WARNING: Another 2008 Housing Crash Or WORSE? (Housing Bubble Explained) | Jaspreet Singh

We assume that the reason why we're not successful is because we don't have the right tool set, when in reality for most people is we don't have the right mindset. It's not a tool set issue. It's a mindset issue that so many people have where if you have the right mindset, you'll realize that the tool set is right in front of you. Yeah. And you just got to.

I think you gotta have a dream.

The school of greatness, really. Yeah. Please welcome Lewis Howes.

So do you think there will be another kind of housing crash like there was in 2008? What do you think is happening right now? Where do you think it's going to be heading in the next year? I want to talk about the housing stuff for a little bit with you.

So that's a very good question. And the reason why is because there's a lot of scary stuff happening out there. Inflation is still near record highs.

What's it at right now?

Our Last report was 8.5%.

Do we think it's going to keep going up?

Well, is it stable? We'll get into inflation a little bit. We have our gdp, our economy, which is slowing down. We've seen two quarters of economic slowdown. Our market, stock market is way off its high now. Real estate is starting to slow down. Interest rates are starting to go up. And this has a lot of people wondering now what's going to happen to the housing market? Like you said, are we going to see a repeat of 2008? And the reason why that question is asked so much is because 2008 has really left a huge impact on so many people's lives. Because you have a lot of people that are still paying the price of the 2008 aftermaths today.

Really?

Yeah.

Because a lot of people took out loans and they had to, you know, they had to give up their home. They bought all these homes. Right. They had to foreclose on them and the banks.

Losing your home is not an easy thing to do. And that is traumatic for a lot of people. And that's something that's very difficult. It stays on your credit score for seven years. So this is what people are really worried about, is something like that going to happen again. And the first thing that I want to say, because there's a lot of headlines, a lot of news stuff in there, that this is not a repeater 2008. So let's understand that it's not because.

It'S not a housing bubble crisis like it was then.

Yes, it is not the same as 2008 because 2008 was a financial crisis started by the real estate market. Right.

It's funny because I just watched the Big Short a few weeks ago again. I love that beautiful movie. And to see like the analysis of people forecasting and no one believing because they're like, oh, the banks are going to like bail it out. But then it's crazy.

So 2008 was the real estate market that trickled down to the rest of the economy. This is more of an economic issue that could then trickle down into real estate. So it's very different.

Interesting. Which is why that was a real estate problem. This is an economics problem. Yeah, the economy problem, which could affect real estate in a big way.

So, you know, I think your readers, your viewers already know this, but I like to go backwards to understand where we're going forward.

Yes. Look at the history and see where the future is going to go.

History doesn't repeat itself, but it does rhyme.

I like that you said that last time. History doesn't repeat itself, but it rhymes.

So in 2008 or before 2008, what happened? Well, there was four major factors that led to the 2008 housing bubble bursting.

Okay.

The first was something called ninja loans. No income, no job, no asset loans. So you don't got an income, you don't got a job, you don't have any investments. You walk into the bank and you say, hey, I want to buy this $200,000 home. Can you help me? And they'll say, sure, you don't need a job. All homes keep going up. So we will give you the money. Then the next thing you say is, but I don't have money for a 20% down payment.

Give me 10%.

Well, no, they said zero percent.

Oh, in your first home it was like a zero percent.

You could go zero percent mortgages. So it was a boom of zero percent mortgages. But even beyond that there was this push for actually 110% LTV loans, meaning if you wanted to buy rough numbers, $100,000 home, not only would the bank give you the $100,000 that you need to zero down, they'd also cover your closing costs. They'd also give you some move in costs and then give you a free TV so you can move in. Because home prices never go down. See, the banks are in the business of making money. And their mind was the more money we lend out, the bigger commissions we get. And if home prices keep going up, well, we'll just give you A little bit extra cash and then a couple years down, home prices will go up and we'll be okay. So now you have no income, no job, no asset loans, ninja loans, 0% down. But what happens then if you don't have a good credit score? Well, that was where we had this huge subprime lending issue where banks created programs to help people who had bad credit scores, subprime credit scores that you could now qualify to get a home. So your subprime, your no income loans, no income, no job, no asset loans with zero down. But then you say, oof, that's a big monthly payment. I don't want to pay whatever $1,500 a month. And that was the fourth factor, which was adjustable rate mortgages. There was a big push for ARMs, adjustable rate mortgages, which meant that, let's just say typically that this home would cost $1,500 a month for you to purchase. You might not be able to afford that, or maybe you don't want to pay that. The bank might say, well, how about we give you a low teaser rate for the first few years. So you only have to pay $900 a month. So you get a low interest rate for the first few years.

So you can afford the house.

So you can afford the home. And now once you're in the home, it's your problem, it's no longer the banker's problem. Right. Because the mortgage agent, they just get paid as soon as you sign the paperwork and then they walk away. So now you get this low teaser rate. And there's two aspects to this because now you who is buying the home, you don't have that financial education because it's a tool without the financial education where now you don't understand how an adjustable rate mortgage works. You don't understand that in a few years, mortgage is doubling, it's going to readjust. And so if mortgage rates go up, or even if they don't go up and they stay the same, your payments are going to increase. And so all these things happen together. And everybody was making a ton of money. Homeowners are making money because now you bought a home for $200,000 and now it's worth $250,000. You feel great. Bankers are making money because they're lending out loans. They're handing out loans like crazy. Wall street is making money because then the extra factor was in. Wall street would take these loans, chop them up, package them up into their own investments and sell them off. And then you saw the short, they're.

Talking about packaging all these B loans, making them A loans or whatever.

Exactly. And then the insurance companies got involved. So it just kept getting bigger and bigger and bigger. So everybody's making a ton of money off of the real estate market. It's no big deal. And then comes the year 2005. 2005 came. This was the first year that there was concerns about the housing market. Ben Bernanke, who was then the chairman of the Federal Reserve bank, came out openly and said, what real estate bubble? There is no real estate bubble to burst. Meaning how can there be a real estate bubble bursting? Because there is no real estate bubble. That was what he said in 2005. Well, 2006, we started to see home prices start to go down a little bit more. Now people are starting to get underwater on their homes. So the pitch was, if you took this adjustable rate mortgage, well, if in a few years you can't afford the payments, no big deal. You could just sell the home, walk away with some cash, or you can refinance and we'll try to give you something else. That way you can manage your payments. But the caveat, which many people did not understand or they didn't know, was that it requires your home to be worth more in the future, or at least the same. That way you can refinance. If you bought a home for $200,000, then comes a few years later and you're trying to refinance, and now you owe 190,000, but it's only worth $180,000, you go to the bank and you say, hey, banker, I can't afford the payments. They readjusted. You told me that I can refinance or sell. What do you think I should do? Well, then they say, oh, man. So I just pulled up the numbers. Your home is not going to sell for more than $180,000. So we're not going to refinance you because you're underwater. So you're going to have to figure something out on your own. Now, you can't sell it either, because if you wanted to sell your home for $180,000 and you owe 190,000, you need to bring $10,000 to the closing table, which most people in this situation did not have. So what are you left with? You can walk away or get foreclosed on. So this then became a much bigger issue because then we started to see some foreclosures. And this built a huge house of cards, which people didn't realize because now we're just Talking about the housing market. But this then became an everything issue because Wall street was then gambling on the housing market. Mortgage backed securities. There was all these things that we were talking about where now Wall street was double dipping, creating all these new investments based off of people's mortgages, creating all these. I mean, I can't emphasize enough how many different investment scenarios and things that they created. And so now when the base layer, which is the housing market started to collapse, the whole house of cards started to fall down. And I'm going to say this now because I think we're going to talk about this later on. But this is where you have to be financially educated and be aware because sometimes the media and people in power will lie to you in your face to keep you calm. Because if I remember the date correctly, I believe it was May 17, 2007. Big day. Because Ben Bernanke, the then chairman of the Federal Reserve bank, who remember in 2005, said two years prior, two years prior, said there's no housing bubble that could burst, came out and said that the subprime housing issue will not trickle down to any other parts of the economy. It is contained to the housing market. So you don't need to worry about the economy. He said that openly in 2007.

And then a year later, then a.

Year later the whole thing imploded, crumbled. The whole house of cards came crumbling down. So now that was what caused 2008. It was a real estate issue, then trickled down into the rest of the economy. Today our real estate market is very different. People have equity in their homes. Very few people are buying homes with 0% down. Nothing like 2008. Adjustable rate mortgages are not as popular, although they are growing in popularity now because mortgage rates are going up. Adjustable rate mortgages are making a big comeback, but they're not out there to the extent that they were before 2008. We don't have the same subprime lending. And so it's a very different housing market. People have equity in their homes, people have skin in the game. And many people have a 30 year fixed rate mortgage. Meaning if interest rates go up and you have a 30 year fixed rate mortgage, it doesn't affect you as long as you still have a job because your job can continue paying off that the mortgage. So different situation. However, this is where now we have to look at the economic issues. Because if you lose your job because the economy is going down now, you can't pay your mortgage. And if that happens on a broad scale, where People don't have the ability to pay their mortgages. Now you can see how that would then trickle down into the housing market. So that is the concern. And this is where you have to dissect what's actually happening in the economy. Now, of course nobody can predict what's going to happen and I do not recommend anybody trying to trade what could potentially happen. Be an investor, look for opportunities. Be a long term investor. If you find a good opportunity, buy it and hold for the long term. Don't try to trade or try to predict what's going to happen in the market. What I want to talk about is what is possible. That way you can make sounder and better decisions for you and your money.

What do you think is the worst case scenario and the best case scenario?

So let's go right into that for.

The housing market over the next couple of years.

So I think if we go into the economy, if I answer the question the economy, it will by default answer the question in the housing market. So in the economy, it's a weird situation where our economy is slowing down because of high inflation. So 2020, 2021, the Federal Reserve bank.

And the economy pump all the money into the economy.

We print a lot of money. This devalues our dollar, causing the price of things to go up. So now your rent is more expensive, your groceries are more expensive, your gas is more expensive, the airfare is more expensive.

Why do they do that? Knowing the price? Everything's going to go up in price.

See, you said knowing they will go up in price. Right. In 2020, they said the opposite. When they were printing trillions of dollars through things like the PPP lending program, through the stimulus program. The concern was not inflation, it was actually deflation. Because in 2020, when the economy shut down, the concern was the prices of things are going to drop. We don't want that to happen because.

No one's spending enough.

Is that why or no one is spending. And so deflation is a very bad thing for the government. It's great for. Because now you're saving something valuable. If you make 50 grand a year and you have deflation, your 50 grand can buy you a whole lot more because the price of things drop. But it's bad for the government because today our government has something like $31 trillion worth of national debt. And so if deflation were to happen, that means their debt, their 31 or so trillion dollars is now more expensive and so the payments become more expensive.

So we're paying for their mistakes. Yes, the American People are paying then for the debts of the government?

Yes. The United States government does not make money. They generate revenue by taxing you when.

You work hard and they print money.

They print money and then you pay the price. Inflation. So the government. There's no such thing as free money. The most expensive kind of money is free money because now look at the cost. Now it is everybody that pays through inflation. So free money is the most expensive kind of money. And so in 2020, when the concern was deflation, they started printing money through stimulus programs, through bailout programs, through money printing programs to fund out, you know, whatever they wanted to do. That was when the money printer opened up. And you said they knew inflation was going to happen. No, they did not.

How can they not predict that, though? Knowing that you're going to give all this free money out isn't inflation.

Okay, let me, let me rephrase that. Either they willingly lied to the American people or they're just completely ignorant. But these are some of the smartest people in the world. I mean, they're Ivy League economic schools, right? I mean, these are very supposedly smart people who said that this was going to happen. Now, what's interesting is a lot of people predicted this. Like, I talked about this very openly on YouTube. I said, look, this is what's going to happen. 2021 came. Inflation is transitory was the, like the phrase where inflation started to go up. And I kept saying, hey, don't expect it to be transitory because the Federal Reserve bank doesn't have some fairy dust to make inflation magically come down.

Right.

How are they going to do that? They're still printing money. Inflation is going to get worse. And when inflation hit around 6% in August of 2021, it. That was slightly lower than where it was previously. And that was when they said, inflation has peaked. We're all good now. But now this is on its way down. Now it's at, it's at eight and a half percent. And so it was, it was quite. I mean, it was a long process. But this is where you have to understand that either they're lying or they're completely ignorant. And now we don't want to assume. I mean, you shouldn't want to assume that they're lying to you. And that's. That would create a lot of chaos. They're ignorant. So again, we want to be financially educated. Why is it that in. Actually, let me mention this because this is interesting. In 2007, when Ben Bernanke said the subprime market will not affect any other part of the economy. Did he not know any better? I mean, I think most people who were aware, financially aware at the time could have looked at a spreadsheet and said, hey, this is a big issue. Ben Bernanke actually spoke about that after he was done being a Federal Reserve. And he said that I was asked not to say anything because I could not incite panic. I didn't want to incite fear.

So that's what he said.

This is what he said. So he essentially lied, essentially, because they don't want to create panic. Now.

Keep spending the way you're spending, Keep living your lives. Don't worry, everything's gonna be okay. I mean, like, look, don't save a little bit more. Don't, you know, they're just like, I.

Know, you know, you got to be careful because I'm not trying to be a conspiracy, conspiracy theories, but like, look, the Federal Reserve bank are made up of highly educated people. To think that money printing, printing trillions and trillions and trillions of dollars. I mean, on the low end, with the Federal Reserve bank and government spending, on the extreme low end, it's $6 trillion. To think that that's not going to create lasting inflation is insane. And so either someone's lying or they're completely ignorant as to the way that money works. And so these are the things that I've been trying to Talk about on YouTube to get people educated. But this is where now the question is, what's next?

So what's the worst case scenario?

The worst case scenario, I mean, this is the worst, worst, worst case scenario is you face some sort of currency crisis, hyperinflation. I mean, that is not rare. Yeah. But let's focus in on now. What is the worst case, kind of likely in terms of the economy. So the inflation problem is still very high. And this high inflation is contributing to a slowing economy. Now the Federal Reserve bank is working to fight inflation. They're doing that through raising interest rates and they're doing something called quantitative tightening where they are pretty much giving back some of the money that they printed over the last few years. So they bought up a whole bunch of bonds, mortgage backed securities, they bought up a bunch of treasury bonds as a way to stimulate the economy. And so the Federal Reserve bank has built up this balance sheet of almost $9 trillion of assets. So the Federal Reserve bank doesn't have cash. Like they don't have a pile of cash anywhere. They had to print $9 trillion to buy out these assets over the last number of years. And now what they're doing is they are finally starting to sell them off. Now, they're not selling them off very quickly. They are selling them off a little bit slower than what they expected. But they are starting to sell them off now to help free up some of this inflation. The second thing that they're doing is raising interest rates, because when you raise interest rates, it makes borrowing money less attractive, which creates less inflation to help cool down the economy. The Federal Reserve bank wants a stock market crash. Really? The Federal Reserve bank wants real estate prices to go down.

Has the stock market crashed yet?

Well, it depends what you mean by crash. So if we go just by now, it's funny, I'm going to say technical definitions because nowadays technical definitions seems like they can change.

Yeah, yeah, it don't matter.

But traditionally the definition of a quote unquote crash would be something going into a bear market, meaning that the stock market has fallen 20% off of their highs. We saw that happen. And then we have also seen stock market rise since then. So the stock market is very volatile. It has gone down. And the Federal Reserve bank wants stock prices to go down. They want real estate prices to go down, and they also want unemployment to go up. They want some people to lose their jobs.

Why?

They want wages to go down. This is going to sound very bad, but they've also made this very public. So the reason why they want these things to go down is because it's a way to cool down the economy. That's why they are raising interest rates. So when the Federal Reserve bank raises interest rates, there's two things that they're looking at.

And when they're raising interest rates, they're doing that on the housing market or whether they're raising it.

So they're raising something called the federal funds rate, which is overnight lending. So essentially think of it as when you go and get a mortgage from the bank, you're buying something from the store, you're getting the retail price. The store, in this case the bank gets a wholesale price. They get a discounted price. Right. They're buying it in bulk. So the banks can borrow money at a cheaper rate and then they lend it out to you. So when banks have to pay a higher rate, then they're going to have to charge you a higher rate. Just like when stores have to pay a higher rate from their wholesaler manufacturer, they have to pay it more down to you. So when you buy from the bank, when you get a loan from the bank, it is the retail price. So The Federal Reserve bank does not affect.

How do you get the wholesale price?

That's the Federal Reserve Bank. So this is now the Federal Funds rate that the Federal Reserve bank controls.

Can an individual get it at wholesale? That's what I'm trying to figure out.

No, we cannot. So we get from the bank. Unless you are a bank, you're not going to be able to do that. So the Federal Reserve bank gets to control these things. And then they impact mortgage rates, which then impact spending. So when the Federal Reserve bank raises interest rates, so when the Federal Reserve bank raises interest rates, now you're going to have to pay a higher price to get a mortgage. Now that affects inflation, which can also affect the housing market. So the Federal Reserve bank is looking at two things. When they're determining what to do with interest rates, they're looking at inflation. And then they're looking at the general economy. When inflation is high, that's more fuel for the Federal Reserve bank to continue raising interest rates to fight inflation. But in order for that to happen, there's a second factor that they look at. They're looking at the economy. They're looking at things like unemployment rates. They're looking at the strength of the economy. Because if people have jobs, well, that means then we have a strong economy. So. So it's ammunition that the Federal Reserve bank is okay to go and keep raising interest rates. Because if it was flipped, where we have a super high unemployment rate, people don't have jobs, the economy is crashing.

You said the government wants that.

So the Federal Reserve Bank.

Federal Reserve bank wants people to lose their jobs.

They want people. They want a lower unemployment rate. Sorry? They want a higher unemployment rate, meaning they want some people to lose their jobs and they want wages to come down because that will help cool down inflation. And it's a very weird thing. You're going to go search it on Google because they have said this because you're going to think, Jasper, what the heck are you talking about? No, Jerome Powell has openly said this where the labor market is too tight, it's too strong, meaning too many people have jobs. They want wages to cool down. They've said this very openly where they.

Want people to be getting paid less.

Exactly. They don't want wages to keep rising at this rate because they're worried about something called the wage price spiral. I'll talk about that in just a second. So they don't want wages to keep rising. And on top of that, they're looking at this economic data, comparing it against inflation, and that's going to help drive their decision about interest rates. And so if people have jobs, wages keep rising. That means interest rates are going to keep going up. They're just going to keep going up and they're going to keep doing that until more people lose their jobs, until wages are going up, and then that will hopefully bring down inflation. Because now let's talk about this wage price spiral very briefly, because this was a big thing that happened in the 1970s into the early 1980s, where you made money, but you struggled to survive because inflation was high. So now you went to your boss and you said, hey, boss, I need more money. And your boss said, well, I don't want to lose you. So their boss paid you more. Even though you're not doing more, you're not producing more value, the boss is paying you more just because it's more expensive to survive. So now you're getting paid more money.

So the business has to go earn more. Somehow the business has high or they're losing margin.

Right. So now you have the money to go out and spend, but then the business then has to start charging more money because to their cost to the higher cost. Yeah. So now the price of things go up. Now the price of things go up. You go back to your boss and say, hey, look, the rage wasn't enough. I need another raise. Now it starts to create the spiral. And this is what the Federal Reserve bank wants to avoid by breaking that, by saying, we don't want wages to keep going up. We want to break this inflation thing because we want to raise interest rates to stop this whole inflation mess. And so one of the things they want to do is they want to see more people have lesser wages. They want to see a little bit higher unemployment. They want to see the stock market come down. They want to see real estate prices cool down, because that cools down inflation. Because that's their number one issue right now.

I guess the people will. I mean, it'll eventually happen because if employees are like, I need more and more money, and the company's like, we don't have any more money to give you, they're eventually going to leave or they're not going to be able to pay them and they're going to have to shut the business down.

Something has to break.

Something else. The business has shut down.

So what's going to break first? Is it going to be the housing market or is it going to be inflation? Is it going to be the stock market? Is it going to be inflation? Because the Federal Reserve bank is going to keep jacking up interest rates based off of the economy and inflation until inflation comes down or until the economy goes up or. So do you see what I'm saying? Like inflation is going to come down or the housing market is going to break, where now it's the Federal Reserve Bank. You have to look at their intentions. I know I'm kind of scattering around here because there's so many different aspects here. But the Federal Reserve bank today, and this can change today, says that their number one goal is to bring inflation down to 2%.

And it's at 8.

It's at 8 point some percent right.

Now they want to bring it down to 2.7 by when they haven't said.

That they want it as soon as possible.

And how high do you think it could go? What's the likely worst case scenario of how high it could go before it drops?

Let's talk about history, right? Because in the early 1980s, if you wanted to go and get a mortgage, you were paying upwards of 18 to 19% to get a mortgage.

Oh my gosh.

Today we're talking about five and a half to six percent on a fixed rate.

Thirty years, so still the lowest.

We're still historically extremely low. So a lot of room to grow. Now, if mortgage rates went from 6% to 10% next month, the housing market is going to crash. It's going to go down.

Costs are going to go way down.

There's no alternative because no one's going to be able to afford those homes because home prices are so high. And the reason why they're so high is because people have been able to borrow more money at a lower interest rate. And so this is where now it goes back to the question, what is going to break first? Is it going to be inflation or is it going to be the housing market? And you can replace housing market with stock market with crypto market with the economy. It doesn't matter. And this is the dilemma that the Federal Reserve bank is facing. And this is where their goal and what they say is we're going to have a quote, unquote soft landing where we're going to raise interest rates gradually enough where we can cool down inflation without crashing the housing market, without crashing the stock market, without creating too much of a problem. Like, they do think the housing market is going to go down. They do think that we need to see stock prices go down. They do think that we need to see unemployment go up slightly.

Wow.

That wage growth has to slow down. However, they don't think it's going to create a massive crash.

Right.

So that is what they're saying now the question is, what is going to actually happen? Right, because this is where what rhymes? History. Exactly. History rhyme. So this is where you want to pay attention now, obviously to what's happened in the past, but what's actually going on. And this is where now you can dive a little bit deeper into the data. Because now if you're looking at the housing market, you're going to say, okay, interest rates look like they're going to keep going up unless the Federal Reserve bank completely does a 180, which is also possible. That's why it's so hard to predict and why I do not Recommend Trading. Because 6 months from now the Federal Reserve bank could say, you know what? Inflation is no longer number one priority. It is the slowing economy. We're going to cut interest rates, we're going to pump money into the economy. You can see the stock market and real estate prices crash upwards. I mean, just think about this. If tomorrow, mortgage rates, what happened to.

The stock market in 2020?

Exactly.

They started printing. It's like everyone started buying and went up. Real estate went through the roof, especially in LA.

Think about if tomorrow mortgage rates went down to 2.5%, what would happen? Everyone and their moms are going to want to buy their home. They're going to say, oh, we were waiting, now we're going to go take advantage of this opportunity. We're not going to wait. And now home prices will go up.

There'S going to be no inventory or.

It'S the same issue. Right. And so this is where you have to understand that you cannot try to perfectly time or predict what's going to happen. But you can understand the different scenarios where the Federal Reserve bank today says that they want to bring interest rates up to bring inflation down. What is going to help them make that decision? Well, they're looking at inflation rates, they're looking at the economy, the economy, meaning our economic slowdown. And they're looking at unemployment rates. So the fact that today unemployment rates are, quote, unquote, extremely low or the lowest ever in 50 years. And the fact that our economy is not slowing down that much based on that, well, they have more ammunition to keep raising interest rates. Well, the more you raise interest rates, what's going to happen? The more the housing market gets hurt, the more the stock market gets hurt, the more the economy gets hurt. It's very obvious how it works in the real estate market because now you have to pay More money to buy a home. Well, it works the same way in the stock market and in business. You're a business and you want to go borrow money to finance operations, to finance growth, to buy some new machinery, you have to pay more money to do that. Well, if you're going to have to pay more money to do that, you need bigger returns. If you need bigger returns, you need to be able to sell more stuff. If you need to sell more stuff, you need more people that have money. The situation right now is people don't have that discretionary money because they're spending so much extra money on things like rent, groceries, gas. Gas prices have come down, but still significantly higher.

Right.

So this is the situation where the.

Route and rent inflation, rent seems like it's going up too, right.

Rents are about 20 to 22% higher now than where they were a year ago. Housing costs around the usa, around the United States, on average. Right. In some instances, some serities, it's more. Some cities it's less. And this is where you just have to, I mean, understand, these are the options. And this is where people start to panic. They start to freak out and they assume that I need to make a rash decision today because, oh my God, this is going to happen. I need to need to sell my home, I need to buy a home. I need to do this, I need to do that, because this and this might happen, but something else could happen. So you don't want to make rash decisions. This is where you want to understand what's going on. Take a deep breath, calm down, and first understand that the real estate market, if you're focusing on that, moves much slower than the stock market moves slower. It moves slower and that nothing happens overnight. Right? So you want to be aware of what's happening. And to give you an example of that, when the 2008 crash happened, stock prices collapsed in 2008 and they bottomed in 2009. So in 2009, the stock market started to go back up. Real estate prices really started to get hard in 2008. They continued to go down in 2009, it continued to go down in 2010. Really, it continued to go down 2011, and then they bottomed in 2012.

Took four years.

Four years. So real estate prices bottomed in 2012, and in 2012, the stock market started hitting new highs. So the real estate market moves significantly slower than the stock market because you can't buy and sell a home the way you can buy and sell a stock.

Takes more time.

You can buy and Sell a stock in a second. So people get emotional, they get excited, they get scared, they panic. Whatever the emotion is, you can do that in a second. And that can cause massive swings up and down in the stock market versus the real estate market. It could take months to sell a home, maybe even a year. And so it moves significantly slower. And that's what you have to understand about the real estate market.

So we're starting to see. It seems like prices are going down, you know, in the real estate market at least I'm seeing if I go on Zillow in la, because I'm just curious about the market. You'll see homes that were up there for a few months and now they're cutting prices. You see homes that have been there for three, six, seven months now. Yeah. That aren't moving. So now they're dropping the price because they don't want to keep paying the mortgage on something. They're not going to live in it. And we're starting to see it happen a little bit. So if history is rhyming and the stock market's been kind of crashing, it seems like for the last whatever, six to something months now, is this now? Okay, we're seeing this a little bit and it's going to keep going as we go into the next year or what could history teach us about potentially what could happen now?

So you want to keep your eye on the Federal Reserve bank and you want to keep your eye on the economy.

If inflation keeps going up, if inflation.

Keeps going up, or rather if the Federal Reserve bank keeps raising interest rates, that is the better indicator that you want to keep your eye on. Because if they keep raising interest rates, that means mortgage rates are going to keep going up, which will make housing more expensive. So I'll give you a quick example. If in the end of 2021, you wanted to buy a half a million dollar home, you could put down 20%, which is $100,000, meaning you would borrow $400,000. Now you could borrow that $400,000 at 2.8% for a 30 year fixed rate mortgage in 2021. And so your monthly payments would be like $1,650 a month for that half a million dollar home. If now, today you wanted to buy the exact same home with no modifications, no upgrade, it's not going to cost you $500,000. It's going to cost you about 20% more, which is about $600,000. So now if you put down the same 20%, you're not putting down 100 grand, you're burning down $120,000, which means you're no longer financing 400,000. You're financing $480,000. Now. Back then you were able to finance the 400,000 at 2.8%. Today you're going to finance that $480,000, close to 6% on a fixed rate 30 year mortgage. So you're borrowing more dollars at a higher interest rate. Back then, it cost you $1,650 a month. Today it's going to cost you about 2,850amonth to borrow the $480,000 for the exact same home. So you went from paying $1,650 a month to $2,850 a month, which is about a 70% increase in monthly costs on the exact same home, assuming no modifications, no upgrades. That's kind of unsustainable unless there's more money coming into the markets, unless you keep having a way for people to keep affording that. And this is driving the issue now is how much higher can it go? Because if you keep raising interest rates, what's going to happen? Your cost to buy the home are going to keep going up. So unless you have a 70% raise in your monthly salary, it's going to be much harder for you to afford that higher cost to buy that home. So that's the situation that we're in right now. And like you were saying, it's driving this kind of shift in the housing market where you have a lot of people who want to buy a home saying, I can't really afford the same home anymore. I don't want to live smaller, so I'll just keep the same house that I'm in right now. I'll keep renting, I won't sell, I won't move because I don't want to pay this higher price. And this is where, you know, the question is, again, what's going to happen next if we keep raising interest rates and the monthly cost keeps going up? Well, it's going to become more expensive. And that 2,850 that I mentioned, it also does not factor in the higher property taxes you have to pay and the higher insurance because your property taxes are based on the value of your home. So when you're buying a $600,000 home versus a $500,000 home, more near the property tax, yeah, you have higher property taxes, you're insuring a more expensive property. So your cost to own this home are significant. I mean, almost Double what they were a year ago, month to month. And that's where it becomes, I mean it's, it's, it's not rocket science to see why less people can buy homes today than they could a year ago just because the cost to buy a home has gone up so much.

So who is it the right time to buy a home for? Well, is it the right time for anyone?

Yes. Look, okay, if you want. Now we got to understand now, are you buying the home as an investment or are you buying the home to live in? Because those are two different things and a lot of people get this confused and I'm gonna explain why I really want to get into that. Because that's one of the biggest misconceptions in America. I would say when you buy a home for yourself to live in, we're told it's the biggest investment of your life. So go big.

It's not a good investment for a lot of people.

It is not. You should buy a home because you want to create memories there lifestyle environment. Exactly. And because you can afford it, you should not be trying to time the market with the home that you want to create members in. The biggest thing is going to be can you afford the home and do you want to live there? Now to answer that question of can you afford it, there's three different things you want to ask yourself. Can you afford the down payment, can you afford the monthly payment and can you afford the move in costs? Because that gets overlooked a lot. Because now when you want to move into this home, furniture, moving, all this stuff. Exactly. First you have the closing costs and then it's the cost of furniture, the cost to move in. And then when you want to move in, you got to upgrade. Right. Because now you want to have a nicer kitchen, you want to finish the basement, you want to have the new appliances. And furniture is not cheap. And so you want to make sure you factor that in before you can move. Now if you can afford the down payment, you can afford the monthly payment and you can afford the move in costs and you find a home that fits your needs, go out, buy it, get a 30 year fixed rate mortgage, don't worry about it. Because now you can afford it. If interest rates go down, just refinance, get the lower monthly payments, don't stress about it. Right.

Because you can refinance in a couple years.

If interest rates go down, you can always refinance because you know if you're trying to time the interest rate market, you never know what's going to Happen, just refinance if they go down. So that's the main thing. You need to know that if you want to buy a home, don't try to time the market. If you can afford it, hey, go out and buy it. You know, everyone's saying, well, what if home prices crash? Then I can buy then, sure. But what if they don't? What if they go up by 20%?

Waiting and timing. Yeah.

So you know it's the same thing, right? When you talk about investing your money in any asset, stocks, the best advice is time in the market beats timing the market. This is what every fundamental investor says. So now, if you're trying to buy a home, why are you trying to time the market? It's not even an investment. Are you gonna, you know, wait to buy your shirt until you see cotton prices come down? You're not looking at that. If you like the shirt that you buy and you can afford it, go out and buy it.

Now, what's your thoughts on, you know, Grant Cardone always has this famous line. He says, live where you rent and rent what you own.

You know, it's a great line, it's a great pitch. If you want to own a home, there's nothing wrong with that. Just understand that it's not an investment for a lot of people. For a lot of people, the freedom of owning a home and paying off your mortgage is all that you want. You just want to have that stress free life. And this is where it comes down to your lifestyle, right? Do you want to live big? Do you want to live large? You want to have all the luxuries and the nice stuff and you want to go for it all. And you're willing to take that risk, then yeah. Don't put all the cash down into a down payment and tie yourself down into the home rent. Take the down payment, invest it in your business, invest it somewhere else. That way it can grow bigger. But if your lifestyle goal is, hey, you know what?

I want a great space, I want to have family, I want memories, I.

Don'T care about all that fancy stuff. Then go out and buy a home, there's nothing wrong with that. And this is where you just have to understand, like, I'll give you a personal example. We have an office for minority mindset companies, market briefs and all that. I rent it. We could easily buy the office.

You don't own the office space.

I don't know the office space. I'm paying $4,400 a month plus utilities and all that.

Michigan's cheap man, cheap rent in Michigan.

You know, it's still a lot of money. 40. We're paying what, 50 grand or so a year in rent?

Sure, sure.

And I could go out and buy the property. Yeah, but why don't I? Well, if I wanted to, it's probably, I don't know, let's just say it's a million dollar building. If I wanted to buy the building, I got to take $200,000 from the business and go out and get by the property. Then I can own the building and then see some return. The average real estate return, somewhere between 7 to 10% a year. Okay. If I took the $200,000 and reinvested it back into Market Briefs, my financial newsletter, I'm trying to get a better return than 10% a year. And so for me, in the business sense, that's why I'm renting, because I know that I can get a better return by investing that money back into the business to grow the business. And this is where you just have to understand the goals in your lifestyle and make sure your actions are aligning with your goals and your lifestyle goals. Because if you say, hey, I want to live large, I want to have the nice things, I want to have a big investment portfolio. But at the same time, you have Gucci, Louis Vuitton, you have a bimmer, but you have no investments, your priority is in the wrong place. Sell the Louis Vuitton, sell the Gucci, sell the bimmer, go on and start investing your money. Start building your investment portfolio if you really want to be wealthy. So you can't speak out of both sides of your mouth. You got to figure out what you want and just make sure your lifestyle aligns with that. Because a lot of people try to push this, this is the right way to do something, but that's not the case. I mean, if we just take a step away from finance for a second and look at, for example, health, many people say this is the diet you need to have. These are the exercises you need to do. Well, there's so many different things they can do. And at the end of the day, it's eat healthy and exercise. And now you can dig down deep and find what's right for you. But at the core, it's eat healthy and exercise. In finance, it's very similar. You could say, invest all your money into real estate. Don't own your home, invest it all into real estate. Buy as many rental properties as possible. Some people would say, buy it in stocks, do this. Or build a business at the end of the day, it comes down to live below your means, invest the difference, eat healthy and exercise. Live below your means, invest the difference that is at the core. And then you can get down into the nitty gritty. Like that's what I talk about, right. Because I'm interested in that. And that's where I try to learn more. But I also don't try to say that this is the only thing that you can do because your goals are different than mine, your background is different than mine, your risk tolerance is different than mine. And so you're going to want to make different investment decisions than me. Which is why I don't try to say, this is what you need to do. I'll say, hey, this is what I do. This is how I invest in real estate. This is how I invest in my business. This is how I invest in stock stocks. But what you do is going to now depend on what is interesting to you, which is why the financial education is so important. Because I'm not trying to. I don't want to lead a herd of sheep. Right. I want you to be educated. That way you can make smarter, make your own decisions. Decisions for yourself, but make an educated decision. Because the issue that so many people have is we assume that the reason why we're not successful is because we don't have the right tool set. When in reality for most people is we don't have the right mindset. It's not a tool set issue. It's a mindset issue that so many people have where if you have the right mindset, you'll realize that the tool set is right in front of you. Yeah. And you just got to be able to harness the power of that.

So what's the best case scenario then for the housing market in your mind over the next 12 to 24 months?

Well, the best case scenario really depends on who you ask. Because if you ask somebody who wants to invest in real estate or buy a home, you're going to say the best case is real estate prices crash because now I can come in and buy at a discount. But I think what you're trying to get at for the economic, right, if you look at it from we want a strong economy, want a strong real estate market. The best case scenario is the Federal Reserve bank can continue to raise interest rates slowly. Interest rate or, sorry, inflation comes down drastically and the economy doesn't get hurt. That's the best case situation.

Say it one more time.

So interest rates go up slightly.

So from eight and a half to no interest rates, Interest rates from a five and a half to.

So mortgage rates. Those are mortgage rates different than the Federal Reserve Bank Federal funds rates. So five and a half to maybe six, six and a half. We don't really go up on mortgage rates.

But interest rates is different than the mortgage rates.

Right, because the Federal, remember that's mortgage rate is retail. The interest rate is.

What's the interest rate right now?

So interest rates, we're rubbing around the 2 to 2.5% range right now. So it goes up to 3%, ideally, no more. That would be best. Right? So mortgage rates, interest rates don't really change. And we see inflation come down magically, and we see the economy not slow down. So that. That's best case scenario. If you look at it from an.

Economic perspective, what do you think could happen if you're like, you know, what if I had to make a great prediction?

Well, Louis, look at this, man. You print the most amount of money in the history of time in 2020 and 2021. We're talking about, you know, at least $6 trillion at the very low end. You print this money injected into the economy. Now you're trying to take this money out. You're trying to burst the bubble that you created without crashing the markets, without trying to crash the economy. There is a cost to free money. We are paying the price for that through inflation. So now if the price of everything has gone up so high, people are struggling to pay their bills, they can't buy more stuff because inflation is so high. And we're already seeing the economy slow down. We've seen six months of an economic slowdown, which technically, traditionally, before 2022 would be considered a recession. Because before, before 2022, if you saw two quarters of GDP, meaning economic decline, that was defined as a recession. This year, we're deciding that that's not true. We're going to look at other factors, broader factors.

So if we go one more quarter, do you feel like they would say, okay, now we're in a recession?

I don't know.

They might try to keep down the road and say, yeah, no, it's not true.

It's one of those things where, you know, when did we start saying that inflation is not transitory? It was very late. So it was November of 2021 that we said inflation is transitory. It was around March or April of 2021 that we said it is transitory.

What transitory mean?

Transitory means a short period of time. Right? It's going to come and it's going to go because the original thought was we'll see a little bit of inflation in 2021. It'll go away by the end of 2021. Well, that clearly did not happen. Then it said it'll go away by the middle part of 2022. That clearly did not happen. We're breaking new highs in the middle part of 2022. Now they're saying that it'll be gone by the end of 2022 to the beginning part of 2023. So that's one side on the inflation side. Now on the economic side, it's, we don't want to say anything. We don't want to create fear or panic because people have jobs. The economy is strong. However, if you dig deep, you can start to see all these like red flashing warning signs that yeah, potentially they could just blow by. But you have a lot of warning signs on saying, hey, look like the inflation is still extremely high, gas prices are still high. We have an economy that is slowing. We've been seeing unemployment numbers start to go up and these are the things that you want to pay attention to. And even unemployment, if I can mention that for a second, there's a difference between unemployment, which is reported, and what's quote unquote, real unemployment. So I don't want to get too technical, but when you see these headlines for what unemployment is, this is something called U3 unemployment. And what that means is it looks at a specific set of unemployment numbers and this is what they're reporting. Because now if you say what does somebody unemployed mean? You might say somebody who doesn't have a job. But what about somebody now who is an engineer? You used to work at a great engineering company but you got laid off and now you're working at McDonald's because you can't find another job that doesn't qualify under that. Or what about now if you are a full time worker, you're working at, I don't know, you're working at a factory, you had a great job and then your factory is doing layoffs and now they've cut your hours to part time even though you want to work full time because the factory is struggling, that doesn't count in this data as unemployed. That doesn't count yet. So none of that data is recorded here.

But those aren't the stablest jobs is what you're saying.

It doesn't have to be stable. I mean, we could talk about doctors, we could talk about engineers. It's just a matter of what is the definition of unemployment so the U3 is not looking at that. U3, all it's looking at is fully unemployed. Well, let's define that. What it's looking at is you don't have a job and you haven't actively been looking for a job for the last four years. Sorry, four weeks. So what that means is let's just say that you lost your job and you decided that after four weeks that you no longer want to continue looking for a job. Maybe you want to stay home with your kid, maybe you're taking care of a parent, a relative, whatever. So after four weeks you stop looking for a job. You're no longer considered unemployed under U3, so you're no longer in that data. So there's Another thing called U6 which does look at this. It looks at things like if you are underemployed, you're an engineer working at McDonald's, but you want to be an engineer. You are a factory worker or any type of worker, you're a doctor who used to have a full time salary, but now you're working part time. It doesn't really matter what the career is. Just looking at somebody who's not getting the full employment that they want. You are somebody who is more than four weeks out of looking for a job. All these things are looked at in U6. And if you look at U6, it tells you a little bit of a different story than U3. So this is where you have to be again, right? It's being able to understand data a little bit better. Now I'm going to do a little bit of a pitch here because this is one of the things that we try to talk about in market briefs is this financial news and understanding what's actually happening. Because this gets a little bit complex and I don't want to go too into depth because I've got a whiteboard to diagram it all out. But it gets a little confusing. And this is where headlines don't tell the full story and you want to be able to dig deeper, but it requires that financial education and that willingness to learn. And if you don't want to spend all the time doing that, that's where Market Briefs, which is my financial newsletter, completely free, breaks it down into a fun, witty and easy to read email that way. Now, even if you don't understand this, we explain it that way. Anybody, anybody can understand even if you don't have any sort of financial education. Because these are the things that most of us are never taught. We're never told this. You read the Headline saying unemployment is this. And you assume that that's right. But what is unemployment? You have to understand these things. And this is where understanding this level of finances becomes so much more complex because we're never told this.

So if you could predict the next 12 to 24 months of what you think is going to happen to the housing market and the economy.

Sure.

Look, your best case, what you think is going to happen.

I definitely think that our.

Based on all this information, I do.

Look, our, our economy has a lot of trouble ahead. We are not out of the water. And the question is, when are we going to see the price of that?

I mean, look, have we paid the biggest price yet?

Absolutely not.

Really? It's going to get worse.

Our inflation issue is not going away. And either we're going to kick it down the road further, we might pause.

It for a little bit, but then it's.

Yeah, either the Federal Reserve bank is going to kick the can down the road because they're going to say, you know what, unemployment is rising. It's a bigger concern than inflation. So we're going to stimulate, we're going to pump, and that's going to create a bigger bubble. Or they're going to start fighting it now and we're going to start paying a bigger price right now because this inflation problem is not going away. The economic slowdown will probably continue because of this inflation issue. And the person who's going to decide what's going to happen is the Federal Reserve Bank. So the question is, are we going to pay the price now or are we going to do it later? If we do it later, it's going to be a bigger price that we have to pay then. If you pay it now, it's going to be painful, but not as painful as later. So this is the situation that we're in where the economic slowdown is a real concern, the inflation is a real concern. You don't want to panic because nobody makes good decisions out of panic or fear. But you want to understand this, that we're not shocked 12 months down the line where if the Federal Reserve bank stays true and they keep raising interest rates, they keep doing quantitative tightening and they push the economy into a deeper recession that you're not like. Nobody saw it coming because that's what they said about inflation. That's what they're going to say about the economy, too, because they don't want.

To put fear into the world. Just like they said in 2005. About 2007.

Exactly.

So what are you personally doing to prepare for the next, for when that happens with your own money and assets. And are you saving money, cash? Are you investing now? Yeah, real estate, all that stuff. And what do you recommend someone to do, whether they're an employee or maybe they have some extra cash?

Sure. So I would say, you know, this is a lot going to depend on you because I'll be very personal with what I'm doing because I'm an entrepreneur, so I look for different types of opportunities and somebody else might. So if you are an employee, there's going to be different opportunities for you. If you're a business owner, there's going to be different opportunities for you. If you're an entrepreneur, there's different opportunities for you. So I invest my money in five places, invest my money into my own business. I talked about market briefs. I invest my money into real estate, invest my money into stocks, invest money into crypto. Then I invest my money into physical gold. This is the order that I invest my money into. This is my type of diversification. Now I understand what's going on, and I do have some cash. I always have some cash put aside for, like, you know, things going wrong, investments. I always have some cash putting aside there. And what I've been doing is I passively invest my money, meaning no matter what's happening in the markets, whether the market is up, whether the market's down is automatically every month you have a.

Certain amount going in.

And this is happening into stocks, into crypto and into physical gold. That does not change. That never changes. So I get paid. Money is automatically invested no matter what. Then in the past, I've had my more active strategy where I would take money and actively go out and buy real estate. I'd actively go out and buy stocks. And in this situation, I'm looking for good deals, meaning a good price. I haven't been doing that as much recently, not because of what's happening in the market, but because I see more opportunities for me in the entrepreneurial business side. So I've been investing money into market briefs. Like I talked about, hiring more people on your team, hiring more people, building infrastructure. And then I'm also working on a tax firm. So I'm going to talk about tax for one second, if that's okay, because there's a very interesting thing happening right now because going off of inflation. President Biden just signed something called the Inflation Reduction act.

Was that 80 billion or something?

It was a huge. It was a huge, huge. I think it's even bigger than that. 80 billion is just the IRS.

The IRS.

So the tax side.

So they're hiring, they're investing 80 billion in the IRS to start auditing more people, essentially.

Right.

To start trying to get more money from people.

And that's only one part of the Inflation Reduction Act. So let's go big to go small. Because the Inflation Reduction act is supposed to reduce inflation. That's what the name says. The point is, I'm laughing because it's kind of silly because how do you reduce inflation? You spend less money because the government has spent so much money they didn't have, which caused money printing.

You tax more people, you collect more.

Exactly. So that's how do you now pay off all this debt? Remember, the government doesn't make money. They tax you, they tax me, they collect taxes, and then that's what they use to pay off their expenses. Now, it's not surprising that the government is running into an issue because they have 31 almost trillion dollars of national debt that they need to pay off. This is not fixed rate debt. So as interest rates go up, their payments on this debt go up as well. So we talked about what happened in the housing market. Imagine that on a $30 trillion level now. So the payments are getting bigger. So what does that mean? Well, if they have this pool of money, either they're going to need to inject more money into the government, the Fed has to print more money, but they can't do that anymore because of inflation, or they're going to need more tax dollars. So that's one of the reasons why, through this Inflation Reduction act, one of the things they want to do, which is one of the most like financially interesting topics, is they want to invest very heavily billions of dollars into the IRS to help them beef up and collect more tax dollars and past tax dollars. Now, I do want to clear up some of the false information out there because the act is working to hire 87,000 more IRS workers.

That's crazy.

It is crazy, especially considering that today there are about 80,000 IRS workers. Double yes and no. So the 87,000 people that they're hiring are not all IRS agents and they're not all being hired today. They're going to be hired over the course of 10 years. And the whole idea is this is what they say again, this is what they're saying. What might happen could be a little bit different. So I want to be just completely transparent because I don't want to mislead people. I want to make sure everyone's fully understanding what's happening. You have about what's scheduled is about 50,000 or so people in the IRS are scheduled to retire over the next 10 years. So these 87,000 people are supposed to replace them and beef up the agents that are actually going to be doing the auditing to go and collect more money. Now, even if 50,000 people retire, that's still adding almost 50% more people to the IRS. Who are they going after? Well, they say the wealthy, the super rich, and there's about a thousand billionaires in the United States. Do you need tens of thousands of people to go after them?

No.

So you go a little bit deeper now again, what do we look at? History. I look at history to answer the question because they keep saying that we're not going, saying it's not in the bill, it's not written anywhere. This is what they say, that we're not going to go after middle income people or anything like that. Well, in 2021, 50% of IRS audits were on people earning less than $75,000 a year.

Come on.

50%.

50%.

50%.

How do they know? How do they. Is that public information?

Go search it on Google. Wow. Google has a lot of information of.

The audits were on people that were making less than 75, under $75,000 a year. And why are they doing that?

Well, probably because if you're making less money, you're not going to have the resources to hire a good accountant and hire a good attorney to represent you. So it's a little bit easier, less cost. I mean, it's just, it's just easier, right? I mean, you're maybe less financially savvy than somebody who's making half a million dollars a year or $2 million a year. Because now you probably have more resources to defend yourself. So that's a bigger fight for the irs. And you're probably more protected because you have good advisors who've told you what to do. Because now, let's say you're making, you're.

Filing your taxes, you're doing all the right steps.

And maybe if you make a million once, you start making a lot of money, like if you're making over a million dollars a year, you're not trying to play the game of trying to hide $10,000 because now you're already under scrutiny. Yes, the IRS is trying to see you do something wrong. And so if you try to get $10,000 under the table, it's a bad idea because you already know you're being watched.

You're trying to, you do Everything by the book. You're trying to do the best.

And you have good advisors to guide you to do everything legal so you can pay the least amount of taxes. Impossible legally. Now, if you're making 50 grand a year and you have a side hustle making you $1,000 a year, you might take that in cash because you might say it's a grand a year. You know, it's just the reality, right? You're taking pictures at people's weddings, you're doing whatever, you're making some cash, and you're just doing it under the table.

The IRS wants that thousand bucks.

And this is one of those things where it's not surprising, because if you look at what's been happening with the last couple of years, this is almost like, been a foreshadow of things to come. Because you remember over the last couple of years, we've seen this new rule on Venmo, right, On Venmo transactions, where they want all Venmo transactions over $600 or something like that. Where now if you're, you know, let's say you're a photographer and you're taking pictures at your friend's wedding and he pays you $700, and Venmo has to report that. They want to know that. They never said why. But now you're starting to see all these things start to add up where if you're doing these small things, you know, it's just like things starting to fall into place where, oh, no wonder they started wanting all these details for this. No wonder they started really going after cryptocurrency brokerages. No wonder they really started doing all of this stuff, maybe creating a digital dollar, because they want to be able to see every transaction, which means they want to be able to tax every transaction. Of course, I can't validate this, but, I mean, it's just like puzzle pieces starting to come together. And so this is where the tax thing, why is it so important? Because of inflation, because of the national debt. The government needs more tax dollars to be able to go and fund their payments. And so what are they going to do? Well, they're going to try to find the easiest hanging fruit. Is it going after a billionaire? Probably not, because the billionaire is going to say, come after me. I have my resources, I have my.

Army, all my accountants that do everything we have.

We have everything there. Everything is documented because we want to play by the books, because we know you're already watching right now. I'm not saying that everything always is right, right there's. Of course exceptions to this. But this is where you just have to understand, you know, they say that they're not going to go after anyone making middle income, whatever, but after you.

Go after, you look at the thousand or so billionaires, okay, you got to look at everyone else.

I mean, so again, right? That's what we would have to.

And you got 8, 000 people working on it.

It's like, all right, it's just looking at history, right? I mean this history is the best indicator for what's coming. I keep saying that. I'm sure your audience is getting very bored on the way to me saying this, but I mean, it's what the best indicator because I can't look into the future and say what's going to happen. But I can look in the past and see what has happened happened. And I see that, hey, this is what happened in 2021. This is what's been happening. Because this is just the situation. And so for me, I've also seen a big difference between good tax advisors and bad tax advisors.

Is that why you're starting a tax?

That's why. Because I, you know, it's the entrepreneurial mind where when I get scammed, I get screwed over. I get, you know, these things happen. It makes me want to find a new solution. That's how I started Minority Mindset. I got scammed when I started Minority Mindset, I got screwed over when I started my event planning company, I got completely screwed over my first real estate investment deal. Pretty much every part of me had to do with something really bad happening. So I had a really bad tax advisor. He was really just an accountant who filed my taxes and was never on time. And I got this call. It's horrible. It was just a mess. I got a call from my accountant one day. I'm in the office. This is right before my morning huddle. So we have a 9:30am morning huddle. Calls me, I think it was like 8:45 in the morning, I'm in the office, says, hey, Jaspreet, how are you? I said, good, how you doing? He says, hey, listen, I need you to do me something. Can you wire or send the IRS $100,000 by the end of the day today? And can you also send about $15,000 to the state government by the end of the day today? I was like, what? He says, sorry, we had some miscalculations. We did something wrong, we missed this, and you need to send this by tonight. And I was like, jeez, are you serious? Oh, yeah, one more thing. You're probably gonna have to pay a penalty on this as well. Oh, my gosh. This is a completely true story. Like, when was this? This is not. I mean, this is less than a year ago.

Oh, my gosh.

And so it's. I mean, it's painful. It's very painful. And so I'm like, okay. Like, I was very frustrated because I'm like, what did I do wrong? Like, what are you talking about? He said, you didn't do anything wrong. And I was like, well, if I'm the one that has to pay this and I'm the one who has to pay the penalty, something's not right here. And so I paid it. Then I fired him pretty quickly because, you know, that's not the way I like to do business. I like. I want. I want everything to be clean, but I also want people who care about what they do. And he was a cheaper accountant. I got what I paid for. And so I went on the hunt to find a top accountant, top of the line accountant, and I pay a lot more than what I used to. However, the situation scenario is extremely different because he has a very different personality about a different Persona. And the way it works now is one, he manages all my books on time and ahead of schedule. So every month, he meets with me and he shows me, hey, Jaspreet. Here's your profit. Sorry, we'll start from the top. Here's your revenue. Here's your expenses. Here's what your expenses look like. Here's how they changed. Here's your profit. Here's your tax liability. And here are the things that you can do to limit your tax liability.

That's cool.

Here are three recommendations or whatever that we believe based off of what's happening right now to legally limit your tax liability. And he has given me so many interesting ideas because the tax code is over 2,000 pages long, and you need. I'm an attorney. I studied a lot of tax. It takes a lot of knowledge and education to understand and read the tax code. But then things keep changing all the time. Like, even this inflation reduction act is changing corporate tax structure. So you need somebody who literally eats, breathes, and all they care about is tax. And this is this guy, right? And I'm like, dude. Like, this is amazing. Like, I love this because I don't have the time. I don't want to spend my time thinking about taxes and all the cash flow stuff. I want to build my business. And so I got to know him, got to build See how he worked and really liked it. And after a number of months of working with him and seeing him in action, I was like, hey, man, like, you have nothing on social media. Like, can we work together? Like, let's. Like, he's very good at what he does, but I was like, let me work with you. Like, I think we can create a lot of things here because there's a lot of small businesses that need what you have to offer, because there's a lot of small businesses who have bad accountants who all they do is file their taxes. And you need a tax advisor. Especially now, as we're going to see a big change. You need an advisor who's going to guide you on what to do with your money, how to document what you do, like, just to make it completely seamless. That way you don't have to stress about it.

Right?

And he was like, I'm down. So over the last couple of months, we've been working to build this together. It's not launched yet. We're just talking about it. Cause it came a conversation. But that's something that I've been really working on. So, you know, if you're listening to this and you want a good tax advisor, just email me teamtheminoritymindset.com or send me a DM on Instagram minority Mindset, and I will connect you. But these are. I mean, this is where. What am I doing? I like entrepreneurship. I like this stuff because it gets me excited. It's the way that my brain works. It's the way that gets me my purpose. Right? And so I do that. I like investing in real estate. I like investing in stocks. I'm passively doing it in stocks. But right now I just see more opportunity for me to invest in things like market briefs, to invest in things like this tax firm. Because I see the opportunity. It's fun. I have a blast doing it. I get to meet really cool people. So. So, you know, it's just. It's a matter of now, what is that lifestyle now? If I didn't. If I wasn't an entrepreneur, what would I be doing? Yeah, I'd be stacking up cash to find good investments either in the stock market or the real estate market or to buy a startup because it's very accessible now thanks to the Internet, thanks to all the crowdfunding sites out there. And I'd be passively investing. Like, I would not change that. So, I mean, I think everybody should be doing this.

You can put a hundred bucks a month away into stocks or into. Into an automated account that is investing for you.

Did you know, if you're 21 and you start investing $100 a month and you never change that, and you just get a 10% return on your money, which is the average stock market return, and you do that until you're 65, you will retire a millionaire. Come on, we're talking about less than $4 a day.

100 bucks a month.

100 bucks a month.

Automatic.

Automatic.

Going into a index fund.

And you just keep trying to match the market. Right. Doesn't mean you're going to get 10% returns every year.

Decades. You will.

Yeah. That's what the historical stock market return is. Now you can just plug this into a calculator and you'll see that that hundred dollars a month for from 21 to 65, 66, you will be a millionaire. But if you don't start that until, let's say, in your 20s, you don't care about money. You're all partying, you're not having a good time. In your 30s, you're trying to get a good job, trying to figure things out. And now in your 40s, you're like, I gotta put.

I got thousand bucks, couple thousand bucks.

It's very different if you're 45 and you're putting 100 bucks aside at the same 10% return when you retire, you're going to have $100,000. Not a million, not even half a million. We're talking about 100 grand. It makes that big of a difference because time is such an important factor.

I'm such a big fan of doing this. I started doing this in my late 20s, actually gotten a whole life insurance in my late 20s. And my dad was in life insurance. And so I learned about it a lot as a kid. But I started, I bought my own policy, I think, when I was like late 27, and I keep buying more whole life insurance, but I started doing the automatic payments from my checking account right into an index fund every month. Now when I was in my late 20s, in my early 30s, and it's in seven or eight years, it's been just compounding and growing and it really starts to grow. And as you earn more money, you can say, I'm going to put 200 bucks a month in, or 300 bucks or. And really put that extra money in automatically so you don't even see it. You don't think about it. And you know you're going to be making money for the long haul.

Exactly.

Hundred bucks a month.

It's so simple. And there are so many apps out there that make it so easy, that don't even charge you a fee, that there's really no excuse not to do this. And you just set that up and that never changes. Yeah.

Now what are those top apps for?

People use M1 Finance.

M1 Finance.

M1 Finance. It's easy to use. You know, there's tons of them out there. Do your own research. They are a sponsor, an affiliate for Minority Mindset. Full disclaimer. I'm not getting paid to say this here, but do your research. There's this ton of apps out there.

What are the other. What are there a few others that.

You think are for dollar cost averaging? Honestly, like you can do something like FTX does that.

Like Acorns.

I've heard Acorns does something where you can start with a dollar. So they like round up your change. Yeah.

Does it?

Yeah, there's. I mean, if you go to the minority mindset.com because my team is literally.

Doing reviews of this, about all this stuff.

Yeah, they. I don't know all of them off the top of my head because I use what I use. But if you want like reviews, just go to the Minority mindset dot com. We have dozens of articles over there on that. Awesome. But that never changes. Yeah. Hassle. Invest forever. Okay. And then on the active side, now this is where you can understand you a little bit. Where maybe you want to invest in real estate. Maybe you say, I hate that idea. Maybe you want to invest in individual companies. Maybe you say, I hate that idea. But this is where now you can also start putting some extra cash aside to be invested. So this is money where you're looking for a good opportunity. And you know, the percentage of how much you're going to do is going to really just depend on you. Some of you are going to say, I don't even care about that. I just want to passive and never have to worry about it. Fine. Some of you are going to say all passive. But I want to be in the game. I want to be involved.

What's happening.

Some people like that and I like that. And so now you're putting some cash aside into, you know, maybe it's a bank account or whatever and you have some cash sitting here waiting to be invested. Maybe it's waiting to be a down payment for a home or you're waiting for just a good buying point in the stock market. But this is where you're doing your research right now and you're trying to Find the right opportunity where now you just want to take this cash and go out and actually buy something. And again, right, this is assuming you're not an entrepreneur and there's different opportunities for different people in different stages of their life. And this is just understanding you where you are in your life. If you want to be in the entrepreneurial side, building your own business, if you want to be in the I want to invest in real estate side or I want to be in the stock market side, like it's just a matter of personal preference. Because at the end of the day, we try to make investing so complicated, but it's live below your means, invest the difference. And that's ultimately the solution to becoming wealthy. No matter what market you're in, no matter what economy you're in, no matter where in the world you're in, that is the simple solution. Now, you can get as nitty gritty as you want, but once you understand that you have the formula to become wealthy.

If you guys are loving this, make sure to leave a comment yes below. If you want more with Josh Frit and myself, comment below. Make sure to follow jaspreet on his YouTube. We'll have it all linked up. Leave a comment if you want to learn more about becoming financially free in the future with Jaspreet. Amen.

Amen. Thank you for having me on, Louis.

If you got value from that, then go ahead and stick around for more. Coming up right now. What do you wish we taught everyone from the ages of 10 to 25 different things around money.

First thing would be, what is money? Because money as we know it is fake. Our dollars are just pieces of paper. I grew up thinking that our paper dollars are like the holy grail. You want to save this money because it is the most valuable thing there is. As I became older, I started to realize that that's not the case. Our paper dollars are just pieces of paper. It's fiat currency, which means it's issued by the government and the value is backed by through the strength of the government. Now, we're lucky here that the United States is the world's superpower. We have the world's strongest military. We have the world's strongest economy. But we can't stay on top forever. And you know, inflation is when the value of a dollar goes down. So these dollars, which many of us think that if we hoard this, we'll become wealthy, saving money to wealth is actually keeping you poor, and it's making you poor each and every day. So the first thing you have to understand is, what is money? Second thing you got to understand is, what do wealthy people work for? And most of us, the majority of us, are taught to work to get a job and climb that corporate ladder. But wealthy people are doing something completely different. They're working to own the corporate ladder. They're working for something called equity. And this thing really blew my mind, because wealthy people are not working for that paycheck. They're working to own a piece of the company. That way, they can get a piece of the profits. So the best way to understand this is a lot of times people complain about how much money I'm making. I wish my boss paid me more. And this is where, if you start to understand the system, you'll start to ask the right questions. See, a big company, you have to ask the question, who are they working for? Are they working to take care of their employees? Are they working to take care of their customers? Neither. They're working to take care of one person. They're shareholders. It's this concept called fiduciary duty. I learned this in law school. The executives of a company have a fiduciary duty not towards the employees, not towards the customers, but towards the shareholders, the owners of the company. Now, what that means, an easy example of this, is you're going out to dinner with your girlfriend or your wife, and you're on a date, and you get a text from one of your good friends, hey, let's go play Fortnite. Right now, your fiduciary duty at the moment is to be with a girlfriend, to be with your wife, to be with your partner, to spend time with him or her. If you go out and leave, you're gonna get in trouble, right? So it's who is your alliance to. And the shareholders, the executives, CEO, and the executive's company. Their fiduciary duty is to the shareholders, the owners of the company. So what are they trying to do? They're working to drive up the valuation of the company. So once you start to understand that, you'll realize why this big discrepancy between what people are paid and what people want to be paid. And when you start to understand that you're going to change what you do with your money. That's why I said a minute ago, or a little bit ago, wealthy people are working to climb, not climb the corporate ladder, but own the corporate ladder. So how do you get that equity, that ownership? You have to own a piece of the corporate ladder. Now, if you work for a public company, that means now you can take some of your income and you can buy stock in the company. Maybe they pay you with equity, maybe they give you some sort of revenue share. That's what we do in my companies. Or if your company doesn't do that, then you have to start taking this money that you're earning and you have to start investing it into a place where you're getting equity. Maybe that means stocks, maybe that means real estate. It could be a number of different investments, but you have to work towards that equity. The third thing is that you have to think bigger. I know I grew up thinking that somebody who looks like me, somebody who's brown, somebody who wears a turban, somebody who didn't have entrepreneur investor parents could go out and do this. Because you think that somebody like me can't do this. My parents also told me that I couldn't do it. I didn't know anybody doing it. I didn't know any investors. But you have to be the one to take that first step. And once you start to take the first step, you're gonna learn and see the second step. Then you take the second step and you're like, oh, I can start a hundred dollar investment here. You don't have to start with hundreds of thousands or millions of dollars. Start with $100. Apps on the Internet make it so much more accessible. Anything is possible. If you live in America, you speak English, you have more opportunities than really anybody else in the world. People will literally risk their lives, risk their lives to come to this country because there's opportunity here. And so if you're here, you have the ability to understand what you and I are saying. And you have that technology to do it. You're blessed. Now what do you do with this? Right? You have to go out and start learning, you have to go out and start doing. And then the next thing that you have to do.

Number four.

Number four is you have to understand the concept of debt. Because we live in this consumer culture culture, and it's interesting where we want to live this flex lifestyle, right? I want to show off on Instagram, I want to show off my new car, my new Chanel Gucci purse. And we kind of get caught up where I need to live a certain lifestyle. That way people can think that I'm rich. But what you're doing now is you're living broke, right? Making everybody else rich. Some people think you're rich, you're product rich, you have a lot of nice stuff, but you're, you're broke. And so when you live that type of lifestyle. You are the reason why Gucci, Louis Vuitton, Chanel are making so much money, but it's keeping you broke. The richest person in the world, sometimes he's the second, sometimes he's the third. Is the CEO of Louis Vuitton.

No.

What?

Really?

Yeah. Bernard Arnault. And why? How did he get there? Because everybody wants to look rich. Everybody wants the Louis Vuitton. I saw this in the pandemic especially. We were in a recession in 2021, but luxury sale products were breaking new records.

Really?

They're breaking records in 2021.

Why is that?

Stimulus. Checks went out, people had cash. And some people used that money to save, some people use that money to pay down debt, some people invested that money, but a big chunk of people took that money to places like Gucci, Louis Vuitton and now you go and spend it.

You would think when the economy is, well, I guess when people are losing their jobs and there's financial uncertainty of the future, you'd think people would be saving or investing, not spending on luxury goods. Especially if you can't even go outside to flex it, you can only do it on social media. In the company you're on, you don't.

Need to go outside anymore. You can just do it on social media. And so if you don't have the cash to do it, people are going into debt to buy. And it's becoming easier and easier because of now. Things like buy now, pay later, it is one of the fastest growing industries in fintech. I love financial technology, but it breaks my heart. I mean, it just, it rips my heartstrings when I see the growth of this buy now, pay later because what does that mean? I can go out and buy anything I want, not pay for it today, pay it off over three months, and then if I don't, I get slapped with 25% interest. And if you are 18 or let's just say 21, I gave you $6,500, you never invested another penny, but you invested those $6,500 and you could get an 18% return on that money. And you retired 65, and you look at this investment portfolio, you would have over $11 million. Wow. Now everyone watching this saying, where the heck am I going to get 18% on my money?

Exactly.

But your credit card company is doing it every single day. $6,500 is what the average American household has in credit card debt right now. And you're turning around paying these companies 18, 20, 25% a year. And they're the ones that are getting rich, not you. So what's happening? You're going into debt to buy liabilities, which are things that lose your money, and then you're paying interest on top of that, which is making everybody else rich, which leaves no money in your pocket to make yourself rich. And you have to break out of that mindset.

So what do we need to know about debt then? How do people get comfortable understanding about debt? Either using it in the right ways and eliminating the debts that don't support our financial growth.

Yeah, so the first thing is never finance anything that isn't going to pay you. Okay, so give me an example. Gucci, your vacations, your car. Stop financing these things that aren't paying you. And people are going to get upset when I say your car, because they're going to say, wait, how am I supposed to buy a car without a car payment?

Don't buy a $100,000 car unless you got the money in the bank to buy it. And plus more, buy a used car for six grand.

Exactly. Go buy a used car, good working condition car with cash.

Ride it for 10 years.

Exactly. The first time I made a million dollars in a year, my car was 500 bucks, dude. My employees had better cars than I did.

I had a $4,000 car for the first five years living in Los Angeles. $4,000 car, used car, 1997. I love it was the car when I was made. And that thing was great. It was comfortable, got me from A to B. Yeah. It didn't break down.

Exactly.

I didn't need to be flashy.

Exactly. I still have my $500 car. I still drive, you know, and it's one of those things where, you know, because I fell into this trap where the first time I started making money, you know, in my culture, cars are a big thing. The Punjabi culture, people really want to put money in their cars. They want to look cool, Right? So when I was 17, 16, 17, I started making a little bit of money because I was doing my side hustles. The first thing I did was I put new rims on my car. Then I put tints on my car. Then I put subpers. I had two 12 inch subwoofers in my trunk, right. I put the tints on. I put a new sound system in there.

Lights around, glow in the dirt.

Yeah, I had a Toyota. Right. And then the next thing I was gonna do is I called up a cousin, I said, guess what? I got three grand in the bank. I'm about to put Lamborghini doors on my Toyota. And he's like, just me, you're stupid. Don't do that. And so he sat on the phone with me for like 20 minutes, convincing me not to do it. Luckily, I didn't. I'm really glad I didn't. But that's where all my money was going. I looked cool, my car was cool, and that's where all my money was going. I had a thousand dollars in my bank and I went out and I bought a thousand dollar watch. I was like 18 years old, right. It was like I was in that industry, the entertainment industry. I wanted to look cool. And then, you know, I start to read these money books and my mindset starts to shift. And now all of a sudden is the, like, I went from one polar extreme to the other polar extreme. I don't want to spend a penny.

On anything, on anything, unless it's making me money.

Exactly. I don't want to spend anything unless it's making money. So now I'm saving as much money as I can. I'm investing my money as much as I can. I'm trying to build my business. And I mean, I'm talking like I'm running my shoes into the ground. They have holes in them. I put a piece of tape, wrap it up, I'm going to school. I got rental properties, but I got my shoes that are taped up, right. And it's like I realized that I'm going to go, I'm not going to make the same mistakes again. And you have to break out of that mindset. The first time I made 100 grand a year, I was in school. School. And I was living in an apartment, paying $400 a month, including my water, my electricity, my cable, my gas, my Internet, everything. And the reason was because I didn't have a room. I slept on the living room floor. I had a little mattress. I used to pull that into the living room, put that down, go to sleep at night, wake up, fold up the sheets, put them away, drag the mattress back into the hallway. Because I'm, you know, I realized that the power of compounding your money, I realized the power of putting your money into the right assets. And I'm like, this is my time to build. I've been blowing this money that I'm earning on things that are making everybody else rich.

Right.

I'll spend money on that stuff a little bit later. Right now I want to make myself rich.

Yeah.

And so, you know, you have to just first understand what it is that's worth spending money on and what's not. And then you know, if you do have that debt, you've got to come up with a strategy to pay it down as fast as possible. First thing you can do, if you have a lot of credit card debt, call up the companies, see if they're going to be willing to just give you a lower amount. See if they're willing to work with you, say, Look, I got $10,000 worth of debt. I'm never going to pay this off. It's not going to happen. How about you work with me and give me $5,000 and I will work to pay that off. You start to work with them, see if you can do something, then you can consider moving some of that money to a 0% APR. If you have 12 to 18 months to do that, that way, now you can aggressively. You got to do this smart. Because if you're just gonna keep doing the same things you were before, don't do it. But you have to start aggressively paying it down. You stop spending money that way. Now you can pay down this debt as fast as possible. And then you work to earn more money. And the money has to go somewhere as you're earning more money. You live the same lifestyle, if not smaller, and you take all this extra money and you use it to pay down your debt that way, now you can start building, right? You gotta lay that foundation. You gotta got to start working to grow upwards. But you have to get aggressive.

Is there ever a time where people should go into debt? The right type of debt, the credit card debt, student loan debt, buying a car and going in debt on that, those things I'm understanding, is not helping your financial future. When is the right time or is there a right time in your mind to take money out and spend interest on that money?

Depends, right? If it's something that's going to make you income and you can manage the debt, then yes. But it's not for everybody. Some people don't have it in them to manage the debt. Some people don't have it in them to manage investments, Some people don't have it in them to run a business. If you're not the entrepreneurial investor type and you don't like looking at numbers, you don't like managing money, you don't like trying to grow this, stay away from it. Now you go up, maybe you can get debt to buy a home, but that's it. But if you are more the entrepreneurial type, you have it in you that you want to grow now. If you're using debt, you should only be using debt to buy something that's paying you with income, something that's going to make you more money.

Do you have any debt out right now?

Right now, I do not. I have people paying me loans, but I personally don't have any debt right now. And I kind of went through this phase where I have all this real estate, but I have no debt on it. And the reason is, is because I'm waiting for the right opportunity. I will. I will have more debt. Really? Yeah. I'm just waiting for the right opportunity because right now all my real estate is paid off.

You've paid off all the real estate. How many properties do you have?

Units in the dozens, A number of units. But now I'm just waiting for the right opportunity, and it's all paid off.

So now there's just cash coming in.

It's cash coming in. And, you know, you still have that. I still got that rented for $850 a month.

That $8,000, $8,000 place. $8,000 place that's just bringing in 800 bucks a month.

$850 a month, clear and free.

Just.

Yeah, you got to pay your expenses, your property tax, insurance, your maintenance, your management fees. But right now I have no debt on it. And so now what I'm waiting for is.

And how much could you sell it for now?

Probably 100,000, 120,000. I mean, I don't know the exact something that range.

It's not bad.

Yeah, I mean, it's. It's crazy because I never. I. When I buy real estate, I never look at what can I sell this property for. I'm looking for one thing, cash flow. Yeah. And so this is a big mistake that leads people into a lot of problems in real estate. Because when you start buying real estate, hoping that you'll be able to sell it for a higher price in the future and things don't go as planned, then what?

Yeah, you're screwed.

You're screwed. So, you know, for me, I look at one thing, cash flow, and will I be able to see more growth in this area? So I look where businesses are moving, where's money moving, moving to, and then that's where I want to invest. Because I know if property prices go up, it's icing. Property prices go down. It's okay. I still got my rent, which is. Which is covering my costs.

So what's your goal, Right, with the dozens of units for the opportunity for something bigger, or what's the plan?

Something. Yeah, it can be anything. Something bigger in real estate. And I'm looking for the right opportunity. But again, my focus now isn't in real estate like it was before. A few years ago, I was heavy in real estate. Now I was doing everything that I can there, and a lot of opportunities were there. I bought a property in 2021. Haven't bought anything in 2022 yet. But my focus now is building my business because I see a bigger opportunity there for me than real estate. That's why I've been kind of. I'm still involved in real estate, but not the way that I was.

Because you can earn more with your business if you put the attention and the energy and the money into building the team and the resources and technology and those things.

And it's more. It's more fun because it's a lot more active for me.

Yeah.

And then, you know, once this gets bigger, then I'll go back to real estate. But right now, like, for the last few years, I've been kind of phasing slowly away from real estate as I can transition more into the business because, you know, it's just. It's just more fun for me. Yeah.

Okay. So understanding debt was the fourth thing. What was the fifth thing you wish people learned from 10 to 20 years old about money?

You have to be willing to make mistakes, take risks and start. And this one is hard, and it sounds simple, but a lot of people that I know, a lot of people, they are so hesitant to making that first investment because what if I do something wrong? What if I make a mistake? What if my investment goes down? And so the simple thing that's happened.

To me multiple times.

Yeah, but you learn every time. Right? It's your. Your tuition, it's your real tuition. And you have to be willing to try things because if you don't, you're going to get stuck in the game of what if. What if I lose money? What if it doesn't work out well? What if it goes up? What if you learn? I have made a lot of mistakes. I made a video on my YouTube channel where I went through my worst real estate deal ever. It was my third property that I ever bought. It was a home in the city of Detroit, and I made every mistake possible. Now I'm still in college. Right. I don't know what's going on exactly with real estate investing. And I mean, I bought the property, and I bought it because my contractor at the time told me that we can make a lot of money on this deal, we'll be able to rent it out. We could flip it if I wanted to. And he was like, don't even worry about getting a home inspection now. When I buy a property now, the first thing I do is I get a property inspection where somebody walks through the deal, makes sure a third party, an independent person, and they tell me anything wrong with the property, in the foundation, in the plumbing, in really anything with the property. So I know what I'm getting myself into. And so he told me, don't do that. He said, don't worry, I already walked through. He's a contractor, so I figured he knows what he's talking about. All you have to do is spend $5,500 and I will make sure this property is ready to go.

Wow.

So I said, okay, let's do it. So I bought the home. I gave him a check for half, maybe 2,500 or something around there. 3,000. And a week goes by, nothing starts. Two weeks go by, nothing starts. And I call him. I said, hey man, what's going on? Like I thought we were going to have this done in two weeks. Here we are two weeks later and you haven't even brought your materials here. So I got caught up with something. Something's going wrong. And so now two more weeks go by, he brought some materials there, he started painting one wall and that was it. And so, you know, I'm getting upset because now it's like, you know, every day that this property is now leased out, it's collapsed and still nothing's getting done. Another two weeks go by and now I'm like, okay, look what's going on? We got to get this taken care of because now we're six weeks into this deal. You haven't done a single thing. You keep putting me off. You took my money and nothing's happened. And so long story short on that he ran away. He was having financial difficulties. That's why he wanted me to close on this deal, because he needed some cash. And now he's gone. So now I have another property that somebody was working on, a manager. And he was having some issues at my property. He was causing some problems. So I figured he's causing problems there. How about you come work at this property and you need a home. You can live in this home for free.

Fix it up, just fix it up.

And so he said, okay. So now I thought, alright, you know, I found a good deal here. I got somebody who'll fix it up, he'll live there, take care of it, and it's going to cost me less money. And so now he's living in this property, and he's like, how about this? How about you just open up a charge account at Home Depot and I'll just go buy stuff and take care of it at the home? I said, okay. So I go open up the charge account, he starts buying materials not to work on my home, but to work on other people's properties.

Oh, my gosh.

So now I'm like, dude, like, you're spending my money to go work on other people's properties so you can make double profits over there. You haven't started any work on my home. You're not paying me rent. You have a dog that you're not taking care of who's pooping everywhere in the property and it's not being taken care of. And so now how do I get somebody out of this home? I got a victim out of my own property. There's no lease in place. So now, as regarded to all these legal issues of how do we get this person out of the home? We get him out of the home. It took me months to get him out. The property now is destroyed. Oh, man, there's crap, little crap all over the home. He damaged the place, did not take care of it. And now it's like we have to start all over from negative to start fixing this property up. So now we start fixing it. I get a licensed and an insured contractor. We're months into the deal, and he wants, I don't know, like, a lot more money, at least ten grand, if not more, to start doing the renovations. And we start digging deep and we start to see problem after problem after problem. So now every cost keeps adding up. Now the home is ready to go. And I'm like, all right, fine. And everybody told me, jaspreet, don't license this home with the city of Detroit as a rental, because nobody does it. And this is, you know, Again, after the 2008 crash, Detroit went through its bankruptcy. They were having their own issues. But I don't like to play games. I want to play by the rules. So I said, I'm going to get a rent. I'm going to get a license for rental. When you get a license for rental, they're going to send their own property inspectors out to the property, and they're going to inspect it and make sure that it's okay. So now the property inspectors come out and they say, I need to lift up the home. What do you mean, lift up the home? They're like, yeah, we need to raise the home. I don't even know that you could do that. Apparently you can. And it's very expensive.

Wow.

So I lift up the home, and then we start running the water in the property. And it turns out that the water is not draining to the main city line. Apparently, somebody previously living in this property had poured cement down the main drain. Now, in order to get this property working, we have to bust out the cement in the basement, take out this pipe, put in a new pipe, repour the cement, and then these property inspectors start disagreeing with one another. One person says that you need a 10 foot electrical riser. So we make it 10ft. The next one comes says, why is it 10ft? It needs to be 13ft. I'm like, your first person said 10. And now they start fighting with each other. And we have to keep paying for these inspectors to come back. They keep charging me permit fees for everything. If I want to pay, paint the window sills, it's a $100 permit fee. Change the smoke detectors, $75 permanent fee. So this goes on and on and on and on for months. Finally, now we're approved for rental. I was like, oh, my God. Like, this is the biggest headache of my life. We get a tenant in the property, we get licensed tenants in the property, and now we have the license. And the property inspector just decides to go back to the property. They don't tell us, they just go back there. Even though we're fully licensed, they had no reason to go there. They knock on the door, and apparently we didn't know this. The tenant was having a babysitting operation in a property. So now the inspector sees this, that the tenant is running an illegal babysitting operation. He tells us, he finds us, tells us we need to evict the tenant, and now we have to start this process all over again. So after that point, I was like, you know what? Just sell this property.

Wow.

Because this is the biggest headache. And that was the only deal I ever lost money on. But I learned a lot. It was my tuition. So you have to be willing to learn, be willing to make mistakes, and then be willing to grow from those mistakes. Go on and, you know, keep willing to go.

So oftentimes, especially like businesses, they think that their price is the most expensive.

Thing that they have in the cost, and it's not.

So think about this. If you've ever asked someone, hey, I'll.

Give you my service for free, and.

They said, no, it's because they're other.

Costs that you're not taking into consideration.

Which also means a lot of times your price has far more wiggle room in it than you think it does.