Get Rich Education

Get Rich Education

This show has created more financial freedom for busy people like you than nearly any show in the world. Wealthy people's money either starts out or ends up in real estate. But you can't lose your time. Without being a landlord or flipper, you learn about strategic passive real estate investing to create wealth for yourself. I'm Show Host Keith Weinhold. I also serve on the Forbes Real Estate Council and write for Forbes. I serve you ACTIONABLE content for cash flow on a platter. Our bottom line in real estate investing together is: “What’s your Return On Time?” Where traditional personal finance merely helps you avoid losing, you learn how to WIN. Why live below your means when you can expand your means? Since 2002, international real estate investor Keith Weinhold owns multifamily apartment buildings to single family homes to agricultural real estate. New episodes are delivered every Monday.... Show More

Before you buy a property, I discuss something crucial that you’re probably missing.

Five of your listener questions are answered. 

(The entire episode’s lyrics are in the Show Notes below!)

1 - How should I reward my child for their good school report card?

2 - How reliable is a real estate income stream?

3 - Are we in a housing bubble?

4 - Should you pay off $200K in student loans or invest?

5 - Should I get an inspection for a new construction property?

“Packaged commodities investing” is a way to think of real estate.

You have a buying opportunity for income property in Florida, Alabama, Indiana, Maryland, Tennessee, Arkansas and more all at www.GREturnkey.com.  

__________________

Resources mentioned:

Inflation Lesson:

Sears & Roebuck DIY Homes

Mortgage Loans:

RidgeLendingGroup.com

QRPs: text “QRP” in ALL CAPS to 72000 or:

TotalControlFinancial.com

New Construction Turnkey Property:

NewConstructionTurnkey.com

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GREturnkey.com

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Welcome to Get Rich Education. I’m your host, Keith Weinhold - answering your listener questions today. How do you reward your child for a good school Report Card? What about the long-term DURABILITY of a real estate income stream? 

Are we in a Housing Bubble? What should I do - pay off student loan debt - or invest? Should I get a Home Inspection? And what’s the one thing you should do before you buy ANY property that you’re probably not doing? 

All today - and more … on Get Rich Education. 

___________________________

Welcome to GRE. I’m your host, Keith Weinhold. From Colombo, Sri Lanka to Columbia, South Carolina to Columbus, Ohio and across 188 nations worldwide. 

This is Get Rich Education. 

We’re having my favorite guest on the show today. That guest is you! Because I’m here with your listener questions today!

The first one concerns a kid’s school report card and then the rest are about real estate investing. 

Rebecca from Los Angeles, California asks, Keith:

What reward should I give to my 11-year-old son, Mason, for having a good report card at school - all As and Bs? I love your show, keep up the great work.

Well, thanks, Rebecca. I love this question. Even though we’re largely a real estate investing show, I think there can be so many lessons about life for your 11-year-old son, Mason here.

The reward you can give them for their good report card is cash. Tell Mason that he’s getting $100 - or maybe it’s $40. But in any case, let’s just stick with the $100 example.

Divide it in half. 

Tell him that he’s getting $50 in cash.

And tell Mason that, as a bonus for later, another $50 is going to be invested for him.

Over time, Mason will probably see that the invested $50 grew and the $50 that he spent on video games or whatever didn’t.

But see, he still gets rewarded with “short-term” fun. That way, it’s not ALL delayed gratification.

As you know, the abundance mentality isn’t about either / ors, it’s about “ands”. 

 

This way, he can have his cake and eat it too. What good is cake if you can’t eat it?

 

Now, I didn’t say that he had to SPEND the $50 cash part of this. $50 gets invested - and you’ll have the fun of keeping Mason updated on his investment over time. 

 

He can do whatever he wants with the $50 cash part. And over time, if he sees the invested portion gained value, he might choose to actually invest some or all of the $50 cash reward too.

 

But for now, let’s be realistic - he wants to spend his $50 cash on Minecraft or Fortnite or the latest release of Grand Theft Auto. A video game like that.

 

That’s fine. You need to let him be rewarded now - because that might incentivize more near-term good school performance - which is what you value seeing in Mason.

 

Thanks for the question, Rebecca.

 

Now, before I move onto the next question. There’s … I think … a real extrapolation here for you, the adult listener, with the way I recommended that Mason’s report card could be rewarded.

 

Really, there’s a real estate investing lesson there. Mason gets rewarded both now & later.

 

A employer-sponsored retirement plan punishes you now by reducing your salary and make you delay gratification.

 

Real estate investing reduces your salary now - in way - when you make your down payment. But it begins returning that to you in the form of cash flow now - and gives you the asset appreciation for later.

 

As you know, I’m not in love with the term “delayed gratification”. Now, I do think there’s a little something to be said for it.

 

When I made my first-ever property that four-plex building where I lived in one unit and rented out the other three, I could have bought a nicer SFH. So I delayed some gratification there.

 

I see some investors buy-in to “delayed gratification” so much that I wonder how long their postponing happiness and if they’ll EVER find it.

 

Sometimes, people get shocking reminders of this, but they soon forget it. I know this hits close to home for an Angelino like you, but you think about 41-year-old Kobe Bryant and his daughter Gianna being taken away from the world a few weeks ago.

 

There are really all kinds of analogies for life here. Sometimes “later” becomes “never”.

 

Would you say that IF 11-year-old Mason spent half his report card reward - the cash half - if he spent it all on video games, would you say that he “blew that money” - that he “wasted that money”. I don’t know.

 

What about you - the adult listener. Sometimes I hear people say that you should save all your moeny and not “blow it on a vacation” - as if you squandered money if you went on a vacation.

 

I don’t know that that’s necessary true.

 

Look, what is money for? What if you’ve wanted to travel to tour the beautiful Croatian coast or see glaciers in Greenland.

 

How can a person say that you’re necessarily “blowing your money” if you go out and to that.

 

You’re getting out and seeing the very world that you live in. You’re living the life you’ve dreamed of. What would you want to do any less?

 

Most people just don’t have a vehicle - they don’t know about a durable vehicle like real estate that pays them so many ways - both today & tomorrow.

 

See, a lot of investment promoters WANT you to delay gratification. 

 

They oversell that stance. They’re selfish. They want you to invest your money with them so they get the sale first and that they get the commission first and that they get the referral fee first.

 

They’ve convinced you that paying yourself first … means investing with them first … so that you can accumulate dollars in an account with your name on it so that you can only then consume it in years or decades.

 

Use your dollars in years or decades? That’s not paying yourself first. How did that get to be paying yourself first? It’s because that promoter of salesperson is only thinking of themselves first.

 

There’s something to be said for delayed gratification, yes.

 

But delayed gratification should not be a permanent condition.

 

When are you really going to start living the life you’ve always wanted? The year 2052? Or do you have a plan to compound your cash flows so that you can do that in three years.

 

You know that that’s the big reason - the #1 reason for me, in fact - that I don’t care for conventional retirement plans. 

 

They only invest for later instead of both now & later like cash-flowing real assets do.

 

Now, I don’t think you’re going to find it self-redeeming if you go broke trying to LOOK rich with ostentatious displays and classic CAR status symbols like the Lambo - unless that’s sustainable for you. Then … that’s great.

 

So be gratified both now & later. Give Mason cash - half now, half turned into an investment that you make for him.

 

And to 11-year-old Mason, if you listen to this now, I know you might want all $100 bucks right now. Most 11-year-olds would.

 

If you listen to this in 2030 when you’re age 21, you still might not understand.

If you listen to this in 2040 when you’re age 31, it’ll probably all make sense.

 

Thanks for the question about your son Mason, Rebecca.

 

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The next question comes from Gerald in - Oxnard, CA - that’s just up The 405 and 101 - west from L.A. where our last listener inquiry was from.

 

I went through Oxnard on my last drive from L.A. to Santa Barbara.

 

Gerald writes. “Keith, thanks for your show. Nobody anywhere makes real estate investing more clear. It’s my favorite 40 minutes of the week.” 

 

Now, see, with a comment like this, it really increases your chances that I’m going to read your question on-air here, Gerald from Calabasas.  :o)

 

He asks, you discuss the importance of multiple income streams. 

How PROVEN do you think that real estate income streams are long-term. How do I know it will still perform as an asset class for me in 30 years?

Thanks for the question, Gerald. I know I’ve discussed elsewhere that people are going to keep needing a place to live, like they have for centuries or millennia now - and that inflation is the long-term trend and your long-term friend for a leveraged real estate investor. 

It’s also what makes your cash flow rise faster than inflation since rents move up with inflation but your principal & interest cost doesn’t - it stays fixed.

So, I’m going to take this in a different direction, Gerald. You’re asking about the durability of real estate an asset class and I think it’s a good question. 

I recently had another listener write in to me about a concept that … I’ve thought about it before but I never heard it articulated in such an elegant way. And, I’m sorry that I don’t remember this listener’s name.

But she referred to real estate investing as “Packaged commodities investing”.

I love the … ingenious thought of packaged commodities investing.

When you buy a rental home, yes, you’re buying the cost of the utility and the construction labor. 

But think about those materials in the home, those commodities - you now own brick, lumber, glass, copper wire, styrofoam insulation, granite, ceramic, paint, oil in the roof shingles, masonry, concrete, rebar, you own an HVAC system - every one of these individual commodity components are hedges against inflation. 

Gerald, a while ago, Reddit had a trending article over these Do-It-Yourself Houses that Sears used to sell over a hundred years ago.

Look, this is fascinating -

I’ve got this one-page ad in front of me - it looks like a newspaper ad. It’s for Sears Roebuck and company from the year 1913. 

This ad - that’s more than 100 years old - is interesting to any investor or economist - or marketer even. 

This ad is for - like a kit you can buy where you help construct the home. Let me read it to you.

It says, “By allowing a fair price for labor, cement, brick and plaster, which we, Sears, do not furnish, this house can be built for about $1,530 - including all material and labor!

Now, this looks like a small, single family home plan that Sears was offering you here, back in 1913. I can’t quickly find the square footage on it - say it was 1,500 sf.

So, you’re buying this house over a hundred years ago, for say a dollar per square foot then.

They show you the flooring layout plan. This is a livable-looking place, complete with a nice, wide porch. It’s not a tiny home.

Ha - this is so quaint!

The Sears ad goes onto say, for $872 (which is more than half of your all-in cost of $1,500 that I just mentioned) - we will furnish ALL of the material to build this 6-Room bungalow …

… consisting of mill work, siding, flooring, ceiling, finishing lumber, building paper, pipe, gutter, sash weights, hardware, painting material, lumber, lath, and shingles.

NO EXTRAS - is in all caps. We guarantee enough material at this $872 price to build this house according to our plans.

So that was $872 for the material - and then, remember, your all-in price with labor and everything else is the $1,530. 

This home, that’s giving us some historical commodity and real estate PRICING perspective here - doesn’t look like a piece of junk.

Reading on - the large porch is sheltered by the projection of the upper story and supported with massive built-up square columns. 

A unique triple-window in the attic and fancy leaded art glass windows add much to this pleasing design. Ha! That’s all I’ll read from the ad. 

So … I think this is representative of this concept of “packaged commodities investing” that a listener introduced me to. 

It tells us a lot about monetary inflation, and at the same time - it speaks to the durability of residential real estate as an investment.  

This IS less sexy than the “five ways you’re paid” stuff here. We’re just looking at an element of durability here.

When you have direct ownership of rental property, you simultaneously own all of these vital commodities. You own a basket of products.

You’ll see this Sears ad linked in the Show Notes. It’s fascinating to see.

And a lot of home construction here in the 2020s decade is still done largely the same way that it was decades ago.

3-D printed homes are not being adopted into the mainstream. Now, if they do, that could lower labor costs. 

You’d still need to add a lot of things to make a 3-D printed residence livable - components and penetrations and mechanicals and the  - all those commodities we mentioned, plus, you’ve got the cost of the land. 

Decently-located land, is a commodity in itself - and IT’S of a limited supply.

By the way, this is a learning show, and the first definition of the word “commodity” when I Google it, is: “A raw material or primary agricultural product that can be bought and sold, such as copper or coffee.” That definition is from Oxford.

Ha - they even have copper as the first example - and you expect to own copper with each home that you buy.

I think yet another angle to your question, Gerald, about the durability of where your income stream comes from - is that we focus on RESIDENTIAL properties here.

As the office and retail real estate sectors KEEP feeling pain - residential has become even more important at the same time - and you already know all the reasons -  more people can work from home, order products from home, and do more from home than they ever have before. 

AirBnB properties might work in the short run, but we haven’t yet seen what happens to them in a recession yet - and as we know, the short-term rental market cater to business travelers and vacationers - and durability is what you need your income stream to have.

That’s why, for durability reasons, I favor long-term residential investing above all else … and love to consider the elegance of this “packaged commodities investing”. 

Thanks for the great question, Gerald from Oxnard, CA.

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The next question comes from Andrew in Ridgefield, Connecticut.

 

Keith,

 

I have been listening to your podcast for a while. Your mindset resonates with mine.

 

I am a small animal Veterinarian, I own - and run - my own small animal hospital.

 

On the investment side...….I have a balanced Wall street portfolio (Stock, Bond, Mutual Funds). On the Real estate side I have a $280 cash flowing SFR, and am involved in some multifamily Syndications.

 

I wrestle with Buying more SFR properties vs. more syndications. 

 

I feel that since money is so cheap in today's economic climate there is not much room for appreciation when buying RE. Should I sit on the sidelines and wait? (wait for Blood in the Streets?)

 

I like the Tampa area...but go back and forth with my thought process.

 

I look forward to hearing from you.

 

Signed, Andrew (his last name), DVM - DVM is Doctor Of Veterinary Medicine, BTW

 

Yeah, it is interesting that I’ve noticed a good deal of doctors & dentists listen to Get Rich Education. But I doubt that it’s #1.

 

Anecdotally, I’ve noticed that for some reason, we seem to have a really high proportion of listeners that are in LAW enforcement - like police officers & such.

 

Thanks for the question, Andrew, veterinarian from Connecticut.

 

On the first part of your question, buying more SFR vs. real estate syndications - that has a lot to do with both your risk tolerance and your desire for passivity.

 

Direct investing, like turnkey investing, does require a little remote administration - even when you’re not the property manager, but you’ve typically got higher returns and you’ve got control - versus a syndication.

 

In many cases, direct investing and that great control actually means you’re more liquid with your funds. 

 

You could sell in a few months if you had to … and with syndications, if you’re in Year 2 of an apartment syndication where it’s 7 years until that deal matures … then good luck getting your money out. You can’t access it.

 

So, those are some more of the trade-offs between direct investing & syndications.

 

Ah, I know you wrote that money is still cheap - meaning that interest rates are low and that you think that might be an indicator that appreciation has run its course.

 

Well, I’m still buying direct property, where I own the deed. 

 

See, interest rates have basically been low for over a decade and we’ve had appreciation the entire time.

 

Let’s look more recently. In 2018, interest rates really began a march higher and there were some people predicting that it would make housing prices go down. It didn’t. In 2018, national appreciation rates were about 7%.

 

In 2019, mortgage interest rates went lower and appreciation went lower, down to about a 5% annual gain. 

 

Now, yes, there’s a lag effect between mortgage interest rates and pricing too. 

 

But mortgage interest rates are one of - at least 10 different macro factors that effect the price of housing, so one doesn’t lead to the others.

 

There might be more substantial factors skewing the numbers than interest rates affect housing prices.

 

Housing prices can be more affected by things like chronically low supply like we’ve got today, wage growth, job growth, in-migration, birth rates, death rates - and did lending requirements get more stringer or more lax - did credit score requirements get more stringent or more lax and on and on.

 

But you do ask a good question, Andrew. Ah - if I didn’t think it were good, I wouldn’t be answering it here.

 

Now, I know that you didn’t bring up the word bubble.

 

But a few weeks ago, I described why I don’t think we’re in a real estate bubble. Prices are sustainable for a lot of reasons.

 

But on the flip side, I don’t see any scenario in which real estate, nationally, hits any high-flying annual appreciation rates of 10 or 12% anytime soon - like we saw back in 2005 either.

 

Low supply can only push prices so high. Affordability is the component that governs and tempers the upward price escalation. 

 

Affordability is what’s moderating the rate of appreciation rate right now.

 

Of course, whenever we talk about the future, no one REALLY knows what’s going to happen. These are just my thoughts - and the basis and the reasoning for why I have them.

 

You mention that you like Tampa - I do too. I really like so much of Florida - of course, you have to get your submarket right. 

 

And I need to say that’s generally Florida north of Miami - because the numbers don’t work so well in south Florida. 

Around Miami, you just don’t get a higher rent income proportionally to the much higher purchase prices there.

 

Think about this!

When you look at net migration by state for this past year, Texas was 2nd in the U.S., and they had a net in-migration of 190,000 people.

Florida, even though they have a smaller population than Texas, is #1 with 322,000 people. 

Yeah, net 322,000 moving into a smaller state - Florida. And 190,000 into a larger population state - Texas.

Florida has rent-to-value ratios that are favorable.

And as an investor, your property tax rate is substantially lower in Florida than it is in Texas too.  

There are a lot of reasons to like Tampa and Florida. Of course, that’s why we had our real estate field trip there last October in Tampa … as well.

Thanks for the question, Andrew!

If you want to hear your voice on the show, ask your question at GetRichEducation.com/Contact

I realized that on earlier listener question episodes, I had only left you with our mail address so that’s why I have mostly e-mail questions today and only one voicemail question.

I’d really prefer to hear your voice on the show. So by visiting GetRichEducation.com/Contact, that way, you’ll have the option of either leaving a voicemail or an e-mail, whatever you prefer there.

Two more listener questions today. What should you do first, pay off your student loan debt or invest …

… and I need to tell you why you should always get a property inspection before you buy a property - and do one other crucial thing - before you buy property - that you may not have ever thought about before. 

That’s next. You’re listening to Get Rich Education.

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Hey, you’re back inside Get Rich Education. I’m your host, Keith Weinhold, answering your listener questions today.

 

The next question comes from Dillon in Nebraska - I’m not sure which Nebraska place he’s from. Let’s play the audio: https://www.speakpipe.com/msg/p/120531/30/p15zsoamb252hyob35bvfc8d6uwrqv3ml1yh3h1suwgf6

 

Yeah, thanks, Dillon. And I do consider student loan debt as bad debt because YOU have to pay it back yourself … 

 

… that is, you can’t directly outsource those payments to someone else, like tenants in a rental property where they pay all your mortgage loan interest, all your mortgage loan principal, and hopefully, another couple hundred dollars on top of that called cash flow.

 

Not to mention, Congress passed an act in 2005 which made student loans quite difficult to discharge in bankruptcy.

 

With your question, being basically, “Should I pay off $200K in student loan debt as quickly as possible before starting real estate investing?”

 

Well, the answer ... as it often is, is “It depends.” But I’ll tell ya what it depends on. 

 

The short answer is - if your real estate cash-on-cash return could beat the interest rate on your student loan debt - only then would you invest in real estate and make the minimum student loan debt payment.

 

Now, that was really good insight on the inflation-hedging or even inflation-profiting that long-term debt can provide you. I can tell that you’re a careful listener to the show, Dillon.

 

Of course, that's just one tailwind. Just one consideration.

 

And the reason why inflation-profiting is lower in priority than your cash-on-cash return is that you need liquidity. You need cash to service your student loan debt.

 

I don’t know what your student loan debt INTEREST RATE is. But let’s just say you’re paying a 6% interest rate on that debt.

Now, I understand that it’s really easy to look at all 5 ways that real estate pays you and think - aw, I can get 20, 30, 40, maybe even a 50% ROI when I buy right. 

So I’m just gonna pay the minimum on the student loan debt and plow all the extra into real estate.

I would say, not so fast. Even though that might work out for you, we need to be more conservative …

… because real estate appreciation isn’t liquid, tenant-made loan amortization isn’t liquid, and neither are real estate’s tax benefits or the aforementioned inflation-profiting.

So, to use the simplest example, if your rental gives you $100 of monthly cash flow, which is $1,200 annually - and you’ve got $20K of skin-in-the-game on your rental as down payment and closing costs.

Well, that $1,200 annual cash flow divided by your $20K down is 6%. That’s your Cash-On-Cash Return portion and if you can get THAT at 6% or above, then reduce your student loan paydown dollar-for-dollar for every dollar that you put into real estate.

That’s really the upshot here.

Yes, there are some smaller things to consider. Last time I checked, student loan interest in the United States is a tax deduction up to $2,500 annually. 

So, your 6% interest rate might effectively be 5, 5-and-a-half or whatever it is.

Understand the risk. You don’t want to be left cash poor.

Your TOTAL Rate Of Return on real estate will almost certainly beat your student loan interest rate. But that's not enough. 

Let's be conservative.

To summarize, because you service your loan debt with cash, not equity, the key question you must ask yourself is: "Am I confident that my cash-on-cash return from real estate will exceed the interest rate on the student loan debt?"

If your answer to this key question is "yes" - invest in real estate and stretch out the student loan and only pay the minimum on the student loan. 

 

Otherwise, you're walking away from an arbitrage opportunity.

 

If it's "no", retire the student loan debt balance sooner. Otherwise, then you're hemorrhaging cash.

 

What did I personally do? After college, I retired my student loan debt fairly promptly. 

 

But this was before I knew about REI. I still thought budgets were good and that the best way to financial betterment was cutting expenses and all the wrong stuff.

 

That was an awesome question, Dillon in Nebraska. Because I know that so many people have that question - how do I best allocate a dollar toward debt retirement versus expanding my upside.

 

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The next question is from Monique in Quebec City, Quebec. Monique says,

 

Keith, I love your show. I’ve listened to every new episode since 2018, and now I’m also going back and listening to them from the beginning. Thanks, Monique. I’m grateful for your listenership. 

 

Monique goes on to say, “I’ve bought four cash-flowing properties from the providers at GREturnkey.com. (Good job there, Monique) They were all EXISTING construction properties.

 

Though I expect the cash flow to be less on my fifth one, because it’s going to be a brand new construction property.”

 

Is the HOME INSPECTION a required expense for me when the property is completely new?

 

Thanks for all your help. Signed, Monique.

 

Monique, the answer is “yes”, you should. Always have a pre-purchase inspection done, even for new construction property.

 

Sometimes people think of a NEW CONSTRUCTION property as “perfect”. Well, I don’t think of any property as “perfect”.

 

But an example of a mistake made in a new construction property is that, maybe the air conditioner is too small and doesn’t have the capacity to cool all, 1,800 sf of the home or whatever it is.

 

Maybe some new flooring wasn’t installed correctly and it’s showing signs of de-lamination. 

 

An inspection provided by a local, independent, third-party inspector is a cheap insurance policy for you, the buyer and you need to factor it in as one of your closing and due diligence costs.

 

Now, an inspection on a SFR, is probably going to cost you somewhere in the neighborhood of $400 - of course that’ll vary based on the area.

 

You have the inspection performed shortly AFTER you & the provider agree on a purchase and sale contract. 

 

The reason that you want to get the inspection scheduled shortly after you’re under contract is because sometimes it can take a while - weeks - for your provider’s contractor to fix the deficiencies that your inspector finds.

 

Now, how do you find an inspector for your property, anyway? There are a few ways of going about it. You can ask your provider to recommend one. 

 

If you’re leery of that or think that your provider might be in “cahoots” somehow with the inspector, you can Google your own, or thirdly, get an opinion from friends or if you don’t have friends that have invested there before, then use an online real estate forum.

 

Seek an inspector that’s ASHI-certified. A-S-H-I stands for American Society Of Home Inspectors. Those certificants are educated, tested, verified, and certified.

 

The inspections that they do are really quite thorough. They go everywhere in the home you’re planning to purchase, even looking in the closets and pantries, making sure all the doors & windows open & close.

 

If there’s a crawl space, they’ll climb down into the crawl space looking for deficiencies, taking notes, and taking photos that they compile in a report and send to you.  

 

Before you buy the property, the inspector might even go up on the roof - or at least zoom in and take some photos of the roof. And of course, they go all through the home and check everything in between.

 

They do the entire inspection same-day. It takes a couple of hours.

 

Some common findings that your property inspector might have are:

 

  • The outdoor rainwater downspout discharges water at the foundation. Add extensions. That’s a super cheap, easy fix for your seller to do for you.
  •  

  • The kitchen window doesn’t close all the way because it has a broken crank.
  •  

  • The exhaust fan in the bathroom doesn’t have any power and it’s not pulling any air.
  •  

  • The outdoor water spigot is missing its valve.
  •  

  • The backdoor is bent at the bottom.
  •  

  • A porch this high off the ground needs to have a railing added.
  •  

    So, Monique, as you can see, some of these are deficiencies that could occur in a new construction home.

     

    Now, let me touch on a couple of these. The backdoor is bent - that could be pretty minor. If you don’t think it’s aesthetically detracting and the door still closes - then maybe you do ask the provider to fix it - and maybe you don’t. 

     

    If I were you, I’d usually just ask.

     

    But if there’s a minor dent in the door instead, and it functions well, then asking for something like replacing the entire door might make you appear unreasonable to deal with. 

     

    There’s some judgment there.

     

    But if the backdoor won’t close, you’ve at least got to see that it closes and latches properly.

     

    The last example that I mentioned - if the inspector cites a finding that a porch this high off the ground needs to have a railing for safety, you’ve got to be sure that’s done.

     

    In fact, a reputable provider will be sure that’s done for you.

     

    This is part of you being a good operator. Remember how I’ve discussed that having an LLC is only your fourth line of protection, at best.

     

    Make sure any health or safety findings are addressed from the inspection. Do that good in the world.

     

    If an accident ever did occur at the property - you can always point to the inspection that you had done - and it was an option that you paid for. 

     

    The inspection is an option. 

     

    So, these are all the findings that the inspector reports to you - and he’ll send you a report of a few dozen pages in a .pdf format.

     

    Some things might be noted in the report, but the inspector won’t list them as deficiencies that NEED to be remedied - like small cracks in the sidewalk.

     

    Often, in the report, the inspector makes a clear delineation as to when a condition is poor enough … such that it falls to a deficient level - and he puts them all in one punchlist at the end of the report. 

     

    That way, you’re not having to split hairs and do too much interpretation.

     

    You look the report over, and then you ask the provider to fix them for you before you’ll close on the property.

     

    The provider might take, say a week or so to have their contractor fix those punchlisted items. 

     

    When they’ve finished them, then you’re on your way to having your appraisal and moving closer to the closing table.

     

    But, I’ve got to tell you something kind of disappointing here. I’ve been directly investing in real estate actively and continuously since 2002 - and I’ve got to tell you …

     

    … many times, even when the contractor says that they’ve completed fixing everything - even when they send you pictures … something really wasn’t quite fixed right.

     

    So what I suggest, is that - existing construction or new construction - when you hire your inspector, tell him right then & there, that you are also going to want a follow-up re-inspection that occurs after the initial inspection.

     

    The purpose of a re-inspection is confirming that all of the deficienies noted in the original inspection were indeed done. 

     

    And by the way, there will ALWAYS be original inspection findings. 

     

    An inspector will always find at least one deficiency and I’ve dealt with properties from Pennsylvania to Florida to Alaska to Texas and in-between - and outside the U.S. too. 

     

    Inspectors always find stuff that’s wrong. Always. It’s like a universal law.

     

    But, getting back to re-inspections. Upon scheduling your original home inspection, if you point out AT THAT TIME that you’ll also be getting a re-inspection - tell both the inspector & the seller this, I tend to think it helps keep parties on their toes and that they try harder to get the original inspection findings handled - the first time.

     

    And look, re-inspections are super cheap. If a SFR ORIGINAL INSPECTION costs $400, a re-inspection is going to be less than $100. 

     

    I’ve even paid $50, $60 in some markets for the re-inspection. It’s hard to believe that you can even get a trained, qualified professional to make a field visit somewhere that inexpensively.   

     

    Now - and I have this happen too - what if after your RE-inspection - which would really be a second inspection, that the provider or their contractor STILL didn’t get things repaired properly?

     

    Then the responsibility shifts to your seller - to schedule and pay for a second RE-inspection - which would be a THIRD inspection then - to prove that it’s right. 

     

    That’s correct, in every state and nation I’ve ever invested in, the seller-side pays for your second re-inspection … if it comes to that.

     

    That’s fair. Because after the original inspection findings, your seller said they’d make the repairs. 

     

    If the re-inspection that you paid for to confirm that it was done, instead shows that it wasn’t done. Your seller had their chance and messed it up. That’s why it’s customary that they pay for the SECOND re-inspection.

     

    So, Monique, to summarize for you here. 

  • Always pay for a property inspection, even on new construction.
  •  

  • Expect there to be findings every time.
  •  

  • And my own personal experience shows that at the time that you book an inspection, it helps to indicate that you’ll be getting a RE-inspection too.
  •  

    Now, getting a re-inspection makes so much more sense than getting a re-appraisal - if you get a low appraisal, which doesn’t happen often, maybe I’ll discuss that another day.

     

    Re-appraisals are a waste of time … more than 95% of the time, they just come back with the same valuation you got the first time.

     

    An appraisal protects the bank. An Inspection protects you - so be sure to have one done. Excellent question, Monique from Quebec City, Canada.

    Next week on the show, I’m going to discuss Real Estate’s Secret Market - a geography where the numbers really work for investors that might have been off your radar.

    After that, we’re going to talk with a prominent economist that’s never been on the show before that’s going to help you see your economic future over the next 1-3 years.

    We’ve hosted a lot of economists here on the show that give you those long-term investing insights like Richard Duncan, Harry Dent, Jim Rickards, Jim Rogers - and also,  though they might not be economists, Robert Kiyosaki and Chris Martenson are here with us to give us those types of insights.

    Then there’s “Yours Truly” - I’m your armchair economist without an economics degree. 

    But this new guest is the leader of the oldest continuously operating economics prediction company in the entire United States, so I’m excited to chat with him and bring you that show soon.

    As you know, nationally, housing inventory is scarce, especially with these types of single-family homes that make the best rentals.

    You can’t make any money from the property that you don’t own. So whether you prefer to call it “packaged commodities investing” or the “get paid up to 5 Ways” vehicle, next time you’re looking to connect with a provider at GREturnkey.com …

    As we spoke of Florida earlier, you’ll see that Jacksonville has brand new construction property, where you’re probably more of a fan of appreciation than cash flow on those. 

    Rents are $1,350 on a $180K purchase price. That’s a 0.75 rent-to-value ratio.

    Tampa has existing construction property where you have a 0.8 or .85 ratio and might get, say $150 of monthly cash flow.

     

    Alabama has numbers that work - like rent-to-value ratios near a full 1% and really low property taxes in either Birmingham or Huntsville.

     

    If you’re looking for low cost property - as low as $80K in decent neighborhoods that really cash flow well, Memphis and Little Rock could be the places for you.

     

    The Indiana State side of Chicagoland is advantageous too.

     

    All those places - Memphis, Little Rock, Chicagoland - you can get a full 1% RV ratio or even more than that sometimes.

     

    If you’ve got more patience and want to benefit and capture some forced equity along with your cash flow, the BRRRR model in Baltimore could work best for you.

     

    Check out all of those markets and more - at GREturnkey.com

     

    Thanks! I’m grateful for all of your excellent listener questions today! I’m your host, Keith Weinhold. Don’t Quit Your Daydream! 

     

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