How to Invest With High Interest Rates

What’s up, guys? Let’s talk interest rates. Probably one of the most common questions that investors are asking me these days is James, should I still be investing in Airbnb and short term rental properties with interest rates being this high is now still a good time to invest? Given that I’m going to be paying more on my mortgage payments every single month, because interest rates are now at about 6% rather than the one or 2% that they were at four years prior. So let’s talk about it. First off, the answer to this question is, it depends on again, what is a prize? If you’ve been following this channel for a while, you know that in real estate investing, there’s generally not a lot of one size fits all answers in terms of a macro, should you invest at all? Yes, absolutely. There are still really great deals out there. But should you invest in this particular property that you’re looking at right now, or this particular market that you’re looking at right now? Well, that is where it starts to depend. So the thing that I always like to remind people is that when you’re fighting against interest rates, you want to think about what is the downside you need to protect, and then also, if you just don’t invest in real estate at all, because the interest rates are high, then what’s the outcome there. So let’s look at it. If you keep your money in cash, instead of investing in into real estate and into a short term rental property, then you’re guaranteeing yourself a loss, because inflation is going to happen, that’s going to devalue your money, whether you like it or not, if you’re planning on keeping that money in cash, there’s no ifs, ands, or buts about it. And there’s no way for you to protect your downside, if you’re going to stay invested in cash. So it’s just a guaranteed loss. That’s never what you want to do. If you’re looking at the prospect of growing your wealth. Now, if you invest in real estate, you’re going to, you know, basically protect yourself, give yourself a hedge from that inflation, because the value of the property is going to go up over the long term, you’re gonna get the rewards of that appreciation. But the downside risk is that you could cashflow negative on the property. It’s just challenging. If you have cash, you don’t have to pay anything every month to keep that cash, you just may lose the value of the cash over time, when you have real estate. If there’s a mortgage on especially with a higher interest rate, then you have to make sure you can cover that interest. And so that’s the downside. Now the question is, can you mitigate against that? Well, absolutely, you can. And the way to do that is with cash flow, it’s definitely going to be better to invest your money in real estate than holding in cash and waiting on the sidelines. Like any good investor, long term investor will tell you, it’s not about waiting to buy real estate, it’s about buying real estate and then waiting, right, you don’t want to try to time the market, you want to spend time in the market. So there’s never a bad time to get started. In real estate. There’s a bad time to hold your money in cash, like when inflation is where it’s at. But there are bad ways to get into real estate at any given time. For example, right now, if you get into real estate by getting into long term rentals, it’s gonna be really hard to cashflow positive. So if your property sits vacant for a while, you’re going to be scraping out of your own savings to be able to cover the cost of that property. And then a lot of cases, even when the property is fully rented, it’s still going to be cashflow negative for you every month. So that’s a really bad place to be as an investor. So it’s not a bad time to get into real estate. But long term rental is a pretty bad way to get into real estate in most markets right now. So again, similarly with short term rentals, if you get into the wrong property or into the wrong market, then it’s a bad time to get into one of those deals for sure. But you want to avoid that. So how do you do that one of the things to look out for so that you can actually protect yourself, given the interest rates are as high as they are, which relatively speaking, they aren’t actually that high. If you found if you rewind back a few decades, interest rates were at 10 20% for purchasing real estate. And the question then is the same as the question now, can you make enough cash from the real estate itself to support the monthly payments on that real estate and the interest if you can, then it’s not you paying the interest, it’s your guests paying and you’re still generating positive cash flow every month on your investment and hedging against inflation and getting to reap the rewards of appreciation. So it’s a total win win as long as you have your cash flow protected and you make sure that you have positive cash flow on the property. So here are a few things to look out for in order to ensure you have positive cash flow. Guys just want to take a quick break here to say that for those of you watching who want to build cashflow, and long term wealth by purchasing Airbnb ease and short term rental properties, there’s a link in the description right down below for a free training that will walk you through my exact strategy for investing successfully in Airbnb ease. Now if you’re not ready to actually buy properties and you want to get started managing other people’s properties on Airbnb the same way I got started and build a full time income managing others Build properties, there’s actually another free training linked in the description down below as well, that’ll be a really great fit for you. So whether you want to invest in short term rental properties and actually build amazing cash flow and long term wealth by acquiring the assets, buying the properties themselves, or you’re looking to earn a full time income, managing other people’s properties on Airbnb, we’ve got some awesome trainings that are linked in the description down below, that’ll definitely help you out. When you sign up for the trainings, we’re also going to send you a few other tools and resources completely for free just to help you get started. Again, the links to sign up are in the description down below. And both trainings and all the tools are completely free. So make sure to register for the trainings, links in the description down below. One go into the right market. Right now, the reality is there’s some really, really great deals out there. And I hear a lot of people talking about markets where even as the interest rates have gone up, the property values are still going up, they’re still bidding war, there’s still lots of competition. And so you’re not seeing the prices of real estate come down with it in relation to the rising interest rates. And there are some markets like that the reality is there are some markets that are detached from the fundamentals don’t buy there, that’s the honest answer is if you’re buying a property that’s overvalued, that shouldn’t be valued at what it is right now. And that won’t be able to cash flow, you need to avoid that. But because so many investors think that’s all markets, which it’s absolutely not, they’re just shying away from real estate, which means that there’s way less competition out there right now. So there are some really, really great deals to be had, if you know where to look and what markets to look into. So there are lots of markets where as the interest rates have gone up, like you would expect prices have come down. And so you can get really great deals. So number one is just finding the right market. Number two is then doing your due diligence and analysing that property to make sure you’re buying the right deal. Because I always like to tell people that in bad markets, there’s both good and bad deals. And in good markets, there’s both good and bad deals. It’s not just about finding the right market, and then just buying any property out there and expecting it to be a homerun success, you need to do proper due diligence. And the two things that we look for we do our due diligence on a particular deal, as we look for at least 15 to 20% cash on cash return, meaning that we should be cash flowing 15 to 20% in profit after covering all the expenses, including the mortgage, including that interest rate, we should be cash flowing 15 to 20% of the cash that we put into the deal. That’s a bare minimum. And that’s any reasonable scenario. I see too many people looking at this going well, in a best case scenario where outperform everyone and crush it and do something that’s never been done before, then I’ll hit this 15 and 20% Mark, so let’s do it. No, do not think that way. You want to find deals, they’re easy to make work that a trained monkey could hit a 15 to 20% cash on cash return with. And so in order to do that, you just need to do your due diligence and be reasonable. And then what we also want to look for is that in a worst case scenario, let’s say this property does terribly, everything goes counter to our plan, we want to make sure that in a worst case scenario, we’re still going to be cashflow at breakeven. What does that mean? It means that in a worst case scenario, the property is generating enough in revenue to cover all of the expenses, that’s operating expenses, like cleaning fees, it’s your internet bill, it’s your hydro, it’s your mortgage, it’s your taxes, it’s your insurance, everything, you never want to be dipping into your own pocket into your own savings to cover the cost of that property in any given month, even in a worst case scenario. And so to figure this out, we can run worst case scenario, we can do that projection, we can do that analysis to make sure that our downside is protected. Now, if you’re investing that way, imagine how different that is from the typical investor that you did talk to who just goes out and buys any property and thinks that it’s just going to work out? Well, sure, if you do that you may work out but chances are, it’s going to do really poorly for you. And not only does that lose you money and cost you a bunch of opportunity costs, but it drastically slows down your timeline for building your portfolio and for generating some significant passive income from your real estate. Because remember, if you get that first property and it doesn’t perform well, that means it’s going to take even longer to buy the second, the third, the fourth, if it means that you buy that property and cash flow is negative even longer again. But if you buy that property and it cash flows positive and does really well, it makes that timeline to buy in the next one much shorter as opposed to longer.

So that’s how you ultimately get to 510 1520 $30,000 a month in passive cash flow in a short period of time is by getting the right deals by doing your due diligence and buying the right deals. It pays to do that due diligence and to take your time to do it the right way. So again, it’s just about knowing your numbers and having that that security that you know it is going to cover the cost of those additional interest rates, interest rates are not a reason to get out of the market or to avoid getting into it. It’s just a reason to make sure you’re doing the proper due diligence. And also, it’s an opportunity, because so many new investors think that you need to avoid real estate right now, because the interest rates are high. And those are the people that we’re normally competing with when interest rates are low, because they’re naive. They think that that’s when they should be getting into the market. Now that interest rates are high. All those newbie investors that aren’t well educated don’t understand this. They’re not getting into the market. So we just means less competition for us, which means more great deals to be had. So again, that’s my thoughts. That’s what I always recommend to people. I want to know yours in the comment section down below. If you have any questions about this, let me know if you got value from this video if it was helpful if you’re wondering about this yourself, then drop me a like on the video just hit the thumbs up button. It really does help me out tremendously with growing this channel and getting these videos in front of more people. And it just shows me that you actually enjoyed and got value from this content. So I’d really appreciate if you do that. And last but not least, make sure you hit that subscribe button to stay up to date. We post two new videos every single week on this channel and have been for years now helping you to perform short term rental investing. So make sure you hit this subscribe button so you can stay up to date with that. And with all that said, thanks so much for watching, and I’ll see you in the next video.