Neel Dhingra shows how the Fed's mortgage-backed securities purchases pushed 30-year rates from 4.5% to 2.8%, letting buyers control $100k more property on the same monthly payment. He argues this is the time to use leverage and buy real estate.
So today, guys, I'm going to tell you about the biggest stimulus that literally no one is talking about. What's up, guys? Neal here again with another video. If you don't know me, I put out videos regarding real estate and mortgage and also to help people in those industries grow their business. So if you haven't done so already, hit that like button. So I could continue to put out more videos and consider subscribing. So if you haven't already seen the news, the Fed has been buying an insane amount of debt in the mortgage backed securities market. And what that has done is driven interest rates down to the lowest level ever. Interest rates right now for home mortgages are the lowest they've ever been in the history of the mortgage market. Now what does that mean for you and how can you use this? That's what we're going to get into today. Now, some of the wealthiest people I know use debt as a tool, right? Debt is a way to get leverage. And what is leverage? Leverage is taking something and squeezing it to get the most out of it, right? So taking $1 and getting $10 worth of return from it. That's how the biggest, smartest investors are using debt to get outsized returns. Now, any one of us can do this as well, but most people don't know how this works. So that's what we're gonna get into today. So let's go back to 2019, right? Last year, if you were to get a mortgage for $450,000 and interest rates at the beginning of 2019 were around 4.5% for a 30 year fixed mortgage, right? That principal and interest payment would work out to be $2,280 a month. Okay, now let's fast forward to right now 2020 for a $550,000 mortgage. The current rate is 2.8%, right? That's a dramatic decrease in rates. Unprecedented. Right? The payment, principal and interest for this $550,000 mortgage is now approximately 2280 per month. So what does that mean, guys? That means that your purchasing power just went up from 450,000 to 550,000. That's $100,000 in your pocket, right? That is probably the biggest stimulus that any one of us can take advantage of right now. Okay, now you might say, well, home prices went up from 2019 to 2020. That's true. But let's just say a home price has gone up. So let's say that property for $450,000. We'll use this as a purchase price back in 2019, that property has gone up approximately 5%. Right. So now that home is worth $472,000. Right. So yes, home prices have gone up over the last year, but that's a 5% increase. Your purchasing power went up from $450,000 to $550,000. That is a 22% increase. Right. And you know, the smartest companies and the smartest individuals and investors I know are taking advantage of this leverage right here to control a larger asset. What does that mean? Right. So in the debt markets, when you're purchasing things and you want to get leverage to get bigger returns, you want to control more for less. Okay? So now you get to control a larger asset for the same cost. Now think about if you did this on one property. Now you can get that nicer home. Now you can get the property in the better community with the better school district that you couldn't previously afford. Or think about this, maybe the homes here were comparable, but you would like to upgrade to a property that is going to appreciate at a rapid pace or at a better pace than the other cheaper priced home. Right? So you have to think about these things when you're looking at properties and many people are taking this one example and then scaling it across multiple properties. So now when you look at it, you're controlling even more for the same or lower cost than you would have been able to do just a year ago. So anybody in any market across the United States can take advantage of this in their local community. The numbers will vary slightly depending on where you're located and depending on the exact rate at the time of your purchase. But in general right now, things are dramatically better than they were just 12 months ago. And I would urge all of you guys to take advantage of this. The big guys are doing it, so why can't you and I take advantage as well? So if you guys have questions on any of the stuff we covered today, leave a comment below and I'll be happy to answer anything and we'll see you guys on the next video.
