Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host Jumping in for now. Let’s dive in.
Welcome to the show, Aaron Chapman. We have had you <laugh>, we’ve had you on the show quite a few times.
I know I should just like, you should just have a little corner for me to sit in all the time. I know.
Well, you’re just full of information that everybody needs to hear, so we’re just gonna keep on having you back until we pound things into people’s brain and we don’t have to keep doing this show anymore, which will never happen. But we’ll, we’ll keep trying. Exactly.
So we’re gonna be at this forever. We just decided that when we go to the grave, we’re coming in hot people and you’re gonna be able to witness it on this show <laugh>.
So, okay, so for everybody who’s listening, Aaron is not only a good friend of mine, but he is my lender and he’s also your lender. He should be your lender. He is a creative investment lender and we have a million episodes you guys need to go back and listen to. But today we are going to be talking about something very new that I have no idea about. I’ve just seen the news you know, the news flashes and different things, headlines on social media and people are talking about it. And I am dying to get into this with you. Aaron, are you ready?
I am very, very, very, very ready.
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<Laugh>. Okay, now that we’ve teased everybody with what we’re gonna be talking about, <laugh>
Since you brought something new, let me hit something new real quick folks. Okay. Redneck Economics, Aaron Chapman. Not my first book, but new book coming out. You gotta go to quitjerkingoff.com to get the pre-order. So if we’re talking about new stuff, I wanted to promote that first New and Ball didn’t know I was doing that, so I’m just gonna take advantage of the situation. If you guys have not heard of Robert Allen before he wrote my foreword, there’s his signature. If you’ve never heard of Dolf De Roos before, you gotta look that up. He wrote my afterword, where you got two of the biggest baddest OGs in real estate and multiple New York Times bestsellers, both these guys back in the eighties when you can’t manipulate it. They’re the bookends of my book. So I wanted to pitch that out there. Go to quitjerkingoff.com, get your pre-order going. Okay, now let’s go to what we’re talking
About. Amazing. No, thank you Aaron, for adding that in. Everybody’s gonna be super, super excited to get that. And I am gonna have you back on the podcast. We’re gonna talk all about the book and interview you as the author. So thanks for throwing that in. ’cause We definitely are gonna hit on that when I, when I you know, hit you up for another calendar date. <Laugh>
We got a couple things we can throw on the calendar, actually, so let’s just do that today.
Oh my gosh, there’s so many things going on. Okay. Okay. Kay, back, back to the headline. Okay, the headline, <laugh> before we go down, down the, the road of, of no return. The headline that I am dying to talk to you about is the 50 year mortgage. So I’ve not really seen a lot of people explaining it in a way that you can do it. I wanna know what the pros are, what the cons are. We are big fans of leverage. We’re big fans of mortgage. So as an investor, let’s, let’s separate it and let’s talk about it as an investment tool. If investors, if it’s even being pitched to investors or is this for homeowners? Let’s dive into it. Please take it away, Aaron.
So I know it’s being pitched to help home ownership. ’cause What have we experienced over the years? We experienced the, the interest rates go normal to everything got crunched during the, during the the crash of 2008. Then they started quantitative easing, feeding tons of capital in the market, bringing us in interest rates artificially low and literally lending money from our tax dollars. And so then you have them creating capital, devaluing the dollar, pushing the value, the interest rates way down, shoving the value of real estate through the freaking roof. Now, if we wanna get tin foil hat time, I think that if we were wanna dig back into all those happenings, it benefited the groups who held the most real estate, which would be your hedge funds. Huge benefit for them because what happened to the property values or property prices? I wouldn’t say anything values.
They’re not as valuable as they are priced out at, but that’s where things are. Then you have COVID, which comes along and kills our supply chain. When you kill the supply chain, you don’t have the ability to, to meet the demand of housing with all the houses they need to build. But once they did open back up and that supply chain is giving materials where the materials going. Now a lot of apartment complexes, they’re pushing us vertical as far as our housing. So it’s turning us into that subscription based economy that we’re, that we’ve heard about now with the mortgage situation. People that have been in homes for, you know, probably about 5, 8, 9, 10 years with those really, really low interest rates. They’re not going anywhere. They’re gonna maintain that. In fact, many of ’em are not even tapping into their equity because of what’s happening with the rates.
So what they’re gonna do is they’re gonna try and give the, the idea is let’s, let’s attract it a little bit more by expanding out the, the terms to a 50 year mortgage instead of a 30 year mortgage. Therefore stretching out your payment by another another 20 years. So you’re expanding it by what, that’s 40, let’s say 35 to 40% longer on the mortgage. Many people are just slamming this saying, oh, that’s a, that’s a play for the banks. You’re gonna be staying in debt longer. Well, if it’s your primary residence, they’re kind of right ’cause you are, it’s gonna take you longer to pay it off. Less money that you put into the monthly payment will go to knocking down the balance. But if you’re a real estate investor, which we all are, do you really wanna pay that off? Think about how stretching that does, you are able to increase your cash flow, more money that comes to you more that you can reallocate someplace else to invest.
Well, the longer you take to pay, we’ve already proved the less you actually pay. So we’ve got a calculator that I’ve used for years now, these, this is the calculator I had developed, that the longer you’re paying with the US dollar, you’re paying back with something’s diminishing. So we’re looking at, in a 30 year fixed environment, a person can make a payment for 30 years and you recalculate the value of what you’re paying it back with. You’re paying back less than what you borrowed. Well, you consider that over 50 years, even though you’re making that monthly payment for 50 freaking years, the the instrument you’re giving back loses that much value, at least a significant amount of value to the extent that you’re probably gonna be paying even less. It’s more dollars but less value over the 50 years. Does that make sense?
Yeah. And so, you know, here’s the thing too is we’ve talked about this so many times of the power of leverage and borrowing money at today’s dollar because the dollar’s going down in value, like you just said. But as investors also, that frees up capital well in, in in cash flow. We’re, we’re now going to see more cash flow possibilities if they allow investors to do this, we’re gonna see more cash flow and what, what are we gonna do with that money? Well, if you’re smart, you’re gonna reinvest it. Even as the homeowner, when you were saying that as the homeowner example, if I have, let’s say I have a $5,000 a month mortgage. Let’s say I recast it into a 50 year loan, I’m just gonna make up numbers. I don’t even know what they are. Let’s just say all of a sudden now my mortgage is 2,500, so I just freed up $2,500 of my income.
Now if I’m smart, I’m not gonna use that money to, you know, go blow and you know, go on vacations <laugh>, and I’m going to use that money to invest. So now I’m gonna make my money work even harder for me. And if I can invest in something that is more than that interest payment, then that’s a no brainer to me. Like to me it sounds like this is freaking amazing. Like I, I want this and that’s why I’m, I’m like dying to hear your side of it because in, in that regard, I think it sounds pretty cool.
I think it sounds awesome. The only thing is when you’re talking about that, that 50 years, one, we gotta get the amortization tables out. We gotta be able to see that. I haven’t seen one yet. There’s gotta be one floating around out there. Frankly, I haven’t had the time to even look. So to see what you’re gonna put out, you’re still paying interest. So when you think about those first few years, probably instead of our current 30 year fix, the first five years, almost heavy interest, I can almost guarantee a 50 year is gonna have to be very heavy interest for the first 10. So you gotta be, you gotta be willing to settle into this thing for a little while. You gotta find a property, it’s gonna, and I wouldn’t be, if it was me, I wouldn’t be saying, Hey, I’m gonna go find me the the C class that’s really cashflow.
And right now can you imagine it’s gonna cashflow a real badass for you to do a 50 year loan? Those don’t appreciate enough to make it worthwhile in my opinion. You could sit there and pay interest for the first 10 years and not effectively do anything to the balance. And now you have this property that may have actually not done very well in appreciation, but any cashflow we’ve had was going into fixing it up and keeping it rentable. Well, you’re not really moving the needle over the 10 years. So in my opinion, you gotta be careful what you’re putting your money into to begin with no matter what. But now with this instrument, the other thing that we have to consider, if this instrument is put in place, what’s that gonna do to the price of housing? There’s a lot of folks out there saying, well let’s just wait till the fifth year comes around.
If it, if it even does, and then we’ll buy an investment property, then it’s no different than waiting for the rates to go down. ’cause The second something like that happens, you’re gonna put more people into the market. More people in the market means more bidders on the real estate. More bidders means price going up. Now we do know if, if the interest rate drops one percentage point, you can see a 12% increase in the price of the housing. That alone, that’s just 1%. Can you imagine what a 50 year or a 20 year expansion on the mortgage might do? That affordability index will kick up a bit and there’ll be more people in the marketplace to push the price of housing up. So you as a real estate investor, can’t sit back and wait for one of those to happen. You’ve gotta do it now.
And so when I, and one of the reasons I push that really, really hard is ’cause if you are so hell bent on having that lower payment, that 50 year payment or that lower interest rate on the, on the loan, so you get that little tiny bit more cash flow, well then you’re gonna sit and you’re gonna wait for that and you’re gonna get screwed because of the price of the house. What’s interesting is you could have today’s rate, today’s 30 year fixed and if you’ve gotta scratch that itch for rate or term, you can always refinance with the increased value. Let the house appreciation or the increase in price pay for the new refinance that you absolutely have to have ’cause you got this nervous tick so that way you can get what you need. But if you did it the other way around, you can’t get the lower interest rate to pay for the higher priced house.
It doesn’t work that way. But you can take the higher priced house to get you the lower interest rate and you never have to go to your pocket for it. Let the appreciation of the property do it. That’s a benefit there. Now is it a benefit to me? No, I think that’s, it’s a waste. But each person’s got their own perception of what’s valuable and what’s not. So we’ve always talked about when it comes to the dollar, right, you’re paying it back the long you take to pay unless you actually pay. So I’m gonna bring this example up that we brought up a hundred times and I’ll keep bringing it up. I’m holding in my hand a one ounce gold coin from 1888. It’s an actual, a full ounce of us mint. And on the back of it, it’s for $20. So according to this, it’s minted for the same as this same 20 bucks.
But this $20 will not buy this, this gold coin. This gold coin is about probably close to 5,000 right now. So when we understand the value of a hard asset paper assets not worth what that is. In fact, just in the last year, if you go to a gold chart, look it up guys, just search for the gold price history. You’ll pull up probably gold price.org is where you’ll end up. If you look at 2024 January, 2024, it was worth about $2,700 between yeah, about 26, 2700 bucks per ounce. Right now we’re showing about 4,300 per ounce. Look at that swing. That’s in a year. In 11 months, it’s moved that much. What percentage is that? If we’re talking 40, say 4,300, subtract out the 37, the 2,700. What is that? You would think as the banker that I pulled that stuff off my head <laugh>. But there, there has been ever since the little Casio watch, I’ve never needed to worry about that. So that’s a $1,600 swing, right? Well at 1600, if you divide it into where it was in 2024, that means the dollar has moved 59%. We had a 59% swing in the buying power of the US dollar in that period of time. 59%. That’s insane. Now, I could be wrong on that calculation.
That’s half our money. That’s literally half our money sitting.
Half is buying power just based upon the gold, gold value, right? So this used to be backed by gold is no longer. So if you just go based upon that alone, just the weight of the gold, that’s a 59% swing and it could be 30, even if it’s 30% swing, guys do the calculation for yourself. Even it’s that, that’s a significant thing to consider. Why do I wanna bring that up? When you’re talking about 30 years and you’re paying it back with this, not this, you’re really not paying the bank anything. So these guys who go off on Donald Trump as a dirt bag piece of that is, that is tied in with the banks and the banks are just gonna make a bunch of money off of you. No, they’re not. They’re gonna lose money on, they’re gonna lose it badly. I would not want to give anybody a loan for say 5, 6, 7, 8% for thir for 50 years.
I don’t wanna give it for 30 years. Look at all your hard money lenders. Anybody who’s a hard money lender. So I’ll give you 12 and two or 12 and three or 12 and four. Why? ’cause they want their money back now because they know the longer they take to get it back to you, the less they’re actually making the banks arrange this in a way that will give you 30 years, potentially 50 now. But we are going to advertise the out of you to make you refi as often as possible. ’cause We don’t want to hold that capital for that long that because they lose they lose and they lose hard.
Yeah. So one of the things too is I’ve, I’ve seen this argument online in, in different chat groups on Reddit and stuff. And in fact I saw somebody post something on, I think it was, I don’t know, Facebook or I don’t even know where it was. And they said, you know, the, the secret trick is to, and this was for homeowners. This wasn’t for investors sa it would, it would work the same though. And they said, you know, all you have to do is make one extra payment a year and you knock off, you know, have you seen those where they say you pay, make that one extra payment and it actually knocks off like so much interest and everybody’s on there arguing about it and everybody’s like, you can’t make extra payments. You know, I, you know, for that goes towards the equity.
It all goes to the bank and, you know, so I’m just sitting here thinking as, as myself, as an investor, if I decide that I want to pay off this 30 year loan sooner, if I decided that I would just make extra payments towards the equity, you know, and I would separate it on the statement. I see it on my statement. It says, do you wanna pay extra towards the balance? And so I’m thinking, you know, that that’s why I personally love 30 year loans. I’m like, let’s just do it. And if I decide to pay it off sooner I can. And I’m kind of thinking, obviously we haven’t seen anything on the 50 year, but that’s kind of a cool option too, is if they, if they offer it, if it actually becomes real, maybe we can just pay it down. If we decide, hey, we don’t wanna do the 50 year loan, let’s just pay it. Start paying towards the equity more.
That’s what I always tell everybody when they say, well I wanna do a 15 year mortgage, I wanna pay it off faster. I’m like, well why don’t you just do the 30 and pay it like a 15. You can always pay a 30, like 15, but you never pay a 15, like a 30. It gives you flexibility. Yeah, if they offer me the 50 year mortgage and the interest rate’s very similar to 30 or they think I’m gonna take the 30, no, I’m taking the 50 and then I get to decide how to reallocate my capital, I can pay the extra and pay it down. You can point money towards principal and the extra payment per year. I think it supposedly knocks off about, I think it knocks off seven and a half years or something like that. Every, an extra payment every year, which could be substantial, which works good for you as the house you live in.
But don’t ever do that with the house you’re renting. Take the money and let the renter pay you the mortgage payment and you keep the extra, don’t give it to the bank. This whole thing of, well, I’m gonna pay off my mortgage so I get better cash flow. That’s such a waste. Take that extra capital, reinvest it into other properties. Expand your holdings. Make your holdings. Expand your holdings. Don’t keep parking into one little place. You know, I look at money actually this kind of money and I not, not this paper crap. That’s not real money. This is, this is fic, this is fiat currency, this is money I take. Look at money as a natural resource. I look at it as a river. If the river’s flowing, you can do stuff with that, right? It stays live. It’s usable. You know, all the biggest cities popped up around waterways.
Why? Because it, because you could continue to grow things around it. But what happens if you took all that? That’s fiat crap that’s here, right? And you pulled it all up, pulled it off of the, off the, the waterway where it’s flowing, it’s creating life. And you pulled all this stuff up and stuck it in a pond. How long does that pond last before it becomes, becomes corrosive full of, full of toxins and parasites and crap like that? You don’t get anywhere near that water. You can’t do anything with it. It erodes. That’s what this does. This erodes when you let it sit there, it’s turning into nothing. Let it flow, let it do things. Don’t take it and keep piling it into an asset. I wanna pay off this asset. Not only do you pay off the asset and you have it so-called free and clear, there’s a lot of dirt bags out there playing this title game where they’re stealing titles from free and clear properties.
You gotta keep it lean now, leaned by the bank, lean it yourself, create a, create holding companies and LLCs and trusts. And we’ll get into that in a different episode because I the house, the property right here, right on the other side of this wall, I tried to get from a seller, it turns out it was ’cause it’s free and clear. It turned out it wasn’t even the seller. He had stolen the title and they figured it out. Before I was able to get things worked out and try and make that deal, which is disappointing for me ’cause I’d like to have had that acreage right there. But doesn’t change the fact that it’s happening out there. You real estate investors need to quit having free and clear properties. You’re putting yourself at risk, having a lien on a property deters a lot of people and taking all your money and pull, pulling it into that one house. So now I got that free and clear blanket that’s gonna keep me all nice and warm at wintertime. It’s corrosive, it’s gonna erode. You don’t do it.
Yep. Yep. One of the asset protection companies that I’ve worked with and talked to in the past, and he said that one of your best asset protections when everybody’s so worried about their properties and you know, doing all the things with it is having a loan on it, having debt on it. Nobody wants your, you know, on paper, bad debt, nobody’s gonna go after a property that is leveraged. You know, it’s just, it’s too much work. But if they see a property free and clear and they’re suing it for something, you betcha they’re gonna try to go after that. So another reason why we love debt and leverage as investors exactly.
You, you’ve gotta lien on it. You’ve got the capital, you put the capital into something else, get that lien and keep compounding those liens. What’s funny is you can have one property that you had that had a lien on and you pull the capital out, say a hundred thousand dollars, you could turn that one property into three or four more properties and now look what’s happening. We got three or four properties being paid down by a, by a third party, which is your tenants. They’re appreciating in a market that’s going to, that’s bound to appreciate. Guys think about this. We’re gonna have Jerome Powell swapped out here real soon. The current administration is and screaming for quantitative easing again and then they’re talking out a 50 year mortgage. Can you imagine what’s gonna happen in 2026 and 27 if we get quantitative easing and a 50 year mortgage, it’s gonna go insane in property value. If you are not in the game right now, you’re never getting in.
Speaker 2:
Yep. Yep. I was just gonna say that the market is gonna go absolutely ballistic. Investors should take this very seriously. You guys listening right now as you know, one quote that Aaron says, often it’s not timing the market, it’s time in the market. Once we get you in, get in today, tomorrow, January, set your goals, what you’re trying to accomplish. I mean, if you need to get your tax returns to the end of the year, we’re getting close, but I think we can still swing it here. But we’ve gotta put together a plan for you. We’ve got to help you set your goals. I can do that. Aaron can do that. This is literally what we do all day long. We love doing it. Let’s help you set up your goals so that you don’t miss out on these opportunities. ’cause These opportunities, by the way, if this 50 year thing doesn’t happen, push that aside. Like everything <laugh> is still the same for investors. There’s still plenty of cash flow out there. Markets are appreciating. Rental demand is as high as ever. There’s not enough housing right now is still such an amazing time to invest. But gosh, if that 50 year thing goes through, whew, it, i I don’t, I don’t even know what’s gonna happen. Like you said it, it’s gonna be very interesting to see.
Well, to to those points, another thing I like to tell people is the start that stops most people just get fricking started so we can get you moving. The other thing to to your points there on that, even if the 15 year, 50 year never does hit, there’s enough chatter about different ways to make a, to, to increase affordability. Not by dropping property values guys. It’s by using all these other things, quantitative, easing the 50 year mortgage, other stuff to, to do that. Anything they do, anything will add to the price of the housing period. If you’re not in it, you’re going to end up having to pay more for it. So get your in it and be co be very, very conscious about what you’re putting your money into. Don’t be looking at, sorry, some little St. Louis box just so you can get in the deal and it’s like, oh great cash flow.
No, no, no. You gotta stay away from some of these ugly things. You gotta be with the right people doing the right things. They’re wanting to protect you because if somebody ends up putting you in a position where you lose right out of the gate, you’re never gonna move forward. We need you to be successful on y on one, you know, 5, 7, 9, and 12. We need you to be successful. Mine and Melissa’s success depends upon your success period. So do not hesitate, don’t hold back, don’t wait for quantitative easing, don’t wait for the 50. Start looking at what deals are available right now. ’cause There’s a lot of amazing stuff out there.
Amazing. Aaron, we’re gonna end with that. I’m not even gonna add anything to it because I think that was perfect. Well said. So thank you again and Aaron , I’m gonna drop the link to your book so make sure you get that to me so I can drop that for everybody. And also obviously you can reach out to me and I’ll send you the link as well. And then we’re gonna have Aaron back on to actually talk about the book. I’m so excited. I have an advanced copy. I’m halfway through it, Aaron, I have not finished it ’cause we moved and so I’ve been a little extra busy setting up everything. But I’m excited.
So apparently it’s not, it’s not a, it’s not a page turner people. Well we found that out.
What do you mean? What do you mean it’s not a page turner? Just because you only half through said through Oh, <laugh>.
If you’re only halfway through, it’s like, hey, that means you stop.
No, literally I, no, I know. Geez, that sounds terrible. No, sounds I literally forgot. I mean, sorry, <laugh>, I got bit.
Oh, that’s even better.
I know. No, no, we were moving.
Okay. And guys, if anything, here’s the thing I’ll tell you about this thing, if anything about this book. It’s not so much the words there. The words are I think are awesome. My mom thinks they’re awesome, I’ll tell you that. But see artwork that’s in this, there’s over a hundred thousand dollars in artwork in this book. You get to hold it in your hand for like 28 bucks. And it’s real artwork. It was oils on the outside and all watercolors and, and what was it he had silver and gold and copper leafing on the insides. Unbelievable. Yeah, my brother did the illustration. Robert Allen did the Ford. He said, illustrate your book. We’ll. Well no, you gotta turn to the next one before I tell any more stories.
Yes, yes. Don’t, don’t tell any more stories. But no, that is one of the things that I noticed automatically and I got, I got lucky. I got a signed copy as well. But the artwork was absolutely beautiful. So I’m excited to dive back in. I need to find it. It’s one of my boxes somewhere. So now I gotta, now I gotta go find the box. Finish it.
Now you gotta go dig.
Exactly. And then I can have an awesome conversation with you. So anyways, thank you. Thank you again, Aaron. You guys check out the links in the show notes. You can book a call with myself. You can book a call to Aaron and we are excited to chat with you. Thank you guys. Bye.
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