WEBVTT 1 00:00:01.199 --> 00:00:04.919 This is a bonus episode of the Rebel Income podcast. 2 00:00:05.400 --> 00:00:09.759 And no, there's been a lot of changes in the 3 00:00:09.800 --> 00:00:12.919 mortgage market recently, and a few weeks ago, the Federal 4 00:00:13.000 --> 00:00:16.960 Reserve made a surprise half point rate cut, Jayley, can 5 00:00:17.000 --> 00:00:19.879 you tell us what this means, give us some background 6 00:00:20.079 --> 00:00:22.399 on what this means for the mortgage market. 7 00:00:23.399 --> 00:00:24.039 Absolutely. 8 00:00:24.079 --> 00:00:25.559 So, first of all, let me take a minute and 9 00:00:25.640 --> 00:00:28.879 explain to your listeners or dispel maybe some of the 10 00:00:29.559 --> 00:00:32.320 myths or misunderstandings that they get when we talk about 11 00:00:32.359 --> 00:00:35.200 the Fed Fund rate. So, first of all, everybody, this 12 00:00:35.399 --> 00:00:38.920 is the intra daily trading rate between banks. That's what 13 00:00:38.960 --> 00:00:41.640 the Fed Fund rate is based off of. Very different 14 00:00:42.079 --> 00:00:45.159 to our long term mortgage rates that are bond driven. 15 00:00:45.560 --> 00:00:48.759 The Treasury is the one most commonly measured for our 16 00:00:48.799 --> 00:00:51.679 longer term mortgage rates. So just to differentiate those two, 17 00:00:51.719 --> 00:00:54.759 and while there is a connection clearly between them, they 18 00:00:54.759 --> 00:01:00.240 are very different indices indexes. So you know, I was 19 00:01:00.600 --> 00:01:03.320 one of those believers that thought that when the Fed's 20 00:01:03.399 --> 00:01:06.040 met on September eighteenth, that we were going to hear 21 00:01:06.079 --> 00:01:09.799 them announce a quarter percentage point rate cut, when in 22 00:01:09.840 --> 00:01:12.319 fact they came out with the half As you mentioned, 23 00:01:12.439 --> 00:01:15.799 Dan I lost lunch based on that I had bet 24 00:01:15.840 --> 00:01:17.400 out there and I got to pay for lunch, So 25 00:01:18.799 --> 00:01:19.359 I didn't. 26 00:01:19.159 --> 00:01:19.840 Get that one right. 27 00:01:20.239 --> 00:01:23.200 But as a result what we found right afterwards, we 28 00:01:23.239 --> 00:01:26.159 did see some improvements to our long term rates, initially 29 00:01:26.200 --> 00:01:28.840 probably within the first few days to week right after 30 00:01:28.879 --> 00:01:32.239 that announcement, But from then to now, if you've been 31 00:01:32.280 --> 00:01:34.319 watching this or even seeing any of the headlines, you 32 00:01:34.400 --> 00:01:38.480 know that the reverse has taken place for our long 33 00:01:38.560 --> 00:01:41.280 term rates. Interest rates are actually up, and the reason 34 00:01:41.359 --> 00:01:45.000 for that is is that the inflationary metric or data 35 00:01:45.319 --> 00:01:48.560 that's been posted since the announcement, the economy is. 36 00:01:48.560 --> 00:01:49.359 Still too hot. 37 00:01:49.480 --> 00:01:52.319 So as a result, Wall Street has kind of taken 38 00:01:52.319 --> 00:01:55.599 it into their own hands and made the appropriate corrections 39 00:01:55.680 --> 00:01:57.879 for mortgage backed securities as it relates to our long 40 00:01:57.959 --> 00:01:58.480 term rates. 41 00:01:58.640 --> 00:02:01.400 On today's Bonus episode, chay Ley's going to explain more 42 00:02:01.439 --> 00:02:04.159 about what's going on in the mortgage market and what 43 00:02:04.200 --> 00:02:07.959 this means for us as rental property investors. We'll take 44 00:02:07.959 --> 00:02:10.000 a look at what the mortgage rates are today for 45 00:02:10.080 --> 00:02:13.639 a rental property and go over a payment example with 46 00:02:13.680 --> 00:02:16.879 today's rates, and we'll see how much your payment could 47 00:02:16.919 --> 00:02:19.759 be if rates come down a little bit more. Jay 48 00:02:19.840 --> 00:02:22.520 Lee's also going to talk about a creative way to 49 00:02:22.800 --> 00:02:26.439 finance your rental properties. Joining us on the show today 50 00:02:26.639 --> 00:02:29.479 is longtime friend of the podcast, chy Ley Ridge. If 51 00:02:29.479 --> 00:02:31.960 you've been listening for a while, you know she's been 52 00:02:31.960 --> 00:02:34.319 on the show a bunch of times, and she's been 53 00:02:34.360 --> 00:02:37.960 sponsoring the show for years. We'll take a really quick 54 00:02:37.960 --> 00:02:40.520 break to bank our sponsors today. We'll come right back 55 00:02:40.599 --> 00:02:43.159 and we'll talk to Chailey. I want to let you 56 00:02:43.199 --> 00:02:46.039 know about a really easy way to track your rental 57 00:02:46.120 --> 00:02:50.479 income and expenses. It's an accounting software custom made for 58 00:02:50.639 --> 00:02:54.400 rental property investors. It takes just seconds to enter an 59 00:02:54.479 --> 00:02:57.840 expense or to record that you collected rent. It makes 60 00:02:57.919 --> 00:03:01.439 tax time really easy to report and give it to 61 00:03:01.479 --> 00:03:05.280 your tax person and you are done. They're currently offering 62 00:03:05.360 --> 00:03:08.560 a free thirty day trial. There's no credit card required, 63 00:03:08.639 --> 00:03:10.879 so if you don't like it, there's nothing to cancel. 64 00:03:11.400 --> 00:03:14.879 You can learn more and sign up today at rentaltrial 65 00:03:15.080 --> 00:03:19.159 dot com. That's Rental Trial t r I, a l 66 00:03:19.840 --> 00:03:25.639 rentaltrial dot com Rental Income podcast. We're recording this on 67 00:03:25.719 --> 00:03:28.919 October seventeenth, twenty twenty four, so this is real time 68 00:03:28.960 --> 00:03:32.159 information for anyone listening. But I think if you're listening 69 00:03:32.199 --> 00:03:34.319 in the future, you'll still get something out of this. 70 00:03:34.400 --> 00:03:38.639 But Chayley, when the FED cuts the short term rates, 71 00:03:39.199 --> 00:03:42.240 can you explain how that impacts mortgage rates, because it's 72 00:03:42.280 --> 00:03:46.439 not it's not like a one for one example, but 73 00:03:46.879 --> 00:03:51.000 the rates kind of trend down as the FED cuts 74 00:03:51.080 --> 00:03:53.000 rates where they should trend down, right. 75 00:03:53.840 --> 00:03:54.840 They should in theory. 76 00:03:54.879 --> 00:03:58.159 But let me just start by answering that that there's 77 00:03:58.400 --> 00:04:02.039 so many different variables, almost unlimited amounts of variables that 78 00:04:02.120 --> 00:04:05.319 will play a role in determining with what the FED 79 00:04:05.400 --> 00:04:08.199 has done and what actually happens with that long term 80 00:04:08.240 --> 00:04:12.080 interest rate that could completely turn it on its backside. 81 00:04:12.120 --> 00:04:15.000 So let's just use the most recent example. The FED 82 00:04:15.080 --> 00:04:18.240 reduce the Fed Fund rate that in daily trading rate 83 00:04:18.279 --> 00:04:21.240 between banks by a half a point. So there is 84 00:04:21.279 --> 00:04:23.399 no metric that I can give that we would say, Okay, 85 00:04:23.439 --> 00:04:25.600 if the FED reduces by a quarter or a half 86 00:04:25.680 --> 00:04:28.120 or whatever the number it is, it's going to yield 87 00:04:28.519 --> 00:04:30.800 an eighth or a full percentage point or whatever the 88 00:04:31.279 --> 00:04:33.000 one to one would be. It doesn't work that way. 89 00:04:33.040 --> 00:04:36.399 There's too many other components at play, and those are 90 00:04:36.399 --> 00:04:38.920 going to be the things like the Jobs report, or 91 00:04:39.000 --> 00:04:43.000 the PCE, which is an inflationary metric that stands for 92 00:04:43.439 --> 00:04:47.079 personal consumption expenditures. That's the one that the Feds most 93 00:04:47.079 --> 00:04:52.959 closely watch. That's their favored inflationary metric CPI consumer Price Index, 94 00:04:53.959 --> 00:04:58.279 foreign affairs, all kinds of things are going to help 95 00:04:58.360 --> 00:05:02.519 shape and dictate how the comments. And sometimes they don't 96 00:05:02.560 --> 00:05:04.639 even have to reduce the Fed fund rate. They just 97 00:05:04.720 --> 00:05:07.959 speak in a certain language, and we'll see some volatility 98 00:05:08.000 --> 00:05:10.279 to our long term rates. So you've got to really 99 00:05:10.360 --> 00:05:13.040 understand that it's not going to be just one thing 100 00:05:13.160 --> 00:05:16.240 or two things. If I had to give somebody one 101 00:05:16.279 --> 00:05:20.399 way in which they could potentially try to forecast where 102 00:05:20.399 --> 00:05:22.319 interest rates we're going to go, that might be the 103 00:05:22.959 --> 00:05:27.199 most reliable, and certainly not full proof. It would be 104 00:05:27.279 --> 00:05:30.480 the treasury. The ten year Treasury bond is the one 105 00:05:30.480 --> 00:05:32.480 that if you're tracking that and you're watching the ticker 106 00:05:32.519 --> 00:05:35.560 tape throughout the day or weeks, that one tends to 107 00:05:35.680 --> 00:05:38.000 measure or be in line with how you're going to 108 00:05:38.079 --> 00:05:40.720 watch the long term interest rates move up and down. 109 00:05:41.439 --> 00:05:44.079 Okay, so the Fed is going to meet two more 110 00:05:44.120 --> 00:05:47.480 times this year. They have a meeting November six, and 111 00:05:47.519 --> 00:05:52.000 then another one December eighteenth, And what's the thinking right now? 112 00:05:52.439 --> 00:05:55.040 What's the kind of the word on the street on 113 00:05:55.519 --> 00:05:57.279 what they're going to do with those meetings. 114 00:05:57.879 --> 00:05:59.519 So I'm going to answer that directly, and then I'm 115 00:05:59.519 --> 00:06:01.560 going to give some context. You know, I think that 116 00:06:01.639 --> 00:06:05.519 they'll probably reduce another quarter point in November. It'll be 117 00:06:05.560 --> 00:06:07.519 announced on you. Like you said, they meet on the 118 00:06:07.519 --> 00:06:09.759 sixth and seventh. On the seventh is when we will 119 00:06:09.759 --> 00:06:12.639 hear mister Powell state whether or not we're going to 120 00:06:12.639 --> 00:06:17.160 see another rate cut at that meeting. But the things 121 00:06:17.160 --> 00:06:19.279 that we want to be looking for for where I 122 00:06:19.360 --> 00:06:21.639 may or may not be changing that statement are going 123 00:06:21.680 --> 00:06:24.560 to be. On the thirty first of October, we're going 124 00:06:24.600 --> 00:06:27.399 to get that PCE that I just mentioned, so they're 125 00:06:27.399 --> 00:06:28.360 going to be waiting on that. 126 00:06:28.680 --> 00:06:30.319 So depending on what that reading says. 127 00:06:30.360 --> 00:06:33.199 And then on the first of November or the first 128 00:06:33.439 --> 00:06:36.279 Friday of every month is when we get our jobs report. 129 00:06:36.600 --> 00:06:39.279 Both of those two pieces of information are going to 130 00:06:39.439 --> 00:06:43.120 shape what really happens when Jerome Powell makes that announcement 131 00:06:43.160 --> 00:06:43.720 on the seventh. 132 00:06:45.040 --> 00:06:47.920 The rates have dropped quite a bit from where they 133 00:06:47.959 --> 00:06:53.040 were at the peak. Do you remember where what the 134 00:06:53.120 --> 00:06:54.600 rates were at the peak. 135 00:06:55.439 --> 00:06:57.839 Sure, I would say, just make sure that it's it's 136 00:06:58.240 --> 00:07:02.079 prefaced by saying that it's very specific to the characteristics 137 00:07:02.120 --> 00:07:05.600 of the transaction that you're quoting. Okay, the difference in 138 00:07:05.600 --> 00:07:07.680 interest rate that someone might say at the peak for 139 00:07:07.720 --> 00:07:09.920 an owner occupied versus what we're talking about most of 140 00:07:09.920 --> 00:07:13.120 the time between us is the non owner occupied side. 141 00:07:13.279 --> 00:07:15.600 All of those variables count. But I would say the 142 00:07:15.680 --> 00:07:17.680 highest that I probably sought over the last couple of 143 00:07:17.720 --> 00:07:20.160 years was in the high sevens, maybe in the low eights, 144 00:07:20.240 --> 00:07:23.920 credit score loan to value, loan size driven, but I'd 145 00:07:23.959 --> 00:07:26.199 put it in that range, high sevens, low low eights. 146 00:07:26.439 --> 00:07:28.879 Okay, So in the rates have dropped quite a bit 147 00:07:28.920 --> 00:07:31.120 from that, and we'll get into where the rates are 148 00:07:31.120 --> 00:07:34.240 here in a few minutes. But the rates went up 149 00:07:34.319 --> 00:07:38.319 pretty quickly. Do you see them coming down pretty quickly too. 150 00:07:39.279 --> 00:07:43.319 Unless something devastating happens within the economy. No, And I 151 00:07:43.319 --> 00:07:47.439 would quickly just mention that, you know, a lot of 152 00:07:47.480 --> 00:07:49.800 times we want it both ways. We want the economy 153 00:07:49.839 --> 00:07:51.920 to be doing great and we want interest rates to 154 00:07:51.959 --> 00:07:53.560 be low. And I think a lot of people just 155 00:07:53.680 --> 00:07:59.279 miss the detail that that they're not mutually exclusive it's really. 156 00:07:59.040 --> 00:07:59.600 One of the other. 157 00:07:59.680 --> 00:08:01.879 The the economy is doing, the lower the interest rates 158 00:08:01.920 --> 00:08:05.279 are going to be, and vice versa. That said, I 159 00:08:05.279 --> 00:08:09.439 would also say that historically speaking, that interest rates do 160 00:08:09.600 --> 00:08:11.720 go up much faster than they end up coming down, 161 00:08:11.800 --> 00:08:14.240 so I would expect a slower burn on the way down. 162 00:08:14.360 --> 00:08:17.439 I do think that we are headed in that direction. 163 00:08:17.519 --> 00:08:20.720 I think trajectory is south for interest rates, but I 164 00:08:20.720 --> 00:08:24.199 think it's going to be or take a lot more 165 00:08:24.319 --> 00:08:27.879 time for them to level out to maybe the baseline 166 00:08:27.920 --> 00:08:30.519 that we hope back down in the fives ish right 167 00:08:30.560 --> 00:08:32.960 for our non honor occupiedes. If I'm going to guess, 168 00:08:32.960 --> 00:08:34.799 and I think that we're probably a good year year 169 00:08:34.840 --> 00:08:38.519 and a half in timeline from now to then, so. 170 00:08:38.720 --> 00:08:41.200 Real estate moves and cycles, and if you were to 171 00:08:41.279 --> 00:08:46.720 take a one thousand foot view of the market, would 172 00:08:46.720 --> 00:08:49.759 you say that we're at the beginning of a cycle 173 00:08:49.879 --> 00:08:53.320 where the rates are going to be trending down and 174 00:08:54.440 --> 00:08:59.000 that may translate to prices going up as the rates 175 00:08:59.039 --> 00:08:59.480 come down. 176 00:09:00.559 --> 00:09:04.559 You know, I am of the opinion that a we 177 00:09:04.639 --> 00:09:06.279 are at the precipice of a new cycle. I think 178 00:09:06.279 --> 00:09:08.360 it's actually already begun. I'd say in the last couple 179 00:09:08.360 --> 00:09:11.480 of months, but right there, kind of at the beginning. 180 00:09:11.759 --> 00:09:14.480 And I think that both rates and and I'm not 181 00:09:14.519 --> 00:09:17.000 going to blanket statement this for the entire nation. Okay, 182 00:09:17.000 --> 00:09:19.399 there's pockets, there's markets, and it's always going to be 183 00:09:19.799 --> 00:09:22.240 very specific to the market. But I do think that 184 00:09:22.320 --> 00:09:25.360 a buyer's market is on the horizon. I think that 185 00:09:25.440 --> 00:09:28.519 home values are going to start coming down in certain markets. 186 00:09:28.559 --> 00:09:31.759 The appreciation rate in some places have been has been 187 00:09:32.159 --> 00:09:36.679 completely out of control, very unsustainable. So even though many 188 00:09:36.720 --> 00:09:38.799 would assume that as interest rates come down, then they 189 00:09:38.799 --> 00:09:40.559 think that the home values are going to go back up, 190 00:09:40.799 --> 00:09:42.720 I'm not sure I agree with that. In a lot 191 00:09:42.720 --> 00:09:45.200 of markets, I think that we're going to see buyers 192 00:09:45.240 --> 00:09:49.440 having more opportunity to negotiate, whether it be price point 193 00:09:49.639 --> 00:09:54.080 and or seller concessions, closing costs, along with some reduction and. 194 00:09:54.159 --> 00:09:56.480 Interest rate well, I mean that could be really good 195 00:09:56.480 --> 00:09:58.919 for investors. I mean, if the rates are coming down 196 00:09:59.240 --> 00:10:03.120 and if prices do come down a bit, that could 197 00:10:03.159 --> 00:10:04.840 be really good for us. 198 00:10:05.360 --> 00:10:05.840 I agree. 199 00:10:05.879 --> 00:10:06.080 Yeah. 200 00:10:06.120 --> 00:10:08.720 Now, obviously the pushback there is people are going to say, well, 201 00:10:08.720 --> 00:10:11.399 what about you know, lack of inventory, et cetera. But 202 00:10:11.480 --> 00:10:16.240 remember it's market specific but in some of those markets, 203 00:10:16.240 --> 00:10:19.600 do you guys know which ones they are? The appreciation 204 00:10:19.759 --> 00:10:24.320 values are just they cannot continue in the same theme 205 00:10:24.360 --> 00:10:27.000 that we've been seeing. It's just not possible. They will 206 00:10:27.039 --> 00:10:27.919 start coming back down. 207 00:10:28.399 --> 00:10:31.240 Well, let's talk about rates today. So what can you 208 00:10:31.240 --> 00:10:34.879 give us an example of what an interest rate is 209 00:10:35.159 --> 00:10:35.679 right now? 210 00:10:36.399 --> 00:10:36.639 Sure? 211 00:10:36.639 --> 00:10:38.360 And I think a lot of people will be pleasantly 212 00:10:38.399 --> 00:10:42.120 surprised by this news. So let's just set the stage. 213 00:10:42.440 --> 00:10:44.720 We'll talk about a purchase of an investment property. We're 214 00:10:44.759 --> 00:10:46.759 going to call it a single family residence, will put 215 00:10:46.799 --> 00:10:49.840 twenty five percent down. Let's say that the loan amounts 216 00:10:49.840 --> 00:10:54.120 about one hundred thousand dollars, good credit, et cetera. You're 217 00:10:54.120 --> 00:10:57.080 probably looking at about six point six two five is 218 00:10:57.080 --> 00:10:59.279 an interest rate, and you're probably looking at about two 219 00:10:59.320 --> 00:11:00.879 points for that interest rate today. 220 00:11:01.000 --> 00:11:04.399 Okay, well that's pretty good. That's really good. Now, what 221 00:11:04.600 --> 00:11:09.000 if rates were to drop, say a half point, like, 222 00:11:09.799 --> 00:11:12.679 is that going to make How much of a difference 223 00:11:12.879 --> 00:11:14.679 in the payment does that make? 224 00:11:15.519 --> 00:11:17.559 Yeah? I'm glad you asked that question, because I feel 225 00:11:17.559 --> 00:11:20.120 like this is the piece that I'm I'm constantly trying 226 00:11:20.159 --> 00:11:23.720 to put out there for investors. So that they're doing 227 00:11:23.759 --> 00:11:26.440 that math because without actually doing the math, there's a 228 00:11:26.480 --> 00:11:29.840 psychology about the rate itself, and people I think, play 229 00:11:29.879 --> 00:11:33.519 themselves out of very substantial investments just because they hear 230 00:11:33.559 --> 00:11:36.320 a number. So to put it into perspective, let's just 231 00:11:36.399 --> 00:11:39.240 keep using our example. At about one hundred thousand dollars, 232 00:11:39.240 --> 00:11:42.279 the principal and interest payment at six point six two 233 00:11:42.360 --> 00:11:45.480 five is four hundred no excuse me, six hundred and 234 00:11:45.559 --> 00:11:48.840 forty eight dollars a month for each eighth of a 235 00:11:48.919 --> 00:11:51.159 percentage point below that, Let's go to six and a 236 00:11:51.240 --> 00:11:54.279 half percent. The six hundred and forty eight goes to 237 00:11:54.600 --> 00:11:57.320 six hundred and thirty nine. So what is that That's 238 00:11:57.360 --> 00:11:59.440 going to be about a nine dollars a month difference, 239 00:11:59.519 --> 00:12:02.120 right for eighth of a percentage point. So if we 240 00:12:02.159 --> 00:12:05.480 take it down half a point in payment at six 241 00:12:05.519 --> 00:12:08.440 point one two five, So again six point six two 242 00:12:08.559 --> 00:12:11.120 five down to six point one two five is a 243 00:12:11.159 --> 00:12:13.720 half a point reduction in rate. The payment is six 244 00:12:13.840 --> 00:12:17.200 hundred and fifteen dollars. So you know, the mental math 245 00:12:17.240 --> 00:12:19.200 there is what thirty three bucks? 246 00:12:19.360 --> 00:12:21.320 Did I get that? Right? Yeah? 247 00:12:21.519 --> 00:12:24.080 It's it's not as substantial as a lot of people 248 00:12:24.919 --> 00:12:27.559 mentally expect the number to be, especially on the smaller 249 00:12:27.600 --> 00:12:28.159 loan sizes. 250 00:12:28.720 --> 00:12:33.360 Okay, so there's not a big incentive I guess to 251 00:12:33.519 --> 00:12:35.720 wait for rates to come down, and it's not like 252 00:12:35.879 --> 00:12:38.679 that's not going to have a significant impact on your 253 00:12:38.720 --> 00:12:42.679 cash flow. I guess just getting a better deal would 254 00:12:42.759 --> 00:12:45.120 really be the driver. If you can buy a property, 255 00:12:45.200 --> 00:12:48.120 get negotiate a little harder and get a better deal, 256 00:12:48.279 --> 00:12:50.399 that's going to benefit you more. 257 00:12:50.759 --> 00:12:52.759 Sure, Sure, and especially if you can get the seller 258 00:12:52.799 --> 00:12:55.519 to contribute towards the closing costs, right, a few percentage points, 259 00:12:55.519 --> 00:12:57.639 and maybe you can use those to get that rate 260 00:12:57.720 --> 00:13:01.279 down if that were the case. But you know, I've 261 00:13:01.320 --> 00:13:04.200 got I've got countermeasures to every one of those discussions, 262 00:13:04.240 --> 00:13:06.399 because I'm talking about rates all day long. It's it's 263 00:13:06.480 --> 00:13:08.840 the buzzword, right, everybody wants to know about interest rates. 264 00:13:09.080 --> 00:13:11.279 And what would I would say about that is a 265 00:13:11.279 --> 00:13:15.399 few things. One, if you're holding out for the lower 266 00:13:15.399 --> 00:13:17.720 interest rate, and in our case, we're talking about thirty 267 00:13:17.720 --> 00:13:19.679 bucks a month or whatever we said it was, the 268 00:13:19.679 --> 00:13:21.759 first thing I would say is that if the deal 269 00:13:22.000 --> 00:13:24.159 is a make or breakover thirty bucks, there's something wrong 270 00:13:24.159 --> 00:13:26.639 with the deal. And I would continue to research and 271 00:13:26.679 --> 00:13:30.519 look for potentially another investment. The other thing is is 272 00:13:30.559 --> 00:13:33.039 that if you're waiting, you may play yourself out of 273 00:13:33.080 --> 00:13:35.919 the deal altogether. And then remember when we talk about 274 00:13:36.000 --> 00:13:39.320 layering in the advantage of tax the tax benefit, And 275 00:13:39.360 --> 00:13:43.240 while this is secondary, I fully recognize, be sure to 276 00:13:43.240 --> 00:13:45.679 know that you're going to be less in the deduction 277 00:13:45.879 --> 00:13:49.440 of interest on the lower interest rate too, So there 278 00:13:49.519 --> 00:13:52.639 is checks and balances at work here, and for thirty bucks, 279 00:13:52.720 --> 00:13:56.440 I don't know that in my mind the float of 280 00:13:56.480 --> 00:13:59.399 the interest rate or the holdout for getting into real 281 00:13:59.519 --> 00:14:03.080 estate too, to look at it as an investment justifies 282 00:14:03.320 --> 00:14:05.159 the potential reward. 283 00:14:05.519 --> 00:14:07.519 Does that make sense? Maybe it's saying that another way. 284 00:14:07.960 --> 00:14:10.519 If you know it's the difference between half a point 285 00:14:10.559 --> 00:14:12.639 and thirty bucks on whether or not I'm going to 286 00:14:12.679 --> 00:14:15.399 make a decision to invest in this particular property in 287 00:14:15.399 --> 00:14:18.720 this particular market, I would argue that there's something else 288 00:14:18.759 --> 00:14:22.039 there that needs to be considered that the investor isn't seeing. 289 00:14:22.480 --> 00:14:25.279 Yeah, I mean, you shouldn't walk away from a deal 290 00:14:25.279 --> 00:14:28.200 over thirty bucks, And that's really kind of short sighted. 291 00:14:28.240 --> 00:14:30.919 I think that you're going to get a thirty dollars 292 00:14:30.919 --> 00:14:34.440 rent increase at some point and that deal is going 293 00:14:34.519 --> 00:14:37.360 to be right there, So I think you're a spot 294 00:14:37.399 --> 00:14:40.440 on with that. Well, one thing that I really like 295 00:14:40.480 --> 00:14:43.639 about having you on the show and sponsoring the podcast 296 00:14:43.679 --> 00:14:47.320 for so long is that you've got lots of creative 297 00:14:47.320 --> 00:14:52.600 strategies and you're not just a lender that's just processing applications, 298 00:14:52.600 --> 00:14:55.919 like you really help people kind of get a plan 299 00:14:56.039 --> 00:15:00.240 together and help them invest and help them build a portfolio. 300 00:15:00.879 --> 00:15:04.039 And I wanted to see if you could give us, 301 00:15:04.759 --> 00:15:07.919 like maybe one of the creative strategies that you've used 302 00:15:07.960 --> 00:15:11.360 recently with one of your clients, just to maybe give 303 00:15:11.440 --> 00:15:14.480 us an idea of some things that we can do differently. 304 00:15:15.639 --> 00:15:17.519 Well, first of all, thank you, Dan, thank you for 305 00:15:17.559 --> 00:15:19.559 saying that. I really appreciate it. We work very hard 306 00:15:19.600 --> 00:15:22.799 to be as holistic a lender relationship as we can, 307 00:15:22.919 --> 00:15:26.240 so that means a lot coming from you. Yeah, I've 308 00:15:26.240 --> 00:15:29.960 got something that I think would be noteworthy. We have 309 00:15:30.039 --> 00:15:32.759 a loan product, and I think we've talked about it before. 310 00:15:32.799 --> 00:15:34.720 It's a first lean helock and check this out. 311 00:15:34.759 --> 00:15:35.200 This is my. 312 00:15:35.320 --> 00:15:40.480 Absolute favorite loan product, especially for real estate investors where 313 00:15:41.159 --> 00:15:43.320 and it's going to take a minute for some people 314 00:15:43.320 --> 00:15:45.919 to wrap their heads around Okay, it's a first lean helock. 315 00:15:46.000 --> 00:15:48.240 Like I said, it's called the all in one. And 316 00:15:48.279 --> 00:15:50.440 if you've ever heard of the term velocity banking or 317 00:15:50.480 --> 00:15:53.720 infinity banking, that might resonate and connect a few dots here, 318 00:15:54.080 --> 00:15:57.320 but it is a way that you can utilize an 319 00:15:57.480 --> 00:16:02.600 open ended, revolving line of credit at your discretion so 320 00:16:02.679 --> 00:16:06.960 that you've become your own bank theoretically, whereby I have 321 00:16:07.080 --> 00:16:11.519 clients that have let's say, access to large sums of 322 00:16:11.519 --> 00:16:14.600 depository dollars and cents every month before it has to 323 00:16:14.639 --> 00:16:16.919 go back out the door. Okay, I'll give you an 324 00:16:16.960 --> 00:16:18.799 example so I can try and paint a picture here. 325 00:16:18.879 --> 00:16:21.240 Let's say that you have one hundred thousand dollars in 326 00:16:21.279 --> 00:16:23.720 cash that sits idle for or you can allow it 327 00:16:23.759 --> 00:16:26.840 to sit idle in an account for the majority of 328 00:16:26.879 --> 00:16:29.120 a thirty day billing cycle let's call it twenty nine days. 329 00:16:29.639 --> 00:16:32.039 And let's say that you have an outstanding balance on 330 00:16:32.200 --> 00:16:35.320 this heelock of one hundred thousand dollars. Just to keep 331 00:16:35.360 --> 00:16:38.080 the mouth simple, if you were to take your one 332 00:16:38.120 --> 00:16:42.840 hundred thousand in cash that's sitting idle, deposit it into 333 00:16:42.879 --> 00:16:47.039 this all in one loan vessel, it's going to drive 334 00:16:47.080 --> 00:16:50.360 that one hundred thousand dollars balance down dollar for dollar. 335 00:16:50.679 --> 00:16:54.679 So for twenty nine days of that thirty day billing cycle, 336 00:16:55.320 --> 00:16:59.960 you're going to pay zero in interest. No interest will 337 00:17:00.120 --> 00:17:02.879 crew because on any open ended revolving account this is 338 00:17:03.080 --> 00:17:06.240 think about a credit card. Okay, same principle here, you 339 00:17:06.279 --> 00:17:09.920 will only pay interest when there is a balance. So 340 00:17:10.079 --> 00:17:13.200 if you're an individual that has access to good depository 341 00:17:13.240 --> 00:17:15.559 income and then maybe residual income left over at the 342 00:17:15.599 --> 00:17:18.440 end of the month, the all in one product can 343 00:17:18.559 --> 00:17:22.119 greatly and I mean by hundreds of thousands, greatly diminish 344 00:17:22.119 --> 00:17:24.680 the amount of interest that you would pay in comparison 345 00:17:24.720 --> 00:17:27.519 to say a traditional three year fixed mortgage. It's it's 346 00:17:27.680 --> 00:17:32.039 quite a tool that most investors, I believe should have 347 00:17:32.039 --> 00:17:32.680 in their tool belt. 348 00:17:32.960 --> 00:17:35.680 So just to walk through an example on that, like 349 00:17:35.759 --> 00:17:40.240 saying someone has twenty thirty forty thousand dollars a month 350 00:17:40.319 --> 00:17:44.160 coming in in rents every month and your mortgage payment 351 00:17:44.200 --> 00:17:45.880 ded They say the rents come in on the first. 352 00:17:46.119 --> 00:17:48.480 You've got forty thousand dollars coming in on the first, 353 00:17:49.079 --> 00:17:51.960 and you're going to pay your mortgage on the fifteenth. 354 00:17:52.720 --> 00:17:57.519 You could save money by having that money deposited to 355 00:17:57.599 --> 00:18:01.039 your all in one account and then paying the mortgage 356 00:18:01.319 --> 00:18:03.480 out of that account. 357 00:18:03.119 --> 00:18:04.960 One hundred percent. And the nice thing, the reason it's 358 00:18:04.960 --> 00:18:07.519 called all in one is because it doubles as both 359 00:18:07.880 --> 00:18:10.119 this line of credit this he law comaqu a line 360 00:18:10.119 --> 00:18:13.279 of credit and checking in savings. So let's say you 361 00:18:13.359 --> 00:18:16.039 bank with BABA. Okay, you're going to replace your BABA 362 00:18:16.200 --> 00:18:19.039 checking in savings with this new checking in savings, which 363 00:18:19.039 --> 00:18:22.720 it's an FDIC insured account, So exactly the same automation, 364 00:18:23.279 --> 00:18:26.119 exactly the same technology here that you would have over there, 365 00:18:26.880 --> 00:18:30.079 and you're just going to nothing changes, nothing changes about 366 00:18:30.079 --> 00:18:32.200 your spending habits or the moneys you've got coming in 367 00:18:32.200 --> 00:18:35.039 are going out. But you're going to utilize this these 368 00:18:35.079 --> 00:18:39.119 deposits in such a meaningful way and letting them sit 369 00:18:39.240 --> 00:18:42.160 and ride so that the interest accrule is is so 370 00:18:42.240 --> 00:18:44.880 greatly diminished on a day to day basis that when 371 00:18:44.920 --> 00:18:48.160 you look at the math, the interest can a crew. 372 00:18:48.160 --> 00:18:50.599 Because let me give you an example. Let's take because 373 00:18:50.599 --> 00:18:52.839 a lot of times I feel like dan people, this 374 00:18:52.920 --> 00:18:54.519 is this concept is very new to most of. 375 00:18:54.480 --> 00:18:55.400 The people in this country. 376 00:18:55.559 --> 00:18:59.240 Okay, it's actually pretty it's pretty popular and widely used 377 00:18:59.240 --> 00:19:01.759 out there and the rest of the planet. 378 00:19:02.119 --> 00:19:03.519 In the US, it's not so much. 379 00:19:03.559 --> 00:19:06.519 It's not as mainstream obviously, So we are kind of 380 00:19:06.519 --> 00:19:09.640 preconditioned to understand that amortized mortgage. Our thirty year fixed 381 00:19:09.640 --> 00:19:11.079 are a fifteen year fixed. So I'm going to give 382 00:19:11.079 --> 00:19:13.359 you an example between a thirty year and a fifteen year. 383 00:19:13.680 --> 00:19:15.440 So let's say that both of these loans start at 384 00:19:15.480 --> 00:19:18.079 four hundred thousand dollars is the balance, and the thirty 385 00:19:18.160 --> 00:19:21.640 year fixed mortgage let's say locked at four percent interest rate, 386 00:19:22.000 --> 00:19:25.119 the fifteen year locked at seven percent. People that don't 387 00:19:25.160 --> 00:19:28.359 understand amortization, and they use that psychology about interest rate, 388 00:19:28.359 --> 00:19:30.720 they're automatically, without exception, they're going to run to that 389 00:19:30.759 --> 00:19:32.839 four percent thirty or fixed. They're not even going to 390 00:19:32.839 --> 00:19:34.920 think about it. I want a four percent rate. Well, 391 00:19:34.920 --> 00:19:38.279 when in fact, because of speed and that velocity of money, 392 00:19:38.559 --> 00:19:40.960 if you were to run the amortization, you will pay 393 00:19:41.000 --> 00:19:44.599 forty thousand dollars more in interest using my example on 394 00:19:44.640 --> 00:19:48.359 a four percent thirty year than a seven percent fifteen year. 395 00:19:48.759 --> 00:19:50.960 So and the reason for that is speed. Now I 396 00:19:51.000 --> 00:19:54.519 know I'm not exactly comparing apples to apples. We're talking 397 00:19:54.519 --> 00:19:58.319 about two closed ended amortized mortgages versus what I'm describing, 398 00:19:58.359 --> 00:19:59.960 or what we're talking about here as an open end 399 00:20:00.240 --> 00:20:04.000 revolving helock. Totally different animals. But my point is speed. 400 00:20:04.039 --> 00:20:06.039 We've got three hundred and sixty months on a thirty 401 00:20:06.079 --> 00:20:08.480