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Hey, so we are live here. This is Episode 30 August 2020 multi market update this is the real estate brought us topics today Oh, who’s statistics on real estate and commerce point of view, we’re gonna talk about the core edge. And then when the heck is that kind of started, but starting off a little bit of a free giveaway, the 2020 version of the buy and hold analyzer for rentals. You can get it in Excel or Google Sheet however you want to use it. For explanation of all expenses for you to make your own performance and spot check performance given to you perform sensitivity analysis. You guys can get it by shoot me an email at simple passive cash flow with buy and hold analyzing the subject line and I’ll send it out to you guys and
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Hey everyone, thanks for joining us lane. I think we’re on episode 34 or monthly brothers real estate show how, how we changed over the years and the over the years over the episodes Arlene from the first episode to this one. It’s kind of interesting how we were pivoting but that’s always awesome. But anyway, so jumping right in talking about wahoo market so the statistics for July wahoo just came out today so this is hot off the presses. But um, yeah, kind of interesting. So, we see, you see the red arrows going down and again, this is July 20 compared to prior year 2019. So receive over There’s a slight dip in terms of median prices, median single family homes went down to 115,000 or 2.4% reduction. Close sales also went down a little bit at 361 3% reduction. But take a look at these median days on market for single family it went down 24%, almost four days quicker at 13 days. That’s really quick. And we’ll talk a little bit more about that. So similarly on the candle, median prices went down from two 440,000 almost a 5% reduction. Closed sales also went down 17% 4226 closed sales and no change in the median days on market, which I mean they’re both still, you know, they’re under a month and we saw them creeping up last month, especially for the cons. I think they went to 40 days which is still not that bad. But um now we see going back down. So it’s kind of interesting how we’re seeing how things are affecting so the story goes is compared to prior year, things have slowed down a bit. But when you’re comparing it to our current, you know, our current situation compared to April, May June, it is increasing when you look at talk about month over month sales and activity. So on the next slide, we just talks about a little bit of how it did change. So single family, we see increase of, it’s blocked for me was that almost 20%? Yeah, compared to June, and for condos, we see a almost a 37% increase in sales compared to prior month. So we’re seeing activity picking back up, which is exciting. Again, month to month are picking up. But year over year, it’s a slight setback. So the next few slides, I’m going to show Kind of like the trend right? So we’re talking about the call just talked about close sales. And so we see the kind of bottomed out in May. And end we see it starting to ramp up these last two months, which are good sign. I think next slide we have I’m talking about is that median sales prices. So if you see, again, it’s kind of coming back up. The yellow line on the bottom is condos and townhouses and so two year, two month upswing, and then the green above is the town houses. But as you can see, I mean, it’s it’s if you’re like a technical analyst, we’re still in this this is built and this rain, these two ranges are staying pretty stable. So that’s kind of a good sign amongst all the things going on with us, economically,
socially, I read it I see prices going down, right because this stuff should follow inflation, which is like 2% 3%
Yeah, so Talking about inflation to right there. I guess the theory is that there’s the short term it’s a it’s a short term deflationary periods are the same, but the long term would be inflationary. But I guess that’s for another discussion. So yeah, like you said, compared to prior years doesn’t look as good, but just compared to our, our bottom, you know, in April matrix a bit better. So then you had the days on market and this is where we see another downtick and again, these a market is a point that an inventory unit is listed until the point that it goes into escrow. So we have going on another going back down again for the month of July. So that’s, I guess, you could say, pause a little bit positive light on the real estate market compared to the rest of our economy and the state in the nation.
And what this is like essentially, it’s a days how much if you put on a house on the market and you price it pretty decently. They’re saying it should sell in this many days, right? versus the average, you know, you got, I’d say a minority of people who kind of price it like a bonehead and too high and maybe they’re not motivated to sell it. And obviously, those are going to go 90 180 days. You see some of those properties out there for a super long time, though, I would say most times what under a couple weeks, right, you got the what are your last last? Yeah,
if he if you price it right, I mean, you’re hoping to and when I say price, the rate is 400 discussion, but pricing it right and in the market, you’re hoping to have that first open house with multiple offers. So then you can go back and use that as leverage because whenever you’re in a multiple offer situation, you know, you can then let all the buyers know that you know, we have more than one person interested. So you know, bring us your your highest and best offer.
So that’s always exciting when you have a multiply situation and gives the sellers a lot of leverage. So What is what is your kind of general strategy? I mean, I’m not a residential agent. But when I work with my, when I try to sell my rental properties off, I was trying to figure out Alright, let’s go, let’s, let’s figure out what the market price is. And let’s call that 100%. That’s listed for like 95 to 100%. No,
that’s exactly how you want to be during a couple offers, right? Is that
exactly that’s my strategy to from the standpoint of you want to be at what you think you’re going to get offered or slightly below because you want to have you want to be in that multiple offer situation because there’s so much leverage you get versus if you just have one person, one buyer and their offer in hand. That’s exactly it. And the challenge is to in like our current market is when you’ve had the last five years of the market going up, up up, you’re you can on an upward market, if you price it above the market price, theoretically, it’ll catch up and you know, you’ll you’ll catch it on the upswing, but when you plateau On a downslope, it’s very challenging when you’re pricing. So working with sellers who are reasonable understand this is very important. And that’s part of what I tried to try to communicate to the seller is like, it’s very important, you know, and of course, again, we’re in this cool video and it’s it’s a very new environment. So in the next couple of slides, we can talk about to the how things are changing in terms of the condo versus single family to you. So you already kind of seeing the difference in terms of median days on market. And so now when you talk about new listings coming onto the market, you see that for the yellow line, which are the kind of townhouses we see it going up, similar for the single family but why this is important is because this is what feeds into our months remaining of inventory, which is on the next slide, if you’ve gone to that slide, lean months of inventory is basically if there were no new inventory to come onto the market. Today, how long it would take for the existing inventory to sell off. So you see the yellow line above on the candles. And we’re at 4.1 for July. And it’s kind of the same as it’s the same as prior month, right? But single family, it’s actually going down. So single single families are actually kind of more, I guess, the harder commodity right now. You see about a year ago that that those two lines are kind of started bifurcating and separating out and a lot of that was because of the short term rental laws that came in to be and you know, Airbnb and all that good, good stuff that we’ve talked about before. So with that said, you know, that the condo inventory that was doing short term or short term rentals, I think what happened was they kind of came into the sales, the resale market, so that’s why we see a little bit of a surge, starting with bifurcation there, right? And then that’s kind of what’s Adding to the little bit of weakness towards the candles in general. And we see a little bit of a split. Yeah.
I like that new word. bifurcation.
They virgin. I mean, something’s going on right here.
You think that that is? I mean, especially come March. I mean it shot off what is that? 20%? I don’t know. 10% but that’s significant. Yeah. So the the short term rentals people’s getting killed doing that stuff.
I think that’s a part of it. That’s definitely part of it. Yeah, because of the fact that they can no longer cashflow and it’s no longer a viable business model for some people who, who bought and mortgage out these properties are banking on the short term rentals because the margins as we know are a lot higher than for the buy and hold long term. renter rentals they’ll a lot more rent for the short term rentals.
The margins were slim to begin with, especially now. Everything shut down.
It totally depends on how you ran it too, right? Because there’s some people, you know, put in their own sweat equity and, and did their own turnovers or fun, some kind of cheap labor to do it or, I mean, it’s like anything if you if you have some kind of competitive advantages, that’s what made you able to do these kind of things right once that that whole law changed it that affected many short term rental businesses. So next we have a realtor.com schedule and this is for q1 of 2020. I’m waiting for the q2 information to come out but it’s kind of interesting to show where the hot neighborhoods are right so it’s kind of like a thermometer so they’re saying that you know, ever beach pro city on the west side is really hot, but then now we’ll get the letter on a loser where their zip codes are coming in as kind of colder and, and that’s kind of consistent what we’re seeing in the condos today because there’s there are More condos and townhouses pursued compared to adient ever beach and pro city so and again this is pre COVID are just at the beginning of COVID but we got kind of also talked about that too right lane where it’s like you know now with the current situation are people going to be moving out towards the fringe or the burbs because, you know, work isn’t going to be calling them in as much the you know, they can work remotely more that option is becoming more available. And so that traffic issue isn’t so so much of a deal because yeah, have a beach traffic coming to downtown is kind of
crazy. So, but to me when everybody’s going one way you want to be the opposite. You want to try and be like maybe a smaller place downtown, and they’re vacating it,
right. I mean, and that’s why we we see that that little bit loosening up or a softening up over the condo market, possibly right. And to your point, you want to Zig when everyone else is zagging, right
yeah. Think although the wind AI and all the other stuff that’s, that’s statistically insignificant.
Yeah, that’s exactly. Yeah, that’s, you know,
slightly different so fine there.
So we’re gonna jump around a little bit here. So yesterday we had the star advertiser put a video all about economist Paul Baker and for me I really like Mr. Baker I like when he talks. So I try to listen whenever he talks at a college buddy who was a econ major when I was in the College of Business, so we drag each other but he would about a you know, he would rag me about being a finance guy and I’d reckon I wouldn’t really rag on what econ but he would drag me out to these presentations and the seminars and these conferences, put on by the bed or he or whoever, and so, Mr. Brue Baker would always be there, Mr. Leroy Laney would always be there, so it’s always good to hear them and I enjoy what he has to say on the next slide. I think Put some of the takeaways that Mr. Brue Baker had to say. One slide that he talked about was comparing different industries and spending based on credit card sales, with the baseline being January 2020. And to see looking at groceries and foods versus foodservice and arson team in creation. So in this scenario, we see that of course groceries and food stores jumped up just before the stay at home mandate happened and then it kind of started, you know, to level off but it’s still at above what it was in January. On the other hand, we have food service that plummeted right because we were forced to stay home and then started to loosen up people started to loosen up too and we see it kind of slowly coming back but not to the to the baseline in January. Then we see our extended team in recreation and that permitted even more, again, making a slowly slow comeback, but not nearly as much as foodservice what he had to say about that, too was taking a look at this is the businesses, the small businesses are the ones that need to think about this look, you know, take this chart to heart, and, you know, you got to pivot. And if you want to survive, you’re gonna have to make adjustments, right, so few of his quotes. So one quote, I put is, whenever there’s a large exogenous shock in the economy, there’s always a possibility that things you think were only temporary changes turn out to be permanent. So basically, you know, just talking to the businesses and seeing that, again, I just read off his code. If you’re in business, or if you’re thinking about changes in the employment landscape in the near future, I’d be thinking about how the structure of economic behavior changes among consumers and households, and how business can anticipate and respond and get ahead of NBA leaders moving us in other those directions. So, I mean, it’s been said before, and it You know, there’s a small businesses locally that are going down. And I wrote this to write. I read this this morning. And I know the news came out this afternoon that we’re going through the second wave of closures. But yeah, the small businesses that survived this first closure, I mean, hopefully they can for the second point is that if you you are surviving so far. How are you going to make that shift? Right, one quote that Mr. Mr. B said that I thought was kind of funny was he said don’t tolerate a few bad actors that can’t keep it in their pants. So for that, I mean, he’s referring to the whole thing with you know, wearing masks were NPP and and social distancing property, because we know the cases are spiking now. And he also mentioned that the answer to the economic problem is that is the answer to the ecological problem, right. We need to solve this issue before we can have people flying back in getting our tourism there. He answered. A bunch of other questions. Some was some people were asking about, you know, the high prices of homes in Hawaii and he said, you know, housing expensive in Hawaii because it’s Hawaii. Another response he had to another question that I thought was kind of funny was, someone had asked about, you know, us, as a state trying to diversify our economy away from tourism. And his response was pretty cool. He just was like, you know, what, if you undo it, we’ll knock yourself out. You know, people have been trying to do this, you know, we’ve had politicians who come on board running and say, you know, this is this is their platform that they’re running on. They’re going to change. You know, get us out of this. diversify our economy, get out of tourism and military as are our main sources of revenue, but it’s not that easy. So the way things Mr. brewery for brew Baker response is kind of funny. So I think sometimes either you love them or you hate them, but I enjoy his his comments. So if you want a link to that, it’s on the Hoi unstarred advertiser website, but shoot me an email, I can easily send you the link i thought was very entertaining. I listen to it twice in a prayer, listen to it again. It gives me kind of some sanity to a certain extent, you know, everyone does something different. So, Alec that again, his quote, don’t tolerate a few bad actors that can’t keep their pants on. I think today, we had one, we had two deaths, which are very sad, of course. And this quote from the newspaper just tells us how, I guess not to say out of hand, but you know, it’s it’s not just these clusters anymore, right? So it says close contact to the individual attended a spin class at a gym taught by a person to the horn errs airlines cluster. So I mean, it’s not no longer to be small groups that they can track right. So and it’s going quickly. So I guess my point to this is Be careful and please, you know, wear your mask and do social distancing. Maybe this doesn’t have to be said now being that we’re going through a second shutdown, but again when I was completing this is before governor Ed and the mayor had come on.
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jumping around again, I don’t know lane if you heard this, but there’s been people that are getting issues with wearing masks now. And there’s a term called mask knee. So that’s like acne getting caused by masks. And you know, people are getting irritations and roses show and all these issues. So now make sure that you have the proper size masks and and you’re doing things to control it. I thought it was kind of interesting. My, my other half had brought this up. And they said oh, let me just throw it in the slides because I was like, more of these issues for us to consider, you know, not becoming the new normal, the new normal. So Like when I was in the mainland last month to check up some properties. Most people in the mainland they were the medical grade bass. They don’t screw around with these homie. I mean the homemade stuff is cute, right? But fuzzing they’re not as effective I guess. And they’re sure as heck a lot less uncomfortable in my opinion. Yeah, I bought a few, a few on Etsy and it ended up being thin like thinner than like a cotton undershirt. And it really provided no protection and like okay, I’m not ordering any more of these. So moving on cooler Ridge so last month was the first round of lotteries for core Ridge the master plan development over in castle in central wahoo
by Casper. What a bad time to come out with
a no you say that. But it was interesting because I was talking to the castle and Cooke representative and I was asking, so how did it go? So what happened was they were supposed to be 45 Homes issued this first round and that were up for a lottery. They only ended up doing 19 because the rest went to friends and family. But they ended up getting 100 over 150 applicant applications, which means the application included a pre approval letter from their lender, and also a notarized affidavits in saying that they’re going to live there for a year. I mean, starting prices for these single families are 85 for this first, this now this first neighborhood, but it sounds like they’re still there’s still demand and they’re priced that at a price that people are willing to put in. Right. But so what happened was, you know, with this, there are a lot of people giving me calls and discussions being had and you know, we talked about the good and the bad. So I just wanted to talk about this, these points. So you know, someone who’s saying, Man, that’s crazy. You know what 85 to 1.0 to five or 1.0 to 5 million for some of the lots are like under five less than 5000 square feet and it’s starting at 1300 square feet living so I mean what can you see right this is Hawaii and that’s that’s what market prices
compare with like couple a like visit bigger lots and or better build or
so when you talk about quality that’s a challenge. The lots are slight I think smaller again you have different size lots in ever right but i think they’re typically a little bit bigger out in in general. Okay, of course they’re gonna be older. So you’re paying for this new build and although everything is you probably gonna won’t have to pay repairs and maintenance for five to 10 years versus if you’re buying a resale property and ever, you know, the roof might be a little aged, along with the different or not
Not ever but like the couple days stuff was at Dr. Horton
well the new stuff
yeah because that’s the that’s the latest new plan community right
yeah well it’s even there they have various different sizes different sizes right so I think the thing that courage is going is it’s further it’s closer to town and then I mean you look at their previous masterplan communities that castle and Cooke dead you with million Mililani mauka being the most recent and I mean, people love their hate. You got the new schools that really good public school system you have the houses over there, I mean, they range similar to what Coleridge is doing. We’re going to do townhouses and and the whole nine it’ll probably temperature wise I’m thinking it’ll be cooler than out further west. right cuz I mean, you know, middle any town in Marquez is is really cool. But anyway, another question was about the quality of the final product. And I think we talked about that today. The developer has, is tried and true in terms of their previous builds, right. Another point that someone was talking about was, oh, you’re not gonna have any weak neighbors and you’re not gonna have any retail shops to go to for a while. And then there’s also that red dirt issue right? And that’s, that’s a really big one. So, you know, constantly that argument would be well you have what went to Costco so close you have Walmart over in Mililani town shopping centers nearby and wait Kelly and YPO Gentry so and when, you know, the retail and commercial is developed finally in courage, I’m sure you’re gonna have some really good top notch real retailers moving in there right. So if you having the buyers paying Almost 900,000 to a million for these places you can imagine the demographics there and so the retailers that would want to be in this neighborhood will probably be high end to you in theory. So and the last comment is how many people can say they’re moved into a brand new house you know, that’s very rare and you know, you’re going to be the one to break it in and all that so just some arguments and counter arguments to consider if you guys are thinking about looking into a new build a new construction like
courage. Let me know when you check out the open house and get the free hotdogs and hamburgers so
so here’s a I mean they have a date, or they have the or end of this year’s when the first construction is going to be built. I know. If you drive by you can see the structure is going up, but there’s no they don’t expect any They don’t they’re not gonna have any model homes built until next year sometime so you’re literally buying off blueprints and so maybe you know once this first round goes up then you can see the first round that goes up and you know maybe make friends at some some of the inhabitants and try to walk through but um, yeah, it’s not gonna be till when I spoke to the rep last month he was saying it’s not gonna be for another year, same time this year, next year for the model homes to be in which is pretty interesting in itself. But um, yeah, it is what it is right? So yeah, turns of popcorn I mean, there’s a sales office in YPO. You can go check out
I don’t know if there’s popcorn. It’s it’s pretty busy out here. So there there is demand. I think this this shows like the the bite right like people move into Kapolei smaller quarters and then the high end stuff takes off. This is the this is just the the by the great divide the haves and have nots here. Yeah. I think you’ve been hearing a lot of like, people can’t afford to live here. They don’t think they have a job. They got to leave. They can’t stay here. That’s what’s happening to me. No, seriously gonna buy this stuff. Yeah.
Yeah. I mean, it’s, it’s crazy because it’s like, we already have a high cost of living and we’re already paying, we get paid less then then our mainland counterparts in most fields, I think so.
I mean, when I moved back home a couple years ago, I had to take a 30% pay cut for the same job. It’s ridiculous. I don’t know how people can survive out here.
Now, mid level engineer making 60 grand a year. That’s ridiculous, right.
So we talked about this already 45 homes and only 19 went to lottery hundred 50 applications. next phase of the first neighborhood is going to be coming out before month end. But before then, there’s pretty You’re going to be the lottery for the second subdivision called lawanna. Which are these duplex types places that 700,000 is the range that I’ve been told. So if you guys are interested, give me a ping and I can get you more information about what’s going
on right or mid range is
not not these I don’t think I think these are still market but again, they’re they’re like, attached homes, right? So to attach to it to be attached to each other. And then, I mean, hence the 700,000. So they’re coming out the Chinese figure out the pricing now is that and but I have to feel it’s probably gonna be in the next couple weeks at the end. It’s going to be quick, right? Because this first round came on so quick, right? Yeah, like three weeks, two weeks to turn in your your completed application and then a few weeks before the lottery and then the date two days after a lottery had to go in and then you had to physically go in and pick, pick which lot you want, and so kind of scary. gonna be interesting. And again, there’ll be a lot more phases and rounds of these lotteries as we say that’s going to come up. So there’ll be time for if you’re not ready now, transitioning over to this topic. So I’ve had I know about yielding but investors are coming to me and saying, oh, where do you Where do you plan to put your money and you know, you know, they know I’m a real estate guy and I invest in real estate, but you know, I also do stocks and bonds a little bit and I know I live in that lane. I know lanes gonna be cringing into the chicken shaking his head, but you know, I am waiting for the next correction. And so I’m not a follower or how do you say I’m not a follower of Jim Cramer? But I do. Listen to his comments once in a while. And this is kind of interesting, where he’s saying that clueless investors are driving the markets. up and it’s kind of funny because I’m waiting for this next correction. But if you look at like the Dow today it said like, over 27,000, which is like not even 9% below the peak in was February March of 29. Five. So it’s, it’s super interesting how this market is doing so well and and we talked about it multiple times before too, right? Where are we seeing? You know, a lot of it’s the feds and the stimulus and all of this but um, is is the first time I read that someone’s saying, you know, it’s it’s like not to say dumb money but yeah leanness they can like the money getting thrown into the market. Right? And, you know, you and I mentioned this multiple times before too, right? It’s like when you’re when you’re when the taxi driver, your Uber driver starts giving you stock picks, you know, it’s like, not a good time to be in the stock market, but I’m just trying to figure out when to start. correction is good. And I’m I’m actually in a short position, you know, I have a lot of fun sitting in the market and I am actually in some positions that are trying to short the market that I’m getting beaten up over. So for those people that are wondering, yeah, I do, do real estate buy and hold residential and I do
stocks and bonds.
So I am 100% alternative assets so no stocks, no mutual funds,
no crypto any crypto
No, I don’t know. I focus on buy and hold real estate. Yeah,
your bread and butter.
But for most people I get it. You want to diversify, right, you
know exactly. And at least if not in, in what you’re putting at least geographically like, right because we’re doing real estate. So we want to be geographically diversified are in different industries, you know, residential, commercial or whatnot. Yeah. Or classes, right, ABC.
They were from things that easy. come easy. Go right. Short term rentals. Easy money. Until us not all these guys unload their their properties so I’ll just take over from here um if you guys want to check out my podcasts on passive investing mostly on the mainland for cash flow check it out simple passive cash flow calm I’m really proud of my youtube channel went over 1500 subscribers there one of my goals of my childhood has become a YouTube star half joking there but yeah pandemic proof investing things that are investing I’m not investing in our things with elevators because you can’t socially distance there dense urban areas because we’re seeing people in New York getting cabin fear having to stay there all the time. things without cash flow. They don’t I don’t plan on investing for speculation and trying the backbone is cashflow lower and tenants seen some of the class C properties struggle a little bit. And you know, I’m kind of like to work with more people with more than $1,000 in their bank account. So more being a class we’re seeing through the pandemic retail shopping, short term rentals, and assisted living get killed in this environment. Also pro tenant states and VCs, all the memorandums on a moratoriums on no evictions. To me I don’t invest in any blue states I invest where the laws are on my side, the landlord side office space you know, who knows that people are ever going to go back to office and then San Francisco Bay Area is getting creamed right now. What What am I investing in? Well, garden style apartments so garden style apartments are anywhere from one to three storeys typically without an elevator. But you know, these are kind of like a motel like how you drive up to your room. Everybody’s got their own entrances. There’s no hallways workforce housing. I think we’ve shown the hover bus. workforce housing is B, B and C class and lower a class or middle of America is not the luxury type and suburban locations. So a little bit outside the city center, we got 20 minutes. That’s how you tend to improve your investment portfolio. A little bit of phenomenon that’s happened across the nation. Those ages 23 to 30 are moving in with mom and dad. Nothing new to Hawaii, but it is happening a lot more. It went from $300,000 in march up to a million in April and May is definitely a trend to watch. Rent cafe did this cool study on kind of polling people when they’re going to buy and the takeaway was about a quarter of the people say that they probably will never buy a home. So if you’re a landlord and you know there’s more renters for you and people are all parts of the device. On this maybe you know homeownership isn’t for everybody. A little bit of a fun map here. This is the richest person in every state. Don’t know what this really does to your investing, but it’s just fun to know. You know, you got Mark Zuckerberg at 81,000,080 1 billion Jeff Bezos in Washington. 117. Ray Dalio at 18 billion Connecticut. This dude, we’re all from Hawaii here Pier. omy dhara. I don’t know who that is to be honest. Maybe I need I’ve heard of the name. Maybe someone’s probably laughing at me now, but I don’t know who they are. They probably made their money somewhere else and move back here.
That’s eBay link. Who’s that? It’s eBay.
Oh, I love eBay. Well, you probably never made eBay in his basement in boy.
His kids, I think I believe they go to Punahou now So he moved, he shop over here. Cool, well, good for him. And
hopefully he doesn’t invest in real estate, then he doesn’t have to pay any taxes. Most of the least affordable cities for home ownership in Hawaii is not on here. But just some of the, you know, as you break it up into regions, obviously, the southern and South East are going to be some of the cheaper places to live. So just kind of highlight some of the bigger ones. But I have a Facebook group that if you guys want to join, this is more of my maintenance group. You know, some of the best data comes from, you know, each of us it’s quicker, it’s more raw, you know, who knows what to believe in the news, right? These days, especially all this data that comes out when individuals say as I’m seeing people move out of the San Francisco Bay area to lower cost areas in California since COVID, has enabled them to work remotely. Real Estate seems to be picking up in those areas like Sacramento or El Dorado County and then another person says rents on average in San Francisco are down 12% from because as much as 20% in some areas, which this meant this is sort of correlate to what I’ve been seeing with in the Git publications never seen as much as like 5% rent decreases were saving for a down payment is slowest. Yep, you guessed it Hawaii is up on the top of the list, they’re at a median home price of over $700,000 at a 20% down payment of 145 grand it’s going to take you 109 months to save that or 9.1 years to save for that downpayment probably take you like a dozen years to save for that core rich property. I don’t know if they take into account that the our wages are way lower here.
Well for these market price units that you’re just getting paid. You’re getting qualified by a regular lender. Yeah. So it’s yeah It has its digits looking at all the good stuff they you know, dti and debt service coverage and all that stuff so they’re qualifying you like it’s not subsidized or you know it’s not it’s not those that stuff yet.
Some commercial news senior housing occupancy slips the all time low. You know, that was one of the the big three, assisted living, retail shopping, office space. Airbnb stuff, short term rentals, getting killed and pandemic, I’ve been starting to look at self storage as an investment. It’s nice because things don’t have rights like how people do and the landlord laws. I don’t know if you call them landlord laws, it’s not people but very great cash flow type of investment. 70 kind of looking at more in this so top five secondary markets to look out for self storage development. Augusta, Georgia Providence Knoxville Rochester Rochester Springfield
when I had cable you see like watching Storage Wars, right? Oh yeah,
I used to love that show too. I would download it off internet. And I think I repetitive right?
Yeah. Then Then it seemed like they started like making up stuff just to make it more exciting and not the same old same. Oh, yeah. Yeah,
yeah, but it’s like treasure hunting. I think that’s why some people like to still do deals even though they’re retired and accredited. The Hunt, right? Exactly. So not all markets have retracted rents, places like Huntsville has actually powered through and rents are increasing through the pandemic. Other places like Jacksonville, I know a lot of people have bought turnkeys. in Jacksonville, they’re actually seeing a slight decline in rents. So again, this is what we call all knowing your sub market. Not everywhere is it’s not like a national market. constructions cost decrease for the first time in that decade, and the makes total sense, right? less demand on contractors. So the contractors, they have less power in terms of pricing, you already made. Your Mark yardie matrix comes out with report and some of the takeaways here is us rents decreased by $2. The average was 14 1400 $57 a month so it came down slightly two bucks, not much but continued a four month trend decline, which makes sense, you know, this tends to happen do a pandemic, I guess. Average rents declined point 8% in the first half of 2020 and point 4% in the second quarter. This is a stark contrast from two point cent rent growth in the first half of 2019 and 1.2% growth in the second quarter. Typically, when you guys are underwriting your own deals, you know, most people will say use a 3% rent increase a year. You know, I think we kind of mentioned that when we’re showing the prices of Holmes, it was interesting that it wasn’t should be increasing. I mean, there’s inflation, that’s typically always happening.
When you underrate the commercial deals these days, is there a bit of change? I, what I’ve been trying to do is getting a little bit better grasp because for us residential guys, you know, went to four doors. Investor loans are a little bit hard to get even though the owner occupancy rates have dropped, you know, below 3%. It’s, it’s a little bit more challenging for us investors on the risk side anyway, to get deals nearly as good. So just curious how it looks on the commercial side for you guys.
Yeah, I mean, normally, they, they say like, underwriting one on one us like two to 3%, our rent increase, just to keep up with the pace of inflation to account for it. And just very similar to like, if anyone’s in, you know, you’re a project manager. When I was a construction project manager, you’re trying to account for projects in the year 2025 or 2030. You use a usually a two or 3%. multiplier, right to account for inflation based on what your Economics Department says. Right? A lot of this flows down
there. How about assumptions for your, your, your debt? Is there any changes for that year?
Yeah, I mean, dude, like, we’re saying, like, 2.9% interest rate on some of these commercial loans. I mean, it almost makes sense just to like, even if it is a lukewarm property just to load up on this great debt. So maybe we’ll have it the wrong way. People were like scared. How could you be scared when you’re going into 2.9% and your cash flow makes no sense to me.
And one thing that I was reminded to us that we should be sensitive to, to listeners to because, you know, some people are, you know, we’re going through challenging times, you know, we have furloughs and layoffs. So I know we have listeners who are, may be in that situation are coming in that situation. So I think to your point, too is like, you know, you want to, we’re trying to pivot and you know, I think that last slide that I got cut off because of my having audio difficulties is, you know, this year crisis is a bad thing to waste. And it’s, it is for the people, you know, for the people who are in a good situation and that he can do these kind of things, that’s great, but I mean, this lesson is to, if you’re, you know, you’re getting the Nazi the short end of the stick or, but if you know you’re in a bad situation, then try to try to pivot. Of course, it’s easier said than done, but, you know, try to pivot and and look at you know, maybe a Looking for the next career that’s more than just a job secure, but because like I said, you know, this COVID thing, no one knew was gonna happen. Right. But, you know, try, try to pivot and and make sure your finances are even more secure. So, so I had to bring that topic up.
Yeah. And the whole covert. Like, it’s, it’s really unfortunate how it life is unfair, it’s affected some people, and then other people are just unimpacted at all right? I mean, it’s, you can’t really say that, like, you know, before, like some of my duck, my dentist clients, like they’re just out of work. And they were, I mean, to me, if I were to bet on a profession that you’re always going to have work, it’d be that but like, and who would have predicted right I mean, to me, the takeaway is there’s if you have a job, you know, there’s no way you can proof your job. I mean, who knows? Right? What’s going to be next. Right? What else comes out of the hopper that? I think at the end of the day, it’s multiple streams of income. That’s the only way you’re going to protect yourself and diversify. Like, life has risk. There’s a different life.
Yep. Good. We’ll put we’ll put
and it’s a fortunate, right, like,
you know, all these businesses are closed. And for no reason, you know, no reason. Like, it’s just unfair. That right now the fat is kind of being trimmed and unfortunately, it’s not the small businesses that are going to be able to survive. It’s all like the mainland big boxes that are well capitalized, they can push through it. To me, that’s, you know, there’s someone I feel bad for the small operator, but, you know, this is the opportunity that I think this is a Rockefeller probe right? When there’s blood in the streets, and there’s no way it’s blood in the streets right now, this is where people who are capitalized can go in. And this is where you create a legacy for yourself. You know, very good. Yeah. I mean, we’re You and I are kind of lucky, right? I mean, kind of lone stars all the time.
I mean, I’m still having to pivot to from the standpoint of the real estate sales that I guess, because we definitely seen a drop in terms of the people who come through to open houses. So yeah, and, you know, a lot of times I’d like to meet up for, for lunch or coffee to me with prospective clients. So, like, it’s, it’s a pivot for me too, right? trying to reinvent or you can’t just do the same thing over and over because it’s, it’s, we see the environments changing before us. So you know, if we want to survive, we need to change too. So that’s, it’s So in some sense, but it’s in motivating and others, you know, from the standpoint, we got to look for what’s going to be the new regular normal, what’s going to get me ahead of the game. So it’s
it’s kind of, it’s kind of fun from that standpoint. So you get to have
positivity it. I mean, it’s hard to do. I know a lot of people are like, as we said, are suffering too, but trying to be positive and put a positive twist on things as we talk. And yeah, so we can do right.
fl man, I mean, that’s the right attitude to have, right? things don’t happen to you, they happen for you even bad things. I mean, I’ve talked to so many people these last few months, like, they’re like, Oh, I just lost my job. But then I started to listen to your podcast and it finally realized that all the stuff I was doing was completely wrong. Right. And now I super motivated right or it is so awesome, dude. I mean, like, maybe we’re doing some like Airbnb. stuff and not investing for cash flow you just kind of betting on appreciation Well, this should be a wake up call, you know, if your stock portfolio goes away, you know, easy come easy go right if you don’t work for it, you just bought low sell high is your strategy. I often say Was it a good strategy? I mean, just me I just don’t think something is reliable unless I’m putting a lot of effort into it
hard work. Had a couple friends that got laid off or actually ended up quitting and just you know, it’s part of his because he had young children but you know, I reiterated with them to because you know, like, they like me have young children so I always like to tell those people on the same board is like well, you know, our, our kids are young and it’s still cool to hang out with daddy. So I’m taking advantage of you know, these days at home with them as much as cat as they cancel it to my friend that got the goal. He You know, they’re doing a lot of fun stuff and I went did that those kind of discussions with people help remind me you know of the choices that we’ve made and taking advantage of that so I took you know, took my daughter to the pool did some GoPro recording and underwater and turn it into video and all this good stuff to capture it and you know it’s not gonna be cool to hang on with that in the next five years so trying to
Yeah, you’re gonna be not cool to hang out with and you’ll hang out with me. Yeah.
at the club right at the club.
not that not the disco club but the
social club. Yeah, social club.
So and just another example right. A lot of people were were gambling on appreciating properties in the Bay Area, some of the hottest area of the of the market and now look what happens. yardie is reporting rents are down 4.6% in San Jose and 3.8% in San Francisco. I mean Easy come easy go there cyclical markets, they’re a lot less deal flow. I mean, everything’s has kind of slowed down Fannie Mae or Freddie Mac reports that climb in 20 to 41% of origination loans in 2014 which makes sense everything is kind of just slow down. Here’s a little shot of the mortgage rates. I mean if you got money I mean Geez, lock it up. 2.9% It’s unreal. I mean, it’s not much Who cares if it goes lower than a quarter point it’s like pretty much all time lows right? remind
the money you know exactly.
But smart right leverage smart knowing
right leverage enough so that you comfortably cash flow of course, right let’s not be irresponsible about it since you stick
to your point if you’re banking on appreciation versus you know the cash flow then that’s that’s the hard part well, live and die by the sword rate.
But it’s I mean, all signs point to inflation going up. I mean, how worse we’re going to pay for that, what, three, four or $5 trillion a stimulus going in? No,
that’s gonna be very interesting, which means good point about real estate, right? They’re talking about the short term deflation, but then long term inflation and or, you know, increase in taxes to pay for all of our, our debt. Right and what we talked about the great potential tax benefits of real estate. Right,
right. So you were talking earlier about your local economists. I got another economist that I kind of follow Richard Duncan, he’s cool. He’s, his theory is like, we’re always kind of going into debt. And, and I think most people have an understanding of adverse understanding of debt. But if you keep printing money, and you’re the most powerful country in the world, and you control the money, the dollar you can keep doing that. And that’s what word America is doing. I Oh, yeah. I don’t like economists. I mean, I follow this guy, but I don’t like economists at all because they’re like the weatherman. You know, they just make these predictions. And I’ve talked to a couple of them in person that are supposedly, like well known, but and they don’t want real estate like they’re not. They don’t have skin in the game is my problem, right? They talk about this big macro economic stuff. We’re not boots on the ground buying a rental property or you know, in a mark, they don’t have skin in the game don’t money in the market, right? They’re independently wealthy. And they’re just making, taking lob shots at what’s going to happen. And they kind of just explain what happened with some arbitrary quote, sometimes. You see, here’s a guy, Sam Zell. He’s kind of well known. But he’s quite the opposite of an economist. He’s actually guy going out and doing this stuff. He’s pretty much like a warren buffett. It’s just a lot less well known. But he’s the guy he went into mobile home park. So a couple of years back and this guy is pretty mean just google him. He’s got a huge track record of going into the right stuff at the right time. So he’s calling sort of like a U shape recovery recovering after after the year. Yeah. So I’m pretty bullish about this whole situation. I know about how you are what’s your what’s your crystal ball thing?
Like I said, I’m I’m am lock loaded and ready and China will get more funds ready for to pull the trigger. I get the dry powder ready? on the stock side, yep, I’m waiting and then on the real estate side and I’m trying to get the deal flow to see what’s coming. I mean, it’ll probably be a little bit a little while. Real Estate there is definitely a leg further compared to the rest of the economy. So you know, people waiting for The short sales and foreclosures are gonna probably have to wait, especially with foreclosure. I think the the court systems are shutting down again and even when they tried to reopen partially, there was, at least locally Anyway, my understanding was the judges are very practical from that standpoint and having leeway for the defendants. Yeah.
So we’re kind of getting out to the end here. If you guys want to submit your questions, take them into the question answer box. You grab those in there. But before we do, the last little free giveaway that we usually have for those who stay all the way to the end, is a little packet of some tutorials on how to do this mortgage rate arbitrage tactic, where you use your HELOC which is simple interest to pay off your ammeter eyes interest. Yes, it does work but I’m not a big fan of it. I’d rather see people on But you know, hey, if your goal is to be debt free, more power to you, I mean I, to me being debt free is not correlated with financial freedom. Most people who do this they pay off the mortgage and they’re like alright well I paid off my mortgage I’m still feel poor you know just your house rich but cash poor and we’re going to build financial freedom to be able to quit your job is with cash flow and buy assets that put money into your pocket. So if you guys want access to this You mean email maintenance and passive cash flow. But yeah, Dean what’s uh, what are some questions?
So one of them was about the first easter egg you had at the beginning that giveaway how they can get that
shoot me an email at simple passive cash flow coming to you guys
and there is another inquiry about self storage and monthly cash flow the the they want to get more information or want
to know about how that works. Self Storage very simple Like if someone pays you rent to store their stuff, supposedly it’s, it’s on the recession proof side because, say the economy goes to crap and like people get foreclosed on. The theory is that they’re going to need a place to store their stuff as they downsize all their stuff. And the nice thing about self storage is people are usually intolerant to huge swings in their rents. Like if I change Dean’s mortgage payment, you know, that’s a lot of money. Like if even if I change it by 5%. But if I changed your, your locker size and your Self Storage by 10 20%, you’d be like, Am cares, 20 bucks, whatever. It’s kind of like the wizard Planet Fitness model. Right? They’re like, Oh, I’ll just like make it really cheap. So people forget about it. Because eventually people never don’t go to Jim after the first couple of months, they just give up. But maybe it’ll be so low they’ll forget about it and they’ll just keep banging us.
And one of our, our tried and true listeners, he just he said he wants he wants in on the next Self Storage deal because he’s interested in monthly cash flow is what he said. So thanks, Mark.
Yeah, you don’t feel bad about evicting him. Yeah.
So put mark on your tickler. He said he wants information on the neck the next deal that you do.
Well, you want to join the club, deal club, simple passive cash flow calm slash club. We got to build a relationship. Yeah, not all deals go well, but that’s why we invest off relationships. Right.
So we have four questions.
Right. Well, I will see you guys next time. Here’s the legal notice. And disclaimer. We are just a couple guys giving some info. Not legal or financial advice here. We’ll see you guys next time.
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