The Interest Rate Lie Everyone Believes

Welcome back to another episode of the Roots Podcast. I'm Max Moore, joined by my host Tyler Lingal. We're recording this episode September 2025. Rates are around like 6% and I have [music] one burning question that I need to know from Tyler. Should I ever buy a property dependent on rates? The short answer is never solely dependent on the rate. The rate is one of many factors. Purchase price, neighborhood. It's essentially on an equitable basis. You could argue the location is more important rate. I would actually say over a long-term basis, yeah, rates mean a lot in the first like two years and they mean very little, right, in the 10, 20 year picture of a property ownership rate because they are changeable. Your location M Kesler Broader downtown is unchangeable whereas the rate is malleable. But I think what people have to understand, we were just talking about this before we started recording is the context of which we are swimming in right now is one in which for a very long time rates were up high in the 80s with U stackflation came down and stayed pretty low. 08 happened but then we have COVID and everyone flips out. They think the housing market could totally freeze up. What did they do? the Fed basically uh buys trillion I don't even know if it's trillions but could be trillions worth of bonds and inject literally trillions of dollars into the economy which then proceeds to lower rates down to what 2. 5 or 3% right and so we all basically got high it was like everyone was snorting rate cocaine not even joking going like crazy jumping around like little bunnies buying everything and appreciation goes wild right things go up 50% %. And so we're now sitting here on the other side and everyone's basically whining and bitching about 7% rates because we've been high on 3% rates for so long. And the question is, should you buy? Should you never buy because of 7%. No, because or yes, you should because the 3% was not reality. It was reality distortion, right? [clears throat] Yeah. It was a a fragment of time, right, in history that we we had the 3% and congrats if you have it. But just like you said, you can't move the house, you also can't move the rate to the next house. So like unfortunately at some point uh you're going to be a consumer of the marketplace again, right? And it'll all come back around, right? The way that I like to look at it is basically we took steroids instead of cocaine because after I mean I guess if you do a bunch of drugs for a long time you have the same effect but steroids you get puffed up you have this huge peak performance window and then you hit the decline and you struggle to come back from it. Mh. We've basically hit the decline. We're going to have a couple years you know where our game's not as good and then it'll all swing back around the Tiger Woods thing. Tiger Woods theory of so what's the analogy then of should you stay on the sidelines when rates at 7%. Yeah. It's never going to be as good as it was before. Right. If it's the steroid theory it's going to you're always backwards looking. Right. Right. You're always I don't know about you but I'm noticing that erode like it was like so tough in 23 24 25 a little bit but now it's like people kind of get it. Yeah. Well I mean I have an 8% interest rate on one of my investment properties. Why? Why did you do it then? Why did I do it then? 202 mid 2023 I think was when that rate was locked in. That duplex pretty much the highest. Pretty much the highest literally it was August of 2023 when I [laughter] bought that property. So yeah, uh that property has uh two grand a month coming in. 2200 a month coming in. I think our payments 1050ish. M so the math mathe right right which is what I love looking at what is your mortgage pit ti what is your rents I heard someone say yesterday to me they're on the phone I love this they were like if my rent is two times my mortgage payment I'm good I don't care if it's 8% I don't care if it's a 10%. He's like that gives me a tough margin. It's very tough. Two times. Yeah. I guess there's Everybody's got their own little way of looking at it. That's really tough. When I look at primary residence though, five you were getting it. You just said though you were literally getting two times. You basically said, right? Yeah. Unicorn property. Yeah. Sure. I don't get that on everything, nor do I aspire to get it. So, let me ask this. Do you think differently about interest rate in your primary residence? Yeah. I have no fears when I'm going into an investment property so long as the math makes sense. Um, when I go into a primary, unless if it's because I have to move, if it's just for like luxury and want to, I look at primary residences as a straight up expense or a liability in my net sheet. The way that I focus on debt there, having that liability being huge and like above, here's how I'll frame it up. If it's above that 30% on income ratio, then I I just don't want to touch it. So if that's 100%. Does the rate matter there? Because you could have 10% still not if you make enough money, right? But it suppresses the viability for the mass average, right, of people. So like when I went to buy mine, I didn't care what the rate was going to be. I looked for that 30%. Let's get super grand there. Rates are 6. 2 or something right now. Good time to buy or no? Uh, it depends on where your primary I'm talking about. Yeah. In in the primary sense, it just that would depend on where your personal income is. Sure. If you're a well equipped, prepared buyer, no, you should go buy it. If you are still working through median income, you need to find a different way to buy a home. Here's where my response is though. If right, looking at it holistically, supply demand, we have more supply, less demand in the marketplace. So, could you get the property 20k off, right? and make up that difference, which is what a real estate agent who knows what they're talking about is going to help you figure out, right? I think now is a phenomenal time because rates aren't in fives. Yeah, you absolutely the second that rates get to five, if you're even thinking about jumping off the sideline. You should figure out how to. The problem is the person googling to find this video likely does not have the capital stack to go make that move. If you're worried about rates, you probably have less margin than you think. Yeah. Yeah, that's that's fair. But I don't want people to get tripped up because you have to it all comes down to the numbers, right? Yeah. You have to run the numbers finance. If you're not running, if you're just looking at the interest rate alone, you're an idiot. I hope that's a real because like that is the dumbest thing I've ever seen. You have to run plug it into the calculators and it comes down to where you are at and your income versus expenses. Yeah, that's all it is. So, I think we're in agreement here. Well, there you go. You have it. You're an idiot. If you uh buy a home [music] based on the rate, you are. Put it on your gravestone. Peace. Thanks, guys.