Preparing for another economic crisis

Housing prices will collapse with a nominal increase in interest rates. Get your financial calculator: N=360 (30 years), Rate=4% per year, PV=100,000, PMT=477.52, FV=0. Those are the numbers for a $100,000 mortgage debt at 4% per year, fully amortizing over 30 years. Change the interest to Rate=6% and recalculate PV=79,628.87. That’s 20.4% decline for the amount of debt that the monthly payment can support. That translates directly to a loss of 20% in the property value, which *just happens* to equal the down payment required by the Banksters. When folks lose all of their equity, they will walk away from their devalued houses, the government will step in and take ownership through the Federal Reserve printing counterfeit currency to buy the bad mortgage notes.

Just a few years ago, a 6% interest rate was considered a very good rate. Artificially driving down rates below 4% caused prices to inflate. When the rates reset to “market rates”, the real estate market, especially commercial, will collapse and banks will fail and merge with larger banks.

You can prepare for this by calculating what the rental property can afford to pay when servicing debt at 8% with a debt coverage ratio of at least 1.5 to tolerate recessionary pressure on income and expenses. Don’t pay more than what the property can afford with those numbers.

With a portfolio of positive cash flow income properties, you’ll have some protection from the next great depression. Acquire rental income properties in “rental communities” with long-term fixed rate financing with the lowest possible down payment and the highest possible debt coverage ratio. You will repay the debt with debased dollars from your tenants (stay away from rent control areas, low income housing, and socialist governments).

See my YouTube channel for more information about real estate finance.