Podcast Episode - Real Estate vs Stocks and a Comment on Crypto

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On a special Saturday afternoon release, this leads to a Suze School lesson on what you need to do to secure your rental real estate investment.  Plus, an update on the stock market and BitCoin.

Podcast Transcript:

July 31st, 2021. Now, one of the most important things that I want you to understand about this podcast is the date that you hear at the beginning when I start. Because it is that date that I'm recording this podcast, that everything I'm saying on this date is relevant and it may not be relevant five months from now or a year from now. So, you have to pay attention to the date because many of you download podcasts and maybe you won't get to this podcast for another six months or so. And you'll be listening to what I'm saying and you'll go, oh, okay. But things may have changed by then. Please remember everybody we live in an economy. And at a time when things rapidly changed, things go up very quickly. They go down very quickly and you have to know the advice that I'm giving. When is it relevant for? So, I want to start with this date July 31 because it is today that the eviction moratorium goes away and the chances of it being extended in my opinion are nil. And that is because the only legal entity that can extend this moratorium is the House of Representatives and the Senate, Biden can't do it. Nobody else can do it according to the Supreme Court. This extension has to happen only if the House of Representatives and the Senate approve it. So with that said, it's almost impossible since the House of Representatives has dismissed, they've shut down right now so they can't vote on it. And even if the Senate still is in session, good luck getting the Senate to absolutely agreed to extend the moratorium. So, if that doesn't happen, which I doubt highly then we have a problem until they do extend it, if they ever extend it again. And the reason that we have a problem is that is going to make that in the next month or two, we're going to have anywhere from six million by one estimate, as high as 30 million by another estimate. But millions and millions of people are going to find a little sticker on their door that says, you have got to get out. Where are these people going to go? The only choice most of them are going to have is living on the streets. So we're about to see, in my opinion, if this isn't changed, a massive tent city throughout the United States in many areas, because there is no other choice for these people. Now, one of the reasons that this is so aggravating to me is that the eviction moratorium first came about for the health of everybody because if these people are kicked out of their homes and they have no place to go and then they catch covid, then covid will spread so rapidly. So, let's contain it. Well, guess what? Covid isn't contained anymore. Covid is spreading with this delta variant faster than it ever has. So, at the exact time when Covid is ramping up, we're ramping down on those people that need us the most. And I just think it's such a travesty. It is absolutely such a travesty and really Congress should have dealt with this. They knew that the date was coming up. Why this wasn't dealt with a month ago? Why is it that they always wait to the last minute to pass something that affects so many people? And it affects not only the people that are going to be kicked out of their houses, it affects every single one of us, because when all of a sudden you have all these homeless people, where do they go? They affect the prices of real estate everywhere. Truthfully, so I just think it's a travesty, but that brings me to the Suze School of today and it's really all about real estate investing versus the stock market, because I'm getting so many emails from all of you saying Suze, I just don't trust the stock market. I think it's like gambling, so I'm putting 100% of my money into real estate, I'm going to rent it out and that is how I am going to make my income when I'm retired and I'm like, okay, here we go. So, I just want to give you a few facts here and a few facts that all of you really need to remember because when it comes to real estate, do you really if you're going to be a landlord now, I'm not talking about real estate that you yourselves live in. I am now talking about real estate as an investment. When you actually rent out to somebody, how much research do you do on them? Sure, maybe you look at their Fico score, maybe you look at their credit reports, but does that really tell you what you need to know? Like, would it surprise you if I said to you that there are approximately 48.5 million rental units in the housing market, today. And do you know that 23 million of those 48.5 million are rented to people who are paying over 30% of their income towards rent. Now, when anybody is paying over 30% of their income towards rent, it's called the rental cost burden because that is too high of a percentage for somebody to be paying for them to be able to continue to pay if anything goes wrong. But it's not just those 23 million. Do you know that 11 million out of the 48.5 million are actually spending over 50% of their paycheck on rent? 50%. Do you have any idea if the renters that you are renting to, how much of their income is going towards rent? Like do they also have cars? Do they have what's going on in their lives? So, how much research are you doing on your tenants? So, if you look at that 34 million out of the 48.5 million are really all people that we call rental costs burden. And you have to be very careful of that. That leaves 14.5 million out of the 48.5 million of people who could probably afford to be renting what they are renting. Now, does that mean that you should rent to somebody like that? No, but you better do your homework. And this is the reason why of that. 48 million rental units, 22 or almost 23 million of them are owned by what everybody calls mom and pop owners. So, it's people possibly like you like not big corporations, not companies that buy it and they sell it and they do all these things just ordinary everyday people that wants some extra income. But what's so sad about that is that more than half of those people don't have any access to a line of credit. So, when they're renters cannot pay them the rent, they can't make their mortgage payments most likely. And then we have real estate in those areas start to tumble down. And so, it's really sad and you know who it's really sad for is people of color. Because over 80% of the people that are facing eviction today are people of color and nobody out there, none of our politicians, were dealing with this. We're thinking, oh my god, what are we going to do? So, the reason that that's important is that when you make a real estate investment, what kind of research are you really doing? How much of a backup do you really have? If something like this were to happen again and trust me, something like this will absolutely happen again. History always repeats itself. So, when it comes to buying a home, a rental property, it is mandatory. It is essential that you have at least one or two years of working capital for that property itself, so that if something goes wrong and you've purchased this property and you've purchased it with a mortgage on it and you have to make payments to the mortgage company and to the insurance company and for property taxes. Because trust me, they're not going to be doing these moratoriums again, they're not going to allow you to not pay your mortgage, not pay your property taxes, to not pay insurance, to not pay things, utilities. Everybody wants to be paid now, and many of them want back pay for all of the months that you didn't pay. So, now you really want to be a landlord. You want income from your rental property. Again, I'm going to repeat thinking that there will never be another moratorium if something were to happen and you rent it to somebody and they can't pay the rent, what are you going to do? So, it's essential that every single one of you now looks at a piece of property and you look at what does it take for you to maintain that property for one or two years, especially if you do not have any income coming in from a renter. And you've got to look at it that way people, you just can't take money out of your 401K plans as a loan or take money out of your Roth IRAs and invest it in real estate because that's where you think the money is going to be made. Big, big mistake. So, you can't go for it like that. You have to really look at investing in real estate. And again, I'm going to repeat, I am talking about investments in real estate that you're going to rent out, not in your own home purchase, got that. So, we have a problem here and I don't know how this problem is going to be solved but I do know that it really is something that has to be dealt with. Now what is so very sad is approximately I think it was $46 billion dollars was originally allocated to help out the renters for rental assistance so that they could apply for it and therefore have money to pay their landlords and everything like that. But of that $46 billion. Guess how much, just guess how much the States have used of it, Uh huh, no, no I can hear what you're thinking. Only $3 billion. So, the States really need to get on it and distribute this money to the people that really need it versus just keeping it in their coffers. Now if you're listening to this and they're one of the people that absolutely are going to be evicted, you don't know what to do or you know somebody that's going to be evicted and they don't know what to do. You really need to apply for rental assistance right now to get help because there is money there to help you. The best place to go is home.treasury.gov and you can go there and find out places to apply. But what's very strange is you have to be very careful because if any of you used your stimulus check to buy something other than applying it to rent or something like that, they very probably will turn you down. It's very tricky, but you have to give it a try. So, when it comes to rental real estate, these are the things that I want you to think about the true health of your renter financially speaking. Do you know everything about them that you need to know so that you feel secure in renting to this person? Next, you need to make sure that you have at least a 1-2 year working capital fund to take care of that property in case your renter cannot pay you. Do you really understand that when you buy a rental property and now here it is and maybe you can rent it out, maybe you can't, maybe you're getting in trouble with it. That it takes time to sell a property. It does. You have to list it. You have to let people see it. And even though I know everything's been going crazy with real estate, you can kind of feel things are slowing down a little bit right now, notice it's not so much in the headlines anymore. And therefore you really need to make sure that you have enough time to be able to sell it. Remember real estate when you purchase it, also has to be repaired. That's part of your working capital fund towards it. And absolutely natural disasters can affect your investment big time. So, there are a lot of upsides, a lot of upsides to rental real estate, but there's also, in my opinion, many downsides and we're experiencing that for many of you right now. And yet you say to me that investing in the stock market is a gamble. Is it possible that not diversifying and putting all of your money into real estate is equally as big of a gamble? I happen to be somebody, and maybe you can tell this by now, I would opt absolutely for the stock market over real estate any day, especially if I was getting older. And the reason that is that real estate requires maintenance and as you get older, who does that maintenance for you? How often do you have to do it? But you have to attend to that property. In the stock market, there are many ways for you to invest in real estate, but it's not that big of a deal you buy and if you want to sell, you put in a sell ticket and you're out, no maintenance, no insurance, no property taxes, no having to worry about your tenants paying you rent. The stock market and the investments in the market really can offer you the most diversification out there. And even though the market goes up and the market goes down and usually you do not see real estate go up and down to that extent. It can happen. It happened in around 1993, it happened in 2007, 2008 where $700,000 properties, in let's say Tampa, Florida went down to $100,000. It can happen. But what makes you also nervous is that every day you see the stock market fluctuating, it goes up, it goes down, it goes up, it goes down. You never see that with real estate, it's not like you turn on the TV and all the pundits are saying, yep, real estate went down 10% today. Oh no, it hit its high today. Do you understand so psychologically many people have put into your head that real estate is far more stable of an investment and I'm here to tell you, I don't think it is. But you're going to have to decide that for yourself. Now, does this mean that you should not be investing in real estate at all? No, it just means you absolutely need diversification. You cannot put 100% of your investment money into real estate properties. Now I know there are many people out there that will disagree with me. But personally I don't care. Because I read the emails talking about the trouble that so many of you are in right now and I know if that money had been in the stock market, you wouldn't be in the trouble you're in at this moment in time. So, it will be very interesting to see what happens if by tonight this moratorium absolutely expires and they don't reinstate it, which somehow I have a feeling they just might not because you can only kick the can down the road so far. You know a little bit ago I was doing a talk on zoom and somebody said to me, Suze don't you think the savings rate in America has gone so high right now that everybody really is prepared for things that they need to be prepared for? And I said you people, you just don't get it. Do you know why the savings rate is so high right now the savings rate is high because so many of you haven't had to spend money and go to work and spend money to get to work. You haven't had to spend money on buying clothes to wear at the office. You haven't had to spend money on food to eat when you go to the office, you haven't had to pay your student loan, your rent, your mortgage, your utility bills, you haven't had to pay your normal expenses. So, you've been able to take that money and save it and save it and save it. But, as soon as all these moratoriums are over and trust me, oh, they will be eventually. So, now you're in a situation where you have got to spend the money that you've saved and you're right back eventually where you were before you had all the money that you needed to keep yourself secure. So, I'm just telling you this because I want you to be protected. I want you to be secure. And I also want you to stop thinking of the market as a place that is nothing more than like Las Vegas where it's all a gamble. It is not. There are places that you can invest that are safe and sound. And just because they fluctuate in value up and down doesn't mean that they won't come back. Doesn't mean that they won't pay you your dividend. So, it's just something for you to think about. All right. So next, let me just address the stock market for a second here. I am still waiting to see if it declines. Absolutely, I am. But does that mean that all of my money is out of the stock market? No, I have a serious amount of money in stocks that I have total faith in. But I have a lot of money in cash so that if in case the market absolutely starts to go down, I can buy even more shares of the companies that I like. So, you just need to know this isn't like I'm thinking, oh my god, doom and gloom here, I'm not. But I do think that there will be a better place to enter this market then right now. But until then there's nothing wrong with dollar cost averaging every month into some ETF and I do like ETF over mutual funds, just so you know. So, there is some ETF out there that you should just be dollar cost averaging in. I still like the vanguard total stock market index ETF. I still like the aristocrats ETF the at symbol NOBL. There are so many of them. It's not even funny. So, just something to think about. Okay. And we'll see what happens through August here. Bitcoin, I just briefly want to touch on Bitcoin. Do you remember a little while ago I said I thought Bitcoin would go down to about $30,000 or $29,000. And I also quoted that Cramer thought it was going to go to $12 or 15,000. But that my projection was, it would go to about $29 or $30,000 and then start to go up again as I am recording this. Bitcoin is back up to $42,400 a Bitcoin. Now one may ask why what made it go up? Well, if I were to think about this. These are the reasons why I think Bitcoin started to go up again. Amazon posted a job listing for a Digital Currency and Blockchain product lead. What does that mean? Does that mean that Amazon is thinking about accepting Bitcoin to do purchases with when amazon enters something, you have got to pay attention to it. Also, Tesla and you know Elon Musk can move these markets. Tesla will likely reverse their decision and they will start accepting Bitcoin again. So, it's fascinating that that's happening also. Do you remember GameStop? Do remember that stock where there were so many people betting that it was going to go down that when all these people rushed in to buy GameStop. All the people that were betting for it to go down, which is called shorting a stock had to go in and cover their shorts, which pushed the price of GameStop up even more. Well, there were 800 million shorts that were shorting Bitcoin. And as Bitcoin went up, most likely they had to cover their shorts which also pushed up the price of Bitcoin. The other thing is that all of a sudden Wall Street and venture firms are starting to invest again and collect money. So, over $1 billion dollars was invested in companies that are venture firms and Wall Street firms that deal in Bitcoin. So, that's interesting. So, the other thing is this, that it seems that the direction Bitcoin is going is that unlike gold that can be used to make a purchase. It seems like people are starting to gear up where crypto isn't just going to be something like gold, it really would possibly turn in to a payment structure. Now if that were to happen where people are starting to take crypto as a payment, then Ethereum is a great place for you to look as well in terms of investing because there's more than just Bitcoin to this equation. So, those are the things that I think are happening with Bitcoin. Again, I think it's something that you hold for the long term or you, dollar cost average into it with very, very little amounts so places that you can do it. Coinbase obviously, also, there's a new exchange out there with Sam Bankman, FTX. Might want to look into his platform. He's quite something that Sam Bankman, it's things that you might want to look into. All right, that's a podcast for you everybody. So, we went from real estate to stocks, stocks to Bitcoin and here we are right now. The main takeaway from all of this is, I think it's really important that you understand what your money is doing and why you are doing what you are doing with your money. Too many of you again are writing me saying my financial advisor is telling me to do this and what they're telling you to do is just horrific. So, you have to know that your financial advisor, if you have a financial advisor has your best interest at heart versus their own, everybody has to make a living people. Everybody, but not everybody has to make a living off of your money. And again, the most powerful thing that I can ever say to you is this if you want to find the best financial advisor in the world, look in the mirror, how many times have I said that to you? Because nobody cares about your money more than you. And what happens to your money directly affects the quality of your life. Not your banker's life, your insurance agent’s, life, your financial advisor’s life, but your life. You have to know when does it make sense to do something and when does it make sense not to do something? And the biggest mistake you will ever make with your money are the mistakes you don't even know that you are making. So therefore, next Sunday's podcast, Suze School is going to be about do you do an IRA rollover or do you leave your money in your 401K or 403 B or TSP plan? Which is better for you and why? So, that's what we're as on store for us now. If anything happens in the stock market or anything, of course I'll change that lesson. But you've got to start learning. So, until Thursday when we are all so lucky in my opinion to have Mrs Travis join us again with her very sweet little laughter. Want me to just tell you a little secret? I got to tell you a secret. So last Thursday's podcast, KT was reading an email about a man whose son was killed in the military and she couldn't get through that. Every time she started to read the email she started to cry and cry and she made me stop recording and cut it out. And I said why KT, if you're crying because you feel so bad for this man and this family, why not show them your emotion? She said no Suze. I cry too much. I don't know. I don't think you could ever cry too much when your heart is breaking for somebody else, when your heart feels the pain that others are feeling and going through. That only shows how incredibly compassionate and caring of a person that you are. If there was ever a time for all of us to have our hearts breaking, for all of these people that are about to be evicted, now is the time. So, contact your senator, contact your congress people, contact anybody you can to make sure that these people somehow are taken care of because right now they're out in the cold and it seems like nobody cares about them. What a shame. I'm sure if KT was listening right now to this podcast, she would be crying. All right on Thursday we'll do another asked Suze and KT Anything. But until then stay safe, stay strong, and most of all stay secure.

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