Interest Rates, “Ego”, and Why You WANT to Get More Debt
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- เผยแพร่เมื่อ 14 มิ.ย. 2024
- Interest rates have become a hot topic over the past six months. Back in 2020 and 2021, homeowners were bragging to their friends about their rock-bottom mortgage rates and how they secured financing at three percent or less! But times have changed, and seven percent interest rates are becoming the norm. Now, nobody is bragging-in fact, many investors are too scared to buy, thinking that today’s interest rates are far too high to buy homes with. If you’re following this thought process, you could be making a BIG mistake.
Welcome back with another Seeing Greene episode, where our “high rates, who cares?” host, David Greene, answers questions directly from investors just like you. In today’s show, David coaches a young investor on building his side business, why quitting your job could be a mistake, and how to learn from past deals to build wealth far faster. Then, David pivots into answering questions from investors on how to get over your fear of taking on good debt, how much to have in safety reserves for your property, and why being scared of high interest rates could hurt you in the long run.
Want to ask David a question? If so, submit your question here (www.biggerpockets.com/david?u...) so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can hop on a live Q&A and get your question answered on the spot!
00:00 Intro
02:07 Quick Tip
02:54 Coaching Call: Financing Deals Without a W2
13:50 Coaching Call: Hard Investing Lessons
20:15 Questions from the Comment Section
25:27 Scared to Take on Debt?
32:26 How Much Cash to Keep On Hand?
36:18 Scared of High Interest Rates?
41:19 Get in The Money Mindset
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Episode 684
Show notes at: www.biggerpockets.com/blog/re...
#biggerpockets #realestatepodcast #biggerpockets684
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The moral of this interview (and a reminder to myself) is that you can’t be to quick to leave your job. Quitting your job can be a major strategic blunder if you bounce too soon. Hunker down folks and milk that W2. PS. I promise jobs start to suck less when momentum builds when working on building your dreams and your earnings are higher than all of your bosses put together. Keep grinding folks.
Also, the health coverage and retirement perks are invaluable. We worked out a nice plan in my house. I handle the rentals and my wife has a W2 job with benefits. Works out great.
@@steveelling9604 that’s it!!
I feel that’s just another mechanism to keep people slaving away at a W-2 for 2 more years. No thanks. Work with a lender that is 1099 friendly (there’s a few online), Portfolio Loan, Bank Statement Loan, or save for 20% down payment, get a W-2 non-occupying or occupying co-borrower, or all of the above. You have options as someone who left a W-2.
@@shotartist good.
The live coaching call was pure gold. I probably skip one out of every 3 or 4 episodes but, if I’m confident that you’d do that every episode, I wouldn’t miss a single one. One man’s opinion
I absolutely love your live coaching calls!! They are relevant to so many situations that people are experiencing. In addition, we can feel the fear and hesitation in the caller’s voice and see it in body language as if it was our own. We’re experiencing the same emotions, or have in the past. Then to witness the lightbulb moments in the caller’s eyes and to see his/her demeanor totally flip (pun here 😁) to the positive is so inspiring! Look at your callers body language at the start of the call then at the end of the call. It’s truly amazing as if you watered a thirsty plant! Please know that you are valued so much more than you can realize! Thank you for all you do!!
David, excellent strategic ideas in the live coaching with Parker! So much outside of our control and yet you highlighted practical pivots for them.
Amazing the first 20 minutes, free mentorship live. I really appreciate it David. Thank you. Emotions vs Logic time was amazing.
Thank you David for the coaching session! You gave me a lot to think about.
Follow pace morby
Love these personal chats, great to see and very relevant as he said!
Great information and knowledge as always David!! Thank you!!
My 1st time listening to this channel. WOW!
Love the live coaching session. Very informational.
David you were very encouraging and uplifting to the dog trainer and new investor!!! You did not take the hammer and bang it on his head , rather you saw an exit and opportunity of what he called a mistake or failure!! Awesome man!! Failure is not the opposite of success, IT IS PART OF SUCCESS !!!!
I really appreciate his willingness to be transparent with his weaknesses.
Great job folks. Awesome interview!
Love this format
This is a solid episode David. Good job
This one is so good because the "David" way of thinking encourages resourcefulness and creativity based on long-term goals. Very important for us newbies out here.
I have moved 3 times that way I only have to put 5%down on the primary residence. FYI before buying know your exit strategy and if you are going to cash flow.
Thank you for this video. This is inspiration, motivated video that I learn the most out of all BP videos. Please have more of these. Let's be more Green.
9:50 this is a great answer to give in a job interview!!
This is freaking amazing information!
Thank you!
David is the best.
Omg, that is exactly my situation too , Thank you so much David that you gave those great advice, I m too shy to on camera talking to you , but I knew someone else will ask my questions and today it is the day ! 🎉🎉 now I m much clear what to do
I also bought my first house in May and only planned to rent out a room or two to help out... but I had the same regret about not getting more rooms... this video was what I needed to hear
Excellent!!
Money is energy. Thanks for creative ways for swings of interest rates. I have a better perspective now.
First time in a while I’ve heard a reference to DISC!
To the first question having an issue with getting standard conventional primary residence financing:
Purchase on seller financing / wrap. Even if you go to a RMLO to verify your income situation, it is entirely up to the seller to decide whether you are a reliable borrower. We would sell to you in a flash.
Purchase with a DSCR loan, with no form of income verification if necessary. Yes, it is a higher % down and worse interest rate, but since the intent is as a house hack / investment property long-term, it will still make sense for you.
Always love the content ur putting out David! I live in Sd and been sitting in the side line trying to purchase my first home.
Can't find deals that are under value here in locations I'm interested in.
Everyone thinks their homes are worth more than it is..
I've been looking for over 10 yrs :/
Hopefully homes will correct soon :)
What’s going on… I live in San Diego as well and am a realtor and investor. I work with a lot of flippers and come across discounted properties all the time. Let me know if you want me to sent them your way.
Inspiring!
greaT INFO THANKYOU
Thank u
Live calls are great
Go the opposite way everyone is going! Great episode thank you
Buy stocks when blood is in the streets!
I buy real estate long term, but buying stocks in the mid to short term.
Thanks for asking and answering that refinance question! I'm in the same boat! Wondering if to sell my property and buy one or two more or refinance into a higher rate and buy a second one! My goal is to have more properties! This opened up another option for me! Thanks again
how to get a heloc on rental properties ? (Lower Value Homes)
Where can I get a HELOC for a rental property? I spoke with 2-3 lenders and they were unwilling to offer heloc unless it was a primary.
Someone please help me!
There it is. Let these guys talk long enough and they’ll tell on themselves. Made everyone think a little HGTV can turn you into a home flipper during low interest rates…. Gotta keep the machine turning though so all they can keep saying is keep going into debt during high interest rates.m
What else would you expect from people who think they invented owner occupancy and cash out refi and renamed them BRRRR and house hacking. It’s not like there has been a mortgage product for the exact same thing for decades
Amazing
Should I get an arm or fixed rate mortgage now?
I have some cash flow. I want to invest but I also want to buy a home. If I buy a home at auction, it would take all my cash but the market, I live in is too expensive so homes are unaffordable. If I buy cash at auction to get a better price and then take a mortgage loan on my home will that be a risky approach? I don't know what to do.
23:33 if theres something i would tell myself before was stick to this point
So i actually listen to 1.5x but so cool you guys read my comment. Nice BP!
Does it ever make sense to do a cash out refinance on a primary residence if you can get your down payment back?
If you will make more profit than the interest on the money you borrow then absolutely.
There are several options for obtaining financing. We can sometimes go as little as 10% down depending on the circumstance. I also have several options for newly self employed.
This is why I love being a Mortgage Broker.
How can I submit a question for this?? This is so valuable.
You can submit your questions here! airtable.com/shrATFS4muSm6nLTk?
I'm a 30yr old self made realtor who owns 3 properties (one is a soon to be duplex) and trying to buy my 4th property. I have the downpayment, but struggling to make things work, lacking creativity...How do I set up a call with you :)
Anyone that says debt is your friend, doesn’t know how to make money without crippling leverage (not the same thing is non crippling leverage).
I am becoming less of a fan of these guys. It’s like they’re preying on the fiscally challenged to buy a house they can’t afford. Next they’ll say that $200 net profit a month from a rental property is a good investment. Shameful
@@johnsmith-bt7xp it is not their fault that people are making bad decisions on buying stuff they cannot afford. However, debt can be a very good thing as long as you are not overdoing it.
The point is, you can use debt to expedite your financial growth. But you need to be smart about the buffers you have in your properties and budgets. If you don't have a good buffer for financial instability, you are a bad investor.
Debt is a fantastic way to actually gain leverage tbh. Most people cannot afford to buy a property without Debt. Debt allows us to get into properties and also allows us to leverage our money and use that money to get more money.
The point is if you don't know how to analyze deals and jump into things too fast without proper numbers. In those situations debt is bad and you should analyze more deals so you can the proper numbers.
@@jeffrey3837 most people can not afford to buy a property without debt, because of debt.
@@michael589m I mean, what does that have to do with this. That is a mute point. If you are in position where you have too much debt, why are you trying to invest instead of getting rid of debt. One of the things to learn prior to investing is to learn how to manage your debt levels and pay things off and not accumulate more by controlling spending.
Most of the times you should manage your debt to the point where you can afford to invest then start investing while also dealing with your prior debt.
You should never get into something you cannot afford, that is why you need to learn to manage your own finances so you don't go too deep into debt and you have wiggle room.
By the way many properties will damn near pay for themselves at the point of purchase, don't buy that single family or if you do house hack and then you can live for free in your own home. That is a way you can deal with it as long as you can get a loan.
Has anyone been able to recently get a HELOC on a rental? Every lender I talk to says they can't do it! I would love that as an option!
They do. Just 65%
I’m having the same issue. They want to do a cash out refi, but not a heloc
So David keeps on throwing out the idea of getting a HELOC to get at the capital your properties. Is anyone able to get a HELOC on an investment property? I haven't found anyone doing it right now...
2023 Goals: I'm going to flip my first home in 2023 after I buy my first home. I've been engulfing myself in learning all that I can so that I can be prepared.
Imho after being in commercial real estate for 30 years - now is not the time to buy!!!!
I have two duplexes I want my next one to be a multifamily with management.
There are ways to finance a propert without looking at your income - there are lenders out there who just look at the asset ONLY. Why didn’t you recommend that?
20% down
If he is self employed, can he just create an LLC or even a C corporation if necessary that takes in the revenues and then pay himself through the LLC or C corp as an employee to get a W2?
P.S. since his wife is in the company probably makes the case for this stronger
Following
He would be an LLC filing as a S corp most likely…that is still viewed as pass through income…part of it is just taxed at a different rate as a W2. The bank would still want to see two years of taxes. I just went through this and there is no way around it for conventional financing unfortunately
Assuming $200k debt for a few hundred a month profit over a 30 yr span is not a worthwhile ROI, much less doing this over and over again hoping to bank on appreciation for future refinancing. This is financially appalling advice to be giving a predominantly green REI audience.
Bought a house built in 1990 and days it’s old. While I’m sitting in my 1890 house 😂
Wow, Angela has a wall of distance-runner awards and medals behind her. Impressive. It's not easy to run those hills in Pittsburgh!🏃♀🏃♀🏃♀
🤔
Leaving your w2 isn't the issue. Having enough capital or access to funds is the most important thing.
Correct
Terrible time for debt imho....
As long as you leave a cushion, it is the best time for debt as you are buying at a high rate/lower purchase.
You then hold until prices go up and then rates go down, then refinance and you have instant equity and much lower payments.
@@jeffrey3837 that’s correct
@@jeffrey3837 Rates are still going up. Part of an investment strategy is patience.
@@BigPimpin101 yes absolutely but doesn't mean this is a bad time to invest and use debt
@@BigPimpin101 you just need to manage your purchases so they are cashflow good at the time of purchase or there is plenty of room in the property budget.
In this environment, buy to flips are not good but buy/hold and rent aka brrrrr is a fantastic time because you can then hold until the property is able to sell or refinance for a profit.
If u don manage & clean ur Airbnb ur guna get took to the cleaners for 40% of total then u still got utilities not worth it! In my book long term midterm way to go!
So I have been around the Construction/ Real Estate Investing for several years.
I finally saved up $100k & partnered up with the GC I worked for on a Duplex with a 4 car garage in Los Angeles Ca 90044 zip code.
My Q’s is: The objective is to sell property. It’s been on market for 22 days now.
Or should I take out of HM loan and Use my VA Loan to keep??
This is my 1st investment. Honestly, I would love to sell and get money back and profit. Then look for another opportunity.
Understood your in $100k. Sounds like you're looking for your profit from the deal back right away. 22 days on the market is not a long time considering it's just been completed. I wouldn't worry about the deal with the duplex considering it's already on the market for listing. Now, you have a VA loan at your disposal this is great for the time we're in when trying to secure financing is tough Utilize you're VA loan. Start looking for another deal now. See how much you're approved for with you're VA. Make sure you run the numbers so you don't over leverage. And continue building. You're doing fine. Don't worry.
Thank you! I will exactly that. Keep looking for the next deal. Again. Thank you guys for responding.
👍🏼
I have to debate this first segment. Use a Debt Service Coverage Ratio loan and keep your time. No need to work for the man to be an entrepreneur. 😂
So sick of the same questions. "I can't get financing and I don't have a downpayment.....but how can I invest in real estate?" The answer: you can't.
This is correct in most cases but not all.
Actually, you *can* get financing. You can use a business line of credit, a credit card + Plastiq/PayPal, or assistance programs like NACA/USDA. Certain credit unions or small banks will also lend 100% if the purchase price is significantly less than market value.
You could also do seller financing, private money, rent to own, subject to, etc. So many options.
@@The1SimLash That's the kind dof fantasy that BP is selling these days.
Get your license.. i got paid 1700$ to buy my last house.. needed 5k EM but got a check for 6800 at closing
True, first you need to save money fix your credit have a decent job and then you can start investing.
Can’t invest if you’re struggling to put food on the table.
He must be kicking his desk talking to this kid. SMH
Would like to obtain 5 new doors in 2023 and a new house for my family.
Advise: skip the comment section waste of time for us listeners
Good debt will make you wealthy and pay less taxes