PODCAST

George Antone | Hacking Finance: Do Unto Banks as they Do Unto You!

Mitch Stephen|By November 14, 2017

Episode 142:

George Antone is considered a thought leader in the finance and investing space. He is the author of 3 best-selling books on finance, the founder of the world’s largest network of private lenders, and a regular guest speaker nationwide on the topic of finance and investing.

What you’ll learn about in this episode:

The origin of hacking finance and what it’s all about
How to pay off your mortgage in 1/3 of the time that it normally would take
Why a 15-year mortgage hurts you more than a 30-year mortgage
What a master sweep account is & how it can help you save money
The benefits of approaching things in a different way than what we’re told by financial institutions
How buying spreads can help you improve your purchasing power
What a loan constant is & why you should focus on lowering it as much as possible
How most people think of investing
The wealth building strategies built-in to real estate investing
Why having reserves in the bank is critical to success in real estate

Resources:

Transcript:

Mitch: This is Mitch, and welcome to the Real Estate Investor Summit podcast. I have George Antone as my guest today, and he’s going to talk to us about hacking finance.

And I know everyone’s going, “What is that?”

Well, I’ve got news for you. I’m asking the same thing. What is that?

Let me tell you a little bit about George real quick, and then we’ll get a word from our sponsors.

George is considered to be a leader in the finance and investment space. He has three best-selling books on finance, and he is founder of one of the largest networks of private lenders, and he’s a regular guest speaker around the nation. The guy knows his stuff, and so we’re going to get to know George here in just a minute.

Stay tuned for a word from my sponsors, and we’ll be right back. Don’t move.

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Mitch: Alright, this is Mitch, and I’m back with George Antone. Hey George, how are you doing today?

George: Great Mitch. Thanks for having me on the show here. I really, really appreciate it. I have to tell you, I’ve heard great things about the show, so I’m super excited about being on it.

Mitch: Well, we’re lucky that we have a great group of followers, and they stay engaged, and they just … I don’t know, they help me. They introduce me to people like you, and all different interesting people, and we just keep finding great people to talk to. And you’re one of them today.

You caught my eye here, because I’ve written three books, but none of them are like best selling books. I want to know about your three … What are your three books that you have? Can you describe them to us?

George: The first one is called The Wealthy Code. I’ll briefly tell you what they’re about, but let me just tell you the names. The Wealthy Code The Banker’s Code, and Debt Millionaire, and briefly, what it is is, many years ago, I read Rich Dad, Poor Dad, which was obviously an incredible book.

And one of the things about Rich Dad, Poor Dad is that it’s really about mindset. It’s not the manual, if you will, on how to go out and invest, but it’s really about mindset.

And so, what I decided to do was, after owning many properties, and buying apartment buildings, and doing some pretty big deals, I realized, “You know what? I think I should share this with the world,” so I continued where Rich Dad, Poor Dad left off, with The Wealthy Code, and I go into numbers and specifics. I’m a numbers person myself, and so that’s what The Wealthy Code does, and then Banker’s Code, I talk about lending and being the bank.

And then Debt Millionaire, I talk about how to use the financial system to work for you. In other words, what it is is, a lot of investors are stuck in the wrong place. The whole system, you know, the financial system, inflation, all of that, interest, all of that is working against them. And the question is, how do they move to the other side, so the financial system is pushing them forward, and that’s what the third book’s about.

You know, I’ve always hated the English, you know, writing and English in college, but for some reason, I really enjoy writing books, so that’s how this came about.

Mitch: I think the reason that happens, George, is because you’re a real giver, and you like to help people get ahead. That’s probably what you enjoy, because I know when I’m writing … I mean, I practically failed English. I was the least likely to even get out of English class. I know there’s some English teachers rolling over in their graves right now.

I wrote three books, and I think it’s because, you’re just so really wanting to let people know that you don’t have to live the way that you’ve been living, and people are telling you things wrong. You’re being indoctrinated by a propaganda advertising machine that’s all about separating you from your money, not helping you get rich.

Hats off to you for writing the books. And by the way, I didn’t know these were the titles when you said them, but I have heard of the first two for sure, The Wealth Code, and The Banker’s Code. I hadn’t heard of the third one, Debt Millionaire, but it has a great, interesting title.

I had someone say to me one time, and I bet your book’s along this line. They said, “By the time … Whenever you owe 10 million dollars, is when you’ll start making a million dollars a year,” and low and behold, if it wasn’t true.

You know, about the time I started owing a bunch of money, I started reaching those debt pinnacle. You know, and it’s all about good debt, bad debt right, like Kiyosaki talks about, good debt, bad debt.

George: Absolutely, absolutely.

Mitch: Okay, so you’re going to introduce us to some concepts that are maybe a little bit foreign. And I’ve got to be honest with the audience right now, he started to go into this description of hacking finance, and how it’s not just to do with real estate and everything.

He started to explain it to me, and I said, “You know what, don’t explain it to me. Let’s all learn about it together. I think this will kind of be a neat experiment.”

I don’t know what this hacking finance is about myself, but where do we start with this subject, George? Where do we start with hacking finance?

George: You know, Mitch, I have to tell you, this is very difficult for … Let me tell you how it’s all happened, because I … The title sounds weird, but let me explain how the whole thing came about.

I was in Palm Springs. I was invited there to be a keynote speaker. I just finished speaking in front of a few hundred people, and this lady walked up to me and asked me a really interesting question. She said, “Is there a way to build financial security without investing in stocks, bonds, or real estate, or even sell anything or start a business?”

My first reaction was, I chuckled thinking she was joking, and she wasn’t. I felt extremely terrible. But what happened is, I decided, “Let me figure out if there’s such a thing to do all of this stuff that she’s talking about without doing any of this other stuff.”

And so, as I started researching more and more, and admittedly, I’m the biggest financial nerd. I’m always looking for ways to use the system to work for us, and I think all of us are like that in a way.

What happened is, I started discovering these interesting strategies that you implement one time, that would help you leap forward financially. So I wanted to try to give it a name, because it’s not investing. You know, you’re not investing in stocks or real estate or whatever it is. You’re not trading, you’re not trading currencies or even stocks or anything like that. You’re not having to save, you know, live way below your means, and save money.

These are the three typical ways, traditional ways of building wealth. This is a completely different way. I struggled to give it a name, because there is no name for it, so I call it hacking finance.

All it is is this. How can you make the system, the financial system work for you by simply making a few tweaks?

Now, I know that sounds crazy, because we’re used to thinking like that, but here’s what I mean by that. We know inflation, we know interest works against us, we know taxes works against us, we know opportunity cost, we know fees, we know all these different things that work against us, and so, if you start thinking about, how do you turn these around so I don’t have to work as hard, because right now, every year, we’re working against those forces, if you will.

It turns out, with financial hacking, and I can give you some examples here. You can turn things around so inflation starts working for you, interest starts working for you, and all these things start working for you, so that you know financially you’re moving forward, and not backwards, without having to necessarily invest.

Now if you invest, it’s even better because that increases or enhances your returns, but you don’t have to invest. This is really for everyone out there, that they can sue this.

Now I know that just sounded so vague, because it’s –

Mitch: Well, I’m on the edge of my seat, because you know, if you can … How do you do this stuff with not having to save or invest? I’m on the edge of my seat, George. I’m going to get out of your way, and let you keep rolling, okay.

George: Okay. Let me give you some simple examples.

I’ll give one that people have probably heard of, and this is what we call a master sweep account. The way it works, and again, I’m sure you’ve heard of this, it’s simply, when you get paid for example, on the first of the month, let’s just say, and then you pay your bills, so you put your money in a checking account, and you pay your bills on let’s say the 10th or 15th of the month, whatever, it is two weeks later.

And so, for that month, your money was sitting there doing nothing for two weeks, and the same thing happens the following month, so that money’s just sitting there doing nothing. Meanwhile, the bank is making money off of that, what’s called a float. And so, if you simply know what to do with that money … If you actually extrapolate that for 40 years, you realize your money’s sitting there for 20 years out of 40 years waiting to pay bills.

Now many of us have heard of this, and what we do is, we simply use a home equity line of credit, as an example, where you park your money there, while it’s sitting there, it’s lowering your what’s called an effective interest rate, and then you pay your bills from there. That by itself might seem insignificant, but hat one tweak, which you do one time, and you set it on auto pilot, will allow you, or help you pay off your mortgage in 1/3 of the time.

Now, many people out there have heard of this, and have tried it. I was extremely skeptical of it until I got into the math of it, and it actually works really well. So that’s one example.

Another example is, if people looked at their mortgage, just having their mortgage on their property … So when you look at, for example, let’s just say Dave Ramsey and Suze Orman, they talk about pay off your mortgage, or get a 15 year mortgage as opposed to a 30 year mortgage so you can be debt free in 15 years. That is the worst, worst advice.

And it turns out, if you look at your down payment compared to what the mortgage is doing for you, you’re actually getting incredible returns, because when you account for inflation, essentially quote on quote paying down the mortgage, which is making your dollars cheaper over time, your return, on just that part, on inflation work on your mortgage, is actually double digits. At first I was very skeptical of that too, but when you do the math, you start realizing that inflation now, by having a fixed mortgage for 30 years, your mortgage now, actually is a huge wealth builder, and you just turned inflation to work for you.

The idea of getting a 15 year mortgage, as opposed to a 30 year mortgage is actually in many ways hurting you, so that’s what I’m talking about. There are so many small tweaks, like I said, you can look at, and start using to your advantage, and you realize you’re actually building wealth faster than the traditional way of investing in say stocks or mutual funds.

These are the things I’m talking about, and it gets into fascinating different strategy like this, that people can implement one time, and it might take them no more than a few hours, and they’re done, and they sit on auto pilot every month it’s working for them.

Mitch: Okay, so I want to go back to the first one you were talking about. Did you call it master sweep? Is that what you called it?

George: Yeah, master sweep accounts. So what happens is, you sweep all your money that you get paid every month, you sweep it into, instead of a checking account, you sweep it into your home equity line of credit, or if people don’t have a HELOC, they can get a traditional line of credit at the local bank, and simply move the money from there, from the checking account, into the line of credit, and pay their bills from there.

Now that one, simple tweak might seem like it’s insignificant, but it actually ends up having a huge impact financially, because the money that the bank would’ve made off of the two weeks that your money’s sitting there, it’s called a float, every month now is working for you, and lowering your effective interest rate. It’s a fascinating idea.

Again, I heard about it years ago, and I didn’t believe it at first, and it took me, you know, two, three days of excel to realize it actually works wonders.

Mitch: Okay so, help me, because maybe I’m a little slow here. I mean, I get the idea of the float, because I think that’s what American Express, and a lot of these credit cards do too, is they’re living off the float, millions, and millions, and millions of dollars that they’re holding, that they’re going to pay 30 days later, or something. Am I right about that?

George: Correct, absolutely.

Mitch: Okay, so let’s say I have a house payment, and I’ve got a 30 year mortgage, or does this have to be on a house that’s paid off, that you go get a home equity loan? Help me, start from the beginning on something.

George: So let’s just pick a simple property. Let’s just say you have your property, you have a first mortgage, and you have some equity that you can put a home equity line of credit on it.

Mitch: Let’s put real numbers on it, just make them up. Give me a case study.

George: Let’s just say it’s a $200,000 property, and you’ve got $120,000 mortgage on it, first mortgage, and then you’ve got some equity there, let’s just say –

Mitch: So 80 thousand in equity.

George: 80 thousand equity, but you have 40 thousand in a HELOC in second. First would be 120 mortgage, right.

Mitch: Yeah, so you’ll get home equity on the 80 thousand equity for 40, so now your debt looks like this, 120, and then the 40 home equity, and you still have 40 thousand pure equity in the house.

George: Correct.

So what happens then … Let’s take that … Let’s just say you get paid on the first of the month. Let’s just say it’s whatever, $6000 or $5000 for the month. Now typically, you’d put that into your checking account, and then you would wait to pay your bills.

So what we now do, is we’re going to change that, so that the money sits on the HELOC. So what we first do, the first step is, we’re going to transfer … And I’m using the word transfer there on purpose. We’re not paying down anything. We’re simply transferring.

We’re going to transfer some debt from the mortgage into the HELOC. So now we have this HELOC for 40 thousand. We’re going to write a check for, let’s just say, $10,000. We’re going to take a check from the HELOC, write 10 thousand towards the principle on the mortgage. So what we essentially do is transfer 10 thousand from the mortgage into the HELOC. So now we have 110 thousand first, and 10 thousand dollars in the HELOC. And all we’ve done is transfer it.

Now when we get paid, we simply park that $5000 or 6000, whatever we got paid, into the HELOC. Now the HELOC, what’s owed on it, drops from 10 thousand down to four or five thousand, depending on how much we got paid. So now, while it’s sitting there, the interest that’s being charged on that money drops, because we’re only being charged on the four thousand. And then we pay our bills from there, so let’s just say we paid all our bills within two weeks, and we have … Out of the money we deposited, we have 95% of it went out to bills, or 90% went out to bills.

And so then what we have is, the balance goes back up. And then the following month, same exact thing happens. You get a deposit. You deposit to the HELOC, and then you wait until you pay your bills when they’re due. That one single tweak of using the HELOC as essentially your checking account, what we call the sweep account, now ends up paying off your underlying mortgage super, super, super fast, because of that one tweak.

Mitch: So, is that because the HELOC … Well, I guess all loans, but it has a daily interest rate or floating interest rate?

George: That’s exactly correct.

Mitch: Now you’re just eliminating those days of having to pay interest on that amount of money, which was the amount of your paycheck, and you’re eliminating that interest bill or that interest fee, because that’s five thousand dollars less that you’re borrowing on that day, and on the next day until you pay your bills. I get it.

George: That’s exactly correct.

Mitch: It’s kind of the theory of making weekly mortgage payments instead of monthly. You know, you make 1/4 every week, instead of one whole payment every month. It just works in your favor over a long period of time. As a habit, it becomes worth tens of thousands of dollars, right. That’s the point, right?

George: That is exactly correct. That’s exactly correct.

This is slightly different in that you’re using the same time frame that the bank is making money off of you, while it’s sitting in a checking account. You might as well just put it in a HELOC. Now the bank makes a lot less money off of you, and the money that they would’ve made off of you, you’re using it to pay down your mortgage. That’s how it works.

And again, that’s just one of many different, what we call, financial short-cuts. There are so many of the out there. And the more I researched them, the more I realized, why isn’t everyone doing these things. They don’t cost anything. It’s just that we have to approach things a completely different way of what we’re told by the financial institutions, because they’re telling us things that work in their favor. Why don’t we change it, and we replicate what they do for us, and that’s what really hacking finance is all about, is the tweaks that you can implement to help you move forward financially.

Mitch: Yeah, well the banks certainly aren’t going to tell you. They want you to pay every minute of that 30 year mortgage, right. That’s where they make their money.

Okay, and then we went onto the second hack, which was you know, don’t pay off your house. I’ve always been conflicted about that. I mean, you know, if there’s any one thing that I thought, well maybe you should pay off, is at least your home. And certainly, my wife feels that way, because I paid off my home a long time ago, and I keep thinking, “Wow, I can get some 2.75% money out of this. Let’s go refinance the house,” and you know, it’s a war to try to get that done, and I’m not winning. I still haven’t got my 2.75.

But besides the personal or emotional things of it, financially what you’re saying is, when you put 10 thousand dollars down on a 100 thousand dollar house, and you get a four and a half percent interest rate, the four and a half percent interest rate that you’re paying, it pales in comparison. And you used the word inflation, but is the word appreciation the same, or is it different, and in addition to?

George: So that’s an incredibly, incredibly, incredibly good question. It’s actually in addition.

Let me just really touch on-

Mitch: Yeah, it’s going to be in addition to, right, because inflation means the cost of bread went up, and appreciation means that your house is going up, and appreciation on real estate can be dramatically more or less than what inflation is. It’s all cyclical right, but inflation and appreciation you’re saying, are two different things, and they’re in addition to each other. So go on.

George: Yes, and I’ll give you some numbers too, but let me just touch on something you said that’s really, really important, which is the emotional part.

I completely agree with you and your wife about the following, which is, the numbers are one thing, but peace of mind is so much more important, and if paying off the mortgage gives you peace of mind, go for it. And ultimately, we do what we do for peace of mind, and for having a less financially stressed life.

However, if you want to look at, for people that want to leap forward financially while they’re in the accumulation phase, having a mortgage, the right type of mortgage is so critical.

Let me walk you through details here, about the numbers here. So having talked about the peace of mind, again, that’s more important, but let me talk about the numbers here. Let me give you some data here, some numbers so we can dive into numbers again.

Let’s just say that you bought a property, and you bought it all cash. Let’s just it’s 200 thousand dollars, and let’s just say that 10 years later, assuming inflation, let’s just say was 4%, so your 200 thousand dollar property, 10 years later will be worth approximately 300 thousand dollars. So at this point, everyone thinks I just made 100 thousand dollars.

Now, let’s go back 10 years, when you first bought the property. Let’s just say that coffee at the time, was $1. 10 years later, the coffee is going to be, let’s just say, $1.50. Well it turns out, you can still buy the same number of coffee if you sold your property. In other words, your purchasing power hasn’t changed. So if you’re able to buy 200 thousand cups of coffee 10 years earlier, 10 years later-

Mitch: With 200 thousand. 10 years, you would be able to … So how ever many billions of cups of coffee for 200 thousand, 10 years later, you’re still buying the exact amount of coffee with the money. You thought you made 100 bucks, but you really just broke even, in this scenario, because you can’t buy … With the extra 100 thousand dollars, it still buys you the same amount of crap.

George: Exactly. Now on the other hand, if you were to get a mortgage, and let’s just say … Let’s go back to numbers here. Let’s just say you’ve got 160 thousand dollar mortgage, with 40 thousand dollars down, and the coffee was a dollar.

10 years later, again going back to … The coffee went up to $1.50, for example. However, the property is still appreciated. You still make the 100 thousand dollars that you thought. But here’s where it gets interesting. Inflation worked against the mortgage, so you actually made money two ways.

One is the appreciation, but in terms of inflation, it kept up, but you didn’t really improve your purchasing power. What improved your purchasing power by a number, by two or three times, is actually the mortgage itself. I’m going to say that again. It’s the mortgage that improves your purchasing power.

You have two things going on here. You have appreciation, but you have inflation making your dollars cheaper. That’s why when you buy a property, let’s just say 30 years ago, and you’re still making 200 dollar payments on it, back then, the 200 dollars was a lot, now it’s nothing. People say, “You’re so lucky,” and the reason is, because inflation worked against your mortgage, so it was the inflation against your mortgage, your fixed mortgage, that actually improved your purchasing power, not the appreciation.

I know that sounds crazy.

Mitch: No, I have an example too, that I want to use in my real life, but you’re hitting on so many cylinders right here, I do want to back up.

One of the reasons I think, that’ll make it easy for the audience, is in scenario number two, where you bought the same 200 thousand dollar house, but you didn’t pay cash. You put 40 thousand down, and you had 160 thousand dollar mortgage, in 10 years, the house is worth 300 thousand again, so you only had 40 thousand out of your pocket to get the same 100 thousand dollar increase over the same amount of time.

I think the only thing that offsets it is, you’re making some kind of payment on that 160, so you’d have to deduct that too, because when you paid cash, you weren’t making that payment, but I’m not exactly sure how to look at it.

But am I on the right track here?

George: Absolutely. Let’s talk about the payment.s

Mitch: But that’s what they call the power of leverage, right? That’s just the power of leverage. 40 thousand made the same 800, because we used money, minus some payments.

George: That’s absolutely correct. So I want to take what you just said, Mitch, because you’re absolutely dead on, and take it a step further by saying this. Savvy investors that understand how the financial system works, they don’t buy a product, they buy spreads. I’m going to say that again. They don’t buy the whole asset, they buy spreads, and for you to have a spread, you have to have the upside, meaning the appreciation in your example, and the mortgage, in this example. When you buy spreads, this is where you can improve your purchasing power significantly more than people that buy the asset all cash.

And so, the more you understand how inflation works, the more you understand how interest works, the more you understand how opportunity cost works, the more you realize you’re always looking for spreads, not the actual asset. That’s why we call this inflation arbitrage, is because you’re making money off of inflation, and for you to do that, you have to buy the spread, not the actual.

You don’t care about the real estate, per se, you care about the difference between appreciation and the inflation bringing down your mortgage essentially.

Mitch: Yes, yes. I get it 100%. And I think this shows up a lot in an argument that I have a lot of times with realtors. I’m going to take a little side step here, but I’m going to try to make a parallel. I hope I’m relevant.

I have realtors, you know, because I owner finance houses. I buy something at 50, and I owner finance it for 100 with 10 thousand down. Sometimes, I can sell over the market, because I back into my market. I back into the rental price for that house. What does it rent for? What is that person paying for rent? What is the price, if I give them exactly the same payment, principle interest, taxes, and insurance, as they’re paying for rent, what is that … If I get to that number, can I make money on this?

And so, I sell my houses based on an owner financed value, which is based on rent, which is really an income approach. I’m finding out what the rents are and I’m backing into a sales price. A lot of times, that sales price is 10 or 15% high than what the costs show, the comparables in the area.

And so, the real estate agents will really chastise me, “You’re ripping this guy off. You’re ripping this guy off.”

And I go, “No, I’m not ripping this guy off. The landlord is ripping this guy off, and let me show you why. Because in 10 years from now, this guy’s payment’s still going to be 850. What will the rents be in 10 years for now Mr. Real Estate Agent?”

And they’ll mumble around, and I’ll make them give me an answer, “No, you have to give me a number. I mean, give or take a few, what are the rents going to be in 10 years from now? They were 850 when they started. 10 years from now, what would they be?”

And they’ll say, “Well, they’re going to be 1200.”

And I say, “Okay, I think you’re light, but they’re going to be 1200. What will they be 20 years from now. Using the same formula that you just used for the last 10 years, it’s going to be up around 2200 dollars now. If we compound it. It’s 2200 dollars a month. What will the rent be in 30 years now sir?”

They’ll hmm haw around, and I’ll make them give me an answer. He says, “It’s going to be at least $3000, $3500.”

I said, “In 30 years from now, my buyer, his payment’s going to be zero, okay. So the landlord is ripping this guy off, not me.”

And I don’t argue with them too long, but that’s what you’re talking about. You can see inflation right in the rents. Because when rents go up, it’s inflation right, just like a loaf of bread, or you said, a cup of coffee.

George: Exactly.

Mitch: Is that a great argument do you think?

George: That’s perfect. That’s actually perfect. In fact, the challenge with most people, when I talk about some of these strategies, what’s brilliant about them is that there’s so simple to implement. The hard part is understanding them, because we’re so used to thinking a certain way, which is, we’re so used to thinking that something goes up in value. We’re thinking for example, buy stocks, and hope and pray it goes up in value.

However, when you understand how the system works, it’s a completely different approach, where you’re using time value of money to actually make you rich, which is inflation, and how can I make inflation work for me. That’s exactly what we’re talking about here. How can I make opportunity? All these things to work for me, because know over time, inflation’s going to keep going up, and we know that using debt strategically to improve your purchasing power.

It’s a completely different approach to building wealth, but it’s so much more … I don’t want to say … It’s more … There’s less volatility, less uncertainty like with the stock market, and different things like this, than doing this approach.

Mitch: Yeah, because for sure, you know, things are going to go up. For sure. I mean, there’s never … They might temporarily hit a low or stall out, but over the period of time in which we’re talking, you’re talking about a lifetime, or half the lifetime you have left, which could be 15, 20, 25, 30 years. It’s a lot of time that … I like to call it … You might coin this if you want. I call it getting on the other side of the clock. You’re on the other side of the clock.

I originally used that phrase when I was talking about, you know, in my previous life, I was on the wrong side of the clock, and that was the side of the clock that I woke up on the first of the month, and said, “Darn, I owe all these people this money, and I hope I made enough. I’ve got to write all these checks to these people.”

And when I got on the other side of the clock, where I am now, I wake up and go, “Wow. Is it the first already? Isn’t that amazing? This is great. A whole bunch of people owe me a bunch of money.”

Again, on the other side of the clock, and I think this is similar to what you’re saying is, you’re trying to encourage people to get on the other side of this clock, on these little bitty matters, that we’ve been blowing off for our whole lives, and that no one’s taught us about, and you’re going to show us these little niches in your free report. I’ll talk to you about how to get to that on your webinar, how to shift over so you’re on the other side of this clock.

Am I doing a good job analogizing this?

George: You know what, Mitch? You’re doing excellent. I’m so glad we’re going back and forth on this, because you’re really helping put a lot of clarity-

Mitch: Well feel free to correct me man, because this is your story, but I think I see what you’re saying, and I’m finding it really interesting, because I’m going to go get the report myself, because I wonder what I could be doing. And I owed millions of dollars, different places, private people and banks. What could I do to shift, and how much would that be worth if I just created a sweep account or was able to take ahold or some of these theories that you’re talking about that take a little bit of time to set up, and it takes a little bit of a mind adjustment, but once you’re there, you just rinse and repeat every month, right? You just do the same routine every month once you’ve got it down, right?

George: Yep, exactly. A lot of it is on auto pilot. And you know, I tell people, it typically takes no more than six hours in small increments, in 30 minute increments to learn and implement … Some of them are like with in two hours of learning, you can learn and implement within two to three hours. But again, you don’t have to do it all consecutive, it can be different 30 minute segments, and so we have people doing two, three financial shortcuts a month, others are doing one a month, and they see this nice, slow … As they implement them, they start seeing things moving or changing.

For example, this one lady, Toby, works for a well-known bank, one of the big banks, and she’s a numbers person, but she’s like, “George, I don’t get the numbers on this, but I’m gonna just follow it.”

And two years later, less than two years later, she called me up, and she said, “George, I have to tell you this. I wasn’t sure on the numbers,” because I give people the spreadsheets. I’m a very skeptical person, so when people make claims, I have to prove on the spreadsheet that it actually works, so I share spreadsheets with all my members and students.

So she tried understanding this, but she said, “I’m going to just do it.”

Less than two years later, she had 50 thousand dollars more money in here pocket because of one of the strategy, and we have so many of them. But that’s what I’m talking about here, is that let’s change the way we think, and let’s understand how bankers think about finance. And that’s what this whole thing’s about is finance. It’s not about any specific asset.

Notice here, we’re just talking about tweaking finance from here, to here, to here, and it’s all legal. It’s all things you do at your bank, to tweak things, and fascinating stuff.

Mitch: Well, and in fact, the more you owe, the better it can be for you, right?

George: As long as it’s the right type of debt. There’s something that I talk about, called the loan constant, and the loan constant … So most people talk about interest rates, and interest rates are extremely, extremely deceiving if you only use interest rates as a metric for debt. What you have to look at is something called the loan constant.

And then loan constant is actually your annual payment, so you can take your monthly mortgage payment, multiply by 12. That gives you your annual payment. Then you divide by the loan amount, not the loan balance, but the loan amount, and that gives you something called the loan constant.

So a loan constant is a metric that banks use to shift risk to the borrower. The key for you, really for the listeners, is to lower your loan constant as much as possible. When you look at a 30 year loan constant, versus for example, a 15 year loan constant, you realize that the 30 year loan constant is significantly lower than a 15 year loan constant.

And the reason is, because you can always get a 30 year loan, and you can always pay it off in 15 years if you choose to, you just have to make more payments. However, if you get a 15 year mortgage, you realize your loan constant is so much higher, which means you are taking on more risk from the lender, they’re shifting more risk to you for 15 straight years.

What I tell people is get a 30 year loan. If you choose to pay it off sooner just make the payments as if they’re 15 year payments, and if you have a bad month or bad year, you can always go back to 30 year loan payments. But with 15 year payments, you’re stuck with higher payments, and so this loan constant metric is a metric that every real estate investor that does buy and hold, needs to know. It’s not for flipping, or rehabbing, but it’s really more for anyone that wants to keep a property for five years or more.

It’s such an important metric, and you want to lower that as much as possible, because it is a measure of risk.

Mitch: Okay, so let me run this from a different angle. I’m a simple man, George, and I’m trying to keep it as simple as I can for the listeners.

I think what you’re saying is, you’ve got a 30 year mortgage. And then there’s a 15 year mortgage. The difference between the two is 300 bucks. So on the 30 year mortgage, it’s $300 cheaper than the 15 year mortgage. But your mortgage is at like 4.5%, so the question is, if you took the $300 a month, and put it into something and made 10% or 8%, aren’t you much better off than paying an extra $300 a month on a 4.5% debt. Am I on the right track again? I have to keep asking for confirmation.

George: Yeah, so let me give you a slightly different example so people get this.

Imagine you have three people, and imagine that they’re all … You and I are going to borrow money from these three people, and we have to pick one of them. And they’re all offering us one hundred thousand dollars loan, at let’s just say, 10%.

So Lender A says 100 thousand at 10%. Lender B says 100 thousand at 10%. Lender C says 100 thousand at 10%. So now we have all the same loans, loan amounts, we have the same interest rates.

However, Lender A says, “Pay me $10,000 a year. That’s 10% of 100 thousand.”

The second lender says, “Pay me $24 thousand a year, because want you to pay me some interest and some principle, so you can pay off the loan fast.”

So we agree to 24 thousand a year, even though the interest rate is still 10%.

With Lender C, let’s just say they say, “Pay me $1000 a year, and anything that’s unpaid in interest gets added to the loan amount.”

So when you hear that, most people think, “Well, let’s just go with Lender B, so we can pay off our loan fast.”

However, let’s look at Lender A. Lender A says 10 thousand a year. We could always … We have the choice of paying more. We can pay them 10 thousand, 12 thousand, 15 thousand, but if we have a bad year, or bad month or whatever, we can always go back to 10 thousand.

With Lender B, we have a very high obligation, and we don’t have any flexibility whatsoever. And then you look at Lender C, we can always pay Lender C a thousand, two thousand, 10 thousand a year, we can pay them 12 thousand a year. We have so much flexibility, if we have a bad month or bad year, we can always go back to the one thousand.

Now, all three lenders are the exact same loan amounts, and exact same interest rates. What metric … So clearly, the 24 thousand is the highest risk, because we don’t have any flexibility. What we want is a metric that gives us the flexibility. If you go back to these three payments, or three lenders, what metric tells us about the payment, the flexibility? And so, that’s the loan constant.

In the first case, it’s 10 thousand divided by 100 thousand. That’s 10 loan constant. The second lender, it’s 24 thousand per year, divided by the 100 thousand, that’s 24% loan constant. That shows you the high risk there. Even though they’re all the same interest rates, again. And the third one, is one thousand dollars divided by 100 thousand, and that’s 1% loan constant. So the loan constant is the measure of flexibility and/or risk, the higher the number, the more risk.

With interest rate, even though all three are the same interest rates, it doesn’t tell us about the flexibility of the payment, so you have to look at both the interest rates, and more importantly, the loan constant.

Does that make sense?

Mitch: Yeah, it really does. And you’re just saying … In your example, you said, you always want your loan constant to be as low as possible, so you pick the lowest one, and then if you want to accelerate, it’s your choice, but what if you found something with your extra money that you could make 25% on in the next 10 days? If you’ve given up all your money, in Lender B, you wouldn’t be able to go … You wouldn’t have any money left over to go take advantage of that 25% rate of return in two weeks, which by the way, ends up being something astronomical, if you annualized it.

So yeah, I get it. And it’s all provided that all of these three loans don’t have an early pay off penalty, which –

George: That’s exactly correct. You said something very interesting also, Mitch, which is, the second lender, the borrower would be in a high stress situation, because they cannot afford to lose their job. They can not afford to have an emergency, because they’re going to lose their property if they cannot make that high payment.

And so, imagine there are people out there that have high stress for 15 years, and this loan constant is a metric that banks use to shift the risk. They want the highest loan constant to the borrower, because it is making them, them meaning the lender, in a safer position.

So what they do is they-

Mitch: Every month, they in a safer position.

George: Exactly, exactly, exactly.

Mitch: Wow. And so, people can learn about this … I want everyone to go to 1000houses.com/HackingFinance.

Hackingfinance, all lower case, one word. 1000houses.com/hacking finance, and I want you to get a free report called Hacking Finance, which is going to talk about these different shortcuts, and I also want you to … While you’re there, you’ll have an opportunity to take a look at a free webinar, or get a link to a free webinar on hacking finance.

And basically, my understanding of this, George, is that you’re going to show us how to get time on our side, how to take a look at different things, and figure out which one has the lowest loan constant, because that’s what we want, the lowest loan constant, which is the annual payment divided by the original loan amount. Right?

George: Correct. And there’s so many different shortcuts that we talk about that people can implement immediately in their lives. And again, it’s almost like … And this is the best analogy that someone gave me. They said, “Eating sushi, you start with one bite, and you’re like, ‘This is so good,’ you can’t stop, because every single one of those financial shortcuts is like one bite of sushi that you implement, and you start seeing the results, and you want to implement the second one, and the third one, and a fourth one.”

And again, this is not something that’s going to take you years to figure out. It’s learn and implement within a few hours. So it’s like eating sushi or chips, if you will.

Mitch: Well, there’s not a lot of things that … Of all the guests I have, there’s not a lot of things that you can implement within an hour of the time that you read it. It’s usually more involved, a couple hours, so very interesting.

There’s that many hacks, huh?

George: There are actually a lot. In fact, I want to share an analogy that we’ll be talking about in this training. Here’s what it is.

Most people think of investing as the asset. They think real estate investing, or stocks, or mutual funds, and they’re so focused on the asset. However, it turns there’s an underlying formula that people have to realize, and so the best analogy is this.

Imagine you’re going to race in this … You’re going to start running this race. You start running, and all you’re focused on is to get to the finish line. And so, what most people are focusing on is, “Let me just keep running at a good pace, and I’m going to get to the finish line.”

And then you look up, and then you realize that the finish line is moving away from you, and it’s moving away from you at a faster rate than you’re moving towards it. So in other words, even though you’re moving forward, you are actually-

Mitch: You’re getting further, and further behind.

George: Exactly. And so, that finish line is actually the financial system. And it turns out that most people are going to run out of time or energy before they find out that the finish line is moving away from them.

So one of the first things you have to think about is, how can I run at a faster rate to catch up to the finish line, because you have to know where the finish line … At what speed the finish line is moving.

That’s exactly how the financial system is set up. What happens is, for example … And this is what’s called a break even, and it’s how fast the financial system’s moving away from you.

It turns out, for most people, they have to generate somewhere between 8 and 10% return every year, just to maintain their wealth without using debt.

I’m going to say that again. They have to generate somewhere between 8 to 10%, most people are at 10%, to maintain their wealth. They’re not actually becoming wealthier, they’re just maintaining their wealth without the use of debt.

Once you understand that, you’re like, “How can I beat that?”

And so, that’s exactly what’s happening, and unfortunately, many people are going to get to retirement age, they’re going to look back, and they’re going to realize, “I made money all these years,” and that’s equivalent to running if you will, “I made money, but I cannot afford to buy the same stuff I used to buy 10, 20, 30 years ago.”

And the reason is because they’re running at a slower pace than the financial system. That’s the biggest problem I see right now in the US, and the world, is that people they’re making money. They see money come into their pocket. They don’t realize that there’s a problem, and they’re only going to realize there’s a problem when it’s too late, so it’s better for them to know now that there’s a problem, so that they can fix it now.

That’s one of the things we talk about on this webinar is, open your eyes. There’s a formula that the financial system that you have to beat every single year, to improve or maintain your purchasing power. It’s not about dollars that come in. It’s about being able to buy more, and that’s the big thing here.

Mitch: Well, it’s certainly been an eye opening conversation. We could probably talk about this for days, and days, and days, but I want you all to go over … If you’re interested in these ways to get ahead, and these hacks, as he’s calling them, go to 1000houses.com/HackingFinance, and learn more how you can get on the other side of that clock, and you can get the things that have been working against you, working for you.

Really intriguing. I’m going to follow up myself, George. Anything else that I haven’t been smart enough to ask that we might need to delve into, or have we done a good job so far?

George: Yeah, Mitch, I have to tell you. I’m really enjoying this conversation. Especially because of your background, you can really appreciate a lot of the … What people end up realizing is how much more powerful real estate is, than previously they realized.

A lot of people think of real estate, they think of physical property, they think of the paint, they think of the roof, they think of all the stuff that comes with the real estate, but the underlying pinnings of real estate, the financial power, the financial aspect of it is what is so intriguing, because there’s built in wealth building strategies in it that are fascinating, and someone in real estate would appreciate it even more once they understand these … How the financial system works.

When you talk about the under pinnings of real estate, you start realizing how fascinating real estate is. What I want to do is give all your listeners the three levers or dials, that affect all of real estate, that you have to think about when you’re putting together deals, and specifically buy and hold deals.

Number one is … I’m going to start with the reserves. Your reserves, most investors out there don’t believe in having any reserves in the bank, because they think the money is sitting there doing nothing, and that is so not true. It is so important that every investor out there … And again, I’m speaking specifically to real estate investors.

Most investors have to have reserves, and reserves is two things. One is your debt service, your mortgage payments, meaning your monthly mortgage payments, and second is your operating expenses. What you want to do is add these up, and have at least three months, preferably six months.

And so, most people think, “Well, the money’s just sitting there doing nothing.”

That is not true. When the money is sitting there, it improves your borrowing capacity. It improves your peace of mind, because the problem with debt is, debt has so many benefits, but if you don’t have the monthly payment ready, it’s going to hurt you financially. But also, if you have no money in the bank, no lender is going to lend you money, so having some reserves in the bank is so critical, because it improves your borrowing capacity, but also, it helps you know that in case something happens, you have that money there. So reserves is one thing.

The second thing is, the percentage of your LTVs basically. You want to look at all your debt, divide by all your assets, and that’s what’s called your debt to asset ratio. That is so critical that you maintain that, and you want your mortgages to be no more than 80% of your property values. And the reason is because, the risk starts going up exponentially as you go up from 80%.

Now, there’s actually a number for every different asset, and there’s no time to discuss it right now, but just keep it at 80 or less. I know people are doing 100% debt financing on real estate, on buy and holds. Again, this is just buy and hold. We’re not talking fixing and rehabbing.

It’s so critical that you don’t have 100% debt financing. It is asking for trouble. If you’re going to use OPM, the top 20%, the down payment, should be structured as equity financing. That means you might tell someone, “I’ll give you X percent of the profits, and then the rest will be debt.”

It’s so important that you understand exponentially, your risk is going up as you go over 80, especially from 90 and above.

And finally, your … So first, covered reserves, then your percentage of debt to asset, or LTV should be no more than 80, and the top is equity financing. Finally, the spread between what money’s coming in, and what money’s going towards the debt. And specifically, I’m talking about the loan constant. You want the loan constant to be as low as possible. So these three things help you structure safer deals with real estate.

Ultimately, it’s not about the real estate, folks. It’s really about being able to build wealth. The last thing you want to do is have … Put yourself in a position of losing everything. I know some people that have lost everything they had.

One gentleman I know had over 1000 apartment units, and had a lot of single family homes, and ended up losing everything, because he had way too much debt when the market turned, and on the day he retired, he lost everything. He was a millionaire on paper, ended up losing everything because of these things, and that’s how I learned these things.

This was is the late 80’s, he lost everything. It’s really important that people understand that real estate is a bigger game than just real estate. It’s a game of finance, and you have to understand these three levers we talked about, or three dials. Very, very, very important.

Mitch: So, let me chime in here, because you started making me think right now. I do houses, but houses is really just the vehicle that allows me to get into the finance game. I’m borrowing … You know, in a typical deal for me, I’m buying a house for 50, and I’m owner financing it, let’s just say to make these numbers real easy, although I just did this the other day, exactly.

I borrowed money at 8% interest only, and I bought a 50 thousand dollar … I paid 50 thousand dollars for a house. [crosstalk 00:55:51]

No, that was a discounted price. It was a wholesale price. Based on the rents, I knew that I could sell it for 110, and try to get about 10% down, but in this formula, we’ll just say 10 thousand down. A little less than 10%. And I financed … I immediately turned around and owner financed it for 110 thousand with 10 thousand down, and I carried the 100 thousand at 10% for 30 years.

So I’m making 2% on my borrowed money. You know, the 50 thousand dollars that I borrowed, I borrowed it at 8, and I’m loaning it out … I’m charging my buyer 10, so I’m making 2% on my borrowed money. That means the more I borrow, the bigger my 2% CD gets.

Case and example.

And then I’m making the full 10% on the 50 thousand dollar spread. And then, as a side note, I got paid 10 thousand dollars in my pocket to make that happen in the form of a down payment. So I’m really not in the house business, I’m in the finance business.

Right? Is that what you’re saying?

George: That’s exactly correct. You brought up a good point. I want to clarify. When I talked about the LTVs and stuff, I was talking about retail.

So the deal you just mentioned is brilliant, because you’re buying under market, and you’re selling at retail, or above retail, and you’re selling on terms, and I think that’s brilliant because when you’re getting paid 10%, and your underlying loan is 8%, that arbitrage, that spread is so critical because … This is the part that people don’t realize.

Inflation does not impact spreads. Inflation only affects people that use their own money. Yes.

So in other words, if I’ve put up … This is going to sound crazy. If I was to put up the money, and if you were to finance … If I was to put money into a deal that makes me 8%, and it’s all my money, and you’re getting 2% or 3% spread, you’re actually better off than I am. Even though it might seem that I’m making more money, but inflation is working against my 8%. When you make a spread, inflation does not work against you. It is a fascinating thing, and there’s no time to go into a lot of detail now, but it is brilliant. And that’s what banks do, and so you’re playing an incredibly, very sophisticated, and smart game, Mitch. That’s great.

Mitch: I just did some numbers so people would know. 2% doesn’t sound like very much, but when you have private money, and you can borrow, the sky’s the limit on private money. There’s no cap on how much private money you can go out and get. There’s caps on how much banks will loan you, and different asset classes and stuff, but private money, there’s no ceiling.

I’ve pulled some numbers out. If I have six million dollars out, that I’ve borrowed to buy all these houses, and I’m making 2% on the borrowed money, that’s 120 thousand dollars a year. Just for borrowing money to buy a house, I’m making that much, because of the way that you have it set up. And then you’re making the whole 10% on the other six million, which is 600 thousand dollars a year, on 12 million dollars worth of debt, you’re making 720 thousand dollars, roughly.

I’m just trying to extrapolate out, so people can see that even small spreads can add up if it’s something that you just are doing over and over and over again. I mean, borrowing money, and having a house payment to someone runs out of my exhaust system of my strategy. It’s nice that I can turn it around so I can make some money off those payments that I have to make. I think that’s kind of what you’re saying.

Let’s take a break here for a second.

George: Mitch, it is such a pleasure … I have to tell you this. It is such a pleasure to talk to someone who is very successful, who knows what they’re doing. The thing that really bothers both of us is that these strategies are out there for people to use, and they choose to go the traditional route of working extremely hard, having financial stress in their lives, and not moving forward. They’re actually moving backwards financially, without realizing it.

And the sad part, Mitch, is that you and I know that these people will get to retirement age, they’re going to look back, and they’re going to say, “You know what? I should of … I could have done this, or I should have done this. I had the opportunity.”

The thing that’s so sad, is that these things are out there, and people can tap into them, and start using them in their lives, and yet, they choose not to.

Mitch: Well, I think a big reason … George, a big reason that it happens is … And it’s just like, I went to my banker, and the banker says, “We’re not sure we want to get messed up … Mess around with these little junky houses that you have.”

I don’t do war zone houses. I do Walmart houses for Walmart people, just run of the mill, three bedroom, two bath, three bedroom, one bath, two bedroom, two bath, little 1200 square foot houses. They’re not in war zones, or in ghettos. They’re just average houses for average people, and it’s not very romantic.

But then they start doing my spreadsheets, and they say, “Well, what’s going to happen when a recession happens?”

I said, “You know, that’s the greatest part. My sales price,” and you’ll love this. I think you’ll love this. In the recession, what happens George, the banks clam up. It’s either the cause of the recession, or the result of the recession, but either way, banks stop loaning money in every recession. They just stop.

That means no one can buy houses, or the amount of people that can buy houses dramatically decrease. So what happens to house prices when there’s a recession? The banks clam up, people can’t borrow money to buy houses, house prices drop. Okay, this is not rocket science. This is common sense, supply and demand 101. Not a lot of money out there being lent, not a lot of houses being sold, prices drop.

But I have private money, so I’m buying houses when the banks stop loaning.

Now, what happens to rents when fewer people are buying houses? There’s a lot of pressure put on the rents, right. So the rents go up.

What did I tell you my sales price of my owner financed houses was based on? My sales price is based on rent, and I’m backing into that payment to find out what I can charge, using 10% interest, in 30 year epimerization. What does that make the house payment? What does that rent payment make?

And I have to take into consideration that they’re not only going to have to pay me principle and interest, but they’re going to have to pay me taxes and insurance. So I’m subtracting the taxes and the insurance off the rent, and then I’m figuring out what they’ve got left over for principle interest, and I’m counting through it like, “What? This payment … This is a payment for how much money if I use the terms 10% and 30 years.”

Well, if you multiply that rent, minus taxes, minus insurance, equals a number that they have for principle and interest. If you multiply that by 115, in the price range that I’m dealing in, you’ll come very close to what they can afford to finance.

And then I just add 12% on top as a nice down payment for me. And so, that’s my owner financed value. That’s the formula. Rents, minus the taxes and insurance, times 115, plus 12%, equals the OFV, the owner financed value.

And so, during the middle of the recession … And the bankers looked at me like I was crazy. I said, “My houses appreciate in the middle of the recession. I’m the only appreciating real estate in the world, because I’m owner financing. It’s going up in value, because my price is based on rents.

And they had a really hard time, saying, “Well, that can’t be true. Why is everyone else’s house going down?”

I said, “Because I’m basing my price on what they have to pay to live some place.”

And they couldn’t get it. It was hard for them to make the shift. And they looked at me square in the eyes and said, “So, you’re telling us that you have an inflation proof business?”

And I said, “I’m telling you, in the last recession, I sold my houses for more than I ever sold them for before, because the rents went up. I don’t know how to explain it to you guys any clearer,” and they did not want to believe me. And it’s an absolute fact, and it’s because they’ve been ingrained to a certain, I don’t know what you want to call it, ideology, or learning system. What’s the word I’m looking for, George?

They’ve been kind of brain washed in the way that, it all works like this. Well, it doesn’t work like this, because exactly what you’re pointing out, when you get on the other side of some clocks, and you stop listening to traditional mumbo jumbo, and start really looking at what moves the needle on this stuff, what moves the needle. If I change this number, what happens? If that number changes, what happens to my number? And you start saying, “Wow, that’s really weird. When the rent number changes, my number changes, and it doesn’t matter what economy there is.”

And this is why my … And I’m going to go off on here, on a little personal note, George. The reason why my strategy works is, I don’t need a bank to buy my houses, because I’m using private money, and I don’t need a bank to sell my houses, because I’m owner financing them, and I’m wrapping the underlying debt with my home buyer’s debt. It’s all legal, called a wrap around mortgage, and that’s the dynamic that I live in.

And trying to explain to people this, who are very sophisticated, they go back and think somehow I’ve out flipped them. Somehow, I’ve gotten really slick, and they want to go back, and review it over, and over again, and the outcome’s always the same. I’m right.

George: Yeah, they’re stuck in a box, and that’s part of the problem. The box that the banks put out there, and everyone is used to thinking inside that box, and nobody is stepping out of the box and realizing, “You know what? There are many ways to work in this system that is outside of what the banks and the financial institutions are telling us.”

And that’s precisely your genius there, is you’re saying, step out of the damn box, and look at how … It’s a win, win for everyone in your situation, that –

Mitch: And it’s common sense. Don’t try to get too clever. Just use your common sense. Don’t try to get too clever.

I tell people, you know, I function off of 8% private money, and I give them a lien on my … That house that I told you I sold for 100, or 110 thousand, I give that guy who loaned me the 50, I give them the first lien on that house. So they either get paid 8%, or they get my house. It’s really hard to go broke that way.

Actually, the worst they’ll do, is if I pay them on time, because they’re only going to make 8%. They actually do a lot better if they get my house. And I like to tell everybody, “You know, if everyone in Bernie Madoff’s scheme,” you remember Bernie Madoff, sold people for billions.

If everyone in Bernie Madoff’s scheme would’ve had a 100 thousand dollar house as collateral, for every 50, 60, 70 thousand dollars they gave him, none of them would be broke. Not one.

So when I’m trying to explain this to my private lenders, I say, “Look, don’t pay the house off with the 50 thousand. Your house is like 4.5%. Give me the 50 thousand, and I’ll pay you eight. You can go and pay 4.5% of it to them, and you can still keep 3 … You still keep 3.5% to yourself.”

But they go and pay the mortgage off. I said, “Well why did you do that? You would be much better off if you’d have given me the money, and just had enough mental discipline that when I paid you your 8%, you wouldn’t have gave up … Let that payment make your house payment. It’s the same thing. You’re not making your payment anymore. I’m making your payment.”

But they don’t … That was maybe a little bit more emotional with houses. I did it once with my dad, who wanted to pay off the car. That was a 4% interest rate at the time. My dad said, “I’m going to retire. I’m going to pay off the car.”

I said, “So how much do you have owed on the car?”

And he said, “$22000.”

I said, “How many years are left on the payment book?”

He said, “Four years.”

I said, “Well, how much is the payment?”

And I don’t remember it exactly here, but I’m just going to pull a number out. He says, “It’s $400.”

I said, “Okay. So, you want to part with $22000 of your hard earned money, so that you don’t have to make a $400 a month payment? Is that what I’m hearing, for four years?”

He said, “Yeah.”

I said, “Okay. Hand me the payment book, and hand me the $22000.”

He said, “What?”

I said, “Hand me the payment book. You no longer have a payment. That’s my payment. And hand me the $22000.”

He says, “Why would I do that?”

I said, “Dad, you wanted to give up $22000 to get rid of the payment. Hand me the payment book, and hand me the $22000.”

Eventually he … I mean, it was really foreign to him, right. He said, “Why would you do that?”

And I said, “Because I will take $22000 at 4.5%, with four years left, all day long. I’ll take as much of it as you have.”

That was my first nothing down deal, and I went and bought a house worth 40 thousand, that I owner financed for 550 a month. I made 150 spread for four years, and then after four years, I didn’t even have the $400 dollar payment anymore. So the remaining 16 years, or 25 years, or how many years were left on that mortgage, I made the whole 550. It was like a deal made out of … I wish I had 100 of those, 1000 of those.

But anyways, it’s about listening with a different set of ears, and looking with a different set of eyes. Right, George?

George: Yep, absolutely. You’re absolutely right.

Mitch: How many people are going to recognize that situation? Hey Dad, give me the payment book. You’ll be rid of the payment, because it’ll be my payment now, and give me the 22000. See, that’s what you’re teaching. You’re teaching people to see that, to hear that. When it’s right there on their plate, you’re going to teach them how to see that.

George: Yep, and people need to understand … I mean, everything you’re talking about there is what I call the game of finance. They need to stop thinking about the car, they need to stop thinking about the stuff. They have to understand the underlying finance, because there’s some brilliant things you can do, and once you see … There’s something I call the financial matrix. Once you see the matrix, the way things are, you realize that the car, and these things are nothing more than collateral for a bigger game, and the only reason it’s there is for the bank to feel better about lending you the money.

But there’s some brilliant things you can do to turn the system to work for you, not against you. That’s exactly what you’re talking about, and brilliant stuff, Mitch.

Mitch: Man, I want to thank you for being on. I want everyone to go to 1000houses.com/HackingFinance, and learn what George Antone is talking about. There’s many, many more hacks, I’ve been informed, that you can do. We’ve just touched on a couple. I’m not exactly sure how relevant all my analogies were George, but I thank you for putting up with me. I try to give a different angle.

You know, you’re so sophisticated. You know so well what you’re doing. I was just trying to point out for the listeners maybe a layman’s way to look at it sometimes. I don’t know if I did a good job or not, but I tried.

George: Well, it was great being on the show, and again, Mitch, I have to congratulate you. I’ve heard a lot of amazing things about the show from a lot of my students, so obviously you’re doing something right. It was a pleasure talking to you finally after all this time, and it’s really … I want to thank you again for this. And congratulations on your success. It’s great to hear that.

Mitch: Well man, I appreciate you too. I want to thank the audience for stopping by to get you some George Antone, and again, one last time, 1000houses.com/HackingFinance, all lowercase, no spaces. You’ll go there, and you’re going to get a free report on exactly all the different areas that you might just get on the other side of the clock, get time on your side. There’s also going to be a free webinar there, on the same subject.

It’s just been amazing. I’m going to go there myself. Maybe we’ll meet up in the future somewhere, some seminar or something, George. I look forward to meeting you in person. You’re a great guy with a great mind, and I appreciate it.

Also, check out George’s books, The Wealth Code, The Banker’s Code, and Debt Millionaire. This is Mitch Steven with the Real Estate Investor Summit podcast. I hope you have a great day. I hope you have a great week. I hope you have a great month. I hope you reach all your goals this year.

I want to thank you so much for stopping by to get you some George Antone. We are out of here. Bye bye now.

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