176: How To Avoid Overpaying For Income Property, How To Value Property, Using Your IRA and 401(k) For Real Estate
Get Rich Education
Keith Weinhold
4.8 • 612 Ratings
🗓️ 27 June 2018
⏱️ 41 minutes
🧾️ Download transcript
Summary
#176: Stock investors are not getting ahead, but they think that they are. 10% return, minus 5% inflation, minus 2% fees, minus taxes, minus volatility, minus more.
Most methods of valuing an income property are lousy. I tell you the good and the bad methods: price per square foot, price per unit, RV ratio, Gross Rent Multiplier, Cap Rate, Cash-On-Cash Return.
I tell you how to avoid overpaying for property by making your offer contingent on seeing the seller's "Schedule E".
The bustling Charlotte, North Carolina real estate market is discussed. It is growing at an enormously fast rate.
Learn about using IRAs and 401(k)s for buying real estate, and leverage vs. paying all-cash for property.
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Listen to this week's show and learn:
01:06 Why stock investors aren't getting ahead.
04:17 Real estate performs.
06:27 Mortgage interest rates are up, Fed Chair change.
07:26 How to avoid overpaying for property.
09:50 Income, expense, and financing gears.
10:03 Price per square foot, price per unit, RV ratio, Gross Rent Multiplier.
11:49 Cap Rate vs. Cash-On-Cash Return.
17:35 Avoid overpaying with Schedule E.
22:45 Charlotte, North Carolina's rapid growth.
25:12 More appreciation, less cash flow.
29:11 Typical property is an SFHs, $100K-$120K rents $1,000+.
31:02 Using IRAs and 401(k)s to buy real estate.
35:08 Leverage vs. paying all-cash.
Resources Mentioned:
GetRichEducation.com/Charlotte
Transcript
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| 0:00.0 | Get Rich Education is brought to you by Volhollow Wealth and Ridge your host keith whitehold back to help you build your wealth. |
| 0:40.4 | What are stock investors thinking out there? What are they thinking? Well, they think that they're getting ahead. |
| 0:49.4 | And you know what? They are wrong. I'm not even talking about the recent bumps that the stock market has had or even |
| 0:56.2 | the longer run-up since 2009. Okay, let's just talk really long-term here. What are these people |
| 1:03.5 | thinking? Let's look at the S&P 500 over the long term and call it a 10% return. Okay, I'll give you that. Well, that's something |
| 1:13.1 | that stock investors seem to be proud of. That 10% return, that's a return in name only. It's a nominal |
| 1:22.5 | return. Nominal means in name only. Subtract the drags off of that 10% return. It's 10% minus 5% for |
| 1:33.1 | inflation, minus 2% fees, minus taxes, minus volatility. Well, what is left over? What in the |
| 1:41.8 | heck's left over? And then there's that emotional predisposition, |
| 1:46.0 | that undeniable tendency, which you cannot discount, that gets stock investors to transact |
| 1:53.0 | at precisely the wrong times, emotionally buying in off the momentum when the share price is higher and then selling off the |
| 2:03.1 | discouragement emotion when it's lower. So what the heck is left over? A real, real rate of |
| 2:10.0 | return of minus three and a half percent, maybe minus five and a half percent, maybe. What if your |
| 2:17.4 | account isn't subject to emotions plus |
| 2:20.3 | you pick really well well then where would you end up plus one half of one percent annually |
| 2:27.3 | maybe at best your 401k plan administrator doesn't want you to know this Edward Jones doesn't |
| 2:34.0 | want you to think this way Charles Schwab doesn't want you to know this. Edward Jones doesn't want you to think this way. |
| 2:35.3 | Charles Schwab doesn't want you to know this. They don't want you to consider these things. |
| 2:40.0 | And 5% inflation, that really is more like it, not the 2% inflation that the government has been |
| 2:46.2 | reporting for a while. If you're uninitiated on that, just read about the CPI, the consumer price index, |
| 2:52.2 | and how the government has an incentive to use the CPI to underreport how much they're really |
| 2:58.9 | debasing our currency. A person that believes that the real rate of inflation is as low as 2%, |
... |
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