Rates Are Rising, Investor Loans over 4% Already. Do the Work, Understand the Math and Tweak Costs

Video Closed Captioning:

good morning good afternoon good evening

folks michael zuber one rental at a time

it is thursday afternoon which means

it’s the three amigos how you doing matt

i’m doing awesome i’m so excited for

this topic i can’t wait and dion how are

you

howdy i’m doing great ready for round

two i’m glad you gave me a couple

seconds to catch my breath because the

things you guys say between recordings

that’s me every time

it is a lot of fun it is a lot of fun

well guys what we’re gonna do in episode

number two uh is we are going to revisit

the 50-year spreadsheet this is actually

something i first created seven months

ago

to highlight that i believe we were

entering 70s environment wage inflation

people at the time thought i was crazy

look at where we are now we have more

and more people including the ceos of

goldman sachs and jp morgan saying wage

inflation is everywhere that is their

words their quote not mine

so now that more people agree that we

are in wage inflation i want to bring it

back

and remind people what happens when

rates go up 300 when rates double uh

because most people think of rates

double housing crashes so we will remind

people what happened

um yeah so we’re going to go back and

revisit the 50-year spreadsheet i’m

sorry but again most more and more

people need to see it you ready

very ready now if you updated the

spreadsheet to have a sound clip when

you go to update the field and you

return to where it actually laughs no

not yet

now yeah that would be sophistication

and skills that i do not have i’ll get

on it there you go there you go

so folks just a reminder i created this

spreadsheet all the data sources are

highlighted if you want to go see that i

got the right numbers all the links are

here go to go

go check it out i’ve summarized stuff by

decades highs and lows so there’s a lot

of stuff in here and most importantly i

thought this was so valuable i give it

away for free in my free course link

below and in the paid course it’s just

in the bonus sections but specifically

let’s talk about the 1970s

and the first thing i want to do is i

want to look at 1973

which you see here in column e

and then i want to go right over here to

column i don’t know what that is behind

the lumberjack m um

yeah and it’s a 16 interest

right so it goes from here to here and

that would be a 800 percent

increase or 800 yeah 800 percent um

not not percent 800 basis points

yeah increase and so again it is

possible for rates

uh to double and uh that’s that’s pretty

crazy so any thoughts on on interest

rates doubling what that might do to

housing uh we’ll go to dion first i

guess

so what i don’t think people understand

is how likely it is that interest rates

double

i think they’re going to go up quite a

bit

i still think middle of the year middle

22 we’re going to see rates come down

because of the fear of deflation but

right now as the data is coming out

first saying inflation is transitory and

then saying something ridiculous like

inflation is seven percent yeah it’s way

more than that it’s when it’s way more

than that yeah i i wonder what crystal

palace with a gated community and a

guard standing at the edge those people

live in that they’re looking at the

numbers thinking it’s only seven percent

or you see something like rents have

gone up two point three percent oh that

makes me mad i actually had to recompute

cpi because i’m such a stupid number

right and in my area

at tenants request

rents are increasing 20 to 40 percent

and there is data out there that’s

showing 2.3 and they’re saying that

that’s part of inflation

when the data comes out and they can

prove that inflation is multiples of

what people think it is currently rates

could go up and i i could see it easily

doubling

and that’s key that’s that’s one of the

things that i want people to take away

from this 10 or 20 minutes the chances

that the 30-year mortgage rate double

aren’t zero

and they’re not even 10 they’re it’s a

significant number and the one reason

we’re doing the spreadsheet again

because six months ago when i created

this nobody thought everybody thought i

was crazy

and

now we’re here in wage inflation is real

so again

rates doubling matt what do you think

i called four by july first and i called

um

upper four up between upper four and

five by the end of the year yeah i still

think i’m right and you know what i’m

not only just saying it

i refinanced exactly 80 of my portfolio

because that’s what i believed

so i’m not saying anybody else should go

out and do what i did but that’s what i

did

that’s what i did millions upon millions

of dollars of real estate

i spent the

hundreds of hours with my lovely wife

putting together all these spreadsheets

because this is what i feared the most i

fear that the rates that we saw as

investors at four percent

30-year fixed-rate debt was likely the

last time that we were going to see that

and worst case scenario

is i have all the fresh data

and i have all the data already put

together if in six months dion’s right

i’m going to go back and i’m going to

refi them again exactly

that’s the worst case scenario that’s

what i’m going to do best case scenario

is or

depending on what you call best case

i’ll keep it the way it is and i got 30

year fixed rate debt

yeah and a bunch of cash

yeah again the beauty of our channel is

we really do this we think about our

market every day we talk to the audience

but we’re doing this for a living so

yeah i did the same thing yeah so so

again the other prevailing

call out there is if interest rates go

up you know if they go up one point it

has to fall 10

so in this example it goes from 8 to 16

it’s supposed to fall 80 percent right

you guys you guys have heard that yeah

well let’s see what actually happened

in in 1973 it was 27 000

and in 81 it was 59 000 so just in case

you’re not good with math that’s more

than a hundred percent

that’s not supposed to be possible

i don’t get it how can that be

what do you think matt wages

exactly

it’s just that simple wages so look at

this wage line folks

this is why i keep telling people the

wage inflation cycle is real it’s going

to

surprise a lot of people wages went up

almost 100 as well right the family of

four went from 10 05 to nineteen

cumulative percent never below five

point four percent now again i’m not

calling wage inflation like this for a

decade i’m just saying

don’t be an idiot talking about rates in

price

without understanding that wages can

make all of that go away correct

correct yeah

yeah i think there’s

i was gonna say i think there’s this i

think there’s this component which is

the wages piece you know on top of the

pricing and price of pressure but the

other thing that’s also not being ever

really discussed in any of these crisis

videos is inventory yeah exactly

and when you put

the four of these things together

i mean this is a monster like we’ve

never seen before

because there’s never been this much

cash in the market there’s never been

wage increases like what we’re gonna

like actual real wage increases

not what the government’s telling you

they are but what they actually are you

know the whole reason that you know we

had talked about you know doing that

when you did that number it was like

factoring cpi over 10 yeah you and i

were laughing in between a videotape

we were laughing between the tank

because i was like there’s no way it’s

two percent annually on rents

it’s not the number it’s not the number

anywhere

like i don’t care where you are it’s two

percent nowhere no you know and so again

it’s just one of those things where

people will be lazy

and allow themselves to get permission

to not do the work

and to sit back and wait and like well

you know what i just wasn’t doing it

listen if warren buffett listened to the

news

every day on how to invest he wouldn’t

be warren buffett

yeah

dion you want to add anything to this

there’s a couple of things that changed

between 1970 and now too we had

in a family in a family of four in the

70s generally you had one income true

and so if one income

goes up

it’s kind of like owning a single-family

house versus a duplex yeah if if a

single-family house if rents increased

200

you get 200 more with a single family

house with a duplex it’s 400 more

because my duplex is rent for exactly

what single family do in my in my area

there’s no difference because they’re a

small multi-family so a couple of units

will increase more so if yeah if you

have currently

and in the 70s and 80s which is what our

parents time yep you would have a job

and you would stay at one job for a long

period of time so you saw those

incremental increases in wages where

people would say oh i’m i’m making seven

percent more than i did last year so

that brings the average to these numbers

that you’re seeing

in the 2000s it’s more common to change

jobs every two to three years and see a

significant increase instead of that

gradual increase from the same employer

but the wage inflation that we’re seeing

now is partially due to this um what are

they called the

great resignation of the uh november and

december of four million plus people

quitting jobs that’s not four million

people who went on unemployment that’s

four million people who changed jobs

exactly changing jobs increases wages a

lot more than the percentage of wage

increase that we’re going to see wages

drives rent

people by buy houses based on payment

and the 40-year mortgage so

again i see

and see a significant increase in

housing prices in the next couple of

years based on this data and even with

interest rates going up because we have

those other in factors increasing the

ability for people to buy more and more

expensive places yeah and and just for

the final one because more and more

people ask for it i did add s p data row

  1. look at the s p 500 1973 january 1st

close it’s 118.

look at it

january 1st at the end of 82

it’s 117. s p 500 did nothing for a

decade that is dead money dead money

dead money real estate doubled rents

went up

uh again this is just a repeat of what’s

going on in the 70s i believe we are in

a very similar environment where the

stock market may have some dead years

ahead

but real estate because it’s levered

because you need a roof over your head

nobody likes to live in a car

wages are going up wage inflation again

jamie dimon ceo of goldman’s like

wage inflation is everywhere

i don’t know what you guys want to see

i’m glad i brought this to you six or

seven months ago if you didn’t pay

attention then you might want to pay

attention now go get this spreadsheet is

in the free course uh link below uh deon

any closing thoughts

what is measured can be improved

follow the data

don’t don’t think

my real estate agent or my lender said

said this and follow or worse

the lender who’s telling my friends to

get their adjustable rate mortgages

follow the data what caused 2008 a lot

of the problems in 2005 adjustable rate

mortgages ninja loans 105 percent loan

to value borrowing we can look at

historical data like that

to know what to do now

and so when you put all the work into

this spreadsheet that’s actually helping

me figuring out

here’s my plan if rates go up here’s my

plan if rates go down here’s my plan if

they stay the same have a plan for each

outcome

love it

and how can people find you

right here on youtube dion talk

financial freedom very cool and matt

what do you think

um yeah i think at the end of the day

why are graphs on these other channels

more important and more valid than your

graph it’s your spreadsheet like they’ll

they’re taking i will i will always

pick the winner of an argument that

brings nine data elements and how they

correlate to the one that brings two and

how they correlate so i’ll take the

narrative that’s supported by the most

factors of data

i’m a slave to it i’m a slave to the

number it’s the way it goes i don’t

invest on feelings

it’s not what makes me warm and fuzzy on

the inside the numbers the facts

touchy feely lumberjack

is that possible that’s what makes

that’s what makes me giggle like a

schoolboy there you go is the numbers i

want to see the numbers and i want to

see if you’re going to give me a

narrative i need to see the supporting

data elements and when you and i were

talking about the spreadsheet and the

original was 10 years and then you were

like okay 20 and then it was like 50.

and it was like yeah like let’s see what

the story is and that is the story and i

think that so many things

i mean the gas crisis then food crisis

now yeah exactly

i mean everything and everything’s up

off the charts so at the end of the day

when you walk out your door when you’re

paying your bills do you feel better

about where you are now versus even two

years ago

how could you how could you and so

recognizing that things are shifting in

the market it’s your opportunity if

you’ve done the work put in the time

brought in the right number of resources

you will be playing at an elite level

that puts you far and above the other

people in in the game that will be on

pause right now because they read a

report that said

yeah and how can people find you

lumberjack landlord mr mrs lumberjack

tonight live stream at 8pm eastern time

hopefully uh

we have i expect we’ll have some fun but

i have no idea what ashley’s gonna say

because i haven’t really seen her so in

other words you might be in trouble i

should probably

i don’t know i think she might have seen

the video where you said that we were a

great couple and that she was the half

of a great couple and then i said 72

percent

i don’t i mean i was saying that about

me

i’m hoping that she understood the joke

but i don’t know

ashley he really does love you for sure

there you go thanks guys

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