I am what you consider a small real estate investor. I have a total of 43 units I’ve had 75% of them for 20 years. I have a mentor, about 3 1/2 years ago. I told him we were considering refinancing bringing a couple of properties interest rates down. My mentor who is a real estate wizard told me 3 1/2 years ago to ask for a blanket mortgage with a 3.75% interest-rate and he told me not to accept anything but a 10 year fixed rate in five years that I won’t be sleeping at night if I have to refinance in five years. He said interest rates are going through the roof. I did what he said 3 1/2 years ago 3.75% fix for 10 years thank goodness I did that. he has been doing this for 50 years. Experience is everything!
Bruh, 43 units you ain't small no more. Once you went past 3 properties at once or 5 or more doors at once has always been the threshold for small imo.
When I look at what Ken has for units. I feel I am a small investor compared to him. 43 units is a lot of work!! feels like a full-time job. there has got to be an easier way of making money.
Right on George. Macro is what a lot of people never look at… Nearly 9 million people lost their jobs and at least 10 million lost their homes. 10 million homeowners did not all have bad loans. In 2008 the Fed started to raise rates due to high inflation, then banks stopped lending and things started to crumble.
Hi George - the reason for the increase in the usage of the BTFP is because it has become a rate arbitrage opportunity. Banks can either choose to borrow at Fed Funds rate of c5.4% vs. 4.96% under the BTFP. They are borrowing at 4.96% under BTFP and gaining 44bp interest by depositing at Fed. The BTFP spiked in March 2023 due to sudden increase in rates pushing price of treasuries down and, because some banks didn’t appropriately duration match their liabilities, they got caught out. Not the same situation in a rate-cutting environment. This is simply a rate arbitrage play. Great content otherwise so thank you!
9:48 as the quote goes, "there is nothing more permanent than a temporary government program." The government should allow the program to expire, but we'll have to see.
Home prices are relative to Income; that is a true statement only if the ratio of housing to population is the same. If you double the number of people and don't add supply additional homes then that historic figure is no longer relative. I was hung up on that argument for a long time until I visited China and realized that we don't understand population here after visiting cities with 30+ million people.
I got run over in 2005! I could tell Arizona was overpriced but I did not understand it was nationwide and I overleveraged my out of state investment and lost everything
Kenny is talking about the lack of construction in 2009-2011. However, corporate and consumer debt today is at all time high and in 2009-2011 we didn't have inflation. The housing market nationwide did not come out of its bottom until around 2011 despite the Fund Fund Rate going to zero in 2009. It's the Bond Market,,,Kenny
Hi Ken I was wondering if you had any advice for the next downturn in real estate, they were going to be lots of opportunities like there have always been when things turned bad. Can we get a peek into your playbook? The units that I own 43 in total I paid less than $30,000 a unit, the same units today are selling for 200+. When I first purchased my properties two bedrooms were renting for $550. Now they’re renting for $1800. The cash flow is exceptional. I know what it takes to make money, overpaying for properties is not the way
Thanks for watching an commenting! I did video a few weeks back that gave some insight into my thinking for 2024, hopefully this would help. th-cam.com/video/oxP7QTmRoqU/w-d-xo.html
Boomers are reaching age where they're passing away or moving that could drive the prices down quite a bit when that inventory starts flood in the market the next 5 to 10 to 15 years
I was comparing some regional banks balance sheets quarter over quarter and noticed some banks lost certain core deposits but have managed to attract other deposit funding sources. Not sure from where or if it is some temporary plug or BTFP related.
I agree with you on march 11 date.But HOW is the fed NOT going to extend the B.T.F.P. date???????CAN WE ALL SAY BAIL OUT! The can keeps getting kicked down.
I think its logical to say home prices will come down based on income. So far its been the opposite. Taking this position has cost many people lost opportunity because the logical conclusion is do nothing. I think the answer is stay in the game, buy great deals, dont over leverage. Time will solve any price reductions.
“Buy great deals” is of course always true. The problem is what constitutes a great deal in 2020 is not the same as 2023, the difference is macro conditions, and in my opinion that is all that is being said here. For example assuming 95% occupancy vs 85%. Being more conservative, being more picky, etc. I know an investor who bought a duplex and she expected too high of a rent, rents are actually dropping when she was forecasting them to go up, and now she is cash flow negative and out of cash reserves.
@tublin4940 thats an over leveraged investor. Sometimes i put 50% down, finance 10 years, payoff in 7. Double your money ever 7 years, zero cash flow, 100% wealth building or staying ahead of inflation. Buy a home "speculating" rent increase or equity growth is the only way to succeed is a recipe for disaster. You have to plan for sideways to negative growth, rents and equity. If you cant afford to make payments for a period of time without that income, dont buy real estate. Yes people have bought leveraged to the hills and made a fourtune in a appreciating market, this is not that.
@@tublin4940 I have seen a lot of youtube title with "buy home zero down" or very little, that creates very little cash flow or STR, it works in an appreciating market not a sideways or declining. If rents decline, it will cause hardships for sure. I guess we will see how it unfolds. I liquidate foreclosures for bansk and gov, sold a lot over the years, theres hardly any foreclosures coming to market now.
When you don't trust the banks to hold your cash, because they waste it on buying government bonds at an insanely low yield, where do you put your cash? You put it in government bonds, just like what happened in Europe during the 2008 GFC, because you can afford to Hold to Maturity. Banks cannot Hold to Maturity, because they must immediately redeem depositors' withdrawals. The banks must use the Bank Term Funding Program (BTFP), which just another name Quantitative Easing (QE), which is another name for currency counterfeiting.
Please please please you need to give the original credit of the black chart to Reventure consulting. He’s the one that has been screaming housing crash since the pandemic. It would be worth it to have him on your show.
I agree. It was a Reventure Consulting chart that was use. George found it through a different X (Twitter) account, but the chart does clearly indicate Reventure. Thank you for pointing it out.
@@KenMcElroyhey Ken, longtime listener. Please do not have Reventure on your show. He deleted all of his older videos from 2020 calling for a COVID real estate crash. One of the things I respect most about you and George, is you will admit when you’re wrong. Reventure won’t.
I think with the lack of supply, rates headed down it’s not gonna matter if a few people leave their jobs the market is going to pick up and we’re going into the fives for 30 year fixed.
Wait. I think I just heard an argument supporting the thought that a limited supply is bearish? And, no mention of factors contributing to our population increase. Relevant methinks.
Houseing has always done well throughout a high inflationary environment. I don’t think we have seen the worst of inflation yet or I think inflation will stick around for 5-10 years.
Don’t focus on the price. Focus on the ratios and you’ll see that even if prices are going up, the asset could be going down in real terms. A good example is the Venezuelan stock market a few years back.
@@robnisbet6797 We are living through the biggest bubble in "paper assets" in history! The bonds that were yielding so low back in 2021 will marvel future historians on how the world could be so stupid. The chart that compares financial assets to real assets (which included real estate) was/is so lopsided, its going to create generational wealth for those on the right side of it. Nobody is thinking in real terms just yet, which is the opportunity for us. US treasury is issuing 2+ trillion in new paper per year now, how can that have any value in real terms with real assets at these relative pricing levels?
What George is talking about makes sense in healthy economy and financial markets but reality is quite different “smoking mirrors “ manipulation all over , therefor making decisions on the pointed out assumptions might be hard pill to swallow.
I just got docs for a refinance on an investment property. I would not sign the docs from the bank. There are 20 plus pages of docs they read like the bank is preparing to fail. I have docs like these for a bank loan. Lol
It would have been the same as 2008? Cut it in half maybe. No joke, and not trying to be rude, I'll wager 10 K that bank stocks will be up from today to April 2024. up for it?
There would have to be a glut of houses going on the market. The only thing that would do that is foreclosures. There’s way too much equity in homes for that to happen, forget about it.
George is very smart but he doesn't seem to understand there are four ways to make money in real estate. He only knows about cash flow . The other three are Tax benefits Debt pay down Appreciation. I don't see people selling their houses only to ho rent at double the costs of their mortgage.
Mmmmm...... Buy down. Do all your own own work.... These numbers don't mean nothing, offer more that the cash offer guy to where you break there profit margin. Domestic advantage
Why do you think there is no supply? How about over supply shadow supply not taked about over built and sitting. They keep pumping no supply, no chips, no feterlizer, no evs, no trucks. Really? oh right they can charge more. Look at az George there is no built houses sitting? Really?
I went through the 2008 crash, lost everything in real estate. The crash happened because of 100 ltv, over leveraged, subprime mortgages, combined with a crashing economy. His premise is recession and he makes a generalization in the market. The market is very regional. 400k + moving to Texas, 300k to Florida, all from California. Supply and demand is the most basics, he is discounting that main fact. As well as flattening of rates, and some reduction in 2024. He is using 2008 premises to predict 2024. We live in a much different world. No ARMs, His opinion is fine, just I would not base any actions on his opinion.
I am what you consider a small real estate investor. I have a total of 43 units I’ve had 75% of them for 20 years. I have a mentor, about 3 1/2 years ago. I told him we were considering refinancing bringing a couple of properties interest rates down. My mentor who is a real estate wizard told me 3 1/2 years ago to ask for a blanket mortgage with a 3.75% interest-rate and he told me not to accept anything but a 10 year fixed rate in five years that I won’t be sleeping at night if I have to refinance in five years. He said interest rates are going through the roof. I did what he said 3 1/2 years ago 3.75% fix for 10 years thank goodness I did that. he has been doing this for 50 years. Experience is everything!
Bruh, 43 units you ain't small no more. Once you went past 3 properties at once or 5 or more doors at once has always been the threshold for small imo.
I have 7 units. I would consider you a large investor!
When I look at what Ken has for units. I feel I am a small investor compared to him. 43 units is a lot of work!! feels like a full-time job. there has got to be an easier way of making money.
I say that, but I do love what I do
@@guyscribner There is not an easier way to make money I can assure you.
Right on George. Macro is what a lot of people never look at…
Nearly 9 million people lost their jobs and at least 10 million lost their homes.
10 million homeowners did not all have bad loans. In 2008 the Fed started to raise rates due to high inflation, then banks stopped lending and things started to crumble.
Love learning from George and Ken!
Hi George - the reason for the increase in the usage of the BTFP is because it has become a rate arbitrage opportunity. Banks can either choose to borrow at Fed Funds rate of c5.4% vs. 4.96% under the BTFP. They are borrowing at 4.96% under BTFP and gaining 44bp interest by depositing at Fed. The BTFP spiked in March 2023 due to sudden increase in rates pushing price of treasuries down and, because some banks didn’t appropriately duration match their liabilities, they got caught out. Not the same situation in a rate-cutting environment. This is simply a rate arbitrage play. Great content otherwise so thank you!
There’s my boys !!!! Thank you both 🎉
Please make sure to tap in on inflation or deflation risks . Happy new year 🎉❤
I love those two guys! Thank you for bringing important information out.
Thank you for watching! I'm glad you found value in it.
Thank you Ken! I learn in every video of yours!
Great!!!! Thank you both! -Erik
Ken is great
Ken, your friend's right, owning a house isn't just about the mortgage! 😄
Not sure why your videos are not showing in my feed? I hit the bell notification.
9:48 as the quote goes, "there is nothing more permanent than a temporary government program." The government should allow the program to expire, but we'll have to see.
Even though George is tremendously successful, he understands the financial strain affecting everyday people.
Home prices are relative to Income; that is a true statement only if the ratio of housing to population is the same. If you double the number of people and don't add supply additional homes then that historic figure is no longer relative. I was hung up on that argument for a long time until I visited China and realized that we don't understand population here after visiting cities with 30+ million people.
Yeah he grossly over simplified the factors that influence home prices
George absolutely nails it. There are a lot of first time homebuyers that recently purchased that are totally oblivious to this.
I got run over in 2005! I could tell Arizona was overpriced but I did not understand it was nationwide and I overleveraged my out of state investment and lost everything
Love Georges take on this economy
Kenny is talking about the lack of construction in 2009-2011. However, corporate and consumer debt today is at all time high and in 2009-2011 we didn't have inflation. The housing market nationwide did not come out of its bottom until around 2011 despite the Fund Fund Rate going to zero in 2009. It's the Bond Market,,,Kenny
Love this! You guys are awesome.
Thanks for watching!
Hi Ken
I was wondering if you had any advice for the next downturn in real estate, they were going to be lots of opportunities like there have always been when things turned bad. Can we get a peek into your playbook? The units that I own 43 in total I paid less than $30,000 a unit, the same units today are selling for 200+. When I first purchased my properties two bedrooms were renting for $550. Now they’re renting for $1800. The cash flow is exceptional. I know what it takes to make money, overpaying for properties is not the way
Thanks for watching an commenting! I did video a few weeks back that gave some insight into my thinking for 2024, hopefully this would help. th-cam.com/video/oxP7QTmRoqU/w-d-xo.html
Boomers are reaching age where they're passing away or moving that could drive the prices down quite a bit when that inventory starts flood in the market the next 5 to 10 to 15 years
I was comparing some regional banks balance sheets quarter over quarter and noticed some banks lost certain core deposits but have managed to attract other deposit funding sources. Not sure from where or if it is some temporary plug or BTFP related.
I agree with you on march 11 date.But HOW is the fed NOT going to extend the B.T.F.P. date???????CAN WE ALL SAY BAIL OUT! The can keeps getting kicked down.
I think I’m understanding. But then why would the bank bailout come to a head on March 12th? Why wouldn’t they just keep getting bailed out on and on?
George Gammon? He’s been right less than a broken clock.
I think its logical to say home prices will come down based on income. So far its been the opposite. Taking this position has cost many people lost opportunity because the logical conclusion is do nothing. I think the answer is stay in the game, buy great deals, dont over leverage. Time will solve any price reductions.
“Buy great deals” is of course always true. The problem is what constitutes a great deal in 2020 is not the same as 2023, the difference is macro conditions, and in my opinion that is all that is being said here. For example assuming 95% occupancy vs 85%. Being more conservative, being more picky, etc.
I know an investor who bought a duplex and she expected too high of a rent, rents are actually dropping when she was forecasting them to go up, and now she is cash flow negative and out of cash reserves.
@tublin4940 thats an over leveraged investor. Sometimes i put 50% down, finance 10 years, payoff in 7. Double your money ever 7 years, zero cash flow, 100% wealth building or staying ahead of inflation. Buy a home "speculating" rent increase or equity growth is the only way to succeed is a recipe for disaster. You have to plan for sideways to negative growth, rents and equity. If you cant afford to make payments for a period of time without that income, dont buy real estate. Yes people have bought leveraged to the hills and made a fourtune in a appreciating market, this is not that.
@@1973superdad yep, and I think common sense would say there are a lot more investors like her than there are like you.
@@tublin4940 I have seen a lot of youtube title with "buy home zero down" or very little, that creates very little cash flow or STR, it works in an appreciating market not a sideways or declining. If rents decline, it will cause hardships for sure. I guess we will see how it unfolds. I liquidate foreclosures for bansk and gov, sold a lot over the years, theres hardly any foreclosures coming to market now.
George and Ken need to have a serious talk with their buddy Jason Hartman. He thinks real estate is only going to go up up uo.
Here in Toronto home prices to income is about 12x and thats down from 14x, its going to be a mess
5:43 *Laughs in Australian* Our median house prices are like 8-9x income LOLLL.
When you don't trust the banks to hold your cash, because they waste it on buying government bonds at an insanely low yield, where do you put your cash?
You put it in government bonds, just like what happened in Europe during the 2008 GFC, because you can afford to Hold to Maturity.
Banks cannot Hold to Maturity, because they must immediately redeem depositors' withdrawals.
The banks must use the Bank Term Funding Program (BTFP), which just another name Quantitative Easing (QE), which is another name for currency counterfeiting.
Home prices to incomes is just ridiculous. The pops in that ratio are right in line with low interest rates and excessive money printing.
I thought the yield curve was undefeated in predicting within 12 months. It inverted 2 years ago.
It has to uninvert first
I thought it was within 18 months after it reverts
First it inverts, un-inverts, reverts, then converts. When the long end goes down you jump ship.boi
That looks like a graph from Reventure Consulting.
Haha. Exactly.
😂
Yes it is. It has been getting some attention on X (Twitter) and some TH-cam videos. George found it through a posting on X and decided to share.
George is a big “curve” guy. The issue with other “data” regurgitaters is they never see the curves.
Please please please you need to give the original credit of the black chart to Reventure consulting. He’s the one that has been screaming housing crash since the pandemic. It would be worth it to have him on your show.
I agree. It was a Reventure Consulting chart that was use. George found it through a different X (Twitter) account, but the chart does clearly indicate Reventure. Thank you for pointing it out.
@@KenMcElroyhey Ken, longtime listener. Please do not have Reventure on your show. He deleted all of his older videos from 2020 calling for a COVID real estate crash. One of the things I respect most about you and George, is you will admit when you’re wrong. Reventure won’t.
You scream crash long enough and you will end up being right someday. He isn’t predicting anything
I think with the lack of supply, rates headed down it’s not gonna matter if a few people leave their jobs the market is going to pick up and we’re going into the fives for 30 year fixed.
Wait. I think I just heard an argument supporting the thought that a limited supply is bearish? And, no mention of factors contributing to our population increase. Relevant methinks.
Houseing has always done well throughout a high inflationary environment. I don’t think we have seen the worst of inflation yet or I think inflation will stick around for 5-10 years.
Don’t focus on the price. Focus on the ratios and you’ll see that even if prices are going up, the asset could be going down in real terms. A good example is the Venezuelan stock market a few years back.
@@robnisbet6797 We are living through the biggest bubble in "paper assets" in history! The bonds that were yielding so low back in 2021 will marvel future historians on how the world could be so stupid. The chart that compares financial assets to real assets (which included real estate) was/is so lopsided, its going to create generational wealth for those on the right side of it. Nobody is thinking in real terms just yet, which is the opportunity for us. US treasury is issuing 2+ trillion in new paper per year now, how can that have any value in real terms with real assets at these relative pricing levels?
Bond Market !
What George is talking about makes sense in healthy economy and financial markets but reality is quite different “smoking mirrors “ manipulation all over , therefor making decisions on the pointed out assumptions might be hard pill to swallow.
In the Uk house prices adjusted for inflation are way below trend and the 07 highs. They never recovered … a good buy?
The adjustable rate debt is the problem to watch in the UK
I just got docs for a refinance on an investment property. I would not sign the docs from the bank. There are 20 plus pages of docs they read like the bank is preparing to fail. I have docs like these for a bank loan. Lol
This guy sold off his real estate portfolio just before the massive appreciation couple years ago. Lol. Let’s listen to this guy!
Owners will drive Uber’s, rent out rooms, they will do what they have to do
It would have been the same as 2008? Cut it in half maybe. No joke, and not trying to be rude, I'll wager 10 K that bank stocks will be up from today to April 2024. up for it?
Lol what happened Kenny? Had to cut George off because you didn’t like the bear narative? You both have opposing views on this market
There would have to be a glut of houses going on the market. The only thing that would do that is foreclosures. There’s way too much equity in homes for that to happen, forget about it.
George is very smart but he doesn't seem to understand there are four ways to make money in real estate. He only knows about cash flow .
The other three are
Tax benefits
Debt pay down
Appreciation.
I don't see people selling their houses only to ho rent at double the costs of their mortgage.
Mmmmm...... Buy down. Do all your own own work.... These numbers don't mean nothing, offer more that the cash offer guy to where you break there profit margin. Domestic advantage
Why do you think there is no supply? How about over supply shadow supply not taked about over built and sitting. They keep pumping no supply, no chips, no feterlizer, no evs, no trucks. Really? oh right they can charge more. Look at az George there is no built houses sitting? Really?
I went through the 2008 crash, lost everything in real estate. The crash happened because of 100 ltv, over leveraged, subprime mortgages, combined with a crashing economy. His premise is recession and he makes a generalization in the market. The market is very regional. 400k + moving to Texas, 300k to Florida, all from California. Supply and demand is the most basics, he is discounting that main fact. As well as flattening of rates, and some reduction in 2024. He is using 2008 premises to predict 2024. We live in a much different world. No ARMs, His opinion is fine, just I would not base any actions on his opinion.
Way to ignore all the data and take a trip into lala land.
100% wrong.
Thanks for watching and commenting. Would love to hear more specifics on where you disagree if you would like to comment further.
How is George wrong? Because it hasn’t happened yet or your own personal denial belief?