Rental Property Analysis 2.0 - How to Adapt to High Interest Rates

[@BiggMo]

7:13 this option will only apply to certain regions. Here in SW Washington, prices are not lowering. We have high interest rates & rising valuations. To further complicate things, there is a significant number of investors paying cash to compete with.

[@keithhowes5692]

Such great insights! People have short memories… except for when the memory gives an excuse to not make a move.

[@CoachChadCarson]

ha, ha. So true. We've always got to keep moving and stay in the game. It's just a matter of figuring out how to do that safely and profitably.

[@TeacherPrepTech]

You can tell this was an honest interview and not someone stoking fear.

[@CoachChadCarson]

thank you for saying that and for watching!

[@shana5300]

Coach thank you for sharing this! I was on the fence for a while due to the interest rates environment. His logics make so much sense and this opens my mind to a totally new perspective.

[@CoachChadCarson]

Glad it was helpful! That's why I like talking to Erion, too. He explains the essence of things in a very clear way.

[@laurawardlaw7938]

Great content even a year later. Confirming so many of our recent decisions to put 50% down , etc. Thank you!

[@wallyjohnson4971]

Very informative episode! Thank you Coach!!

[@CoachChadCarson]

thanks for watching!

[@tamarrabarnes8462]

Great interview and insights!

[@Zero_Zero_Zero_Zero]

Thanks Coach needed to hear it. We're anchored to yesterday and that never works. Gratitude.

[@CoachChadCarson]

Thanks for watching! It's a constantly shifting market so we all have to be on our toes.

[@kadila14]

this was so good. Great perspective and really hits at the heart of my struggle. The bottomline is to adjust for the environment and not sit on the side lines. I do wonder if one takeaway is buy high quality assets for a potential lower cash flow and yield now. These will have upside in the future whether appreciation or better rates?

[@CoachChadCarson]

Yes, agree on that takeaway. If inflation continues (which is how interest rates would likely stay higher), buy high quality assets. They will benefit and keep up the most

[@JevonMusicGroup]

Is this idea of yield, as you two are using it, pretty much the same as cap rate? Or similar?

[@DionTalkFinancialFreedom]

Yield is cash on cash return. Meaning: Annual profit divided by cost to acquire. Profit takes into account expenses. Like debt, HOA and taxes. Cap rate doesn’t.

[@CoachChadCarson]

In our case, we are talking about unleveraged yield - so yes it's the same formula as a cap rate. The difference is just in how it's used. We're using this as an analysis tool and goal to figure out if a property is worth buying or not. Cap rate is used more for commercial valuations and is often a MARKET number, meaning it summarizes the income/price ratios investors are purchasing on average in a market.

[@JevonMusicGroup]

@@CoachChadCarson Thanks!

[@andrewmaccaskey4388]

Great information and motivation to take action

[@CoachChadCarson]

Glad it was helpful!

[@mcanultymichelle]

That was great 👍 😊

[@DionTalkFinancialFreedom]

Great episode. Thank you.

[@CoachChadCarson]

Thanks Dion!

[@AllNighterHeider]

Great work Thanks Coach

[@leeroach3381]

Very helpful Thank you for sharing this

[@mike2959]

1st disagreement is we are not in a high interest market. We are in an average interest market. Look at the last 50 years. 2nd disagreement. There WAS a time when values were at rock bottom AND interest rates were ALSO rock bottom. 2012/13. Any surprise that’s when all the KZbin investors started? Bigger Pockets 2013. It took 4 years from 2008 to hit the floor. In 2013 a 16 unit apartment sells for 350,000. P&I is $2200 a month. Rent roll is $6900, property taxes 6K a year. These are real numbers. Same apartment complex sells for $780,000, P&I $6400, taxes $8900, rents are $10,200 Here’s my opinion. For whatever reason and I still haven’t figured out you all think real estate is different then say a Big Mac. It’s not. Raise the rents. Yep. That’s inflation. The feds like to say they are raising interest rates to slow the economy up and lower inflation. Lies. Raise the valuations increase your prop taxes. Raise the interest rates raise our debt load. Both = raising rents. Which is inflation.

[@InvestingArchitect]

Hey Mike. In 2012, values were slightly higher than they were in 2008-10 and rates were also higher than they were in 2020-21. But I'll grant you the point. Now here's the next question. Prior to 2012, when was the other time this phenomenon happened again? Put a different way, if the argument is that perfect storms do happen, it's important to see how often they happen so you can determine if it's worth waiting on the sidelines for them to happen again for you.

[@mike2959]

@@InvestingArchitect Ah. Yes. That’s the game. To be able to predict. Great points.

[@5amivan]

Why does he keep saying the prices are lower. The prices are significantly higher

[@juliecline9552]

This confuses me because prices are objectively higher now than in 2021

[@robertwailus1655]

I dont know about you, but our prices are higher than ever. So inflated. And the interest rates are high. Pretty hard to find good deals.

[@elenajukes-kt8uh]

The video covers this, but in essence you have to change your definition of a "good deal" - prices have stabilized as interest rates have gone up, there is less competition than there was 4 years ago, and there's a lot of assumable mortgaged and homes that need renovation that you can get for reasonable prices still. There are deals still out there, but you have to adjust your expectations a bit and not live in the past.

[@tyjameson7404]

This guest was amazing and point on 🙌🏾🔥👏🏿👊🏽🇺🇸💪🏾

[@tyjameson7404]

Epic interview 🔥🙌🏾🇺🇸👏🏿👊🏽🙏thank you Coach!! Your the bomb 💣

[@Bilbo383]

How is he reaching the conclusion that assets are better now? I'd argue they are worse because expense growth is far outstripping rental growth. If the same asset is generating less income, how is it better?

[@CoachChadCarson]

Is expense growth outstripping rent growth? Do you have data on that? It hasn't been my personal experience with my rentals. Yes, insurance and some repair costs have gone up. But rents have increased significantly as well.

[@Bilbo383]

@@CoachChadCarson yes, I believe there is a yardi report for q2 that shows that expenses are up over 9%, while rents have only gone up slightly. A quick Google search should find it. I'm also seeing this across the 500 units I manage. It's hard for me to say the assets are really better given the rampant exp growth this yr

[@InvestingArchitect]

Hey Anthony. On average, rental growth is far outstripping expense growth across the U.S. There are some exceptions like Florida where insurance costs have skyrocketed. But on the whole, it costs less to acquire the same stream of income so asset quality is objectively better now than 2021.

[@Bilbo383]

@@InvestingArchitect where is rental growth in 2023 exceeding 9% expense growth? I'm in 3 tertiary markets, as well as CA, and this is not the case for any of my assets.

[@InvestingArchitect]

@@Bilbo383 Seems like a more market specific issue (CA tertiary markets). I'm talking about the overall market as a whole. On average, NOIs are remaining relatively stable while cap rates are expanding. That's the definition of a better asset (vs 2021).

[@davebrown7009]

Cut those trees behind you…they are growing roots into your foundation

[@theFifthMountain123]

Prices are lower in Austin and San Antonio. I’m not going to catch a falling knife and wait until at least next year once elections are over.

[@CoachChadCarson]

Are you buying to flip or rent? If long-term hold rentals and the numbers work today, I'm ok buying now even if it goes down more. It matters more to me what the value is 10 years from now than next year.