen to home prices over the next year. Then more than half of America's population growth until 2040 will occur in just these two states. All today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth
 
Speaker 1  1:34  
You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
 
Keith Weinhold  1:50  
Welcome to GRE from Jackson Hole, Wyoming, to Jackson, Mississippi, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education, and Happy Labor Day. Let's talk about your investor psychology, because as you grow your wealth and your portfolio size, there is a trap that you will almost certainly fall into, and I'm not infallible. I've fallen into this trap to some extent too. That is the baseline trap. It's the tendency for every improvement in your income, your wealth, or your lifestyle to become your new normal. Once this happens, the improvement stops feeling like progress, and you need even more just to feel equally successful, if you get used to flying first class and then you have to drop back to coach again, it feels less like flying and more like being deported. Psychologically, we fall into the baseline trap because the human mind evaluates Life relatively, not absolutely. We don't simply ask ourselves how good is my life, how good is my situation. Instead, we ask how does this compare with what I've recently experienced, what I expected, and what others have, and there are a number of forces that drive the baseline trap. One is hedonic adaptation. Hedonic means pleasure seeking. People rapidly adjust to improvements. The first month of receiving a new $5,000 in passive income that feels transformative. After two years, it feels completely ordinary. The income didn't become less valuable. Your nervous system simply stopped registering it as new. Yesterday's luxury became today's wallpaper. A force driving the baseline trap is a shifting reference point. Gains and losses are measured against a mental baseline. Once your portfolio reaches, say, a $2 million net worth, well, your mind soon begins treating the $2 million as mine. You're like, hey, this is mine now, even if much of it came from recent appreciation. A decline to 1.8 million, therefore, feels like losing 200k rather than still having substantially more wealth than you did just a few years ago. Well, instead, you're only focused on the 200k paper loss. Then there's loss aversion psychologically. Losses generally hurt more than equivalent gains feel good. After a higher standard becomes normal, surrendering and. Any part of it feels like some blood-curdling loss. That's why reducing spending from 20k to 15k per month that can feel painful, even if 15k once felt luxurious to you.
 
Keith Weinhold  5:16  
There's also the lifestyle creep component. People convert variable gains into fixed commitments. What do I mean? I mean like a strong income year. Oh, pretty soon that becomes a larger mortgage. Rental cash flow that becomes a vehicle payment. A bonus that becomes private school tuition, portfolio appreciation. Well, that supports new borrowing. See, pleasures that were once optional have now become obligations. And you got to ask, wait, how did that happen to you? You're supposed to have a life of options and not obligations. That's what financial freedom is supposed to be. The baseline then is no longer merely psychological; it becomes embedded in real monthly expenses. Then there's also the dangerous driver of the baseline trap that's called, oh no, social comparison. We commonly measure success against our peers, but instead, what you should do is measure it against your former self. Because as you become wealthier, see your comparison group changes too. If you've got five rentals, you soon stop comparing yourself with someone that owns none, you might even begin comparing yourself with people who own 50 of them, and why not? It's natural, after all. That is where you want to go, despite enormous progress. See, that's how you can feel left further behind. Then there's the recency bias. Your mind gives enormously disproportionate weight to recent experience. A few years of 15% returns, like what happened in 2021 and 2022 in real estate. Oh, you could begin expecting 15% after rapidly appreciating real estate, continued appreciation feels normal. A favorable cycle gets mistaken for the natural baseline, and then when conditions normalize, ordinary performance feels rather defective. Then there's identity inflation. That's a trap. This is when accomplishments become woven into your very identity, like I'm a multi-million-dollar entrepreneur, or I own 20 properties, or my income always grows. Okay, once success becomes identity, maintaining the baseline feels necessary just to preserve your self worth. Now, with this condition, see a temporary setback. It doesn't merely affect the numbers.
 
Keith Weinhold  8:08  
It feels like evidence that you're becoming a lesser person, and the brain rewards progress more than possession. Humans are energized by movement toward a goal, reaching the goal often produces less lasting satisfaction than you expect. Buying the 10th rental creates a dopamine hit, and owning it three years later does not. The investor therefore creates another target, not always because another property is even needed, but because continued pursuit restores the feeling of progress, success erases the memory of constraint. As your wealth grows, it becomes difficult to remember emotionally what financial insecurity even felt like I mean you might intellectually remember earning 60k, but you no longer experience today's 300k income in comparison with it. Your comparison point quietly changes from your former life to your best recent year. The paradox is that your circumstances improve faster than your experience of them? The goal is not to stop growing; it is to prevent every improvement from becoming a new psychological necessity. Keep growing your means, but don't let success redefine enough every time you achieve it, don't let it redefine enough. Let's say you acquire rentals and you do generate another 5k per month. The trap is that your spending and expectations gradually rise by 5k. You're wealthier, but you don't. Don't feel freer. Instead of investments buying freedom, they merely finance a more expensive baseline, and it can distort how you view your portfolio. 10 properties once felt like an extraordinary accomplishment, and soon 10 feels ordinary, and 20 becomes necessary. You keep moving the finish line, and this is closely related to hedonic adaptation and lifestyle creep. But it extends beyond spending because your definition of enough keeps on rising. So the antidote certainly is not living small forever-it's deliberately separating the growth rates of your assets and your lifestyle. What you want to do is grow your means faster than you grow your baseline. Really, that's the key. You're gonna be more satisfied. Instead of simply living below your means, you sure do want to grow your means, but don't let every gain become a permanent new obligation. Let some additional cash flow purchase you things like time, resilience, and optionality-not merely nicer recurring expenses. If your lifestyle rises as fast as your passive income, you're wealthier, but no freer.
 
Keith Weinhold  11:28  
So here's what you do: when your income rises, let your lifestyle rise about half that much. Otherwise, if you upgrade your lifestyle too much, say that you receive an extra $3,000 in monthly rental income, then you add in a luxury car payment, better vacations, and more expensive restaurants. Pretty soon, that extra 3k that feels necessary instead of liberating, and then there's also the record income comparison part of the trap. Say your business earns $1 million during an exceptional year. The next year, it earns a still impressive 850k, but you experience it as failure because the unusually strong year became your new baseline. Don't let that happen. You can compare yourself to others that can be motivating, but the more important comparison is to the former you. Now, another way that investors fall into the baseline trap in real estate is how an exceptional market becomes the standard. Say that you bought rental properties in 2012. Well, 2012 was perhaps the best time to buy real estate in generations. This was shortly after the global financial crisis, so there was this confluence of low prices, low interest rates, strong cash flow, and you had little competition as well. I mean, you had it all in 2012, and those deals performed spectacularly in today's market. Available properties produce lower initial cash flow, but they could still deliver respectable total returns through appreciation, rent income, principal paydown, tax benefits, and inflation profiting. But a losing investor rejects all of those things because they aren't as attractive as the once-in-a-generation deals of 2012, or even the rock-bottom low-rate days of 2020, they fell into the baseline trap. The trap here is that an unusually favorable period for real estate became the new benchmark. It's sort of like how last week I told you about how the deal structure always changes over time from the Reagan administration until today. Today the deal is with Burr properties, and it's also with buying new builds with rate buydowns. But see, in 2012 there were almost zero available new build properties that were created for investors to rent to others.
 
Keith Weinhold  14:25  
Over time, with these new builds that you're adding now, you're going to have fewer maintenance and repair expenses. Tenants tend to stay in new builds longer, and new builds appreciate better over the long run. See, I wasn't getting any of those benefits in 2012, and I bought rental real estate in 2012, and I bought real estate recently as well. Not falling into the baseline trap, because today it's still difficult to find any investment bet. Than residential real estate with a loan, it is a scarce asset that people are going to continue to need. So here we are today, about 15 years on from 2012. Water market conditions like now. Let's talk about that and what can we expect for the next year? National home prices keep rising, but they're only about one half of 1% higher than they were a year ago. I mean, that's an appreciation level with the enthusiasm of someone attending a seven a.m. meeting. I do expect national home prices to keep rising modestly over the next year. Let me tell you about why, and then what the drivers are. And to be clear, we're talking about single-family homes up to fourplexes here. I'll discuss apartments later today. Well, the drivers for continued price growth are many of the same reasons that home prices are up just a little since last year. There are four of them. These four are inflation, the AI boom, short inventory, and a lack of distressed sellers. So let's unpack all of these four factors that I've identified for putting a floor underneath home prices, inflationary pressure is poised to raise replacement cost, energy, wages, and tariffs make those inputs more expensive, and the more war we have, the more inflation we have. A home is a bundle of land, labor, lumber, concrete, copper, and all sorts of energy inputs, plus 14 trips to Home Depot because someone forgot the correct nails and screws. That's what a home is. Recent home price growth it has lagged today's 3.4% CPI inflation rate. So again, we're not even talking about inflation-adjusted gains here. AI that creates local housing heat. It's not so much a nationwide driver of home prices. And in a moment, I'll tell you the top five housing markets for AI-led home price growth, but how does AI investment push up home prices anyway? How does that happen? People are getting high salaries, signing bonuses, and stock options that produces well-funded buyers. They make big down payments, or they even pay all cash for homes, and when a buyer pays all cash for a home, they can pay absolutely any price because they don't have to get an appraisal that comes along with a loan for a financed property.
 
Keith Weinhold  17:53  
That's how all cash buyers can really push up prices. The growth in AI companies that has really helped push the S and P 500 higher that fuels a wealth effect nationwide that makes everybody feel wealthier regardless of where you live as long as you're invested in the stock market but the localized effects with those higher AI wages and signing bonuses in order they are most potent in San Francisco, San Jose, Seattle, New York City, and Boston, and none of those are good cash flow investor markets. Still, short housing inventory is contributing to higher prices, and hey, it's time that we check on this again. Ever since the inventory crunch started to plummet in 2021 and reached its lowest point in 2022, I've been updating you on the housing supply, and I always keep it same same. I cite the same data source, the Federal Reserve Economic Data's active listing count, Fred's active listing count, which counts single-family and townhomes and condos, all wrapped up in this number. And the figure it still hasn't recovered at 1.1 million homes. Now it is 2% higher than last year, 2% more supply than last year, but overall housing supply is still 9% below pre-pandemic levels. And there's one important thing to keep in mind that most don't think about when you hear that figure that housing supply is 9% below pre-pandemic times in 2019, that does not mean we're 9% short. That is because even in 2019 there was a housing shortage, and we are 9% below that yet, keeping. Upward pressure on prices and the most supply-constrained markets today. It includes both good and poor cash-flowing investor markets.
 
Keith Weinhold  20:10  
They are New York City, Chicago, San Francisco, Hartford, Providence, Milwaukee, Boston, Cleveland, Virginia Beach, and Kansas City. All of those places remain especially tight with housing inventory, and then finally, this fourth of four reasons I've cited for continued upward pressure on home prices are the fact that distressed sellers-they are few and far between-and you need a lot of those in order to have a serious down cycle, after the 2008 housing crash, millions of owners were underwater. They owed more on their homes than they were worth. Lending standards were irresponsibly loose. Adjustable rate mortgages were resetting higher. I mean, a lot of people had little choice but to sell or to hand the keys back to the bank. Distress, distress, distress. Today is almost the mirror image. Here's what's really happening with homeowners having this record equity position today-an average of over $300,000. Many also locked in at fixed mortgage rates below 5% it means that they're enjoying perhaps the cheapest long-term debt that they are ever going to have. Lending standards have been strong, foreclosure rates remain low, and virtually nobody is being forced to sell. That matters more than most people think because housing crashes need a lot of forced sellers, owners who must accept almost any price in order to escape the property. But today, most homeowners they can simply either stay put, or if they're going to move out of the home, keep it and rent out the home, or they can wait for a better offer. No distress. In other words, buyers might be frustrated, but sellers-they're just not desperate. And without desperation, it is difficult for home prices to fall sharply. So the bottom line here with today's home prices and looking into next year, home price growth is apparent, but it's weak. The ingredients for a national price collapse are nowhere to be found, so this does not spell boom or crash. Home prices appear poised to keep slowly grinding higher, but with this low affordability, that keeps them from soaring, say 10 or 12% higher. I don't see that happening. And of course, each December, I make my home price forecast to the exact percentage point for the year ahead, so you can look forward to that soon. The Get Rich Education home price appreciation forecast that I made late last year for this year. It looks like it's going to be almost spot on. Of course, unlike a lot of analysts, transparently, I also give you the result of how closely the forecast hit the target every year, so you can look forward to that too. Hey, if you like this show, there's more content where this comes from. Sign up for our complimentary newsletter. That way, you can see the graphs and charts and maps that I break down. If you like what you hear on Get Rich Education, every week I show you what's really happening with real estate rents, inflation, interest rates, and the economy, and more importantly, what you can do about it. You'll get sharp insights, useful opportunities, and a few laughs along the way. Yeah, a couple knee slappers sprinkled in there with actionable strategies, like the savviest way to get rent increases. Get smarter in just a three to four minute read every week. Join 1000s of smart investors right now at greletter.com because your inbox could use fewer coupons and more financial freedom. That is greletter.com. More straight ahead.
 
Keith Weinhold  24:20  
I'm Keith Weinhold. You're listening to Get Rich Education. 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 prequal and even chat directly with President Chaley Ridge. While it's on your mind, start at ridgelendinggroup.com. That's ridgelendinggroup.com. 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. 
 
Dana Dunford  25:59  
This is Hemline's co-founder Dana Dunford. Listen to Get Rich Education with Keith Weinhold, and don't quit your daydream.
 
Keith Weinhold  26:15  
Welcome back to Get Rich Education. I'm your host Keith Weinhold. There will only ever be one episode 622, and you're listening to it. I hope you're enjoying the late summer. I'm wringing every bit of time and enjoyment out of it that I can. I don't know if this part was enjoyable, but I ran an all-out mile on a track. I wanted to see how fast I could run a mile. I had a friend pace me, and I got a 631. I was happy with that since I hadn't done any specific training. Yes, a mile is more than four laps on a track as well. Did you know that? Yes, this detail-oriented shaved mammal here diligently measured off that extra nine point something meters. Ah, I'll tell you that fourth lap hurt so badly that if my buddy weren't there, I might have just quit and not finished the mile. But summer's days are numbered, and that's too bad because it is my favorite season of the year. The NFL season kicks off in just two days on the ninth, with Seattle hosting the New England Patriots in a rematch of last year's Super Bowl. So then, I guess it looks like your productivity for the week will end with a respectable two-day run as you tune in to that game. Where is the future demand for real estate going to come from? It comes from a growing population. The U.S. is expected to add 21 and a half million people from 2025 to 2040. 21 and a half million more people. The overall population it's expected to grow from about 341 million up to 363 million. That is where we're going. That's per the Census Bureau and the University of Virginia, projecting 341 up to 363 by the year 2040, which is just a little over 13 years away. Okay, so that part is not so surprising, but here is what is absolutely staggering: more than half of this entire increase is projected to occur in just two states, just two of the 50 states, more than half of the increase. Do you know what they are? In fact, I showed you a map of this in a recent newsletter, but I can talk about it and expand on it more here. \
 
Keith Weinhold  28:52  
The two states that are expected to account for more than half of the nation's overall population growth through 2040 are Texas and Florida. They're already the second and third most populous states, respectively. It's kind of like America looked at the map, checked their weather app, and started packing sunscreen. Texas is expected to add 6.6 million residents. Florida welcoming another 4.6 million during this span. So that is over 11 million new people between them. This is like taking the entire population of Georgia and dropping it into those two already booming states, that much growth in this fairly short period of time, for real estate investors, more people that generally means more demand for our housing product, and I'll get back to the staggering Texas and Florida imbalance in just a moment. Because there are big gains in other investor-friendly southeastern states like Georgia and Tennessee, the Mountain West should swell alone. The South, okay, the region that the Census Bureau delineates as the South, which sort of runs from Maryland all the way down south and then west out toward Texas, the South just until 2040 is expected to account for 78 percent of the growth. That is just staggering. Cash flow hotbed Indiana that should grow by nearly a quarter million residents as well. The Carolinas are ballooning. Already the most densely populated state in the nation, New Jersey, that will get more dense with some pretty healthy population growth. Its residents have not discovered elbow room, but not every state is adding population. 14 states are expected to shrink, led by Illinois losing 650,000 people and New York down 457k. Again, this is all through 2040. In fact, a small loss cluster actually runs through the South, though West Virginia, Mississippi, and Louisiana-they're projected to lose 440,000 people combined. You know that whole theory that sometimes you hear people talk about, like with Earth warming and drying, you're going to have people stampeding toward the freshwater Great Lakes states. That is probably farcical. That just has not shown up in the data. That people are moving in droves to say cooler Michigan and Wisconsin for those reasons.
 
Keith Weinhold  31:46  
It's just not happening now. Of course, population projections are not delivered from Mount Sinai on stone tablets. Besides births and deaths, the level of future immigration, of course, that's the real wild card here. After the Trump presidency ends by 2029, the next administration that could tighten or loosen the immigration spigot, that could materially reshape the map. But they're probably not going to tighten immigration. I mean, they couldn't because the flow really couldn't be crimped much more than it already is. People love to poke fun at California, but even in 2040, it is expected to barely retain its crown and edge out Texas to still be the most populous state: 39 million versus 38 million, respectively, for California and Texas by 2040. But yeah, Texas and Florida-they are the real stories here, and why droves of people are attracted there for cheaper housing, jobs, warm weather, a business-friendly environment, and Texas and Florida are also places where builders can still build without completing some side quest worthy of a video game with all their permits and regulations and roadblocks. You're largely free of those things in Texas and Florida. Now there are two more important factors to keep in mind here. Some bigger picture context. I've talked before about how the overall American mobility rate is down, and this is a long, long trend. Decade after decade, fewer people move and more people stay put, which is contrary to popular belief. This lower mobility rate, and another factor that gives you perspective is that as real estate investors, we know all this stuff I've been talking about here. These population changes-they only look at the demand side. The supply side matters just as much, despite their slower population growth. Northeast and Midwest states build less new inventory, and that is why Northeastern and Midwestern housing prices and rents are still growing faster today than they are in the Sun Belt, despite all of those Sun Belt construction cranes. You know, too many construction cranes. It looks bullish, and it actually is, but it spikes supply and it suppresses prices. And really, the bottom line here with American population growth from now until 2040 is follow the people, but count the rooftops. Population growth creates housing demand, while limited construction creates scarcity.
 
Keith Weinhold  34:46  
The best opportunities often emerge where those two forces collide. That's what you really want to look for: demand and scarcity. Now, the apartment space. We all know that's been beleaguered for about three or four years, ever since higher mortgage rates set in and high construction levels conspired to keep apartment rents suppressed. In fact, multifamily construction had a peak in this cycle during 2024. That's when 600,000 units were built back in 2024. That was the most new apartment supply since 1986. That is when Cheers, MacGyver, and Miami Vice were on television. Run DMC was on urban radio. MTV was a dominant cultural force, the most new apartment supply since 1986. That's when kids were playing with GI Joe's, He-Man, and My Little Pony. For adults, fashion-wise, they were wearing enough shoulder padding to survive a minor collision. So, lots of new apartment supply to get absorbed. It is getting more and more absorbed. There are more signs there now because the national median apartment rent has now increased for seven months in a row. That's according to Apartment List. Also, the apartment vacancy rate has dropped for six straight months, and do you have any idea what the national apartment vacancy rate is? It has dropped down to now 7.1% Inevitably, overbuilt apartments will be absorbed with a growing population. Lots of great episodes coming up here on the show, where you might be in for a surprise next week. A renowned macro economist will be here on the show with us. I think we all know that in 1971, the U.S. had a lot of economic changes. That's when Nixon completely eliminated us from the gold standard, and the economic system shifted from capitalism to creditism back then. Well, now we appear to be leaving creditism and entering a new economic phase. This could be seismic. Next week here on the show, he'll reveal what the new era is called and how you need to prepare for it, that's next week here on episode 623. If you haven't yet, be sure to hit the follow button or subscribe button on your podcatcher so that you don't miss it.
 
Keith Weinhold  37:31  
Again, if you like what you hear here each week, the GRE "Don't Quit Your Daydream" letter gives you the sharpest ideas of the week in about three or four quick hitting minutes, you'll get surprising housing data, wealth building strategies, timely opportunities, news that a lot of times you can't get anywhere else, and maps and charts that make you say, "Wait, what? It's smart, useful, entertaining, and completely free. Thousands of investors read it every week, and believe it or not, I'm actually more of a writer than a talker. Don't just listen to Get Rich Education, get the letter at greletter.com. That's greletter.com. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
 
Speaker 2  38:23  
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  38:51  
The preceding program was brought to you by your home for wealth building, getricheducation.com