Get Rich Education 430: The Most Important Question in the Investing World
Answer this one question and you won't have money concerns for the rest of your life.
The Dow Jones once fell so hard that it didn't recover for 25 years
Japan's NIKKEI peaked in 1989 and still has not recovered.
I discuss the differences between an economic recession and depression.
During the 2008 housing crisis, national housing values only fell 19%.
Originally, 401(k)s were called "Salary Reduction Plans". They had to scrap the name to foster participation.
Some investing questions are:
How do I max out my 401(k)?
How can I attend my dream college?
How can I become a millionaire?
After building context, I reveal the most important question in the investing world.
Learn how to keep emotions separate from investing.
The vital question is: "Will this property secure an income stream?"
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Show Notes:
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Full transcript:
Welcome to GRE! I'm your host, Keith Weinhold. Happy New Year! What is the most important question in the entire investing world? It is a vital one - and this coming year makes it as relevant as ever.
Asking yourself this question & answering it can make you wealthy - and you've probably never even heard this question before. That & loads of financial education, today on Get Rich Education!
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Welcome to GRE! From Lake Champlain, NY to Lake Charles, Louisiana and across 188 nations worldwide, you're listening to one of America's longest-running and most listened-to investing shows.
I'm your host. My name's Keith Weinhold. I'm grateful to be here myself. Thank you FOR being here… and you aren't here for me. You're here for you… so let's build your wealth today.
What's the most important, vital, essential, and almost MANDATORY question in the investing world today?
While you're thinking about that, let me build some context so that it makes sense.
Now, why don't we discuss stocks more on the show here?
When most people hear the word "investing", they might think of stocks first. Their mind might shoot there immediately.
When someone refers to the market, they just simply say, "the market", they typically mean the stock market, like the DJIA or the S&P 500.
Look, with persistently higher interest rates, it's likely that economic headwinds are still coming.
Now, what if things got worse than a recession and we entered a depression? I'm not saying that it's likely, but let's look at what CAN happen because this actually HAS happened.
What can happen in a depression?! The stock market falls and doesn't recover for 25 years. That's not a guess. That really happened in the United States!
Yes, the DJIA peaked in 1929. The market crash hit. These were the times of "The Great Depression".
Stocks lost nearly 90% of their value. Yes, 90%. That means that after a loss like that, stocks would have to rebound 9X, 900% just to get back to even.
Well, I told you that the US stock market crashed in 1929. The Dow didn't fully recover until late 1954. Yes, 1929 to 1954. That is fully 25 years… just to get back to even.
25 years of zero gain. It HAS happened, right here in the USA, the most powerful nation in the world.
Well, you might wonder… ah, c'mon, could that really happen to any major stock market in an ADVANCED economy today, in more modern times, even if things got really bad?
Oh, yes, things don't even have to get really bad. Understand that the third-largest economy on earth, still to this day is Japan.
Japan's NIKKEI peaked in 1989. It still hasn't recovered from its high 34 years ago. Yes, that's the MAIN stock market index for Japan - the Tokyo Stock Exchange.
That's still going on right now, today. It still hasn't recovered back to its 1989 level. It's not even close today.
So it doesn't even TAKE a depression for those stock market calamities to occur in major world nations' stock markets.
Well, what's the difference between an economic recession and a depression?
The short story is that a recession is a substantial downturn in ONE nation's economy, and an economic DEPRESSION is widespread across many nations.
And there are some other distinctions.
Right? And the old joke is that a recession is when your neighbor loses their job and depression is when you lose YOUR job.
Well, what about real estate? Real estate values don't always go up.
What happened to real estate in its ugly downturn about 15 years ago where we had a mortgage meltdown from liar mortgage loans and a glut of housing supply? (neither of which are happening now, BTW)
During the ugly Global Financial Crisis in & around 2008 & 2009. Well, during that time, real estate went down 19% nationally.
Yes, on a nominal basis, the national median home price was down 19% from $257K down to $208K.
That's it? Maybe you're thinking, "that's it"? 19%. This is when everything was going wrong for housing and it didn't even reach 20% bear market territory fifteen years ago.
And btw, I will put the link to the chart that shows this in the Show Notes for you.
Yes, we really do put links in the Show Notes for you when I tell you that we will. Haha!
You can see that at GetRichEducation.com/430
This is episode 430 of the GRE Podcast, so just go to GetRichEducation.com/430 to see today's resources and today's show notes also, you have access to an entire transcript - all of the lyrics… like we do for some of our episodes here.
So that if you have a deaf or hard of hearing person in your life, they can, I suppose "read" today's show rather than listen to it.
Or maybe you want to read along as you listen… or read after you listen in order to reinforce your learning.
Now, at the start of the recession in 2008, the national median housing value was $234K… and it took all of but four years to recover and exceed that level.
Yes, from the start of the GFC, housing values only took four years to recover.
The source of that information is the Census Bureau & HUD.
That data is also available for you in the Show Notes at GetRichEducation.com/430
So the point is that real estate or stocks can lose value. But real estate is substantially more stable.
If you buy RE in a good market and you have an average or better PM (meaning they're "just OK" with screening tenants), then you can sleep well. It's hard to lose big.
You might not even be in real estate for the values. You might be in it for the cash flow.
This is helping you build context and provide you with a clue about The Most Important Question in the entire Investing World.
While you're still pondering what that question might be, because I'll build some more context for you so that this question makes complete sense… and let's start to isolate it here.
Real estate builds wealth.
Stocks though, can maintain wealth after you've built it. But you've got to build it first.
So that's why this most important investing question today… isn't about stocks.
Well, what about stocks or mutual funds in a retirement plan? Is that more relevant?
Enjoy the compounding growth on PRE-tax dollars & all that.
Take stocks' 10% return and like I detailed two episodes ago, adjust that down for inflation, emotion, taxes, fees, and volatility… and what do you have left?
I'll tell you what the key question is not. How can I max out my retirement plan? Oh geez. The new annual contribution limit to 401(k)s this year is $22,500 BTW.
I'll admit, I used to have a day job and I maxxed out my retirement for a few years before I realized that maxing out my retirement…
… was minimizing my present. And minimizing next year, and minimizing next decade, and minimizing my life for decades until I hopefully was still not just alive… but actually healthy enough to truly enjoy DEFERRING my quality of life all those decades.
Maximizing your retirement contribution means that you're living a SMALLER life for decades.
The risk of delayed gratification is denied gratification.
Now there IS something to be said though, for the psychological benefit of you having something saved for the future, even if it certainly diminishes your life in the near-term.
Instead, with income property, I discovered that I can invest in something that pays me an income stream TODAY… without jeopardizing my future one bit.
In fact, I'm paid an income stream TODAY AND I will get a better return than my 401(k) long-term and the tax benefits too.
Today's mainstream media tells you that it's a bad time to buy real estate because prices & interest rates are up in the past year. But they're talking about primary residences.
Instead, with rental property, your tenant pays all of your mortgage principal & interest for you & all of the operating expenses & a little on top of that called cash flow.
So "How do I max out my retirement?" That is not a great investing question. You're contemplating how to defer your quality of life, delay your standard of living, and live a life of less.
Now, here's another bad question. I heard a teenager say this the other day, "I want to attend my dream college." "How can I attend my dream college?"
Dream college? What? College is still necessary for some skilled professions. But like we touched on last week here on the show, the value of a college degree is down yet the price of a college degree is up.
That's why enrollment has been steadily declining since 2012.
But, even worse, "How do I attend my dream college?" Who would even ask that question?
It COULD matter whether you have a degree or not. But no one cares what school you went to. No one cares what your college grades are either.
The last time that you went to go see the doctor, do you feel like you got a good quality of care from them or not? That's what you REALLY care about.
Did you want to know what college or medical school your doctor graduated from before you saw them?
Do you even know what college they went to? It doesn't matter.
Did you ask your medical doctor about what their college GRADES were? See. It doesn't matter.
Now, I actually don't think college is a complete waste. I got a 4-year-degree. I learned some things. But it wasn't the most efficient use of my four years.
But "dream college"? Who cares? Not a good question.
"Attend My Dream School". It makes no sense.
Here's a third question that is NOT the best question that you can ask yourself in investing today:
"How Can I Become A Millionaire?"
Ugggh. Awful question. I think that longtime listeners know where I'm going with this one. But let me update it because we've had some substantial inflation for almost two years now.
Let me tell you - you don't want to be a millionaire.
The definition of a millionaire is not someone that makes a million dollars a year.
It's having a million dollar net worth.
So if you add up the value of all of your assets and it totals 1-and-a-half million dollars and then add up the sum of your debts and that a HALF million dollars.
Well, your net worth is 1.5 million in assets minus a half million in debts which equals 1 million.
That is not where you want to be. Now, maybe if your 75 years old and you think you've got ten years left to live, you could live a somewhat modest life on a million dollars.
But, as you can see, that's not where most people want to be.
Inflation has rendered the term "millionaire" nearly to middle class now.
The middle class is getting eaten by wages that don't keep up with inflation.
A single millionaire will probably be a POVERTY marker within my lifetime.
Now, if you're a millionaire that has $200K of CASH FLOW each year, that's different. That's better.
Net worth is not as important a measure as your residual income stream.
But just a millionaire? Wrong trajectory. Avoid. Avoid. Avoid.
So maxxing out retirement plans, attending a dream college, or setting out to be a millionaire are all losing financial plans… and they are all losing life plans.
We are building some context and eliminating some paradigms as I'll soon posit "The Most Important Question in the entire Investing World".
There is one question that can make you wealthy - and you've probably never heard this question before.
And if you act on the ANSWER to this premium best investment question to ask yourself… you probably won't have money concerns for the rest of your life.
I think it'll all make sense when I reveal it later today. While you're been thinking about it, I've been building some context and a foundation about why this question matters, and why those other ones don't.
If you're new to the show, again, I'm Keith Weinhold. I'm a 20-year REI in the US. I am an active member of the Forbes RE Council. I write all of our articles on GetRichEducation.com too. I'm also a financial columnist for the Epoch Times.
I host this weekly Get Rich Education podcast every single Monday - this show right here. We don't miss shows. I have never missed a week. And we also don't replay old shows. Fresh material here for you every single week.
Most every financial influencer has been here with me as a guest on the show, running alongside me, including Robert Kiyosaki, Grant Cardone, Jim Rickards, Chris Martenson, T. Harv Eker, most anyone that you've heard of.
Besides writing for GetRichEducation.com, Forbes and Epoch Times, I also write our weekly "Don't Quit Your Daydream" newsletter that I send directly to you.
Then, I am the "talent" - if you can call it that - that's what it's called in the industry "the talent". It makes a slackjaw like me feel uncomfortable saying it.
I am the "talent" on the Get Rich Education YouTube Channel as well - building your wealth over there.
I also host webinars to help you get started with real estate. That's where we look at actual addresses together and more. That's something that we just began a few months ago.
I am also your instructor for a fastcourse that I made specifically for you at: GetRichEducation.com/Course
Those five course videos that average just 12 minutes each could comprise the most powerful and impactful 1 hour of investing instruction that you will ever see.
That's free, again, at GetRichEducation.com/Course
When you know what you're doing in real estate, you're often getting paid five ways. And when you're profiting like this, you're not tempted to cut corners.
When you're not cutting corners, you are providing others with good housing.
Let's do good in the world. Provide good housing and let's abolish the term "slumlord" in this nation.
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More next. I'm KW. This is Get Rich Education.
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Welcome back to GRE Podcast 430. I'm your host, Keith Weinhold. We are in our 9th year of coming at you every single week, 52 weeks a year.
There is one question that can make you wealthy - and you've probably never asked yourself this question before, or perhaps even HEARD this question before.
And if you act on the ANSWER to this premium best investment question to ask yourself… you probably won't have money concerns for the rest of your life.
It begins with keeping your emotions separate from investing.
When it comes to buying a LT rental property, some of the worst advice that I've ever heard is: "Only buy a rental property if you would live in it yourself."
Oh! That really limits your ability to put the most profitable income properties into your portfolio.
Now, of course, you had better only buy a primary residence that you would want to live in yourself.
But it's definitely NOT that way with income property. It is not that way with rentals. Yet you need some standard here, however.
Look, years ago, I had a friend that saw me as a successful REI, so he wanted me to tag along with him to go out and tour rental properties on the weekends so that my experience might inform him on which property to buy and which ones to avoid.
Most of them were unsuitable. Unsuitable SFR, unsuitable condos, unsuitable duplexes and triplexes and fourplexes.
But we found one together - a fourplex - that I thought was suitable and he didn't.
The reason that he didn't like this, oh, about 1980-built fourplex building is because - though it was well-kept, some of its finishes looked dated.
One of the four units had a pink color-themed bathroom that had this sorta weird-looking pink wall tile and pink sink and pink bathtub. It all matched though. But yeah, it looked dated.
And another one of the fourplex unit bathrooms had those same bathroom fixtures but in a dated-looking olive green.
And the third a light blue, and then the fourth was a totally renovated new bathroom.
Well, it didn't matter that the bathrooms didn't match each other. Each family in the fourplex had their own unit in these 2 bed, 1 bath units.
And here's the thing. The building was well-kept, it was fully-occupied, and it had a good history of occupancy.
That's why the fourplex checked my "buy box" but my friend didn't want to buy it. He just couldn't get over the emotions that he felt in, say, a pink bathroom.
See, he couldn't see living there himself. But he was not GOING to live in the fourplex himself. He would be an investor that lived offsite.
That didn't make any sense to me. He gave in to emotions, and lost out on a profitable property.
So when an investor says that they wouldn't live in an income property themselves, my response is often, "Oh, I didn't know that you planned to live there." Because often times, the investor does not.
Emotions got the best of my friend… and he didn't buy this property that would have been a winner.
Here's a different case. Now, being sentimental is an emotion. I've known someone that strongly considered buying a rental property in their own neighborhood chiefly because they used to play basketball at that house back when they were a teenager.
Sheesh, that's an awful strategy. Investing is about facts, not feelings.
And certainly not the feelings that are evoked because you slam-dunked a basketball for the first time on an 8' rim when you were 13. Ugggh. Dreadful investing strategy!
Would that property's income exceed its expenses?
Sentimental feelings are an emotion. Instead, investing is about the facts.
Now, we're building some backstory and context. We are hitting closer to home for what I soon want to reveal as the best investment question that you can possibly ask yourself.
Now it's pretty likely that you want to avoid buying property in a badly blighted, crime-ridden neighborhood that's also trending in the wrong direction, even if the property is CHEAP.
Because in those areas, it's hard to find a respectful, rent-paying tenant… and the property could depreciate in value at the same time - in a tough neighborhood.
Actually, you typically want to avoid BEAUTIFUL neighborhoods too. Yes, "avoid beautiful". That can sound unusual to newer REIs, but for LTRs, beautiful isn't profitable. The rents aren't high enough there.
So, depending on your target market, to go from a working class neighborhood (where the numbers often make sense) to an upper crust neighborhood, rents might triple but purchase prices could 10X.
That's a losing formula for you.
So because you want to avoid rough neighborhoods and avoid beautiful ones, what you want to be attracted to are working class, SAFE enough neighborhoods that are just a little below the median home price.
You don't want to go so low that you're beneath the safe bar.
What are the condition of the cars like in the neighborhood? If someone would park a decent car outdoors overnight, that's one sign that the neighborhood is safe, in addition to crime and school district data that you can find online.
So again, don't let emotions prevail.
Also, don't let PERSONAL PREFERENCES dictate what you do too much. Ah, you'll learn some funny quirks about me here.
I've spent my life living in places that have a real change in seasons, including a substantial winter - that's mostly in Pennsylvania and also in Alaska, BTW.
But distinct seasons are my personal preference. A lot of people don't care about seasons. They just want year-round warmth. So that's why I invest in the Sun Belt states - because I know that it's what OTHERS want.
It's not about where I want to live. It's not about me. It's not about my emotions.
I also know that even people who dislike cold will still live in a cold place if they have a job. Money is very attractive to people and money trumps climate for some people… so it can be good to invest in growing pockets of, say the Midwest.
Personally, I don't prefer to live on HW floor. It's harder, colder, and noisier than carpeting. I prefer plush, padded carpeting… and I've got some reasons for that. But I know that I'm in the minority on that one.
We actually did a poll on that on our Get Rich Education Instagram Stories and 83% preferred to live on a hard surface, only 17% on carpet.
But see, in my rentals, I use either vinyl plank flooring or hardwood laminate flooring - even in the bedrooms sometimes.
Not only is it more durable, but tenants actually seem to prefer it - even if I can't figure out why. Ha!
So I keep emotions out of investing, I'm keeping sentimental reasons out of investing, and I'm even keeping my own personal preferences - like plush wall-to-wall carpet out of investing.
Stick with facts and demographics and infrastructure and migration trends, and jurisdictions that have strong protections for landlords.
So, with all of this in mind, what is the best REI question that you can ask yourself during the course of your entire investing career?
It is:
Will this property secure an income stream?
Yeah, that's the big question. And it is unemotional.
When you ask yourself, "Will this property secure an income stream" for yourself, now you're accounting for the quality of tenant that you can attract there.
Now you're accounting for the long-term building maintenance question, and now you're accounting on if you're in a good market with enough job and population vibrancy for a long-term tenant base.
That's the stuff that matters.
"Will this property secure an income stream?"
And what makes that question multi-dimensional is that even though the word "property" is in that question, the question is really asking more about what SUPPORTS the property - like the metro economic market and the neighborhood that it's in.
See, a modest, 1950-built, 500 sf studio apartment can support an income stream for you if it's in a thriving job market with a future.
Well, as far as your investing for the year ahead, we are still in high inflation - though it's come down, and many feel that a recession is ahead.
Where do you invest in high inflation & a recession?
Well, gold is the classic inflation hedge. But long-term, it's price merely tracks inflation, so though it could be good to have a little, it won't grow your prosperity.
Bitcoin has been beleaguered in this brutal crypto winter as they call it. Bitcoin has a few redeeming attributes in my opinion.
But it's risky. In fact, during the GFC of 2008, the pseudonymous creator, Satoshi Nakamoto was just publishing his white paper. We really don't have any history of what bitcoin does in a prolonged recession.
Here's the thing. If there's a bad recession and you lose your job… what are you really going to need in your life badly? You're going to need more income streams - like a RE income stream.
And you're not going to be able to get a loan for a property anymore once you lose your job.
If high inflation persists, as any longtime listener knows, RE crushes it - income property with a loan.
Yes, by now, you know that you win the Inflation Triple Crown - winning with RE 3 ways at the same time - c'mon - recite them with me - Asset Price Inflation, Debt Debasement, and Cash Flow enhancement.
That's the ITC.
This is why rental property with a loan is the singular best investment in high inflation and a potential recession.
History over hunches. RE has proven itself historically. You can have a hunch. But it's typically best to look at what happens historically over & over & over again.
My question for you today is: "Will this property secure an income stream?" That's the key investment question.
But over the years, I've learned that you've also had a question for me. It's something like: "Where do I find the properties conducive to securing an income stream?"
These are exactly the types of income property at GRE Marketplace. That's a resource that our team & I put together for you where I share the same exact property providers with you… that I buy from myself.
Gosh, I wish that this would have existed 20 years ago when I bought my first rental property through a RE agent that didn't know what they were talking about & I wasn't even aware of it.
It is free to signup just like thousands of investors already have. There's no subscription fee and just one login gives you access to all of the property providers - and they're typically in the profitable Midwest and South.
You don't have to invest in your own local market. The best deals usually are not there.
When you open up your investing possibilities to the entire nation & beyond, you're no longer limiting yourself.
And see, when you aren't limiting yourself & you buy in a market with a strong rent income into a low purchase price, what have you done?
You've made your investment profitable.
How are you more incentivized to think when you're profitable - you don't cut corners. Those that aren't making money on their rentals can be tempted to cut corners and for example, not replace faulty electrical outlets and not replace rickety porch stairs.
When you invest out-of-market and you're profitable, you're less likely to do those slumlord type of things… and that's how this is congruent with our mission to do some GOOD in the world.
It's not complete altruism. You want to be a profiteer like me. So I buy from these providers myself at GRE Marketplace.
Prices over there are often discounted because it's a DIRECT model. There's no real estate agent to pay at all.
We even video-interview the PMs in the markets there for you… since that PM can manage the property for you on Day 1… if you so choose… making this largely passive for you.
So, armed with this best-ever question of "Will this property secure an income stream?"
Understand that GRE Marketplace is not like a big box store. It is more like an organic farmer's market where we help match you with experienced property providers.
Much like an organic farmer's market, you check back regularly for new offerings. It's a vibrant market. Check back every few weeks.
Make this the year when you take action & think big with income property. Hey, I'll see you over there. I've got a video for you over there too to help walk you through GREmarketplace.com
Until next week, I'm your host, Keith Weinhold. Don't Quit Your Daydream!