Seth: This is Seth Williams. You're listening to the REtipster podcast. This is episode 219.

And in today's episode, I'm doing something a little bit different. I've never done anything quite like this, but my friend Keith Weinhold from Get Rich Education, he and I did this little experiment not long ago where he interviewed me and then I interviewed him. And for both interviews, we split it up into two different videos.

So in the first interview, part one of that conversation was on my YouTube channel. And then part two of that interview was on Keith's channel. And then we flipped it around. When I interviewed him, part one was on his channel, and part two was on my channel.

So what I'm going to do here in this episode is air for you both of those interviews back to back. So it might seem a little discombobulated and all over the place, but we really cover a few topics here. The first one is the use of AI as real estate investors, as entrepreneurs. This is something that I've been diving into a ton over the past year. Taught a couple of guided courses on it. Learned a ton of stuff about how to put this into place and really what a life-changing superpower AI can be. So that's what Keith's going to interview me about.

And then I'm going to turn around and interview him about the subject of inflation and how it's not really the big scary monster we all think it is. And if anything, it can help a lot of us build a ton of wealth in the years to come if we understand how it interacts with debt. We're also going to talk about the potential housing crisis, whether there is a housing crisis coming or not, and what may or may not contribute to that.

I had a ton of fun recording these two different interviews with Keith. If you want to see the original YouTube videos that both of these were pulled from, again, you can go to retipster.com/219, and you can see them in their original format as we split these up into four different videos. But if you want to hear the audio-only version of those interviews, we're going to dive into those right now.

* * *

Keith: How do you really use AI? Can you believe if you have a question about anything in life, 90% of the time, it already makes more sense to ask ChatGPT than a human being? That's what my longtime friend says. He's with us today, and he hosts the terrific REtipster YouTube channel. Welcome in to GRE, Seth Williams.

Seth: Hey, Keith. Great to be here. Thanks for having me.

Keith: Seth, you've been interested in AI for years. Tell us how your perspective has evolved over time.

Seth: Yeah, it's actually interesting. I know a lot of people have pretty big variations in how much they use AI and how much they're even aware of it. Personally, I use it every day, like many, many times a day. ChatGPT is open almost all the time. When I have a question about almost anything, it makes more sense to ask ChatGPT than it does to go talk to a human. Because I can get direct answers. It's armed with pretty much all the information that's publicly available in the world. It just is an incredible resource.

And when I talk to people and I ask them like, "Hey, do you use ChatGPT?" And they either say, "What are you talking about?" Or they say, "Yeah, I've used it once." Like, it just hurts me. You know, it's like, seriously? Like, you have a superpower at your disposal here.

It's kind of like what the Internet was back in 1995 or something, where like some people kind of got it, but a lot of people didn't get it yet. But it's pretty crazy when you can harness the power of not just ChatGPT, but all of this AI stuff that's available now. Like there's incredible, very powerful leveraging opportunity here.

Keith: I use it about every other day. I bet after talking to you, it's going to make me want to use it more. But yeah, the guy that cuts my hair, he's only 25 years old. He doesn't seem very familiar with this. But like you said, it's a lot like Google in 1995 to maybe 1998. Like people just didn't automatically think of Googling something.

And it's beginning to get that way, I think, with using an AI like ChatGPT to answer your questions. Why don't you tell us about some of the biggest misconceptions that people have about AI?

Seth: Yeah, well, that's a good question. I guess it kind of depends on where they're coming from and what they are even aware of in terms of what it's capable of. But I know one thing I hear from time to time is people will say, "Well, I'm not a content creator. So I don't really have a use for that." Like it makes sense if you're like a blogger or a podcaster. And I guess the good thing is that they at least have some awareness of what it can be used for.

But things like ChatGPT can be used by pretty much anybody who knows how to type on a computer or even speak to their phone. They're just, this goes on and on. Like the ChatGPT mobile app, for example. Like I just love this thing. You do have to be a paying plus member, which is 20 bucks a month.

That is a laughably inexpensive price for everything that ChatGPT could do for you, especially the mobile app. I can turn this thing on. I can use it as a camera to point to anything and have it give me insights and instructions on how to deal with this thing, whether it's a plumbing problem. I was just using it this morning. I had my phone set up on a tripod on my desk, pointed at Zapier, trying to figure out how to make two complex softwares work together.

And I just had to speak to it in real time and ask it, "This is what I'm trying to do. How do I do this? I don't get it." And it explained exactly what to do and this was help that I could have paid a consultant money for, but it just came from this app and all it has to do is just look at my screen and it understands all that it sees. It sees things that I don't see.

I know people that use ChatGPT as a therapist. I've never done that but I know a lot of people that do that kind of thing and it gives them legitimate, useful feedback, and it's available 24-7, and it doesn't cost $100-plus per session to talk to them.

Keith: You, the listener or viewer right now, are thinking about all the jobs that this is displacing, surely. But why don't we pull back and think about, now, Seth, if someone is completely new to AI, what's the first thing that they should try to use it for?

Seth: Well, I guess if you are a real estate person specifically, I don't know if everybody listening to this is necessarily. But as a real estate investor, the first thing I ever used it for was writing property descriptions for me. Like when I had a property I was trying to sell. I know there's a great way to explain this thing, but I don't really know how to do it in my own head. And you can just feed it basic information about the property and say, "Hey, write me a beautiful, compelling property description that will make this thing sellable and make people respond with interest" and that kind of thing, and just do that, and you'll see what I'm talking about. It's an incredible writer, it does a great job.

Anything that, and I've actually got this problem worse than most people, where I can be looking right at the solution and I don't see it. Like, it's right there in front of me, but I miss it.

But ChatGPT doesn't miss anything. Like, if it's in the picture or even in the live vision camera, it's like a live video feed that you can point at anything, like, it will see it. And it will point out stuff that you very likely are missing.

Keith: That's amazing. I haven't used its image capability that way yet. So, you know, and really that brings up, Seth, there are so many AI tools available, like an explosion these past couple years. How is a person supposed to decide which ones are worth using and which ones are not?

Seth: Well, I mean, it's very true. There's a lot of stuff out there. It can be a little overwhelming. I can tell you I've used ChatGPT. I've used Claude, I've used Gemini, I've used Grok, a bunch of different AI chatbots out there. They can all do some pretty amazing things, but if you just don't know where to start, I'll say if I could only have one of them, ChatGPT is what I would go to.

I think part of that is just a level of familiarity. I've just used it for so long now. It's like a comfortable old shoe, but it really is innovating at an incredible speed. It's actually kind of amazing that this AI boom has been happening for over two years now and ChatGPT is still arguably at the top. I mean they've done a really good job of staying on the bleeding edge of what can be done now.

And ChatGPT is free, but if you pay for the $20 a month version of it, it just unlocks a lot more capability and usability. That's probably what I would do, but I do know there's different ones. For example, Claude - I've seen this myself and I've heard this from a lot of other people - if you're trying to like write a story, Claude is actually a better writer than most things out there. So if that's what you're trying to do, like go with Claude. If you want like a one all-purpose tool that can do pretty much everything reasonably well, that's what ChatGPT is, in my opinion.

Keith: Oh, those are some great tips. And yeah, I thought it was pretty impactful last year when even when you do a Google search, at the top of that, there is now an AI summary before you see your conventional Google search sort of hits, which actually concerned Google advertisers for a little while.

But, Seth, how about some of the most driest and esoteric reading that we can think of and how AI can speed that up and make it more interesting? Just say, doing due diligence in real estate, like reviewing municipal regulations or zoning rules and property restrictions. How does AI help you there?

Seth: Yeah, for sure. I've used it numerous times for that. It's perfect for that. So, for example, in the land business, one way that you can make money from land is by subdividing land. And one strategy within the subdividing business is to find properties that are called exempt subdivides, which means that you can essentially do the subdivide and not get anybody's permission to do it. You can just split it up and not ask anyone, and you can do it.

But you can only do that if the size of the property is over a certain threshold. In Texas, I think it's 10.01 acres or higher. There's certain places, Michigan, they're similar. But you can figure this out by looking at the county and the municipal guidelines to understand what is that threshold or does that threshold exist at all?

You can find these PDFs from the county or the municipal website, upload it to something like ChatGPT or Claude, and just ask the question, "How big does a property have to be before it's exempt from the subdivision rules?" And it'll tell you. If it's in there, it can read through the thing in a matter of seconds and tell you what the answer is and where it found the answer.

A very similar thing with like legalese and legal writing that's really hard for the average person to understand, probably by design. It can decode that for you. I've gotten this before where I've gotten really poorly written emails from people like electricians, or even just...

Keith: I can't believe that would ever happen.

Seth: Exactly. They explain things using a lot of industry jargon and lingo, and I don't know what they're talking about. Right. And I can copy and paste that email into ChatGPT and just say, "Hey, I got this email from an electrician. I have no idea what this means. Can you explain this to me like I'm a five-year-old?" And it does it, and it works every time, where it's like, "Oh okay, that's what you meant" and I can just know that instead of having to respond to them and say, "Hey, can you reword that for me? I don't understand it." And they reply and it's bad again.

And it goes back to this - a lot of questions that a lot of us have every single day historically we've gone to people to ask those questions and that's fine, but it wastes their time and it wastes our time and we still might not get the answers we're looking for.

But with things like ChatGPT, you almost certainly will get the answer you're looking for very quickly. And it doesn't waste anybody's time other than the time you have to spend asking the question. So it's just a big 80-20 lever. You can get a lot more done without relying on the limits of humans to get the job done.

Keith: We're talking about how you can use AI in your overall life and in real estate a little bit, too, with Seth Williams. Seth and I are going to continue. Join us in the conversation. We're going to talk more, including a process to summarize YouTube videos and extract key insights from those with AI and a whole lot of other ways that you can use this tool that you're probably missing out on. Watch part two of two on this with Seth and I right now, right here on the REtipster YouTube channel.

In part two, we're going to talk more about the subject of AI, not only in real estate, but also in business and just in our everyday lives. Keith, what other questions do you have about this?

Keith: Well, you're such a good resource. You're really pretty pioneering in learning AI and helping you with problems and solutions in both your overall life and in real estate investing. So, you know, tell us by now, what are some of the most unexpected or just like totally impressive things that AI has helped you with? And how do you do that stuff?

Seth: That's a really long list. The thing that I have been most impressed with as of late is something that both ChatGPT and Google Gemini can both do this now, kind of in different ways, but they can look at your computer screen and help you figure out all kinds of complex problems.

I talked about this a little bit in part one, but earlier this morning, I had my ChatGPT mobile app right here on my phone. I had it on a tripod, pointed at my screen, and it was walking me through how to set up a couple new zaps on Zapier using webhooks, which just right there, I probably lost most people. It's just a confusing thing to figure out. I still don't fully understand it, but I was explaining my problem and what I was trying to do, and I could just talk for as long as I want until I'm done talking. And then ChatGPT chimed in and in about 30 seconds, it solved my problem and told me exactly what to do.

And Google has another way of doing this where it's actually like on your computer, like seeing your entire screen. And it kind of does the same thing where a voice talks back to you. And it's amazing because I know how hard some of these things can be. The type of thing that would either make me give up and just not do what I'm trying to do or pay somebody a bunch of money to come in, fix the problem for me or stand over my shoulder.

But with the help of these AI chatbots that can see everything going on and they have basically all the knowledge in the world about how to solve the problem, they can do it really quickly and easily. It's amazing. That's one of millions of different things you can do with ChatGPT.

Keith: Oh dear. If AI looked at my computer screen, the first thing they would probably tell me is to close half of the tabs that I have open.

Seth: Yeah, me too.

Keith: Yeah. Yeah. So, well, in any case, here we are in part two of two in our video series here. How are you personally using AI in your real estate investing business today, since we're here on the REtipster YouTube channel?

Seth: Yeah. One thing that has been particularly useful to me is the use of what's called custom GPTs, which basically just means you are training ChatGPT to respond to you in a very specific way based on certain instructions you give it. So every time you start a conversation, like it already knows why you're there, what you're looking for, what assumptions you want it to make.

One example of a custom GPT I've made is one that can very quickly analyze big commercial projects, like whether it's a self-storage facility or industrial outdoor storage. I've explained to it how I want it to run the numbers based on certain information I give it, like square footage and pricing and occupancy rates and that kind of thing.

So I can basically feed it like six or seven key pieces of information and in 20 seconds, it can tell me, give me like a one to 10 rating based on this is a great deal, you should move forward, or this is a terrible deal. Look the other way.

And the reason this is a big deal is because the way I used to handle this was I had a giant spreadsheet and I would go line by line, filling in all these different inputs. And it would take me at a minimum 30 to 45 minutes to get to the same place of understanding like, yes, this is good. I should keep going on this or no, this is a terrible deal.

And it can just like look at a lot of stuff, a lot of data very quickly. And it's not like the final answer necessarily, like, you know, just blindly follow whatever it tells you to do, but it can just get further to the bottom of stuff, wasting a whole lot less time.

So, you know, as a real estate, that's super helpful. People in like banking and accounting fields where like there are full-time analysts that look at this stuff all day long. And it naturally takes humans a lot of time to figure this stuff out, but AI can get there much faster.

Keith: Yeah, that is pretty remarkable. And it sounds like you're finding a pretty high degree of reliability and not getting what we call hallucinations in the AI world. That is sort of a developing thing.

Seth: Hallucinations, it's definitely a real issue where basically we'll just make up stuff that sounds viable, but it's not right. And the only way you would really know that is if you knew better in the first place, which means why am I even asking the question if I already know the answer?

So it was kind of an issue where ChatGPT and Claude and Gemini would just make stuff up. But I think one of the ideas was some of the newer models they're coming out with, like 01 or 03 mini now is what they've got, they use a lot more logic in these models. And the difference is when you ask it one of these questions, and if it doesn't know the answer, it'll just say, "I don't know." That's a better answer than hallucinating.

Keith: Yeah.

Seth: Absolutely. ChatGPT 4.0, it's kind of like the difference between if you hire a very polite VA on the other side of the world who's trained to be a yes man or a yes woman. Like they want to make you happy and they're going to tell you what you want to hear, whether it's right or not.

Whereas these more advanced logical models are more like your accountant where it's like, I'm not here to impress you. I'm just going to tell you the facts and how things really are.

I think depending on what you're trying to do, there are certain situations where you'd want the more creative 4.0 version, other situations where you'd want the logical one. So I'm trying to like do code or analyze numbers or do something where accuracy is very important.

That's where I want to use those logical models. But if I'm like writing a story or song lyrics and creativity is more important, that's what I'd want to do 4.0. So it's not that either one is like better or worse. It just depends on what you're trying to accomplish and what output you want from it.

Keith: Sure. Part of this is knowing which tool to apply. There might be a grain of gratefulness that there are such things as hallucinations, right? I mean, it still takes you, a human being, thinking to confirm, does that answer make sense? And it's just simply a good idea, or could that be inaccurate? So the human component sounds like isn't completely displaced yet at this point.

You know, starting probably more than 10 years ago, Seth, when people began to look for answers to everyday questions, oftentimes they would go to YouTube and they would just like to get their answer that way. You know, why is this faucet leaking or anything else? And watch a YouTube video about that.

What's your process, though, for using AI to take a YouTube video and summarizing it and extracting key insights that way?

Seth: Well, there is a free Chrome extension called GLASP, G-L-A-S-P, that I just used it this morning. I use it all the time. It kind of sits on top of YouTube. So when you're on YouTube and you have this Chrome extension there, this little button appears and you can copy a transcript of the entire video and then take that and paste it into ChatGPT.

And you can ask it whatever you want about what that video is about. You can say, summarize it in one sentence, or you could say, does this video talk about this issue? And if so, where, and what does it say about it? Literally like whatever you can imagine that could possibly come from that video, you could get that information from it. And that alone is amazing.

And it kind of goes back to like, what is the purpose of this video? Or what is my question that I'm trying to get answered? Am I looking for entertainment? You know, for example, I've been watching a lot of videos about guitars and guitar pedals and amps lately. Like, I want to hear what this guitar sounds like. And that's something that I kind of have to watch a video for that. Like a transcript is not really going to help me.

ChatGPT is not going to help me. Like I just actually have to watch the video. So this doesn't totally render videos useless. It just depends on why you're watching it and what information you want to get and how can you get there faster.

Keith: Yeah, well, this has been great. Seth, are there any last things that we should know about AI, whether that's misconceptions or making sure that we're using the right AI tools and avoiding the wrong ones? And before you do, again, this has been part two of two of our AI video series with Seth Williams. If you haven't already, go ahead and be sure to subscribe to Seth's channel and hit the notification bell as well, because he has a lot more granular information on how you can use AI in business, real estate, in just your everyday life. Any last thoughts, Seth?

Seth: You know, I think if people are really interested in this stuff, I mean, there's plenty of places you can go online. This is a huge trending topic on YouTube, lots of good information out there. We actually put together a school community intended primarily for real estate investors and business people. It's you can find that at pulseinnercircle.com, P-U-L-S-E, innercircle.com.

We're talking about this stuff all the time. My friend Mike Balcom and I did a couple different courses on this stuff, like a guided course that was awesome. I mean, we even learned a lot of stuff going through the process. This is a rapidly advancing area right now, and it has been ever since ChatGPT came out. Like every week, there's some huge new thing out there.

It's something that's worth paying attention to because even like right now, it's incredible the stuff you can do. And interestingly, like most people aren't doing it. So if you are up to speed and educated on it, you've got a superpower that most of the people don't know exists or aren't willing to learn.

Keith: That's a great point. If you just learn 1% of this, you're going to be ahead of the general population. And it's really easy to do. Seth, I've done some learning about AI myself. This has been a great chat. Thanks.

Seth Interviews Keith About Debt and Inflation

Seth: He has had millions of dollars in debt from a young age and just keeps piling on more. Today, we're talking with Keith Weinhold from Get Rich Education about the virtues of debt and why he wants more of it. And also inflation. Keith is going to show us how inflation isn't necessarily a bad thing. And in fact, how we can profit from it as a leveraged real estate investor.

Keith, let's start with debt, shall we? Why do you have so much debt? You know, most people are trying to get out of debt and get rid of it. Doesn't this concern you at all? Aren't you afraid of having too much debt?

Keith: I have so much debt because I own so much real estate and that's how I was able to afford the real estate. I think that real estate owners need to embrace debt.

Why? The short story on that is with debt, you can do more.

Instead of owning $1 million worth of real estate over time, you could own $5 million worth of real estate if you have 20% down payments on all of them. So why would you want to do that? Well, if real estate's going to appreciate 5% every year, I would rather have $5 million worth of real estate floating up with it rather than just $1 million worth of real estate. That's the big upside. That is called leverage, getting a return on other people's money.

And this can sound scary to some people, but think about it. In this case, when I buy real estate right, which is where the rent income meets or exceeds all of the expenses, this debt is good because I have reliably outsourced every bit of my debt to tenants. And the more real estate I own, the risk actually goes down because a couple vacancies impact me less. And I'm able to own those assets in different geographic markets to actually reduce my risk this way.

So yes, like you said, Seth, I have had millions of dollars in debt from a young age. I just keep piling on more of it and stacking on more. And this is definitely counterintuitive. But really, when you think about it, building wealth is counterintuitive. You just can't do what the masses do.

Seth: Yeah. Let's talk about the risks with debt. I mean, the presupposition with the idea that debt is okay, as long as there's going to be cash flow there to cover all the expenses and the debt service and all that. But what if there's not? Like, what if rents go down or values go down? Like, does that ever happen? Is there anything you ever worry about? Or how do you hedge against that kind of thing?

Keith: Rents rarely go down. They're extremely stable. Even in the 2008 global financial crisis, rents stayed stable. That's because people couldn't get loans then, and they had to become renters and stay in the renter pool rather than become owners.

But if the real estate values go down, I had it happen to me in 2008. I actually bought a fourplex building for $530,000 in 2007. It went down to $480,000. That didn't feel good, and you didn't know where the bottom was back then either.

But here's the thing. I was able to service my debt even while the building was temporarily suppressed in value because again, I bought a property where the income exceeded all of the monthly expenses and all those debt payments again were outsourced.

But yeah, there's a lot of counterintuition here, Seth. You don't want to become over leveraged. Over leverage is a risk.

Overleverage means that you don't have enough income to make your monthly payments. You don't want to do that. You want to get yourself in a situation where you have a safety factor, and you could reliably make those payments.

But yeah, Seth, it's really counterintuitive. If you would point to a man on the street, you could even call that man me, and learn that he had $10 million in debt, you might feel really bad for him. Maybe he's a homeless person or something. But no, as we all know, net worth is assets minus debt.

That person with $10 million in debt, which I like to call a debt decamillionaire, Seth, it's actually a target to shoot for.

They might have $25 million in their asset column, the difference being a $15 million net worth. And a lot of prominent wealthy people make sure that they don't pay cash for their own home when they buy a new home. They know that they can get an interest rate and they can beat that interest rate out in the market, even on their own home. Mark Zuckerberg and his wife did that. They got a mortgage loan for a property when they could have paid all cash. Jay-Z and Beyonce did that.

I do that too. Another way to think about a person that's in a huge amount of debt, say that man on the street with $10 million worth of debt, is when you think it through and you understand finance, that person would have to be pretty creditworthy to even get $10 million in debt.

And the other angle with the debt is we haven't even touched on it. It should be obvious to a lot of people. You're creating arbitrage when you borrow at a lower rate and invest in a higher rate. You profit on that spread called arbitrage.

When you understand all the ways that real estate pays you, I've only touched on one - appreciation and maybe a second - cash flow. When you understand all the ways real estate pays you, you can beat today's 7% mortgage rate. As long, again, as you don't become over leveraged, you have to be able to make those payments. You're doing that with tenant income streams.

Seth: Yeah. How much of a margin do you think is healthy? Like how much more cash flows should you be making versus the debt payments? Like at what point is it too close or not quite enough to be comfortable?

Keith: That's a good point. If you have a margin of at least one or 2% over the interest rate you're paying. That's a pretty good, safe, stable place to be. But you can often 2x or 3x the mortgage rate that you're paying. A lot of that tied up in the appreciation of the building.

So you do need to stay liquid. And of course, paying down debt, like making an extra principal payment, gets you ill liquid. It's difficult to get those dollars back. Financial freedom is created when you can take your equity and convert it into cash flow. Extra principal pay down does the opposite. It takes your cash flow and converts it into illiquid equity. So that's another important component of this debt, making sure that you have enough liquidity.

Why don't I put it in some really simple terms here? You know, I've talked with a bunch of numbers in the millions, and that might go over some people's heads. Or, you know, maybe you're thinking, oh, well, you can't relate to something like that.

Think about what debt does for you. If you have a $100,000 rental property, yes, you actually still can find some of those. And say that property appreciates it 6%. It goes from $100,000 to $106,000. Well, that's not very exciting. If you had paid all cash, you only have a 6% rate of return.

But here's the thing. If you make a 20K down payment on a 100K property and that 100K property appreciates up to 106K, your rate of return is 30 percent. How is it 30 percent? Because you have a 6K gain divided by just 20K of a down payment or equity. That's your ROI formula. You got the 6% gain on both the 20K down payment and the 80K that you borrowed from the bank. That doesn't go to the bank. That goes to you.

And this is why compound leverage beats compound interest, which is a pretty inflammatory statement. But this is the wealth magnifying power of having good, responsible debt where those payments are reliably outsourced to tenants.

Seth: Inflation. I know inflation is a big topic right now. There's a lot of that going on. You talk about why inflation debases your debt for you. Tell me more about that.

Keith: Yeah, that's a great question. Inflation debases your debt for you. And a lot of people don't understand that. Say that I have a million dollars in debt.

Inflation debases that for me because the bank doesn't ask to be repaid in inflation-adjusted dollars, only nominal dollars. Nominal means in name only. So with 5% inflation over time, whether that takes one year or two years on that million dollar loan from the bank, I only owe the bank back $950K. And with 5% more inflation, $900K. And with 5% more inflation, $850K.

So inflation debases your debt for you. And in real estate, of course, we know that your tenant is also paying down the principal balance at the same time. A lot of people just don't understand that. So inflation, it's like a silent debt killer. And a lot of people just don't account for that.

So debt and inflation are two phenomena that make most people poorer. You've already learned now why you can use debt and inflation to make you wealthier.

Seth: You're turning everything on its head here. Yeah, that's huge. I remember the first time I realized I was like, "Oh, wow. If I know there's going to be inflation, I want to load up on as much cheap debt as I can. Maybe I can even make it go backwards, make money on the deal."

Keith: Right, right. Especially we can outsource it and others make the payment for you. In that case, a cash flow property, the tenant pays all of your principal for you, that pay down, all of the interest for you, and typically a little on top of that called cash flow.

So I love debt in real estate. There are definitely bad types of debt. Credit card debt, where it's hard to arbitrage it and you have to pay your own debt. You can't outsource that. That's not what we're talking about here.

Seth: Yeah. Now, do you think there's always going to be inflation in the future? Like, it seems like the answer is yes in the short term anyway. But is this something you can pretty much always count on in some way, shape or form?

Keith: Yeah, that's an important thing to ask about, Seth, because if we had deflation, which means a strengthening of the purchasing power of the dollar, everything that I just mentioned starts working against you. So you need to have a reasonable assurance that there's going to be future inflation.

And take a look at this device here. Now, if you're listening in the audio only, you can't see this, so I'll describe it. But this is a debt badge. You can see these ticking numbers on the debt badge, this digital badge that you can wear on your lapel. Currently, it's a number between $36 and $37 trillion.

This is linked to a computer and it downloads the latest number. And this $36 to $37 trillion in debt, which is increasing by $4 million every minute, by the way.

All this public debt that we have, it helps ensure that there will be more inflation in the future. It's rather paradoxical that the most powerful nation in the world is also the greatest debtor nation in the history of the world.

So how do we get out of debt? What do we do? This has become more of a problem. It's become more of a thing with Doge working on it now. We could default on our loans to China, but that's not very popular. It's very unlikely that we could do that. The United States could start selling our assets. Just imagine selling the Statue of Liberty back to France and then we would lease it back from them. I mean, it's not very likely that we're going to do that.

The number one way to deal with our debt, Seth, is if you owe your buddy $5 million and you owned a printing press somehow, we're just going to print more dollars. That's what we have been doing for decades, ever since the dollar's been devalued from the gold standard more than five decades ago. We're going to have to print more dollars to pay back our debt.

So the Fed, the nation, we have an incentive to create more inflation. The more dollars that get printed, which are needed to pay back our debt, dilutes the purchasing power of every dollar out there. That's inflation. And it almost helps guarantee that there will be more future inflation at what rate. We just don't know.

Seth: Yeah. Do you think that's at all intentional that, you know, it's in the U.S. Government's best interest to print more money so that the debt isn't as painful? Like, is that part of the plan, do you think? Or is it just like, oops, more inflation just happened?

Keith: Sure, 100%. And it's the most expedient way to do it and deal with the debt.

Think about the other ways to deal with the debt. They're really unpopular. Cutting Social Security, cutting Medicare, cutting Medicaid to help reduce the debt. That's not popular. You're never going to get voted in office. How about increasing our revenue by doubling the tax rate? Again, that's not very politically popular either.

So surreptitiously, just continue to print dollars. What's the easiest way to pay for a new trillion dollar infrastructure program? And you might not even have to get votes for it. Just print more dollars. And that just diluted everybody's purchasing power.

It's just another reason why you want more debt. And real estate investors are in a position to take on large chunks of debt. So I want that floating out there. Inflation keeps debasing my debt for me, just like a million dollar loan on an apartment building, because over time, wages go higher, salaries go higher, rents go higher. It just gets easier to pay back.

You want to get fixed rate debt. It debases both the absolute amount that you owe, a million dollars on an apartment building in this case, and your monthly payment, that stays fixed. Inflation can't touch that. So the monthly payment is debased as well. So the fact that the Fed really has an inflationary mandate is tied to this fact that we have all of this debt, galactically big debt.

Seth: Yeah, no kidding. That's fascinating, Keith. Appreciate it. And I don't want you to miss part two of this conversation. We're going to talk about the massive baby boomer sell-off and what some people think is the coming housing crash, is there are more people dying than there are buying.

Seth Interviews Keith About Housing Demographics

Seth: Will your home's price crash because all of the baby boomers are going to sell their homes at about the same time? Longtime friend and host of the REtipster channel, Seth Williams, is going to ask me more about that.

Hey, Keith. Yeah, so I'm kind of fascinated by this. It seems like from everything I'm hearing, there's a lot of baby boomers who are going to be dying in the coming 20 years, not to be too morbid, but it's just a matter of fact. And there's also been a decline in birth rates. So I'm just curious, like, what does this mean for us? Are they going to be more dyers than buyers, as they say? Do you think this could create a housing crash? Like, where do you think this is going to take us?

Keith: That's a great way to put it. Will there be more dyers than buyers crashing housing prices from all these aging boomers? More and more studies show that more boomers want to age in place, 50 to 70 percent of them, depending on the survey that you look at. But still, we're going to have some boomers that sell their homes. And since this is the biggest generation in American history, isn't this going to be a problem for housing values?

It's a popular narrative that you've seen in the media for about a decade. However, you see fewer people referencing that. And that is because it is not going to happen.

Demographically, it almost cannot. So it really comes down to supply versus demand. Adam Smith, in 1776, wrote the landmark book, The Wealth of Nations. He's known as the father of economics, and that's where he simply stated that when the demand for a good or service exceeds the supply, the prices go up. I think almost everyone understands that.

A lesser-known quote a few decades later was from the French philosopher Auguste Comte.

Comte famously said, "Demography is destiny." All right, well, what does that really mean? That means if you are age 35 today, it is almost completely guaranteed that in 10 years you're going to be age 45. Okay, this is really easy to predict. Oftentimes people make awful predictions, but when you talk about demographics, these things are almost perfectly predictable.

Well, on the supply side, that's really well documented. America is undersupplied by two to six million homes. Estimates are all over the place on that one. But it's pretty generally accepted that we have an undersupply of homes. But here's the thing that a lot of people don't realize. If I can, Seth, I want to talk about the demand side.

Where is the demand going to come from to buy these homes the boomers are selling?

Seth: And I always wonder, like, there's people that own multiple houses. Could that be like artificially spiking up demand when some of these houses are sitting empty? Like, how do you compare the number of people out there versus the actual houses and how many of those people live in one house and that kind of thing.

Keith: Yes, that really is part of it. And overall, we have a smaller household size that affects this, which I'd like to get into shortly. But I think first, Seth, what a lot of people don't realize is that boomers are not the biggest generation in American history. It's millennials. Millennials have surpassed boomers. Both groups have over 70 million people in them.

Millennials are aged 29 to 44. So that's the biggest demographic group. However, just behind them is Gen Z. Gen Z has almost as many people in that cohort as millennials do. Gen Z are ages 13 to 28.

So let's back up a little bit. We're not going to go centuries back like I did earlier with those quotes, but we have to back up a little before we go forward. And then I'll talk about the future. Between 1990 and 2010, there was a surge of births in the United States. In fact, births peaked at over 4 million back in the year 2007. And I'm only talking domestically here. We're just talking births. We're not even including immigration in this, which of course are only going to increase our population in the future.

So what does this have to do with anything? Why talk about the past 1990 to 2010? Well, that peak birth year in those high birth year decades there of 2007, we need to add about 38 to that. That's the average age of the first-time home buyer, which just keeps climbing. But if it continues to be age 38 for the first-time home buyer, we add that to 2007.

That gives us the year 2045 when housing demand is expected to peak or sometime in the 2040s. It isn't until the 2050s where we will see this demand wane. So who are the buyers and where are they coming from? They're these huge demographic groups where we won't even reach the peak of their demand for about another 20 years. So that's where the demand is coming from.

So we do have low birth rates. It continues to go down. It's pretty low today. I don't know what that's going to say for the 2050s and 2060s housing market for the next 20 or 25 years, though. We can see this increase in demand.

Seth: If the demand will start to wane in the 2050s approximately, is that assuming that there are new houses being added to the nationwide inventory along the way at a certain rate? Or is that just like no new houses being added? Because if we add a huge amount of housing between now and then, did that throw those projections off at all?

Keith: Yes. So what I've talked about here is if housing just continues at its historic annual pace, that's the condition that we'll be in. But we've been in this shortage condition for quite a long time. We don't seem to be able to build our way out of it as much as we've tried.

I've done different shows and episodes on shipping container homes or boxable type homes. But the short story is it's more difficult for them to meet the demand than a lot of people think. There's still the cost of land. There's still the utility hookups and all these other things to actually make a home livable, which is why it's difficult to catch up.

Another demographic factor that a lot of people don't think about is how the smaller household sizes actually increase housing demand. Back in 1960, the U.S. had 3.3 occupants per home. Today, it's just two and a half. And it's expected to continue to fall. We have more and more single-person households.

So what does this actually mean for housing demand? I think the best thing to do is let's just take an example of we have a village of 100 people. And say that there are three occupants per household in this village of 100 people. Well, then 33 and a third homes could house everybody. But when that drops to two occupants per home over time, now we need 50 homes to house everybody, not just 33 and a third.

That's a 50% increase in housing needed. And that's even if the population stays the same and every population projection has the U.S. Population increasing decade after decade. So this smaller household size actually contributes to demand as well.

Seth: In immigration, do you think there's going to be more immigration, less immigration with the current administration? Where do you see that going? And do you think that will have any drastic effect over the next couple of decades?

Keith: Yeah. What's the long-term rate of immigration going to be? I'm not sure. I don't think anyone knows. I don't think you're asking me to predict that. It's pretty unlikely that all the recent immigrants that came in in the last administration can be deported, every single one of them. We're starting with illegals.

But yes, immigration at whatever rate, it can only add all these other demographic factors that are really domestic demographic factors alone that I've talked about so far. But that's certainly a variable.

You know, another one, Seth, is I don't know if you've ever heard of health and fitness influencer Brian Johnson. Brian Johnson says, today we have live the first generation that's not going to die.

What would that do to housing demand?

Seth: Yeah, no kidding. Most makes me wonder, like things like immigration or just wherever people are coming from, is that a good thing in any way? Keeping demand high, prices high. I mean, if you consider that good, could it serve the U.S. in some way by having more immigration or is it getting in the way somehow?

Keith: Over the long term, immigration at a controlled rate typically helps the United States. Of course, immigration increases housing demand. We also need immigrants for the construction in order to build more homes. Immigrants often go into construction fields, so that's a big part of it, too.

Deporting immigrants, that reduces housing demand. It also gets rid of our cheap labor and can be inflationary, which inflation is actually a good thing for real estate investors, like we talked about back in part one of this video.

By the way, if anyone wants to see part one, we'll include a link to that beneath this video where Keith talked about pretty important stuff about the virtues of debt and understanding inflation and how that interacts with debt. So be sure to check that out as well.

Keith: Yeah. And again, that's on REtipster's YouTube channel, which Seth hosts. So really in conclusion here, despite the lower affordability for housing we've had the past few years, you might've asked yourself, where does this demand keep coming from amidst higher mortgage rates and higher home prices? It comes from demographics. And just like Auguste Comte said, demography is destiny.

Housing demand is projected to continue to exceed supply for the foreseeable future. That's one reason that I'm bullish on residential real estate investing and why I do what I do. Thanks for joining us, Seth. You had some great questions.

Seth: Thanks, Keith.