1399: Rents Rising, Housing Shortage, Jen Du Plessis, QM & Non-QM, & Lower Interest Rates

Once we did encounter some challenges because we are part of your network and because I have an investment counselor, I always felt like I had somewhere to go for an answer. I always felt like I had somebody with more experience than me that I could lean on. And if Sarah didn't know the answer, she got the answer.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You, you really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to episode 1399. 1399. Glad you could join me today as we are going to get a little insight into the mortgage market. Our guest today was an interview I recorded when I was on that Caribbean cruise. Oh maybe what was that about three, three weeks ago or so? Something like that we recorded from the cruise ship. And I think you'll like her insights. She's been really an industry veteran in the mortgage market. And it's Jen Duplessis, so she'll be here in a few minutes. But first I want to tell you. Well, I don't want to tell you anything. I want to congratulate you. Yes, you investors need a congratulations because I am looking at a headline right now talking about how rents just continue to rise. They continue to rise. They continue to rise. Up, up, up and away go the rents. And that means your income goes up. And what's interesting is a survey by Rent Cafe found that markets that There was a 3% increase and actually that was a slower pace than we've seen. It was the slowest increase in 18 months. So. And that's 3% and that ain't bad. That ain't bad. Now if you believe the official government inflation numbers that tells you inflation is 2% or even a little less sometimes and your rents are rising at 3%. Well, that ain't bad. But remember you've got hopefully that beautiful, beautiful, gorgeous mortgage and that mortgage is, is making you money because you're already getting paid to borrow money as we are on the verge of the lowest interest rates ever. Yeah, you heard me say that, right? I was reading another article just yesterday saying that they are predicting that we are. And it doesn't have to go very much lower for us to have this. We're on the verge of the lowest rates. We're. Well, ever. Yeah. Is that good enough for you? Pretty good. Pretty good. By the way, I want to remind you I profiled a book and I have not been able to book the author on the show yet. And I still want to get the author to come on the show. But I profiled a book last year on the podcast and shared some of it with you on the show. It was entitled debt the first 5,000 years. That was a fascinating book. And I really want to take another look back at that book because I was really, really fascinated by. When you look at the course of history and you look at the cost of money, and there really has always been a cost to money, right? Because if the lender loans you the money, well, what do they have? They can't use that money for something else. Right. They can't loan it to somebody else. They can't invest in something else. They can't buy any new toys for themselves or go on any vacations for themselves. You know, remember, lenders aren't always big banks. Sometimes they're people like your humble host. I'm a lender. I lend money, lots of money. In fact, I just got a loan repayment to one of my companies the other day for like 373,000 bucks. And, you know, I had loaned that money out on a hard money loan, you know, paid me some nice interest on it. Nowhere near as good as being a real estate owner, but it is my second choice. You know, the hard money lending ain't bad, but it's not as good as the actual property, obviously, because with the lending, you don't get that beautiful multidimensional return on investment. And you don't get to be a borrower when you're a lender. Well, sometimes you do. That's actually the business banks are in, right, Jason? Yes, yes. That is their business, sort of. I mean, it's all been watered down nowadays with the Federal Reserve System and such. But the idea, at least in concept of a bank, is that they take deposits. Those deposits are a liability for the bank, and they make loans, and those loans are an asset for the bank. Remember, the balance sheet of a bank is the opposite of your personal balance sheet, because normally you would consider a loan a liability. And money in the bank, an asset bank, looks at that the opposite way that we do. Right. What do they do? They make a margin between the money on deposit that they pay a lower interest rate on and the money lent out that they charge a higher interest rate for. Right. I know this is called advanced education here, folks. Yes. I'm sure you understood this when you were in elementary school. So forgive me, forgive me, but of course, it's all become much more watered down in the days of fractional reserve banking or fractional reserve lending. It's referred to both ways. And the era of the Federal Reserve and the repo market and auction rate securities and the overnight lending rate and all this blah, it's all just super complicated, and very few people can really truly understand it. I don't really truly understand it myself. I will be the first to admit. In fact, I think it was one of the creators of the Federal Reserve, or maybe it was one of the Rothschild family members is quoted as saying that not one person in a thousand can understand our monetary system or something like that. It is truly complicated. And when I had my favorite financial writer on this very show come a couple of years ago, Bill Bonner, head of Agora Financial, who's an extremely wealthy guy and a very smart one, he's, I think, the best financial writer. He said just maybe he was just being humble. At the end of the interview, he said, you know, I don't even understand this stuff. And I'm like, well, you certainly understand it a lot better than I do. But, yeah, you know, you get paid to borrow. And we demonstrated that when Rabbi Evan Moffek, our client, was on the show a week ago or so, you know, he just got that loan on a property he bought through our network at 3.5%. So inflation, taxes, you can just sit on that property, never rent it out even once, and you're still getting paid to borrow the money. That is a pretty darn phenomenal deal. But let's look at the rents in some of these markets. Okay, so the most expensive markets for apartments, if you want to rent an apartment or you own an apartment, there's a. Where do you think you're going to charge the highest rent, by the way? It's an easy guess. You can probably guess this. You probably already are thinking it in your head, because you're probably thinking of a Big Apple. Yes. Bite into that Big Apple. That's New York City. Very overrated place if you ask me. I mean, I love to visit New York, but living there. Nah, no thanks. So 4200 bucks a month it'll cost you in New York to rent an apartment or it'll cost you. I'm going to venture to be a landlord in New York. Let's look at it that way. Let's not look at it from the renter's side, let's look at it from the landlord's side. I venture to be a landlord in New York. It'll cost you $5,800 a month, while being a tenant only costs you $4,200 a month. Why do I say this and how do I know that that math is correct? Well, I'm guessing, okay, it's a guesstimate. But here's how I arrived at it. I think it costs you $5,800 a month to be a landlord of that apartment that you rent for $4,200 a month in New York. Some of you know what I'm going to say, don't you? I think you're on to me because I think that apartment in New York, if it were for sale, I'm just guessing here, would probably be valued at right around 1 million bucks. And for a million dollars, you should be getting about how much rent? 1% you say, right somewhere around there, that would be $10,000 a month. So literally, by being a landlord in New York and renting this very apartment, or an apartment like it, it is costing you $5,800 a month. Because just like that example I gave you of the lender loaning the money, right, they have an opportunity cost. So does the landlord in New York City, okay? Because that landlord has tied that money up and they can't buy another property. They can't buy ten $100,000 single family homes in three diverse markets@jason hartman.com and by the way, be sure you're subscribing to our property cast. So these property Performas are delivered right, right to your smartphone or right to your computer, right as they become available. They're just delivered all the time to you. They can't go there and buy one of those properties or 10 of them for the same million dollars and earn $5,800 more a month. So being a landlord in New York City, regardless of rent control, intrusive government, high taxes, massive amount of regulations, blah, blah, blah, unionized apartment buildings where you gotta deal with unions. Gosh, that's to. Okay, so it's going to cost you about 5,800 bucks a month to be a landlord in New York City, okay? And plus, prices have been declining so that makes it even worse. But I'm just talking cash flow. Where were the lowest rents? The lowest rents were in Wichita, Kansas. Yes. Dorothy said we're not in Kansas anymore. Right. And they were only $662. Now, how much is that property that rents for $662? Well, it's a cheap apartment. We know that. And I'll venture to guess that a cheap apartment in Wichita, Kansas is probably about 50 grand a unit. And you're getting 662amonth. That's more than 1%. Yeah. So there you go. You get paid to be a landlord in Kansas and you pay to be a landlord in New York. I'm. I know it's counterintuitive. And if you're new to the show and you're just listening to this for the first time, and you probably don't know what I'm talking about, so be sure to check out my other podcast. That is a Quick Start podcast that will teach you the fundamentals of real estate investing. Listen to that one concurrently as you listen to this one and you'll get the fundamentals on Jason Hartman Quickstart, whatever podcast platform you're on, itunes, stitcher, radio, whatever. Type in Jason Hartman Quick Start and get the basic fundamentals there and then get some of the news and the more advanced techniques here on this show. So that's just kind of interesting, isn't it? So according to yardi matrix, about 1.5 million units, housing units were delivered over the last five years. And they say they expect to see 300,000 more delivered this year. All right, we still have a giant housing shortage. Now, you may drive around some American cities, or really most any city around the world, and think the national bird of America is the construction crane. Certainly it's been that way in China for a long time because there's a lot of development going on. But it's not enough. It is not enough because guess what else is going on. There's a lot of population growth that's been going on for a while now. When you talk about population growth, of course you have to lag it. Right? You have to lag it. And what I mean by that is you have to go back, you know, 25 years, give or take, because that might be the average age that someone moves into the housing market. They're going to be 25 years old. So the question is not what happened five years ago, because the five year olds, well, they're usually hopefully living at home with their folks. But the 25 year olds. Well, hey, you know what, they're probably living at home with their folks, too, in a basement, eating pizza, surfing the Internet all day and playing video games. Okay, so we know that. But hopefully by the time they're 30, they will get out of the house and leave the nest. So hopefully that'll happen. So you have to always lag population growth. Now, a reminder. What is the highest earning and spending time of someone's life when they're moving through that economy like a bulge and a snake, if you've ever seen a snake eat a, eat a rat or something. I have witnessed that in school, actually, of all places. Kind of gross. But hey, it's the, it's the way the wilderness works. So, you know, you see this big bubble moving through, and that's the population bubble. The demographic of the baby boomers or my little tiny humble generation Gen Xers with only half the amount of the baby boomers or the millennials that are about double my little generation size. When those, when you lag those people to when most of them are about 46 years old, okay, somewhere around there, they are spending the most money and they are also earning the most money. Okay? So they're earning and spending the most, you know, it's, those are slightly off, but just put it mid-40s, close enough for government work. And then you, you see the biggest impact on the economy, whether it be housing or many other parts of the economy at the same time. So just something to know, okay, I'm going to wrap up on this with. But to tell you that the largest rent increase was seen in a market that we've been in and out of a couple of times over the years, but it's way too expensive now. So we stopped recommending it years ago. But many of you, dear listeners and clients of ours have properties there that you have made a ton of money on. So congratulations. And next time you see me at one of our live conferences, feel free to pat me on the back. And that is Phoenix, Arizona. 8.3% rent increase in one year. Yep, 8.3% rent increase. Wow, that is nothing short of phenomenal. But that doesn't mean you should run to buy in Phoenix now because it's too expensive. Okay? So without further ado, let's get to our guest. Let's talk to Jen Duplessis for properties. For additional information to reach out to our Investment Counselor, Jason hartman.com 1-800-hartman Call us on the phone or reach out@jasonhartman.com and here is our guest as we Talk about the mortgage market. It's my pleasure to welcome genduplesses to the show, gentlemen. She is a leading mortgage industry trainer and of course was a broker in the past and has some good insights on the economy and where the market's going. And we are sitting on a cruise ship right now, which is kind of neat.

It is.

I have done some shows from cruise ships before and it's just a good way to knock out a few podcasts while we're here. Right? Yeah. So welcome Jen, how are you?

Thank you. I'm so happy to be here. No, I'm doing great. I'm doing great.

Good stuff. So what is your take on what's going on in the economy? There's so much happening, namely there's a lot of talk about the privatization of the government sponsored entities or GSEs or enterprises. Fannie Mae, Freddie Mac, namely even Sallie Mae. There's been some talk about that one too. And you know, that could really change the mortgage market. It's interesting. Since the Great Depression, the mortgage market in the US has always been sort of subsidized by the government and that really has made for some great opportunities for real estate investors. Do you think this will happen? What's your take on this? It's a pretty big deal.

Yeah, I know it's a big deal, but I don't think it's going to happen. I mean, I've been around the block several years and you know, I just don't think that, that the market's going to be able to hold it and sustain it. I think there's two too much concern about risk still. I mean a lot of people have forgotten about our Great Depression. I mean, you know, I mean, recession, our Great Recession and. But I think that lenders are still very risk adverse. The compliance component is horrendous right now and Fannie and Freddie is what keeps everything in line. And I just feel that, that that could be detrimental to the whole concept of, you know, what's happening with, with the compliance, etc. So.

But I mean in the last 10 years, coming out of the Great Recession, I mean, I think, and I think a lot of people, you might agree that the banks have really overcorrected. They've been so conservative. I mean this is not like the next recession that occurs is not going to be a subprime mortgage meltdown question. Right. So why would they be afraid of risk? I mean I. Underwriting seems pretty solid, doesn't it?

Yeah, well, they, you know, it's like anything with A pendulum. Right. There was an overcorrection, but they've already swung back. And so I don't know that a lot of people know that we've swung back. And so the market's really opened up in non qm. So for those that don't really understand that, you know, how does it say quantitative easing and stuff? Not qe, that's causing problems.

So what's QM though?

Yeah, non qm, it's a qualifying mortgage. So what happened was during the credit debacle, Fannie and Freddie, I mean actually the government came out with Dodd Frank and said this is how mortgages, they have to meet this criteria in order to be safe harbored, you know, in order for the mortgage companies to be able to be supported.

The 2200 page bill or whatever it is that nobody understands.

Yeah, we're going to pass it and we'll read it later.

Okay, Nancy Pelosi, that's not like the health care thing.

There we go. And so that happened. And so QM came in and then immediately after that we had some non qm, which means it's a non qualified mortgage. So it doesn't fit the criteria. And especially for investors that are listening, there's a lot of criteria that investors have to abide by. And if you don't abide by that, you're kind of kicked to the street and go, good, you know, good luck, go get a mortgage. So what was happening is investors were kicked to banks and getting true commercial loans on single family residential homes because then it fits criteria. So in comes non qm. Now what's happened with non QM over the last four or five years is that it's grown tremendously. It is securitized because it came out as being, well, if it's not QM and it is, you know, it's not a QM loan and it's a non QM loan, then isn't that subprime? No, it's not subprime because they're all being securitized.

So before we go on too deeply into this, Jen, the qm, the qualified mortgages, would those be considered the agency loans, the strict Fannie Freddie loans? Then there's the non QM and who's making non QM loans?

Yeah, so non QM loans are by individual private mortgage companies and some banking institutions that are taking on, you know, now that it has been securitized, the banks are now starting to hop on board and say, okay, well we can take on the risk of, of non qm. Whereas before we didn't feel like we could do that. So. So imagine if I bring it down to the, to the nth degree. You know, you have a million dollars that you want to lend out of money, right? And you close, let's say it's, you know, four loans, right? You close four, or let's make it five loans at 200,000. You close five loans at $200,000, you've now sucked up your million dollars. When you as a bank, it's an institution, then take that to Fannie and Freddie.

And they say they're only gonna buy the QM loans though, right? Or are they gonna buy non QM too?

No, no, they're not buying non qm. So that's the point here, is that. So if they. So you send the loan to them and you say, hey, look, we underwrote this loan to all of the QM requirements. You know, with perfect credit score, perfect assets, perfect debt to income ratio. Fannie and Freddie will buy those loans and you will get your million dollars back so that you can then do more loans.

Right. Keep the machine going. You can sell them off the line and do that. So that's the qm. But there's been, you know what's really great is that it used to be you either had an agency loan, a Fannie Mae Freddie Mac loan, or hard money, and there was really nothing in between. Yeah, I mean, there were commercial loans. Right. But people weren't doing those, at least not that I can recall. You know, before the Great Recession. On single family homes.

Yeah. You mean commercial loans on.

Yeah, you know, that they might get due to do an apartment complex or a shopping cent.

They were actually doing them on single family homes because it's considered a commercial loan if you don't meet the criteria of Fannie, Freddie, fha, if you're an investor anyway. So once you had more than 10 financed properties, you had to get a commercial loan on a residential.

Right, That I know, but I'm talking pre Great Recession when you could go get 200 Fannie Freddie loans.

You couldn't. No, you couldn't do that. You actually couldn't do that. There was always a cap from Fannie and Freddie on the number of stuff of loans that you could have and not on the number of properties you could own, but the number of loans that you could have.

Well, I remember coming out of the Great Recession, it was. They capped it really tight at four loans. There were four finance properties for a while, then it went up to 10 per spouse. So if both can Qualify, then you can get 20 total in your family. But before the Great Recession, people were doing way more than that. I mean they were getting a lot more.

Yeah, actually they weren't. I mean, I've been in the business for 35 years and when you went to a traditional lender, that's all you could ever do, especially Fannie Mae was four finance properties period, in a story. Now there was alternative lending. So if you went to like Wells Fargo, for example, they'd send a lion's share of their business to Fannie and Freddie fha. But then they would shelf a loan, they would do a portfolio loan.

Right. Portfolio loans have always been.

Yeah, and that may be what you're thinking because they actually didn't securitize those until after they had a seasoning so they could sell and then say that's what they were.

So, so they'd allow them to season so they could say they were performing loans for a certain amount of time. And then the secondary market, some secondary market buyer was out.

Fannie and Freddie were willing to buy it after a year of seasoning even.

If it didn't meet the rules. So it was a one year of seasoning requirement.

Okay.

And there was a lot of that. But now this whole segment of this what I'll call middle market has just blossomed and the rates really are not bad. I mean they're not incredible like Fannie, Freddie, but they're pretty good.

Yeah, they're actually really good. You know, it used to be and really pre recession for the Great Recession, we, you know, we had a paper, we had alt a alternative A where you had a situational lending and then we had subprime, you know, so it kind of went in that order. And then obviously on private money, if you couldn't even get subprime, so went into that. When everything collapsed, all we had was qm. All we had was a paper. Everything else was gone. Altay was gone. You wouldn't find a bank that would do a portfolio loan to save their lives. And so what I was saying before, you know, about selling on the secondary market and being able to recoup your cash, so many banks had said, well, if I, if I sell, if I can't sell the loans, then I have to have a lot of capital to be able to continue to do business. And it just wasn't there. So what's happened over the last few years with the non QM is that it's become securitized on the secondary market in Wall street and that's Allowed everyone to say well heck if it's securitized and I don't have to hold it on my books, I'll take more risk. And that's been absolutely beautiful. And you know, here's why it's so.

So there's a lot more money out there to finance properties. More than 10 properties per person. Way more. The rates aren't quite as good but they're not bad. The length of loan. Some of them even go up to 30 years fixed. I believe there's a lot that do 10 and 20 year fix type area and certainly you know seven and then they go adjustable after that. But. But the products are pretty good.

Yeah, they're actually really really good. And I'm actually finding it beyond that space because I also, you know when I was originating I was a master at investor loans, investor financing. So yes, the beginning wannabe, I wanna be an investor. We'd go Fannie and Freddie if it could and then you know all the way to non securitized. Really Crowdfunding of, you know, residential. As long as it was non owner occupied it wasn't subject to any criteria. Those now are 30 year loans, you know so now they aren't with the traditional was they were going to be flips, right. They were going to be fixing flips renos. Now they're buying holds on that long period of time as well. So I think that you know that's opened up and I think the biggest thing thing is when we had, when this pendulum swung and it swung all one way. We have to remember that what drives our economy is entrepreneurship. Self employed businesses that could, you know, could move their money and they needed this money. They were the ones who were in the mid to high tier homes. I mean you could still get a fan FHA loan with horrible credit right after the crisis. But these are the things. This particular group was the one that was going to move us forward. Forward. And it was stunted. It was, nothing was happening. So the non QM came out so that we could do bank statement loans. Again the difference this time they used.

To call those liars loans or sort of. But what's the distinction?

Lena's and no income verifications. Yeah, all those crazy things.

No income.

No income, no assets.

Yeah, yeah. It's just no questions asked.

Right, right. And so now they're bank statement loans with good quality credit and good down payment. So there's, there's skin in the game. Right. And so if you think about that old game you used to play about layering your hands you know, that's all kind of gone away. But this opened up the market for small businesses to get residential home loans.

Okay, so when you say that, I, I'm not sure what you're referring to. Are you referring to the fact that a small business owner has a home or some investment properties and they're refinancing them to pull cash out to use in their business? Is that what you're talking about? Or you're talking about business financing?

No, I'm, no, I'm talking about them to refinance their homes for whatever reason because now they have growth equity. You know, they have equity growth and it's all trapped in their house and they can't get a loan because it's qm, qmqm. And so they needed to release.

Now they can.

Now they can. Now they can. And that opened up the marketplace because now maybe they grew out of their home over that period of time. Right. They grew out of their home and they want to buy a new bigger house. But there wasn't any financing for them to do that because traditionally with, with self employed individuals, their tax returns aren't going to support a traditional Fannie and Freddie loan.

Right, that's another reason you were referring to self employed. Okay, I got it.

Got it.

Okay, so let's, we'll try and visualize this for our listeners. Okay. You mentioned the pendulum. A lot of people use that metaphor. I certainly do. In 2003, 2004, 2005, the pendulum was way at one end. The loans I used to show screenshots in my PowerPoint presentations at my live conferences from lenders, namely Countrywide, mostly that would say one day out of bankruptcy, one day out of foreclosure. 540 FICO score, which is low, by the way. Very low. Yeah, you could get a 95% loan. I mean, it was just stupid money. Stupid money. So the pendulum was too far to one direction then. And obviously we had a mortgage crisis. Okay, where is the pendulum now?

I would say so let's just use left and right. Let's just say that the pendulum swung all the way to the left. Everybody cease and desist. You know, it was always clear over there, any kind of loan and went all the way to the right hand side. I would say we're now left of center.

Okay, so wait, where's the, is the right the liberal, stupid lending and the.

Left is the, the left would be the stupid lending swung all the way to the right. So let's get this right.

Okay.

Okay, let's get this right.

Okay.

And so we go all the way to the right. And now I would say we're left of center.

Okay.

We've come back not to center, but even to the way that says, how do we loosen up the markets? Right. And so there's so many opportunities and we have so much liquidity that we have so many private lenders out there. Right. And everyone's crowdfunding and doing all these wonderful things. So I actually think we're left to center as a whole in the lending space itself. I think we're getting to center if we can knock down some compliance walls that are preventing people from even wanting to engage. Right now the average mortgage company makes $457 per loan they originate. That's not much because it's all compliance written. They've had to hire so many people and there are so many fines for making, you know, for computer mistakes, not human mistakes, computer mistakes. They're not going to survive.

So, you know, Trump, when he was a candidate, he alluded to the idea that he was going to get rid of Dodd Frank. Okay. And Dodd Frank is really a stupid bill. Okay. But, you know, whatever. That's not worth arguing about. But is Dodd Frank going to go away? I mean, I think he's already weakened it a bit. I've definitely read some stuff about that, have not followed it closely. He sort of destroyed Obamacare effectively as a kind of. With an end run around, it wouldn't, you know, no, fine for not having your insurance. But what's the status of Dodd Frank?

Yeah, I think Dodd Frank is here to stay. I think, I think that we need it. It should have been there anyway. But there have been, there's been some loosening that happens under the covers and behind the scenes that the normal consumer is not going to see. And that's what I'm talking about is the, the compliance written that tells somebody you can't close your house because you forgot to sign a piece of paper digitally by midnight, those types of things are going to be going away because they have domino effect on people, you know, not being able to close tomorrow because I didn't sign something, then another.

Transaction can't close or. Yeah, a whole bunch of unintended consequences.

Yeah, yeah. And I think that's where it's at. And, you know, for the consumer, you know, my hope is that they understand this isn't a negligence on the part of a loan officer, a realtor, a title company, it's just what we have to do. Because the fear of getting a $2,000 fine on something that you're only earning $400 on. And so now these companies are going to close down.

Yeah, so that'll just make for less supply. That's what regulation always does. You know, it reduces the supply and increases the prices to consumers. The people they say they're trying to help hold debate there for sure. But interest rates, where are we going on rates? 20, 20? You know, the Fed has already said that they might cut rates three times this year. I mean, really, rates are very low. We're going to see them go down even more.

We are, we're going to see them go down even more. We still have a supply issue with homes. We still are, you know, we don't have enough housing for anybody. We have a big issue with that. So what you're going to see most likely during, because we're about ready to hit and we talk about gdp, right. And knowing when you're in a recession. We're, we're heading towards a recession right now.

And of course, the academic definition, of course, two consecutive quarters of declining gdp.

Right, right. And so I'm sitting here while we're on camera holding up two fingers for you.

We're not on camera. Yes, that's a visual.

Yeah, yeah, the visual. I'm sitting here holding up two fingers. But yeah, so we're, you know, we're heading to that. And of course you never know if you're in it until you know you're out of it. But this is probably going to be one of the longest recessions that we encounter. Now recessions can be good and they can be bad. Right. Quite frankly, all of us, if you lose your job, you're in a recession. If you, you know, you lose your house, you're in a recession. If a business loses a client, they're in a recession. But what, what's going to happen this, this next go around is that once we get into this recession, I believe we're going to have a 3/4 rate drop from where we're at right now. This is going to be the lowest rates we've ever seen in our lifetime. And listen, I've been in the business for 40 years and I've said that several times over the last eight, 10 years because rates went down to 3 and you know, 3 and 3, 8, etc. We are going to be three quarters lower than where we are right now on the day that we're doing this, which is January 23rd or 24th.

And we have a massive housing inventory shortage, especially in the lower end of the market. And there's literally in the last 10 years, almost nobody has built any workforce. Housing. I mean, almost. There's almost none built at all. And if rates go down more, I don't know. I know. I don't know what. I don't know what we're going to do. The builders have got to build some houses, some inexpensive houses. So we've got some music starting here.

It'll go away there. Yeah. So values are definitely going to go up. So that's a really good thing for us, you know, as investors. That's a great thing. So this is going to be prime time. And so it's sort of like get your ducks in a row so that you can take advantage. And unfortunately, people are going to lose jobs. Right. Because that's what GDP is. So people are going to lose jobs. So we're going to have foreclosures. We're going to have some of those. That's going to be to our benefit.

Well, okay, so let's just. Let's just talk about that a little bit. So when you say, well, the economy is due for a downturn, the question is always what will cause that? Right. Is it just the business cycle, which we're well overdue for a business cycle, obviously. It's certainly not a real estate debt crisis. Maybe it's a student loan debt crisis, maybe it's an auto loan debt crisis. I don't know. It's just very hard to tell.

And that's one of the challenges that I'm seeing with my colleagues is being able to actually predict when this is going to happen. So some are saying it'll happen this year, some are saying it'll happen in the next year, you know, like early 2021. The question is, are you, you know, are you ready for it? Are you, are you putting the things in place for the potential of another recession, whether you're going to be part of it or not, you know, gain from it or lose from it. You know, your point about, we just had Amazon decide that they were coming to Washington, D.C. you know, the big debacle of where's Amazon going to go? And they're coming to D.C. but to your point, absolutely no housing, no one can afford to come there and work to build the building that Amazon wants to build. Right. So there's no housing that's going to drive prices up. That's going to drive rentals up as well. But the issue is that we're not going to have. People aren't going to Be able to have those jobs, to be able to spend money at the store, to be able to spend money at restaurants. And then those businesses have the effect on it. And I think that that's where we're going to start seeing that happen. Will it happen in. In the Bible? I shouldn't say Bible, but the middle America, probably not.

Just like those properties are so inexpensive already. You know, they're, they're. That's what we like. We like those boring linear markets. You know, we don't invest in the cyclical markets and maybe some of the hybrids we do, but not that. Not the boring linear markets. Those are just nicely insulated from a downturn.

Thank God. Yeah, thank God. And I've got a bunch of those, too. But I also think that we're going to see pressure from the states that are now charging more for taxes. They're charging more businesses who are seeing.

People are voting with their feet.

Right. They're exiting major states and going to more inexpensive states. But I think that's going to have a shift there, too. So the biggest thing, the bottom line for people that are thinking about is investing is get your ducks in a row so that you can rock this recession. So you can benefit from this recession. Having all, you know, have your emergency fund, have your capital, if that's you want, get your finances in place.

That can always be a good opportunity to refi, you know, the refi till you die plan that I teach. Of course.

Yeah. And, you know, one of the strategies that my clients are using right now, my husband's still in the mortgage business, is we're refinancing and pulling equity out to position themselves to lower their expenses so that if the recession touches them, they're going to be in a better cash flow situation every month. But we're doing that with no cost refinances. So it's not costing any money. But we're yanking out the equity now before we have any issues, right?

Absolutely. Equity stripping. I'm a big fan of that.

Well, and that happened when we had the recession. You know, it was, I've got $100,000 equity, but now I don't have a job, I can't help you. So let's get it while you're good. So get your ducks in a row, get your emergency fund, figure out where you can reduce costs and then ride this tide of this recession. And if you have extra capital, buy, buy, buy.

Absolutely. Good stuff. Any questions? I haven't asked you just anything you want to share.

Oh, about anything. Just be patient. Be patient. When you're dealing with lenders, they're working out for your best interest. They are. They truly are. So real estate agents are looking out for your best interest. We're just working within the confines of the new system. And, you know, just be patient with them. Have a real strong relationship with people and don't go transactional because it's going to hurt you.

Jen, Give out your website.

Yeah, it's jennduplessis.com Jen, thanks for joining us. Thank you so much for having me. It was great.

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