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MINDSET & MONEY | THE SOCIAL DIVIDE IS GROWING

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Hosted by
Mike Ayala

Today on Investing for Freedom, Mike Ayala talks about “the social divide” and the “new normal” the world will be getting back to, post COVID-19. 

The COVID-19 pandemic is affecting all Americans in many different ways. The rich and the poor alike, most people, if they still have a job, are working from home. Those without a job are unsure of what the future holds for them as a result of the pandemic.

Today, Mike talks about affordable housing and how it could be your next great investment, not only to get returns but to give someone “who cannot afford a four-bedroom brick home in the suburbs” a place to call their own. 

The demand for affordable housing could be more significant than ever due to the current pandemic. 

So whether you decide to invest in real estate or whether you decide to launch a business or it’s a side hustle or it’s a second job, whatever that looks like, I would encourage you to just really think about what are the needs going to be and how have people been affected by this and where can you invest, that not only provide you a return because at the end of the day, business is about returns and finances, but it’s also about giving back and it’s about a bigger purpose. -Mike Ayala

HIGHLIGHTS:

  • [00:00] Intro
  • [00:47] The Social Divide is Growing
  • [01:00] Asset Class: Affordable Housing
  • [01:39] The COVID-19 toll on the poorer
  • [02:50] Coronavirus Aid Relief and Economic Security Act 
  • [04:29] “I started investing with no money”
  • [04:40] Rich Dad, Poor Dad
  • [05:43] The US is becoming a renter’s nation 
  • [07:08] Home ownership is becoming a pipe dream 
  • [08:40] Affordable housing opportunity
  • [10:00] Demand is going to be higher than ever
  • [10:45] Episode summary – The New Normal
  • [12:08] Outro

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FULL TRANSCRIPTION:

Are you looking for freedom? Freedom from the daily grind and hustle, or just finding a way to live the life you always wanted. Then join us on the investing for freedom podcast. Our hosts, Mike Ayala will help you discover new ways to find freedom with tips, insights, and interviews. You’ll learn the exact systems he’s used to travel the world and live his best life. True success and happiness are all about freedom. And here’s your roadmap on how to find freedom on your own terms. Welcome to the investing for freedom podcast. Here’s your host, Mike Ayala.

Thank you for listening to the investing for freedom podcast. Today we’re going to talk about something that I wrote actually about, at least part of it in a blog a few weeks ago on our website at www.fourpeakspartners.com and it’s called the social divide is growing.

So I’m sitting here May 4th, 2020 and we are in the affordable housing space. I don’t know how many of you guys know that, but we invest in manufactured home communities across the country. We’re in 13 States and we’ve liked this asset class for a while. My wife and I started investing in this asset class over 10 years ago. It’s a great asset class for a lot of reasons, which I won’t get into necessarily right now, but having grown up and spent some time living in a mobile home park when I was younger, just being around it, realizing the need for affordable housing. There’s so many reasons to invest in affordable housing and manufactured home communities in general.

But the covid-19 pandemic, it’s affecting Americans adversely across all social spectrums, we know that. The economic, social, medical toll, I mean it’s being talked about everywhere, it goes deep. There’s growing evidence though that it’s the poor that are suffering disproportionately.

The research suggests that the poor and those living in distress communities are more likely to catch the disease. And because the poor are generally less healthy and they have less access to quality health care, they’re also more likely to die from it. And then those that do manage to stay healthy will disproportionately suffer economically from the loss of income and healthcare expenses, a result of the quarantines, the stay at home orders, etc.

The coronavirus has, I mean, it’s shut down countless businesses and put millions of Americans out of work, and while many white-collar workers will continue to work from home, blue collar workers in food service, hospitality, manufacturing, they don’t have that luxury. A recent Pew survey found that the majority of people making more than a $100,000 said that they would continue to get paid even if coronavirus caused them to miss work for at least two weeks. And just 16% of

those making less than $30,000 said the same. 41% of white workers said that they would continue to get paid compared to 27% and 23% of black and Hispanic workers respectively. All this has caused the unemployment rate to jump. I think we’re up above 30 million unemployed now. It’s just crazy. And in response to the economic desperation that are facing, many of us, but poor Americans in general. President Trump recently signed the coronavirus aid relief and economic security act, otherwise known as Careers, passed by Congress to allocate 2.2 trillion, 560 billion of that was earmarked to directly benefit individuals in the form of cash payments of up to $1,200 which this was, a few weeks ago. And we know that since then we’ve funded even more.

The cash payments under the cares act are intended to help struggling individuals and families on the lower end of the income spectrum with income limits set at $75,000 for individuals and a $100,000 for couples to receive those payments.

The cash payments underlie the growing social divide in the United States. The US Bureau of labor statistics estimates that 40% of Americans don’t have enough money to cover a $400 emergency bill. I’ve been talking about this for a while and I hesitated to talk about it the last six or eight weeks because everybody was in a position of struggle. We’re all, our lives are being impacted immensely. Nobody’s immune from this. But again, the social divides growing and it’s going to continue on the backside of this. So I want to make sure that we’re continuing to talk about this and understand what’s happening and what’s coming and what we can do about it as individuals.

But anyway, back to that Bureau of labor statistics estimate, 40% of Americans don’t have enough money to cover a $400 emergency bill.
And as I’ve said so many times before, the average American is living paycheck to paycheck. And I’ve said this long before coronavirus happened, the average American family is one paycheck away from destruction, not enough money in savings. If that’s you, and you’re listening to this right now, I understand, and again, we’ve all been affected, but that doesn’t mean that it’s too late. It doesn’t mean it’s too late to change your mindset. It doesn’t mean it’s too late to change the way that you think about things, and I started investing with no money. What it takes is beginning to invest in change your mindset. That’s the most important thing first.

And so whether you have $5 or $5,000, you can go to Goodwill and pick up a copy of rich dad, poor dad, the cashflow quadrant, richest man in Babylon, think and grow rich. You can pick up a book at Goodwill for $5. So whether you have $5 to

invest or $5,000 to invest, invest it in your education, invest it in mindset change and growth. That’s what it’s going to take.

So this cash that’s coming, it’ll be a welcome relief for struggling families, but it’s just a band aid. Even before this pandemic, as I’ve said, there was a growing wealth gap between rich and poor and this started a long time ago, but really in 2009 in the aftermath of the great recession, it got even wider. The $800 billion stimulus package under the American recovery and reinvestment act of 2009. It helped the country rebound from a great recession, but still the aftermath spurt a widening gap as stagnant incomes were unable to keep pace with the rising prices of housing in consumer goods resulting from the economic expansion.

All this shrunk the middle class and it left even more income earners on tighter margins. Now more than ever, the American dream is getting further and further out of reach. The US is becoming a renter’s nation with more than 36% of all households estimated to be renters. And the one segment that is most underserved is affordable housing where unprecedented demand is far outstripping supply. We’re actually seeing this even as we speak. We’re all being affected in a lot of different ways. We’re on reduced staff and being in 13 different States dealing with laws and these different States has been a challenge in itself. And if any of you were in housing in general or investment, you need any help or just want to talk about what you’re doing or best practice or need any advice, just go ahead and DM me at “themikeayala” on Instagram or we actually have a great Facebook community that we’re getting ready to really push a lot of amazing interviews through and content. It’s free. It’s called investing for freedom on Facebook. Just go look for the investing for freedom Facebook community.

The dream of home ownership though is becoming less of a reality for many Americans now who are forced to rent and mobile homes and mobile home communities fill basic needs that apartments can’t meet and that’s the pride of ownership and four wall privacy. That’s one of the reasons why we really love it. Another thing, while MHC operators own the underlying land, MHC tenants own the physical homes. And that’s not the case always. We do own some of the homes, but generally speaking, they own their home and that fulfills a basic human need to call a place their own and to not share walls with the neighbors and they get to own it.

The dream of home ownership that is becoming a pipe dream for many is a trend that one can’t ignore. I can tell you to invest in affordable housing only for the ROI, but the reality is I needed affordable housing growing up as I mentioned

earlier. I was raised in a mobile home and investing in MHC is to me is also about giving back and providing safe, clean and affordable housing to deserving tenants. We can’t just sit back and wait for the government to fix all of our problems. And so what am I really saying here? I want you guys to start thinking about what you can do on the backside of this. If you really want to figure out how to create more streams of income, and again, we’re all going to be affected by this, but you got to be able to figure out how to solve more problems and affordable housing is one of those problems. So how do you get involved in that? Well, there’s a lot of different ways and like I said, you could join a community, or you could take a bootcamp or anything like that. Reach out to me. We can talk through some of that. But you could also invest passively. There’s a lot of MHC operators, a lot of apartment investors, that kind of stuff that we’ll take investors and we’re one of those. So you could get involved passively as well.

The government can create incentives, but ultimately, it’s, we in the private sector who have the opportunity to make a difference in the lives of the underprivileged. For example, the opportunities zones that was passed a couple years ago by the president to encourage private investment in distressed communities through the tax incentives. The governments can give incentives, but it’s the private entrepreneurs who need to step up, launch the businesses and develop office space and housing, etc.

Us in the private sector, we have the opportunity to make a difference by making affordable housing available to grossly underserved demographics. Again, at the end of the day, I mean let’s just get real here. In order to make more passive income in order to make more active income, it’s simple economics. You don’t want to start a business that nobody needs your product, right? And so it’s the same thing when you’re talking about investing in real estate. Look at the areas of real that are going to need investment capital that are going to need also, that are going to have demand. And so you’re going to have tenants. I would not be investing in commercial office space at this point in time. That’s a generalized comment. But across the nation, there’s companies that have literally sent hundreds and hundreds of thousands and millions of employees working from home and their office spaces are just sitting empty.

I go to my office space every once in a while. We haven’t had the employees there for two months, two months of paying rent. And we’re realizing that we can run a national company with properties in 13 States without an office building. So what am I saying? There are certain asset classes that are still going to do well, but you’ve got to be really careful on where you’re investing at this point in time. And I

think affordable housing is going to be one of those areas. I know it is. Banks are projecting a 30% mortgage default rate. So I know we’ve got all these people out, it’s the best, housing’s going to be fine and lending’s going to come back and all that stuff. Yeah, I mean I want to be optimistic too, but the reality at the end of the day when the banks are, they’re setting aside reserves and everything else for 30% default rate on mortgages, we’ve got to pay attention to that.

So affordable housing is going to be extremely important. Not only is affordable housing profitable, but it’s the right thing to do by providing a place for those who cannot afford a four-bedroom brick home in the suburbs to call their own, right.
All Americans deserve housing that they can afford. And so I guess what I’m trying to say here is if you truly want to figure out how to make more money and invest in better ways, you have to figure out how to solve larger problems. And I’m telling you during this time, whether it’s affordable housing that you want to invest in or it’s a business that you want to start, you have to be thinking about solving bigger problems and the rules that existed 4 weeks ago, 8t weeks ago, 12 weeks ago, they’re not going to be the same rules.

This has kind of been like a little thing that you’ve probably been seeing everywhere, but the new normal. Well, there’s some reality to that.
There’s obviously going to be a new normal when we get to go back to restaurants or go back to shopping or anything else. But there’s going to be a new normal to business too. And some of the businesses that we thought were critical in the past are not going to be the same going forward. So whether you decide to invest in real estate or whether you decide to launch a business or it’s a side hustle or it’s a second job, whatever that looks like, I would encourage you to just really think about what are the needs going to be and how have people been affected by this and where can you invest that not only provide you a return because at the end of the day, business is about returns and finances, but it’s also about giving back and it’s about a bigger purpose. And so I would just challenge you to maybe take a look into affordable housing and see whether it’s an active investment or whether it’s a passive investment, if it’s something that works for you. Because the demand and the need for affordable housing is going to be higher than ever. And it is up to us, as I said earlier, to really go out and solve that problem as entrepreneurs and individuals, I do not believe that it is the government’s place to provide affordable housing. It should fall on the private sector and there are ways to do that. Manufactured housing is just one of them. So anyway stay strong out there and I hope this helps you guys. Look forward to talking more in the future.

If you found value in this episode and you know someone who’s wanting to start or move further along in their journey toward investing for freedom, I would be forever grateful if you would share this show with them and help me get this message out to more listeners. Also, if you enjoy what you’ve heard, I would appreciate it if you’d take 30 seconds and leave me a five-star review and share this with your friends and until the next episode, cheers to moving further along in your journey of investing for freedom.

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