Keith Weinhold, the founder of Get Rich Education and real estate investing enthusiast, joined us on the Not So Average Investor show to drop some nuggets of wisdom.
His promise to students: “Society needs investors like you to provide food, energy, and shelter. GRE supports your abundant aspirations by providing a portal into real estate investor culture. You absorb an abundance mindset, learn direct investing fundamentals, and stay abreast of the economy and real estate market.”
Keep reading to find out what tips he focused on with us.
Tip #1: Inflation affects things differently than we might expect
When one economic factor changes, we assume all factors will change in the same way or the same direction. The reality is that it sometimes does just the opposite!
We have all recently been personally affected by inflation. Grocery shopping is starting to make some jaws drop. $8 for a bottle of salad dressing?
We know that inflation is the diminished purchasing power of the dollar. So we are seeing higher prices for food, gasoline, and electricity. When we look at what has happened to rent historically during times of high inflation, we find that rents went up 7-12% every year. Currently, rents are exceeding these historic norms. Rents go up during inflationary times along with everything else.
So what happens?
Sometimes renters need to move and step down a housing class. During times of recession, renters may have a diminished quality of life and need to move somewhere more affordable. This is where rental properties come in, you can be a part of the solution, instead of a victim to the problem.
Tip #2: Buy in the median range
Because people are constantly moving in and out of different classes of housing, it’s smart to invest in properties that are just below the current median price range.
That way, even when people move in and out of different economic levels, you have the security of knowing you can fill your property with tenants. It gives people room to move up to your price range or to move down into your price range when hard financial times hit.
It gives you more options and more security during uncertain times.
Tip #3: Don’t be afraid of interest rates
What happens when mortgage interest rates rise? What we have found is that an increase in mortgage interest rates doesn’t actually deter people from buying homes. The home prices grow right along with them.
People don’t make purchase decisions based on mortgage rates as much as they do with their life situations.
Most people who buy homes are primary resident buyers so they’re buying for emotional reasons more so than what mortgage interest rates are.
When it comes to buying a property, inflation actually works in your favor. As the owner, your interest rate is locked in and is not affected by inflation. Rent will go up while your interest rate stays locked. Even better, when the rates cool down again you can always refinance.
Tip #4: Don’t be afraid to buy properties you’ve never seen
It’s not as crazy as it sounds. You can buy properties thousands of miles away that you’ve never seen before and have lots of success that way.
Buying rental properties in times of high inflation might seem counterintuitive, but if the rent income exceeds all of the expenses, the tenant is covering it for you. You will pay more for a mortgage rate today, which can limit your cash flow; however, there’s no better place to invest money today.
Even in times of inflation and possible inflation, there is a lot of security in real estate because everyone needs a place to live. That is not a need that will ever go away and that’s why you can buy properties anywhere across the nation.
Tip #5: Find a good property manager
What should you look for in the perfect property manager? You want, first and foremost, someone you can trust even if they are working thousands of miles away. There’s a good chance you won’t be able (or want) to check up on them all the time.
It’s always good to have an idea of their past performance–specifically with communication and rent collection.
Remember: A good property manager is more important than the property itself. A bad property manager will drive that property into the ground.
What’s expected to happen in 2023?
We predict home appreciation should stay fairly stable. We expect that prices may actually decrease slightly, and then likely stabilize.
So the best time to buy a property is, well, yesterday! You will start to gain equity almost immediately. If you have questions or need any further guidance, reach out and we’d love to help in any way we can.