Why the feds wont keep increasing rates.

In this latest episode Donny Coram the Foreclosure Deals Coach discusses why the feds will not raise interest rates.  Tune in to find out what he discovered and how this information can affect you and your future deals.

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Transcript

0:01

Welcome to the Foreclosure Deals Coach Podcast. The real estate market is shifting. The time is now. The Foreclosure Deals Coach Podcast is your home for the mindset, tactics and tools needed to break through your limiting beliefs and find freedom by investing in foreclosure deals. Don't buy a house, buy a deal. You need to get into this right now. And now your host, the Foreclosure Deals coach, Donnie Koru. Hello, hello, hello, and welcome back to the Foreclosure Deals Coach Podcast. Hi, I'm your host, Donnie Corum, your foreclosure deals coach, and this podcast is where we discuss. The mindset, tactics and tools to become a successful foreclosure investor. Now, a lot of people wonder how coaching is going to work. How can I help anybody to do their first foreclosure deal? Well, the essence of it real quick is that I help you to find. Figure, fund, fix, and flip your first foreclosure deal. So if you're interested in learning more, join my Facebook group and please subscribe to this channel where you can stay updated on all the great new foreclosure news and find out if foreclosure deals coaching is right. For you. All right, let's jump into the show today. We open all of our shows with a little bit of mindset, and the reason we open with mindset is it's so important that you have your mind in the right place when you're learning anything. Listen, if you're taking an education and you're not thinking about that education in the right manner, I can tell you it's not gonna stick. It's not gonna be as useful, so, The thing is we write the title of this show is Why the Feds Won't Increase Rates Anymore. Okay, so we're gonna talk about where the market is heading, but first, this mindset quote from Zig Ziegler says that success occurs when opportunity. Meets preparation. Okay, so we're looking at the market as a whole all the time as a foreclosure deals coach, who basically makes me a real estate investment advisor. I am constantly monitoring where the market is gonna go. So I did a podcast a few weeks back where I'm discussing how I don't believe that the Fed is going to raise rates. Any further based on the impact that rates have had on the market recently, and one of my lovely subscribers wanted to disagree with that. I love that. I love creating a little bit of controversy, but what was commented on is that the Fed is gonna continue to raise rates. Now listen. My crystal ball is no more functional than their crystal ball or yours is, but I do wanna discuss how anticipating the market is super important to being successful in real estate investing. Once again, what we are doing is we're buying low, we're repairing the property to market, and then we're selling at, or hopefully. Ahead of our estimation as to what the property sell for on the market. Well, when the market was going gangbusters, we were selling so far ahead of our speculated future price after repaired value, we call it, that people were like, it was, it was shocking. Well, the Fed had to respond to that. The what that cause was a massive amount of inflation in the market. Because housing prices were going up so rapidly because people were overbidding on property, and this was largely caused by the buying power of the retail consumer. Listen, when you were able to buy a house at two or 3% interest rates, you're gonna buy a lot more house, right? Or if you're limiting your budget, you're gonna bid on a lower price house and you're gonna push that house up. So the comment that somebody made was that the Fed is gonna continue to raise rates. My argument for that is based on what happened, we are seeing in real time that the market is slowing down a little bit. Days on markets come up a little bit. Right after the big rate increase, we saw some degree of drop in the overall pricing of real estate. In certain markets, we saw maybe 5%. Other markets went up to like 10%, and I wanna argue that during a short stint there, we saw my local market go down between 10 and 12% off of retail. Now that was obviously really bad news. Own a lot of properties. During that time, we took some hits based on my current holdings because the property values dropped and I probably had, uh, six or seven. Properties that we had just finished remodels on during that time. This was bad news, right? However, as the market is, it cycled back over. We have definitely seen the market flattening a little bit to even soft, to even increasing just a little bit based on that last time. Rates are higher, but demand hasn't gone anywhere. So once again, I don't believe that the Fed is gonna continue to raise interest rates in this current market because of a couple reasons. Number one, the goal is to curb inflation, right when they increase rates. The Federal Reserve Chairman Powell, he said, well, we increase the rates because we wanna slow down the increase of housing prices because it's causing an economic problem. Ken argue with that, right? When we saw increases in certain markets of 20 to 30% over overlap the year before pricing. That is a clear, unsustainable problem. Right. However, they as always over adjusted. I think we had eight total rate increases in a row since, you know, since they started this process. And the net result was that rates went from the lates and early threes to where they're at now. Which is about five to six. Actually, at the peak, we saw interest rates hit almost 7% in certain cases. This was completely unsustainable and it halted the housing economy for a very short stint. The reaction was that for the next couple of sessions, the Fed didn't raise the rate. They, they, they, if they did raise the rate, they raised it by a little bit, and on the last rate increases, they didn't raise it at all. They left it flat. That's what we're expecting them to do for a while. I don't think they're gonna raise rates. I also don't think we're gonna see a huge decrease in rates until we really filter this out. But you also have to factor in the political season that's coming up. Okay. We are on our way to a presidential election, and I don't wanna turn this into a political show, but if you can anticipate what the market's gonna do based on the election season, you've got a couple of years of anticipating what the market's gonna be before it happens. Here we are about a year away. From the presidential election, and I can tell you that they don't want to go into the presidential election into a housing crisis. Or do they? Right. Does the government want to cause additional dependence on the government? My vote is no, but I've seen crazier stuff happen in my 20 years or so of doing this. Okay. So my belief is that rates will flatten or even reduce. I've got some good friends in the mortgage market. Who are very high up in the chain of the market. One guy comes to mind as Richard. He's a good buddy of mine. He's higher up in the chain of mortgage guys. And he has said his opinion, and again, this is all opinion, right? And opinions are like, you know what? We all have them. They all kind of stink. But his opinion, which I really trust, is that they're gonna start to reduce rates a little bit in the mortgage market. The Fed will not drop the federal reserve rate. Because they don't wanna keep printing money. But what they may do, what we may see is a slight decrease in the mortgage market that we get used to this. This means we're gonna go from where we are now. It's pretty close to 6% or so to the mid to early 5%. That's my prediction. Okay. What does all of this mean? Why do you care about any of this? Well, here's the tactic of the week here. All right? You are willing to spend some time learning about the financial markets so you can understand how the mortgage market is gonna impact pricing on your potential deals. This is important because if you know where the pricing is going to end up, you can then predict a little bit more where the buying power of the consumer is going to be at the time of your flip. We're not looking that far into the future. If you're flipping on a proper schedule, you should only be off the market for 30 to 60 days, so that's not a long time. For there to be a major impact to the mortgage market or the housing market. Okay, but to find out what the mortgage market is going to do, you want to look into the 10 year treasury bond. Now, real quickly, the 10 year treasury bond is the index's, the pricing. That is used to lend money to the federal government. Now, it's needless to say they don't pay a huge interest rate return on that, but when the treasury bond is increasing in price, it tends to decrease the mortgage market. At this moment, we are seeing a bit of an increase. Here's the reason why that is. Okay? The more basically you're lending money to the federal government with treasury bonds. So it's a, it should be anyway by most people's categorization, a pretty stable investment. Okay. We don't think the federal government's gonna default on their loans. Could happen, but seems unlikely since they can print money. It stands reason they can print more money if they can't service their debts, which is literally what they've been doing for the past decade, which is why we are so deeply in debt right now. Okay, so as the 10-year treasury bond increases, mortgage markets go down. If you look into the fu, the history of the Treasury index, you saw the treasury index dropping rapidly when, when the big increase in the mortgage market happened. And during that time is when we saw rates. Increase. So what you wanna look up for the treasury bond index is tnx. And tnx is basically the treasury bond index that most people use to determine what's going on with the market. I'm gonna share my screen real quick so you can see this, but if we look at Tnx right now, you can see here, That it started, it went way, way up, which dropped the rates if we go way back. Right? And now it's starting to fade down. What the index you're looking at right now is just today. So we really wanna look back in history a little bit, and you can see the cycle here to where the Treasury bond index dropped here in a 20 and 21 and rates went way up during this time. So it, it, it was following the pattern that it's supposed to be following. As they started to increase rates started to settle down a little bit, right? And now they're kind of floating here, which is why rates have mortgage, interest rates have settled a little bit. So you've got a little bit of predictive analytics to tell you what the buying power of the future consumer of your flip is going to be. By tracking this tnx thing. So keep an eye on this. The, the, the tactic of today is save this to your, you know, your favorite somewhere, so you can periodically check in and see what the 10-year treasury index is. Listen, I know that talking about financial data is not super sexy or exciting, but you know, it is getting rich, right? And if your objectiveness makes a lot of money with your real estate investments, which is the only reason we invest at all, right, is to make money. Then you want to be monitoring some of these indexes that could make or break you in the future market. So by knowing what's going on, you have a much higher probability of predicting that. If you see that the trend is that rates are gonna increase, okay? You're watching this in the future, rates have come down, they come back up, and you're seeing this index reflect that you know that you wanna be more conservative. With your comparable analysis because as rates go up, people's buying power goes down, and that has a direct impact on the sales price of properties. Right? When that buying power went down to rates we had, when we saw rates in the sixes and sevens buying power went down to Lowe's, we haven't seen in comfortably a decade, and there was a direct reflection on the. Pricing. So you're not gonna have a huge swing in most cases. But you know, in about a six to nine month timeframe, again, we saw the Colorado Springs market dip about 10 to 12%. At the bottom of it. It recovered pretty quickly. A lot of it came back, but in your market, you probably witnessed the same thing. So keep an eye on this treasury index because it can make a big difference on what the future price, the after repaired value of the property is going to be. So that's kinda our segment on that. Moving forward, learn about the financial market, monitor the election season, be able to extrapolate what you can. We're not going back to 3% rates anytime soon, I can promise you that. But if we get back to the mid to early fives, I don't know that we're gonna see the huge boom bidding wars that we saw in 20 and 21, but I do believe we're already seeing a lot more showings. A lot more traffic, a lot more activity. So in investing, your job is just to understand how money is operating. The more you understand how money works. The more money you're gonna be able to make. Right? So take some time to really get into that and learn more about the money market. Alright, let's head into our deal of the day here. We are gonna look at a property we just acquired for one of my coaching clients. Now this is fun cause a lot of my clients are, are on different parts of the country. In this case, Charles bought this property from California. I'm gonna share my screener. You can take a look here and we'll just move this back over. All right. Here we go. I like this, this effect we get Matter report tours on all of our properties, right? So the matter report tour is basically a 3D tour on the house, and I love that we're getting out in front of these now, uh, now that things are a little bit slower, but the cool thing about this is this Dollhouse Effect. Check out this imagery when you're first, I, I, I love this. It's on up to you whether you care now, but check this out. So when you first log into the matter Port Tour, you get this dollhouse effect. As it loads, which I just love, you're seeing the property kind of from an outside angle and then it pops you inside. So here's the property. Right. Not the prettiest thing you've ever seen, but that is the idea, right? We're gonna just walk around it here, and after you've gotten a real feel from what the property looks like, we're gonna talk briefly about the numbers on this incredible deal that Charles is working on Now. A lot of people are worried, you know, I wanna do a deal, but you know, I don't know the Colorado Springs market that well. That's okay. This investment strategy can be done from anywhere. We had a client complete a deal from Poland recently, right? So you can get a deal done anywhere. As we're walking through this property, AC here, it's pretty dated, right? It. It's got a pink bathroom that can't possibly modernize and that can't be uh, cool anymore, right? I was super cool at its era, but it's not cool anymore. What's important is the deal check. So what we do now that we've seen the property a little bit, we wanna analyze the deal in deal check. I am an affiliate of deal check, so if you want to sign up for this software, go to fdc, deal check. Dot com. Obviously, we've already run an analysis on this property because we have closed on it. We are now starting construction, but we're gonna flip down to the deal analysis on this home. Uh, once again, we are on Auburn. Here we go. And we are looking, we bought this property for 2 95. We're guesstimating roughly a 30. We always put a 10%, uh, buffer in there for the remodel link, a remodel price, right? So we got about 33,000 We're planning on spending on the remodel, and ultimately, after we do our analysis, we wanna look at our comps here. And figure out what's selling around this house to justify the purchase price here, right? So we looked at this one nearby, half a mile, sold for 400, another one half a mile away, sold for 4 35. Another one similar square footage, half a mile away, sold for 400, et cetera, et cetera. Net, net, net. We put in that the deal check on this, the A R V we're intending to use on this property came back at roughly 400 thou, well, sorry, actually put in three 90 because once again, I wanna go hyper conservative with my clients on what we believe we're gonna sell it for. That way, if we beat that number, and I pretty much always do, then you're gonna be happier with the net result. So I put in three 90 and based on the analysis, With the fees, the holding costs, the, the payments, et cetera, the backend profit on this property after four months of holding time, right? Which is again, kind of our worst case scenario. We're hoping to fix it in about 30 to 45 days. We're hoping it's on the market for 30 days or less, right? And then we're hoping that the underwriting process takes its typical timeframe, about 30 to 45 days. So total if everything goes wrong. Is about 120 days. Based on that. We're predicting a$32,000 back end profit on this property. This is real world stuff guys. This is not the theory of doing a deal, but actually finding deals on the market, which I work with my clients to do. Then we analyze the deals, we fund the deals using my. Hard and private money lending sources. We fixed the deals using my contractors that are starting work on this property right now, and then we sell the property using my team of agents at a profit. The net result is Charles walks into this deal with the money he put down and walks out$32,000 richer, above and beyond all expenses. Worst case scenario, guaranteed. Absolutely not. But we have do have done the homework. We know what it takes based on the property, seeing the house and doing the research to get to that desired effect. I've been doing it for years, over 300 flips in my repertoire, if you will. So I am confident that I can do the same deal for you as long as you take the first step, join into coaching and get going. So, super excited for Charles to do his first deal, and I'd like to help you do. Your first deal too. If you're interested, book a call with me. Let's schedule a time to see if foreclosure deal coaching is right for you. In the meantime, your tool tip of today is that you gotta subscribe to some financial channels and start keeping track of a 10 year treasury bond. Remember, the market is a lagging indicator, meaning we see what's happening. Now we gotta determine extrapolate. What it's gonna be 16 to 90 days from now when you're putting that house on the market. But by getting a general picture, you'll have a good idea because the market doesn't move that fast, even in times of crisis. Remember Coronavirus, I was sitting around thinking. This is it. This is the end. We can't show properties, and if I can't show properties, I can't sell properties because of the pandemic lockdown, and if I can't sell properties, then prices are gonna drop. If you can't sell'em, there's gonna be a dip. Right? The exact opposite happened during the pandemic. People kind of got shut in and they went, man, if I'm stuck in this house for a while, I may want to consider getting a different house, which is exactly what happened. So suddenly the market soared and we couldn't have predicted that outcome, but it still took three months or so of lockdown to get that effect. So while you're working on your flip, you don't have to worry about a massive market slip. I'm not saying it can happen, I'm just saying it's super rare. The market, it works in a lagging indicator thing. So we will be able to predict to some degree what the market is going to do next. That is your objective. And when you get good at that, you're gonna make a lot of money to help you get good at that. The important thing is to get, get somebody to advise you on what the market is doing. Somebody who's done hundreds of flips, somebody like myself, whose entire jobs help you find that deal and walk you through the process of making a profit. On your first flip, if you're interested in that, you gotta join the Facebook group. Become part of the discussion. If you'd like to work on some deal checks in your very own market or need some help finding deals in your market, get privy to start looking for deals and then let's work together in your deal. Check to analyze those deals so you can start making money. In the real estate investment market, a lot of foreclosures are coming down the pike right now. So if you learn this skillset today, you'll be equipped for the market of the future. We are planning for what is going to happen, and again, taking us Dr. Zig Ziegler's wonderful quote here. Success is where opportunity meets preparation. So if you're getting prepared, Right now, you're gonna make a lot more money when this market is more conducive to the investing environment. I implore you to get started now. The time is now. The market is here and I wanna be your coach to help you out. Please subscribe to the channel if you wanna stay updated on foreclosure activity right here in the market. Join my Facebook group@fdcoachgroup.com and get started. Become part of the conversation and start doing foreclosure deals near your market. You could be my net success story. With that, this is Donny Corrum, your foreclosure deals coach. Thanking you yet again for tuning in each and every single week to the Foreclosure Deals Coach podcast and reminding you don't buy a house. Bye. Thank you for tuning in to the Foreclosure Deals Coach Podcast. If you like what you heard here today, remember new episodes are uploaded weekly. Subscribe wherever you listen to your podcast. Do you want more of the foreclosure deals? Coach, are you ready to learn the mindset tactics? And tools required to be a successful real estate investor. If so, click the link below to schedule a one-on-one coaching Call today with Donny Corum, the Foreclosure Deals Coach to determine if coaching is right for you. And remember, don't buy a house, buy a deal.