095: The Pink Elephant in the Room: Interest Rate Spike & Biggest Wealth Separator
You might be wondering – is now a good time to invest in real estate? 🤔🤔
Trust us, if we had a dollar for everytime someone asked us that, especially recently, we would be billionaires, seriously. Guess what? We ask ourselves the same thing!
It’s one thing when the real estate market is hot – our biggest question then is: it’s hot, but has it peaked? When the market is off peak, we find ourselves wondering if even though the real estate market is on sale, is it too down to invest?
If we had a crystal ball 🔮 and could see into the future with confidence, we would love to share that knowledge with you. The best we can do is remind you that the what if’s in life will always hold you back.
If you are paralyzed with fear and always asking if now is a good time to invest in real estate, you’ll always be stuck on the sidelines, always wondering and daydreaming…We know our people here at the Kitti Sisters want to be put in the game, not sitting on the sidelines.
If you really want to find financial freedom and to disconnect income generation from your time, we want you to ask this important question next: do people make money when the real estate market goes up?
Do people make money when the real estate market goes down?
So why now?
Let’s address the huge elephant in the room. The truth is, if we aren’t already in a recession, we are definitely heading into one.
The reality is that inflation is still at a 40 year high, and interest rates are trending in a certain direction, which obviously affects the affordability of real estate across the board.
But ultimately, if you are here, then we can safely assume you love real estate. Here in the multifamily space, we know that you believe in the value of tangible assets, you desire to protect your wealth and grow alongside inflation, and you want to participate in the greatest wealth transfer in history.
If that’s not you, then you were probably looking for a Kitty with a “y” show and mistakenly came to ours, because here at the Kitti Sisters with a “i”, we love to buy real estate at a discount and now is the time.
Knowledge itself is power. 💡
One of our favorite actors Keanu Reeves said “You can’t stop the waves but you can learn to surf.” Now is the time to learn how to surf, economically and metaphorically speaking. Economic downturns are part of the natural economy, and for those who know how to use it, it can be a transformative life period.
To continue our water analogy, it’s like a roaring waterfall, either we let it flood our village, or we can create a way to capture it and turn it into electricity using dams or divert it for use in agriculture and sustenance. Either way, knowledge is power.
A few weeks ago, during a moment of brain fog, some fear and doubt crept in. We’re in the business of helping our passive investors make A LOT of money so you guys can sit back and enjoy the life you deserve, but with all the craziness happening, how can we make it work?
Don’t worry, after a nice boba break, we regained our lucidity. By the way, if you guys haven’t ever indulged in boba, you should definitely try it out – we aren’t saying it’s the healthiest treat, but sometimes a little sugary snack is just what you need to clear out a little brain fog. 😍😍
Think about the corporate giants Facebook (or Meta, or whatever they are called these days) and Uber – both of which were formed in the year 2008, during one of the biggest financial crises in history! That recession cost a lot of people their homes and was one of the hardest years we’ve endured as a nation.
But a crisis, even a national crisis, doesn’t mean all is lost. In fact, in 2020, We, The Kitti Sisters grew exponentially even in the midst of COVID-19. We went from acquiring $6.25M assets in 2020 to acquiring $80M alone in 2021. Not bad for one of the worst years for our country and really the world in general. ✨
Like it or not, we’re currently right in the middle of the biggest wealth separators in history. You see, in the current economy, there will be people who will come out of this as winners and who create generational wealth and unfortunately, there will be others who will lose a lot of money.
So what’s the difference between the people who will be making money right now in real estate and the people who aren’t?
One word: Knowledge! Quite simply, the know-how. 🤓🤓
Here’s a Kitti Sisters’ ninja tip: if you don’t have the knowledge right now, hang out with smart people who understand things you don’t pay attention to or don’t quite understand yet. Author and speaker James Clear calls this idea a keystone community, where every goal becomes more achievable when you hang out with people who are already achieving it.
When it comes to investing, you must:
- Invest with discipline
- Invest only in the right properties and market.
- Invest only with the RIGHT team, not with a pack of rabid hyenas chasing after any apartment deals indiscriminately. While we’re firm believers that wealth has the need for speed, this should never come at the cost of our passive investors
You might be thinking, this all sounds awesome, but how do I get started investing mindfully? Well, download our Ultimate Passive Income Guide to learn how.
There are different things happening through different economic cycles, but finding a way to pivot and making it work will make you become a better investor! Will Roger said “invest in inflation. It is the only thing going up.”
And we know that real estate likes to follow wherever inflation goes. 😵😵
If you believe that real estate will continue to go up in 10-20 years, then now it’s the time. Similarly, if you believe that high-interest rates will affect people’s ability to buy their own homes (so they have no other choice but to rent), then now is the time.
If you believe by acquiring an asset with an assumable fixed interest rate that is in the mid 3.48%, with a longer-term loan (think 5-10 years left on the loan term), in exceptional markets makes sense in any economic cycle, then now is the time.
👉 We are seeing new interest rate quotes around 7-7.50%.
If you are able to assume a loan that is changing, for example, 3.48%, how much lower will your monthly mortgage be? It’s half right?
If you love getting massive discounts on a property’s purchase price, then now is the time! If you believe even in today’s economy there are sub-markets that are crushing it with cash flow and appreciation, then now is the time to invest.
This means you’ll be more likely to continue cash flow distribution without any fear that the current interest rate will kill your cash reserves. Your property will maintain a healthy balance sheet and will be able to operate brilliantly.
Essentially, this strategy de-risks the investment because it takes out the variables that can tank any apartment investments right now – the high variable interest rate on short term loans. 🙏
So what are our major pivots in today’s market?
1️⃣ First of all, we’ve widened our field of vision and stopped fixating on only investing in the common markets we always have invested in. As Ralph Walden Emersen so famously stated, “do not go where the path may lead, go instead where there is no path and leave a trail.”
2️⃣ Second, focus on a disciplined investment approach. Forging new trails doesn’t mean abandoning all your discipline. We still need to invest in landlord and business friendly states that have no rent control, a strong population, job growth, and high median household income. This just means you open up to new possibilities.
When we were younger, we hated eating cheese 🧀 of all types. This was probably because as immigrants, our first exposure to cheese was super processed and that ruined cheese for us for years. It wasn’t until freshman year of college that our world was opened up and we learned there are so many delicious cheese options: parmesan, gouda, blue cheese, etc. Where had these been all our lives? Always remember that the demographic and market strength criteria that you’ve set can be transferred to other markets that may just be less well known. You simply gouda try it.
3️⃣ Third, we make sure we always approach each investment from a conservative point of view.
Our business plan must be simple and straightforward.
We are always hyper-aware of their investor’s return expectations and they always aim to over-achieve rather than disappoint. For the Kitti Sisters, you know by now that we’ve reviewed hundreds of deals only to purchase three in 2021. This means we say a lot more NOs before we say yes to one. So make sure whomever you invest with has the same approach.
We already acknowledged that people make money in real estate when the market is up and when the market is down. The difference between people who will create generational wealth in this economic downturn and those who will lose out big is knowledge.
With knowledge comes confidence and with confidence comes execution. Believe in your investment criteria, believe in your market selection, believe in your conservative investment approach, and believe in your execution. 🙌
Investing in properties with discounted sales prices, below-market fixed interest rates, and long-term loan properties, de-risks your investment. There will be no market fluctuation that will tank cash flow. Those scary components have been taken off the table.
Isn’t this what we’ve been begging for, for the market to reset so that we can buy apartments on sale?
➡️ In the case of purchasing properties on loan assumptions, we get to have the best of both worlds, we get to take a time machine and go back to 2021 and buy a property at a fixed low-interest rate while buying it at 2022 lower purchase prices– we can’t think of a better scenario.
While you may not control the economy, you have power over your approach to growing your wealth, hedging against inflation, and handling your investment.
The difference in asking yourself the right questions is millions. Instead of asking, “Is now a good time to invest in real estate” you should ask “how or who can help make millions of dollars in real estate in the biggest wealth separator in history?” 😉😉
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