Macroeconomics and Real Estate Investing

George Gammon from The Rebel Capitalist joins us for an engaging discussion about the important relationship between macroeconomics and real estate investing.
It’s good to keep an eye on the bigger picture of what’s going on in the world … it can all have an impact on real estate. 
After all, what good is it to be great at crunching the numbers on a deal if the macroeconomics of the market crunches you? 
In this episode of The Real Estate Guys™ Radio Show, hear from:

  • Your macro host, Robert Helms
  • His micro co-host, Russell Gray
  • Rebel Capitalist and investor, George Gammon





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It’s Important to Understand the Bigger Picture

We spend a lot of time talking about the details of real estate … but sometimes it’s good to take a step back and look at the big picture. Having an understanding of the bigger picture will pay dividends. 
We were blindsided in 2008 with the financial crisis … so we’ve spent the last 12 years trying to understand what happened, why it happened … how to be positioned in case it would ever happen again and how to see it coming a lot sooner. 
As real estate investors, we need to understand what’s happening in the bond market and the stock market … precious metals … and oil and gas. 
We’re happy to have George Gammon as our guest today. 
George has not always been in real estate … and in fact, he says that prior to 2012 when he retired, he never owned any real estate. So he started reading and learning a lot about real estate from some big names in the business. 
George says he jumped into real estate investing aggressively … investing almost 100% of his net worth. He started by going to tax auctions in the Midwest. He also began investing in South America and found great success in real estate in Columbia. 
In 2019 he even got a show on the local TV station in Columbia! He also started a very successful YouTube channel and a podcast. 

Macro Addict

George says that when he started to pursue the study of macroeconomics in 2012, he dove into it with passion … listening nonstop to podcasts and audiobooks. 
George says, “Man, I’m just so passionate about macro …  I just really love talking about macro and investing in the bond market and the equities in the repo market … quantitative easing, and the central banks and all these things.”
After a few years starting out as a student, now George is teaching macroeconomics through his fun and educational videos, communicating things in a fun way that people are really learning from. 
He tried a few different ideas and found that his whiteboard videos in which he goes over complicated concepts turned out to be the most popular among his viewers. 
George works hard to make sure his video content is interesting and relatable … even when the topics are complex. 
“It goes back to terminology as well … once you understand the basic concepts and the terminology, the language used, and then it’s a lot easier to understand,” he says. 
We ask George, “What do you think are some of the most important things people should be paying attention to as a real estate investor, specifically?”
He says pay attention to debt. 
“When I got into the game back in 2012, I was just focused on the underlying asset and the cash flow … the interest rates weren’t dramatically different from the last 10 years or so, and now obviously mortgage rates have really come down, especially on a 30-year fixed-rate loan. But now I think we’re in a different economic environment where the debt is almost a better asset than the underlying real estate, especially if you got a 30-year fixed rate.”

Are We in a Bubble? 

So, that leads to another great question … are we in a bubble? 
George says that since today’s real estate prices adjusted for inflation are higher than they were in 2006 when we were definitely in a bubble, it would lead you to believe that today we are also in a bubble.
But it doesn’t mean you shouldn’t be out looking for opportunities. He says you’ve got to stay hyper-focused on having a positive cash flow. 
The market now might now be right for someone starting out … but for a sophisticated real estate investor, there may be some great opportunities out there. 
George started investing in real estate in 2012, which in hindsight was a good time, so we ask him about what he’s watching today as he picks markets and properties. 
George says he starts from the standpoint of asking whether the investment is cheap or expensive. 
“If it’s cheap, I want to buy it. If it’s expensive, I want to sell it.” 
He says people get too focused on the direction of the price and don’t consider the value. 
“I’m very, very happy to sell now because even if I miss the top, I don’t care, I’m selling it when it’s expensive, and then I just look for the next asset class or the next area where you can buy it cheap and you just do the same thing,” he says. 

What About Someone Starting Out Now? 

We asked George what ideas he might have for anyone starting out in real estate investing. 
“I think they should study wholesaling … if you can understand what they do, understand how they find deals, understand how they find motivated sellers, you’re going to be way ahead of the game as a real estate investor or a real estate business,” George says.
He also says that real estate investors should pay attention to the price of commodities. 
“For real estate investors, one thing that I would encourage them to do is pay more attention to commodities … because at the end of the day, all you’re doing with a house is you’re just buying commodities that have been put together.”
Lumber for example has gone up very high in price over the last few months due to COVID. Investors should be aware when that price increase comes down the pipeline. 
To hear all of our very interesting inteview with George Gammon … be sure to listen to the entire podcast! 

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