451: Racial Controversy

Did you expect to hear this about Black people? We have a discussion about equality in housing.

First, if you close your eyes and wake up in 10 years, where do you want to find yourself? I explore.

For some reason, investors want to time the real estate market, yet they dollar cost average into stocks. 

1% down payment mortgages are here.

Learn about the latest AI development. The maker of ChatGPT is developing “Worldcoin”. It would verify if you’re human by scanning your eyeballs. 

Finally, there’s a long history of racial discrimination in both society and housing.

The Fair Housing Act—part of the Civil Rights Act of 1968—helped break down discrimination.

The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance.

Learn the difference between equality of opportunity and equality of outcome. The latter is difficult to administer.

Providing equal opportunity in housing is not just the law. It’s the right thing to do. I explain why it actually benefits you.

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Show Notes:

www.GetRichEducation.com/451

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Complete transcript:

 

Welcome to GRE! I’m your host, Keith Weinhold. 

 

If you close your eyes and wake up in 10 years… where do you REALLY want to be? 1% down payment mortgages are here, profound AI impacts in your life…

 

Then, some contentious and even volatile discussion about racial discrimination and Black people… in housing. You’ll get my opinion on equality of opportunity. Today, on Get Rich Education.

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Welcome to GRE! From Allentown, PA to Glen Allen, VA and across 188 nations worldwide, I’m Keith Weinhold and this is Episode 451 of Get Rich Education… where we don’t live below our means. We grow our means. 

 

If you’re being told that you’re crazy or that things aren’t going to work out… you know… hearing that right there can actually be a prerequisite to you being successful. 

 

Are people raising their eyebrows at what you’re doing? 

 

Yeah that could actually be some positive feedback on your direction, as long as your head tells you that it’s right and your gut backs it up. 

 

Don’t trade away your authenticity for approval.

 

Look, if you close your eyes and wake up in 10 years, what do you want to see when you open your eyes? Awards for work? 

 

I doubt it. Or is it kids, family and relationship-oriented? 

 

Or is it, invisible footprints that you’ve left behind all over earth because you traveled or explored that much? 

 

You DID raft the Grand Canyon, visit the Taj Mahal, see the Eiffel Tower, or dive the Great Barrier Reef?

 

Yeah, it’s probably those types of things.

 

Well then, why are you putting 90% of your effort into career-oriented stuff… if that doesn’t help you achieve that goal 10 years from now? 

 

That’s a better set of questions for you to ask yourself.

 

That’s why we talk about generating residual income when you’re actually young enough to enjoy it here.

 

Rich people play the money game to win - that’s what we do here. While most people play the money game not to lose.

 

Real estate is not always easy. It’s not OVERNIGHT wealth, you’ll have your problems. But it can be amazing when you have a strategy and stick to it.

 

If you want me to make your financial life better in 30 days, maybe I can in some cases but that’s really not what we’re doing here, probably not even in a few months.

 

But in a few years… yes, definitely.

 

And I think it helps to remember something simple. The only place that you get money is from other people.

 

All your life, the only way that dollars have come into your hands or into your bank account is because it came.. from other people.

 

For many, that’s just one person - one employer that the money comes from.

 

With each rental property that you add, that is one more person that is paying you…

 

… that’s of tangible benefit to you in a world where the only place that you get money is from other people. 

 

Now, as we dip into the mechanics about how to achieve that…

 

What would be different if you HADN’T taken action in RE?

 

Now, I don’t know what it is, but for some reason, people are trained to TIME THE MARKET in RE. 

 

Yet people might put 10% of their salary - up to $22,500 is allowed this year - $30K if you’re over 50. They put that in their 401(k) - dollar-cost averaging - which is NOT timing the market.

 

I don’t know why that is. Why some people are predisposed to time the market in RE but yet they DCA in stocks - which is the opposite of timing the market.

 

Maybe it’s the cost of the property?

 

Treat RE the same way - DCA there too. Keep adding 1 or 2 a year or whatever you can.

 

When you consider 401(k)’s low returns and low liquidity, you might not even be putting money into it anymore.

 

You’ve got the wherewithal to know that very dollar you lock in a 401(k) is a dollar that can’t use OPM.

 

And it gets even worse. 

 

Because with a 401(k), you are HOPING TO DIE before the money runs out. What kind of a retirement plan or life plan is that?

 

Doesn’t sound like diving the Great Barrier Reef to me. Ha!

 

Rocket Mortgage introduced a new 1% down home loan program. This is a new product for them. But some people to think it’s the first. 

 

It’s not the first. It comes on the heels of rival United Wholesale Mortgage rolling out a similar program.

 

But this particular program is expected to reach a lot of people.

 

And here’s the thing. It also eliminates the monthly mortgage insurance fee. It deletes monthly PMI.

 

Now, even if we’re just talking about primary residences here, this affects you in the rental property market. I’ll tell you why in a moment. 

 

But with this 1% down payment program, a buyer using this program who’s purchasing a single-family home, well, their income can be no more than 80% of their area’s median income…

 

… they are only required to make a down payment of 1% of the purchase price. 

 

Then the lender covers the remaining 2% needed to reach the required 3% threshold for conventional loans.

 

So it’s not only going to reduce upfront costs, but that monthly mortgage insurance fee for the borrower is gone, which is typically a few hundred dollars a month…

That what they had to pay traditionally, if the buyer puts less than 20% down on their purchase. That’s going to help affordability.

So with 3% down being reduced to 1% down, then a homebuyer of a $250,000 home would only need a $2,500 down payment instead of $7,500.

Now, strict underwriting guidelines are still in place - you need income and credit and assets.

There aren’t really as many mortgage borrowers that put 20% down on a home as you might think. In fact, the average new purchase down payment amount in America is only between 6 and 7%.

But this 1% option, which it’s estimated that 90 million Americans will qualify for - over the long-term, that is just going to increase the available pool of buyers, of course, because more people that were on the edge of affordability can now qualify.

Now, in a normal market, a few of your tenants that were on the brink of qualification might be able to run off - and buy.

But you’ve still got those erstwhile strict underwriting guidelines and there’s still just such a lack of supply of this entry-level housing - like I updated you on last week.

You can’t move into what doesn’t exist. So this could create some tenant attrition, but it should be pretty limited for those reasons.

 

But, yeah, with this larger pool of buyers that now qualify, that puts more upward pressure on property prices. 

 

When you make any good or any commodity MORE affordable in the short-term like this, with more buyers & more bidders, it makes that much LESS affordable long-term because that competition pushes prices up.

 

It’s just like decades ago, as soon as financial assistance came to the college enrollment world with Stafford loans and Pell grants and all that stuff, what did it do?

 

More people could afford to PAY MORE with more & better loan types and that made college costs skyrocket.

 

The same effect is happening here when you lower down payment requirements to just 1%. 

 

Though, that factor alone shouldn’t make home prices skyrocket. They shouldn’t shoot up. But it’s just another tailwind on upward price momentum.

 

Typically when a tech CEO goes in front of a Senate committee, it gets embarrassing. Like, they end up explaining how to use email. 

OK, Senate committees are not known for being tech savvy. 

Not so a couple weeks ago, when Sam Altman, CEO of ChatGPT-maker OpenAI, testified on Capitol Hill on the future of AI and how the field should be regulated.

Now Sam Altman has a lot more going on than just ChatGPT. It’s possible that he’s the future wealthiest man in the world.

Now, this is where it gets scary.

He’s about to secure a $100 million funding round for an eye scan-accessible global cryptocurrency project, Worldcoin. That’s what the Financial Times told us.

Worldcoin is not totally unrelated to his signature project. The company’s goal is to verify whether users are human by scanning their irises to disburse universal basic income… to workers displaced by AI.

Now, I’ve explained before how technology actually creates jobs, not destroys them. 

But the hearing continued with a discussion of the dangers of an unpredictable, evolving technology that can generate and spread misleading information without us even realizing it’s fake- like those famous fake images of the Pope in a puffer jacket or Trump running from police.

Well, for his cryptocurrency, Worldcoin, Sam Altman has already released a World App crypto wallet that can be downloaded to your mobile phone. And he’s got big plans for Worldcoin as the first-ever cryptocurrency to be held by every person on the planet.

 

It runs on the Ethereum blockchain. You don’t need to know what that means. In practical terms, Worldcoin will look (and trade) a lot like the cryptocurrencies that you’re already familiar with. So in that regard, Worldcoin isn’t breaking any new ground.

 

What makes Worldcoin stand out is the fact that it has aspirations to be both a cryptocurrency and a global identification system. With a tag line of "the global economy belongs to everyone," Sam Altman plans to distribute Worldcoin tokens to every single human on planet Earth.

 

And this is where things get really creepy. To pick up your free Worldcoin crypto token and sign up for a Worldcoin ID, you will need to give Sam Altman a scan of your eyeballs. 

 

Yes, you heard that right -- Worldcoin has created a proprietary iris-scanning tool known as the Orb. Once you've had your eyeballs scanned with the Orb, you're good to go. 

 

Altman says this step is necessary to verify that you are a real human and is not meant to be an invasion of your privacy. He won't even ask you for your name.

 

Yeah… I don’t know if people are going to go for that, especially Americans. Americans are more suspicious and have more resistance to authority than most places. 

 

We’ll see what develops with WorldCoin but expect to hear more about Sam Altman.

 

If you want more real estate education, your source is GetRichEducation.com

 

For actually physical property addresses conducive to financial freedom, create one login one time like thousands of others have. You can get started there at GREmarketplace.com

 

More straight ahead, including a discussion and some contention about racism. I’m Keith Weinhold. You’re listening to Get Rich Education.  

________

 

Welcome back to GRE. I’m your host, Keith Weinhold. As we’re about to get to racism, now, first… 

 

It's no secret that I prefer investing directly in single-family rental homes and apartment buildings.

 

But when I look for real estate investments that are even more passive than turnkey...

 

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If this sounds interesting, text FAMILY to 66866 and ask about the Real Estate Insider Fund.

 

Again, text FAMILY to 66866

 

Let’s discuss racism and discrimination in America.

 

It’s a topic that I think some people don’t want to discuss. But I will today, because, here we are, Episode 451 and it’s the first time.

 

This was recently published on our Get Rich Education YouTube Channel, so expect some sound effects as we’re about to play this for you here.

 

The first voice that you hear is 60 Minutes interviewer Mike Wallace with Morgan Freeman, then Denzel Washington, and finally, Dr. Jordan Peterson. 

 

This is about 10 minutes in length, and then I’ll come back to wrap it up for you.

 

**PLAY VIDEO**

 

We’ll end it there. If you’d like to see more, check that out on our Get Rich Education YouTube Channel.

 

I’ll tell ya. Practicing equanimity, it was kinda difficult for me to discuss a sensitive topic. I’m not sure if you can tell in the video, but my forehead is sweating by the end of it.

 

The least that you need to know is that 1968's Civil Rights Act includes the Fair Housing Act.

 

This is a piece of landmark legislation is something that any citizen should know the basics about, and even moreso for a real estate investor.

 

The Fair Housing Act protects people from discrimination on the basis of race, religion, national origin, sex, handicap, and family status...

 

...when they are renting or buying a home, getting a mortgage, or seeking housing financial assistance. 

 

So it’s not just when you’re renting to someone, it’s when you’re lending to someone.

 

You shouldn't steer your advertising in an exclusionary way. Even terms like "cozy bachelor pad" or "ideal for young couples" should be avoided.

 

And equal opportunity is simply better for you as a landlord.

 

Say that you excluded a rental applicant group that comprised 30% of the population.

 

Then your available renter pool would shrink by that amount, reducing your income potential, reducing your occupancy rate, and reducing your tenant quality. So keep that in mind.

 

Next week here on the show we are talking about some big problems and really… the toxicity in the apartment market, the commercial real estate market… and how 2022’s sudden spike in interest rates is causing syndications to fail. 

 

Apartment building owners are getting foreclosed on. More of that is coming as their VARIABLE interest rate debt resets to WAY higher levels.

 

How bad is it going to get? What are you supposed to do as an investor if you’re IN a syndication? What’s it look like if you’re a real estate syndicator yourself?

 

Who is safe and who is going to go… under?

 

All that and more will be answered next week when Ken McElroy returns to the show here with us. 

 

I really appreciate you being here this week. 

 

But as always, you weren’t here for me, you were here for you. I’m Keith Weinhold. DQYD!