Real estate investing isn’t what it used to be. Back in 2010, in a post-crash housing market, almost any property in any area could cash flow easily. Back then, the question wasn’t “Where are the deals?” It was “Which deal should I buy?” But things have changed, and now in 2023, homes are hard to purchase, let alone cash flow, and more and more real estate investors are giving up simply because they don’t know the new rules of the game. So, here’s what you NEED to know.

Before we unlock every wealth-building secret in the book, let’s welcome back Danny ZapataPhilip Hernandez, and Wendy St. Clair, our recent mentees of the ninety-day mentorship! We brought them back on the show to talk about deals they’ve done, the progress they’ve made, and where they’ve fallen off track. One mentee left their job, another is handling headache evictions, and one had to put a pause on real estate. But now, they’re ALL ready to expand their empires, but they’ll need some advice first.

In this episode, David and Rob show you how to get more real estate deals TODAY, why you’re doing meetups all wrong, the reality of cash flow and why “mailbox money” isn’t what it used to be, and what to do when you CAN’T find the momentum to keep growing your wealth.

Support the relief efforts for the Maui wildfires by donating to the organizations below or clicking here. Together, we can make a difference for those affected by this tragic event:

David:
This is the BiggerPockets podcast show 804.

Rob:
A lot of people get stuck mingling with the same person and it’s a little awkward to leave, and you’re just chatting with someone for like 15 minutes, but you know you have nothing else to talk about, in and out. “Do you have a deal? No. Great. Hey, nice to meet you, man. Have fun at this meetup.” Next.

David:
Yeah.

Rob:
Boom. “What do you do? Wholesaler? Great. That’s exactly what I’m looking for. You on Instagram? Let me get your Instagram.” Boom. Move on to the next one. If there are 200 people like there were last night, if you only met 20 of them, you didn’t do your job right. You need to meet all 200 as fast as possible and see who can serve you because you’re there for a purpose.

David:
What’s up, everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast coming to you live. Well, not really live for you, but live for us.

Rob:
Yeah, live for us. Well, every podcast is live for us if you think about it.

David:
Yeah. Why do we always say coming to you live? What could you say instead? Coming to you previously recorded.

Rob:
We’re coming to you pre-recorded from live in Los Angeles.

David:
Downtown LA at Spotify Studios where we are recording, and we got an update today with three of our former guests. They were the mentees from previous episodes and we’re getting a little update. Rob, what should our listeners look for to help them with their investing journey in today’s show?

Rob:
Yeah, so it’s really fun to examine the journeys of our, I call them our little fish. They’re out there, they’re doing their thing and it’s really great to check in with them. But one of the things that I saw was that they had these big goals, but not necessarily steps or an action plan to achieve those goals. And so I think that is going to be huge because I basically gave them the advice to just make sure that you’re intentional with every single goal that you set. And so I think hopefully that opens up the eyes of some of the people at home that have realized that they’ve set these lofty goals, but they’re not actually giving themselves deliverables that will keep them accountable towards hitting those goals. You know?

David:
That’s a great point. Their motors were revving, but they didn’t know how to put it in gear.

Rob:
Yeah. [inaudible].

David:
In today’s show, we gave some practical steps that they can use to get their motor in gear. We also talked about the market, how maybe we’re being too picky, delaying gratification, the wrong mindset with real estate, how to make money in ways other people aren’t seeing and why house hacking could make people millionaires if they could just get over the stigma of thinking that they’re above it.

Rob:
I love it.

David:
All that and more on today’s show, so make sure you listen all the way to the end to hear about a sneak peek from a book that I have coming out in October that you won’t hear anywhere else. Very quickly, before we get to today’s show, our quick tip is going to be we tell you all the time to go to real estate meetups and you should, but how you go makes a difference. Rob gives some great advice to Philip today about how you should approach a meetup and a way to make sure you get the most value possible, and then I give some practical steps of how you can accomplish that. So your quick tip is to go to meetups, but don’t just show up and expect something to happen. Go there with a plan and work your magic. All right, let’s get to the show.
All right, welcome back to the show, Philip, Wendy and Danny. For those who didn’t know, Philip, Wendy and Danny were initially part of our first ever 90 day mentorship program earlier this year. You can catch updates on their progress from episodes 708, 719, 726 and 738. We’re here today in person, so nice to meet all of you guys and gals in person and talking about what’s been going on in your life. So let’s go around and get a quick update on what’s been happening since we’ve last heard from you. Give us the highlights. We’ll start with you Philip.

Philip:
All right. So my wife and I, we were on the hunt for land to build out a wellness retreat center for almost a year. And about a month and a half ago we got 20 acres outside of Santa Clarita and we’ve been in the mode of what is the build out going to be like. And it’s raw land, so how many things would you like to know about digging a well? I know a lot more than I used to. And yeah, financing that and the business plan for that. So that’s been super exciting.
And then I also, after 14 years in the classroom, I decided to leave teaching. It was, let’s say I’m not at the place where I had replaced my income, but I just felt like it’s time for me to go and to really give my focus and my attention to something that I think has no ceiling to it, which is these different projects that I’m in. And then, yeah, I’ve been raising money for flips. I have a active flip right now in East LA and then different partnerships where I’ve been raising money for long-term holds and pad split and some of these other kinds of ways where I can be parts of deals while the retreat center is in its baby steps, taking its baby steps.

David:
There you go. Thank you. Danny?

Danny:
Yeah, so when last we talked, I was on the hunt for a 10 to 20 unit multifamily in Sacramento to kind of beef up my portfolio and go to the next level. Since then, I had a lot of good momentum after the podcast, everything was recorded, a lot of folks reaching out and looking to get some stuff done, but work kind of took a really hard pivot. I don’t know if you’re familiar with the tech industry, there’s a lot of uncertainty, a lot of things going on, a lot of folks losing their jobs. I have in my company in particular, I just kind of said, “All right, let’s focus real hard on the job and preserving that because that’s the thing that still pays the bills.” We went through some layoffs and different changes and such.
So I had to really spend my time on there and that left very little time for real estate. And I was really dead set against not take carving out from the family time. So something had to give and the real estate time did do that or wound up suffering as a result. But what I learned from that is that I was able to even think of more ways that I can squeeze more time out. So I have all these properties that I’m currently own and running. I was digging deep into how do I figure out how to leverage my time better. Can I give more tasks to other folks?
I had one of my sweat equity partners, I had him take over the day-to-day operations of the property, so that way I’m not the first line of defense when property manager calls and says, “Hey, we need a repair” or “we need to fill this vacancy.” I’m now out of that loop, freeing me up for more time there. I started leveraging my virtual assistant even more, so freeing up more time in terms of making more phone calls, getting her to manage my schedule and my emails and kind of things that need to be done but didn’t necessarily need to be done by me. So that I look at as a positive. Keep thinking about ways to improve my business and to also elevate myself and take myself out of the business more and still have it run successfully.

David:
Awesome. Wendy?

Wendy:
I would say the last six months, four months maybe, for me have been about three things, stabilization, systemization and then prioritization. And I’ll start with stabilization because I came into this year with eight properties that I’d purchased since 2020, and a lot of them were in a state of just trying to still figure out were they rented, did we have good tenants in there, how was my property management company performing and were we making money. And as it came down to it, I had one property in Ohio that was a duplex and I had a very bad property manager there who was really not paying attention to me at all or to the properties, and so I had an almost eviction there. Luckily we got the person out before we had to go through the legal process because that’s always a challenge.
Then on the other side in Baltimore, I have four properties there. Three of them were humming along pretty well, but the fourth one, the property manager put a real loser in there unfortunately in January and he never paid rent. And I tried to get them out ever since January and I’m still to this moment trying to get him out. So we are in the eviction process. Baltimore, you have to take them to court five times.

Rob:
Wow.

Wendy:
Yeah. And the tenant has the ability to pay each time. And so you’re only going to ask them to pay for a portion of what they owe, like last month’s rent. And so each time if he just pays $1,400 he can stay, but he already owes like $3,000. And then to top it off, the property management company accepted a check which then bounced. So then we had to start over. Anyway, so stabilization, just making sure that I have enough funds in the bank to manage the issues that I’ve had.
I’ve had an HVAC that went south, I had to deal with that and that was a third property manager. And they don’t do the hard work that you would, or you or I would, on a property. You have to say, “Did you get three bids?” “Well, no. We use this vendor all the time.” “Well, I’m sorry, that’s not good enough. I’m not ready to just give you $6,000 for a new HVAC. Let’s please back up and get a couple more bids.” And in the end, that saved me. Now I only had to put out $1,200 and it’s going to last me for another eight or 10 years. So that’s stabilization of existing things. Firing two property management companies, getting two new ones in there, trying to get all of my properties humming along well.
Systemization is just squeezing the profits out of what I’ve got. And I’m doing a cost segregation right now on all of my units, which is going to save me 12 or $13,000 just in 2022 taxes. And then ongoing, I’ll have another a hundred thousand supposedly or so that I will be able to take off of my W-2 income going forward. So that’ll bring more profit into my life that I can use for more real estate of course.
And then prioritization. So that’s where we started with this podcast. And that is how do I select where I’m going to go next? I looked at Las Vegas, I didn’t find what I wanted there. I’m now looking at Long Beach. I maybe want to do a house hack somewhere. I was looking at Las Vegas and that didn’t really work out for me as far as midterm rentals or the long-term rental wasn’t working, but midterm rental did, but I just didn’t feel comfortable with that. So I’m still stuck at the stage right now where I’m looking for what’s next to invest my money effectively.

Rob:
Cool, cool. So Philip, can you tell us for old times sake, is there a hurdle that you’re currently facing that we could help you with?

Philip:
Yeah. A lot of the seeds that I end up planting are seeds that are long-term kind of seeds, that I feel really good about more and more as time goes on, but I definitely need to, the retreat center or some of the things that I’ve partnered on, there are things that we’re holding that even five years from now I’m going to feel really good about, but I definitely need to increase my now income so that I don’t have to feel like I’m in a rush with any sort of investments that I make or any sort of deals that I get involved in. And yeah, yeah, I think that’s a big one.

Rob:
Yeah. Okay, so let’s talk about that. So you said that right now you quit your job, you’re flipping homes, that’s how you’re making money, and then you’ve got this retreat that’s an iron in the fire, but not going to really come into fruition for a little while. Right?

Philip:
Totally.

Rob:
So if you’re already making money one way, and if I remember correctly, you’re pretty good at it, you’ve been successful, you’ve made money from flips, it sounds like we need to supercharge that to get you through the development. Right? So what is holding you back there?

Philip:
I think it’s been the consistency of reaching out to agents and building up my deal flow through agents and wholesalers, and that is something that I’ve been actively working on. Okay, every single day I’m reaching out to 10 potential lenders on deals. That’s one side, the money side. And then I think supercharging my agent reach out and my wholesale, networking with wholesalers to really get that deal flow. I actually had a great conversation with someone from the Greene Team yesterday that is right in my Goldilocks zone of the types of projects that my partner and I would be willing to take on. So I think I’m in the process of it, but that’s definitely, if I was going to say, do I feel great about the deal flow that I have right now for those kind of projects that we can go full cycle in a six-month period, I’m not happy with it. And that is an area of growth that I think will help my success a lot.

Rob:
Great. So for everyone at home that doesn’t know, deal flow is effectively the pipeline that you have built that effectively will lay deals out in front of you. How often are deals being sent to you from other investors, wholesalers, people in your network? You’ve been working on this. I am curious, because we did go to a meetup last night, how many meetups have you gone to in the last six months, would you say?

Philip:
I would say I usually go to one a week, but definitely that’s on my list. You need to be going to at least two or three a week because even just the one a week that I’ve been going to, I’ve met potential partners, I’ve gotten actually a deal that I’m going to be partnering on that we worked out the terms this morning. It was from a meetup, somebody that I met at a meetup and that I feel good about. We’ve had a few different meetings. And yeah, I know that your net worth is your network. That is definitely coming through for me. But there’s an aspect of okay, I need to make certain sacrifices with spending time at home, which in the evenings, that’s when I would be spending time with my family that I think it’s a sacrifice that is important for me to make right now.

Rob:
So do you have a clear goal or a clear deliverable that you expect leaving a meetup? When you go to a meetup, are you telling yourself if I don’t leave with this one thing, going to this meetup was a failure?

Philip:
Every single meetup that I go to, I’m looking for potential partners for a deal flow or for private lending, every single one.

Rob:
So that’s a good goal, but do you have an actual deliverable for that goal?

Philip:
I haven’t had a specific number attached to that and maybe that’s good advice. I’m going to connect with four awesome people and exchange contact, and I’ve been adding people to my CRM and even learning what a CRM is. And okay, what does my follow-up system look like? Those are all things that, those were just vague ideas in my head before I left teaching. “Oh yeah, I’ve heard about a CRM, a follow-up system,” but what does that actually look like? How many days until I meet someone, am I going to reach out to them? What is the conversation flow going to be looking like? And that’s definitely something I’ve been working on and developing.

Rob:
Yeah. So you just laid it out for me. So your goal is, “I need more deals.” Now you have to actually put steps in place. Going to a meetup is one step, but now the goal of the meetup is, “I want to get four leads.” Right?

Philip:
Yeah.

Rob:
That’s your deliverable. And if you don’t get four leads from it, you have failed. So you should have some kind of number or some kind of metric that you’re actually working towards. And so if you’re saying, “I want to leave with four contacts,” great. Then you need to make sure that you are being super intentional with the people that you meet when you go to a meetup and you’re not there just chatting, making small talk. If you’re not connecting with someone, if they don’t have a deal to give you, move on.
A lot of people get stuck mingling with the same person and it’s a little awkward to leave and you’re just chatting with someone for 15 minutes, but you know have nothing else to talk about, in and out. “Do you have a deal? No? Great. Hey, nice to meet you, man. Have fun at this meetup.” Next.

Philip:
Yeah.

Rob:
Boom. “What do you do? Wholesaler? Great. That’s exactly what I’m looking for. You on Instagram? Let me get your Instagram.” Boom. Move on to the next one. If there are 200 people, like there were last night, if you only met 20 of them, you didn’t do your job right. You need to meet all 200 as fast as possible and see who can serve you because you’re there for a purpose. David, what do you think?

David:
Perfect advice. I’ll give you some practical tips to help execute that better. You will get stuck in a conversation with someone and want to get out of it. This happens to me all the time. How many people were at the meetup last night? 150.

Rob:
150, 200 maybe.

David:
Right.

Rob:
A lot.

David:
And they’re all going to want to talk to me and I don’t want to be a jerk and not talk to them. But if I talk to everyone and answer every question, they’re just going to keep throwing them at me, then I can’t meet the next one. So you have to look like a jerk to one person to not be a jerk to the whole group. There’s no way around it. So what I’ve learned how to do is say, “I have to get out of this conversation, but message me on Instagram. Send me an email.” I give them some form of follow-up so that it doesn’t look like you’re not important to me, you can’t serve me, like what Rob said. Because you do need to see who can serve you, but you don’t want to come across a self-serving person. You have to balance that thing.

Rob:
Absolutely.

David:
So get their information and say, “Hey, I’m going to reach out after this is done and we have more time to talk. I’d like to help you with,” fill in the blank. That’s another thing I’ll do.
The last piece is you can say, “What do you do?” You’re looking for a wholesaler. They’re not a wholesaler, okay. They’re a construction person. You don’t need a construction person. I would say, “What would help you in your business?” And they’re going to say, “Leads, I’m here to find people that want construction work.” “Okay, let me get your contact information. I’ll pass that along to other investors I find that need that. I need a person that can find me deals in East LA. If you were me, where would you go?” Because they might not be the wholesaler, but they may know the wholesaler.

Rob:
They might know a wholesaler, exactly.

David:
They might walk you over to the wholesaler, they might tell you about their wholesaler, they might say, “Oh, this agent on the David Greene Team crushes it. They’re working on a flip for me. I can introduce you to them.” It’s good to ask what they do, but it’s also good to ask who they know that could help you.

Rob:
That’s a great, that’s a very good supplementary. It’s not just that person, they probably have a whole Rolodex of people. If they’re an investor, they know other investors, they know other contractors, they know other hard moneylenders, they know other operators in the area.

Philip:
Yeah, I think that’s great advice. I love the idea of, “Okay, how can I be of service to you in your business?”

David:
Start with that.

Philip:
“And if there’s a way that you know if there’s someone in your network that can help me with X, I’d love to connect with them.” I had this conversation with Amy Marjorie because I’m in her Mastermind.

Rob:
Yeah, love Amy.

Philip:
Yeah. And it was similar sort of thing where I was talking to her, I was like, “Yeah, I’ll have these meetings with people and then it’ll be like 45 minute meeting where I’m trying to become, I find myself thinking how can I become this person’s best friend so that we can partner and this is not the right relationship for that.” This is like, “Let’s find if there’s a way that we can be in alignment, and if not, I wish you the best and if there’s any way that I can be of service in the future, let’s talk.”

Rob:
Yeah.

David:
Yeah, start with that. What could I do that would help you? Some people, I’d say the majority of them, don’t even know what they want. They’re like, “I’m just nervous. I don’t know anyone here and I feel like everyone makes more money than me.” “All right, so you’re nervous. Okay, well hey, hang on my hip and you could just follow me around and I’ll go talk to people,” or “here’s all the other nervous people, I’ll go introduce you to them.” That’s okay, you’re not going to be solving high level problems for every single person there.
A lot of the time it’s everyone feels inferior. They’re all like, “I have one house” or “I haven’t bought my first house,” and they think all other 149 people are studs that just own tons of real estate and they’re the only one that doesn’t have it. And then you find when you talk to everybody, “Oh, hardly anybody here owns any real estate.” They’re all in the same boat. It’s hard as hell to find anything that cash flows. Everything’s getting multiple offers. It’s still too expensive. They’re all on the same level. So you can bond over a frustration too. It’s not always going to be a specific thing that’s going to help them in their business. Sometimes it’s an emotional thing, but you can’t, like Rob said, spend 35 minutes talking to that one person.

Philip:
Yeah.

David:
Because you finally got comfortable and built rapport and then you don’t talk to the other 149 people that might help you.

Rob:
Or if they are one of the links in that chain, be like, “Hey, let’s go meet other people. Come on, come with me.” That way they can add to the conversation too. I think you can even be more upfront, more direct. You seem like someone that can do this. Wear a shirt that says, “I’m looking for deals.”

Philip:
I actually have a shirt that says yeah, “I am offering double-digit returns for private investors. Are you down?”

David:
That’s from Amy, right?

Philip:
It’s from Amy, yeah, yeah.

David:
Somebody was wearing one of those at our meetup last night.

Philip:
Yeah, he’s a good friend of mine. Yeah, yeah.

Rob:
But see, that’s solving your money issue.

Philip:
Totally.

Rob:
But it’s not solving your wholesale, finding wholesale deals [inaudible]. Yeah, so switch it up. I’m looking for deals.

Philip:
Yeah, I like that.

Rob:
I mean, if I saw a guy that was doing, I’d be like, “Hey, if I have a deal, I’m going to go to the guy that says, ‘I’m looking for deals.’”

Philip:
Here’s my deal criteria.

Rob:
Yeah.

Philip:
Have my buy box on a shirt.

Rob:
Yeah, print out sheets. Here’s my buy box on this sheet. Give it out to people. I think just be intentional. Don’t just go to chat. If you’re going to chat, you’re not going to get what you need, but if you go with something that you really need, then you can form creative ways to get exactly what you need out of that meetup.

Philip:
That’s definitely with the land, there was something about sharing the buildout of the wellness retreats on the land where people would just start to, “Oh, I could help you with this. I could help you with this. Oh, these are the ways that, oh, do you need a contractor? Do you need somebody that builds platforms? Do you need a lender? Do you need a well person?” All of this stuff, people would really start opening up their network when they knew that I had a raw piece of land that I needed so much assistance with it and I could see the same thing being true for other kind of deals.

David:
[inaudible].

Philip:
Yeah.

David:
I mean, that’s advice for everyone in general. Right? What stops us from being direct is fear of rejection. If you can master your fear of rejection, you can get very far.

Rob:
We get rejected every day.

David:
Yeah, we do.

Rob:
But it doesn’t hurt anymore.

David:
Yeah. I’m still trying to be Rob’s friend, he rejects me, but I haven’t quit.

Rob:
On Facebook, I’m like, “Do not accept.”

Philip:
That was actually one of the things when I was, because we bought the land with private money, and I got at least 20 nos of people that are like, “Oh, I’d love to,” or “Let me get back to you,” or actually this, and it’s like I just started getting into a flow. Oh, I’m so much closer to a yes now, I’m getting closer to a yes. And eventually we raised the whole amount all with private investors, but I got so many nos. And yeah, this is a good learning experience.

David:
What can our audience do to help you with your problems?

Philip:
Yeah. If folks that are down to partner on deals that they want double-digit returns, hit me up, see if there’s a way that we can be in alignment together. I’m doing shorter deals like flips in LA and then I’m also building out this retreat center outside of LA and really excited about it. We’re doing a lot of natural building techniques for the build out, really trying to be mindful of our impact on the land and do this in a really sustainable way. So folks that are interested in natural building techniques for the land, we definitely want to grow our community. And yeah, for folks that just want a solid investment in LA, let’s talk. I’m down to work with people of good character.

Rob:
All right, so that was four or five things you asked for when you just told us that the thing you need are more wholesale deals.

Philip:
That’s what I also meant to say, actually I want more…

Rob:
If you’re a wholesaler in LA, send Philip your deals because he’s actively looking for a flip in Los Angeles, California.

Philip:
Rob said it perfect.

Rob:
Boom.

David:
Great coaching there.

Rob:
Thank you. Thank you.

David:
Abasolo.

Philip:
You’re live coaching.

Rob:
Love it, man. Thank you so much.

David:
Danny?

Rob:
You know I’m just giving you a hard time?

Philip:
No, no, I appreciate it.

David:
Pass the mic here. Danny, we’re moving on to you. Is there a hurdle that you’re facing that we can help with?

Danny:
For me, recently, as I’ve been revisiting my business plan and the environment, the real estate environment that I made this in several years ago is very different than the one we’re in today. So one of the foundations that I built that upon was this idea of a 10-year plan. So when I acquire property that needs some love, go and put in as much of the work as possible upfront, fix everything. Ideally, I want to cashflow it for 10 years without really much involvement for me and active participation. I don’t want toilets to be breaking and that kind of stuff as much as possible.
In this environment, that means it’s very hard because of the interest rates and the lack of deals to underwrite something like that where there’s a big upfront cost to doing something like that. I got to go deal with the roofs, I’m going to go change the toilets. Maybe they don’t need to be changed right now, but maybe in a couple of years they will be. So I’m going to go and do that upfront. I’m going to go change the blinds, go deal with the windows, all these different things.

David:
Is that because you’re doing that when you have time or because you just don’t like it hanging over your head that it’s going to come up later?

Danny:
It’s exactly I don’t want it hanging over my head. I want it set it and forget it type of deal. Which in this market, in this environment today, that makes a deal even harder to come by. So I guess my question for you both is around should I be revisiting that? Should I change my expectations? Is there a dial I can change? Do I just deal with the major systems? Maybe I look at the roof and a couple other things, but the smaller things I kind of step away from or let those happen as they do? [inaudible].

David:
Let me ask you a question. Do you think we’re too picky as real estate investors in today’s market?

Rob:
Yes, totally. Because well, picky on one particular metric, which is always cashflow. That’s what it feels like. So overall, I think the more experienced you get, sometimes it is, you get a little bit picky because you know what you’re good at, you know the deals that have worked for you and that’s always the kind of deal that you’re trying to start.

David:
What about your experience coming from a market that is different than the market you’re in? So there was a time where you’re like, “All right, I want cashflow. I want to buy below market value. I want to buy in a good market. I don’t want CapEx that’s going to pop up later. I don’t want a headache tenant.” We were really screening every property until we found one that hit four out of the five boxes that I just mentioned and we knew that was the deal. Well, in today’s market, what if you can’t even find one box? You’re like, “Oh, well I got one that has two, that looks great, but compared to what we used to buy, this is crap.” Do you think that might be playing into our analysis is that we are subconsciously comparing the deals in today’s market to the deals in yesteryear and they don’t look as good?

Rob:
Oh, absolutely. Yeah. I mean it was easy, or it was easier over the last 10 years. And now it’s harder and because it’s harder, you’re not finding deals that line up with the old deals, so it’s like, “Oh, I might as well sit and wait.” I think it’s kind of what we’re seeing a lot right now.

David:
I’ve played this game with myself because I’m trying to play with my own head so that it doesn’t trick me into saying the market’s terrible because look it used to be better. What if I fast forwarded 30 years and we just never really built houses because of government regulations, restrictions, builders didn’t want to go build, people live in public housing type of a thing. And owning a house at all is a big sign of wealth. That you have real estate that you were able to get. The government could get rid of Fannie Mae, Freddie Mac loans, we could get rid of subsidized housing. Everybody’s got to go in there and put 20% down or more to get a house. We haven’t built any. People that own real estate over time become wealthy, but there isn’t any more FHA 3.5% down. Do you think in that scenario, the deals that we’re looking at right now don’t look so bad?

Rob:
Yeah, I’d say so.

David:
What do you guys think about that perspective? That it could be worse. If it got bad would I look back and say I had opportunities right now, but they didn’t look like opportunities or do you think that that’s dangerous to think that way?

Danny:
Yeah, I think one of the tenants things that keep coming up for me is it’s always better, was it’s best to buy real estate yesterday, it’s good to buy it today, it’s always going to be better than tomorrow. Something around those lines. So I think it’s always your advantage to buy something and keep things moving.

David:
So it’s about delayed gratification. We didn’t have to experience delayed gratification five years ago, 10 years ago.

Rob:
Yeah.

David:
You got immediate gratification and then you got a delayed benefit too.

Rob:
Well, to even put a little bit of context, three years ago, you could buy a short-term rental and get a 30, 40, 50, 60, some of my deals, 90% cash on cash return. And so now when you look at deals today that are at 10%, which is an outstanding return.

David:
Compared to everything else.

Rob:
Compared to everything else, it’s like, “Oh, I don’t really, I don’t know, 10%.” And I will also say that way too many investors are trying to get rich, but they’re not thinking about getting wealthy. And what I mean by that is they’re so focused on money, “I need the money now,” stop trying to get rich off of real estate.

David:
It’s the delayed gratification.

Rob:
Yeah, it’s delayed. I mean it’s like you always say this with CapEx and cashflow, especially on long-term rentals, if you take from your own cashflow, you’re sort of just borrowing money from yourself because in five years you’re going to replace that AC and it’s going to cost like 5,000 bucks. It’s going to be the $5,000 that you use to pay yourself. So you might as well just forfeit the idea in most cases. Right? I know your strategy is a little different, Philip, you’re flipping, you’re using money now. But in most cases from a rental perspective, forfeit the idea that you’re going to make money today, but 30 years from now, you’re going to be like, “Holy hell, I got that property for 20% of what it’s worth today.”

David:
And now it’s paid off and I had tax benefits. And cashflow does increase over time. We always forget about that. Think about properties you bought seven years ago. What’s the rent like now compared to what it was before? But it’s all delayed gratification and I think people are really struggling to swallow that pill right now. That it used to be an embarrassment of riches. We had all these deals we could look at, they all cash flowed. It was what’s the best of the best. And now it’s man, if you compare real estate to anything else, it’s still better, but it ain’t as good as what it used to be. And it is going to be work. It’s not passive anymore. You want to be a short-term rental operator, a midterm rental operator, you really got to put some effort into running this project, which people got used to thinking that it should just be like mailbox money, just shows up.
And now there’s an adjustment, I think people are having a hard time accepting it. But I’ve seen that pattern before. Long distance real estate investing was a hard pill to swallow for a long time. I had a bad reputation as the guy telling people to, it was heresy to say buy in another area instead of buy in your own backyard because it was risky. Now, we will do that all the time. What’s the next emerging market? Where do I go? Rob’s got properties all over the country. You don’t even think of yourself as a long distance investor. You’re just a real estate investor and you go to where the deal is.

Rob:
Yeah.

David:
But there was a time that was tough to accept. I think right now, people are struggling with the dream of I could buy cashflow and quit my job in two years is not very likely. I know I kind of took us off that path there.

Rob:
No, but it’s a good thing. I think we need that refresher every so often, that it’s like wait, just wait. The wealth and the money will come, but the first five, 10 years, you’re just going to school.

David:
And that’s like everything else, man. You start a business, no one expects to crush in a business when they first start it. They tell you that you’re going to build a five, 10 year period of time. You want to go start a dry cleaning business, you’re going to be building a customer base, you’re going to be working on systems, you’re going to suck at hiring, you’re going to have all these problems and then eventually you’re going to figure it out and your business is going to be profitable. I think we have to look at real estate the same way. So with that in mind, is there any other hurdles that are popping up as you’re thinking that we can help you with?

Danny:
Yeah. I’ve been thinking also when I set the goal during the mentorship, it was 10 to 20 units, I was very focused on that. And I still think that’s my main focus, but I’m thinking just based on the type of lending and mixing it up a little bit and my experience, it might be good to get some base hits. So maybe some four units, which are definitely a lot more plentiful in the Sacramento area. Should I divert some of my energy and my time to getting some of those under my belt? And just I want to keep things moving and make sure that I keep moving forward.

David:
Let me give you some advice before we move on to Wendy, what you could do. I’ve mentioned about this framework that I’m working on on a book that’s the 10 ways you make money in real estate. We’re talking about one of them, which is called natural cashflow. Everyone’s used to analyzing for that. If you can’t get it, which right now is very tough to get, make up for it in some other way. Don’t just buy real estate just to buy it. So if you can’t get cashflow, it doesn’t make sense to buy a breakeven property in Gary, Indiana that it’s never going to go up in value, the cashflow is never going to increase. Maybe it makes sense to do that if you’re getting cashflow right out the gate. If you take that away, you got to make up for it somewhere else. So if you’re buying in Sac, I would look for something you could buy under market value, that’s called buying equity. I’d look for something you could force equity to, cosmetic upgrades, adding square footage to make it worth more.
I’d look for a way to force cashflow. So this is a method where we buy a property, we build an ADU, we convert something into an ADU, you take a basement, develop it, rent that out. It didn’t cashflow as it was, you added value to it and now it forces cashflow. Now, maybe it does. And then market appreciation equity and market appreciation cashflow. Is Sacramento market that you believe will go up over time faster than other options? Do you believe rents will increase faster than other options? Do you see businesses moving there? Do you see higher paying jobs moving into that area? Fast-forward five years, that’s a really big chunk of money that you can make versus if you bought in, I’m using Gary, Indiana as a stereotypical, please, all the Gary people don’t email me with anger. Maybe it’s a great market, but in my mind, a market that isn’t going anywhere, just kind of stuck in time. If it is a market like that, you can buy there and it looks like a boring deal and in five years it looks like a great deal, in 10 years it looks like a home run.

Rob:
Yeah. I do want to add just your question specifically, and I feel like I’m channeling my inner David Greene metaphors here, but if you go to the gym every single day, every single day, two months from now, three months from now, let’s say you did it every day for six months. By the end of the six months, you’re going to be in shape, your endurance is going to be up, you’re going to be lifting heavy weights. And then let’s say that you stop going to the gym for a year. Can you go back and do what you did before? No, you have to work your way back up. And so to me it sounds like you’ve lost your momentum a little bit. Life gets in the way. That’s fine. That’s a very real thing that happens in real estate. Nothing wrong with it. Life holds me up all the time.
Your momentum, the train has stopped and so now you’re trying to get back to this huge goal that you set for yourself. But it feels so difficult to do that because you haven’t been in it. You haven’t been in the nuts and bolts. You’re a little rusty. So the answer is I do think a base hit is fine. I do think a four unit is fine. Because then you get into this deal, you negotiate with the agent, you get it accepted, you go through the inspections, you close and you’re like, “Oh, that’s all right. It’s not that hard.” Then you can go for the big one. That’s my advice to you. Base hits, totally fine. One of those days, the base hits, all the bases are going to be loaded, you’re going to hit a home run and you’re going to be so happy that you did.

Danny:
I love it. Thank you.

David:
You guys want a little sneak peek from my book, “Pillars,” before it comes out in October?

Wendy:
Sure.

Danny:
Yes, please.

David:
All right. So I have an example in the book that we’re actually in a very highly inflationary environment. So our money is losing value even though we are not losing money. If food costs 15% more every year than it did the year before and you get a 3% raise at work, that’s the same as a 12% pay cut. Right? If our boss came to us and said, “I’m taking away 12% of your money,” we would have a cow. Teachers would be on strike, people would be rioting, there’s no way you’re going to take away my money. But if it comes through inflation, we don’t even know what’s happening. So I use this example that we were all walking upstairs to wealth at one point, now it’s an escalator that’s actually going backwards. And if people are standing in place, working in their job, not investing in money, not growing their wealth, they think that they’re standing in place, they’re actually going backwards. We’ve had a big run of money where the escalator was going up for the last eight years, making money was easier than it’s ever been, and we got used to that. Now we have the downside of all the money we printed, which is inflation and escalators going back.
So if you are trying to make progress, you’re now running up an escalator going down. And I had to do that a few times as a police officer. It was not the most fun thing to ever do to chase somebody going up an escalator when you’re wearing all that gear. You’re burning a lot of energy and you don’t feel like you’re getting results. That can be very discouraging. I think a lot of us are experiencing that. I’m working so damn hard and I can’t get the deals that I want. I can’t make the money. I’m not getting anywhere. But if you compare yourself to the rest of the population that’s not running, they’re all just moving backwards. They’re losing wealth, they’re losing the ability to provide in the future, they’re losing the ability to buy real estate. So sometimes we can feel like we’re not making progress, but you’re actually making a lot more progress than everyone else who’s not running at all.

Rob:
That’s really good. That’s really good. That’s in your new book coming out?

David:
Yes, it is. Thank you very much.

Rob:
When is that going to be available?

David:
Be a game changer. October 17th, “Pillars of Wealth.”

Rob:
Love it.

David:
It’s going to be…

Rob:
Promo code BiggerPockets77. Our producer’s like, “Stop doing that.”

David:
You could probably use the code David to get a code on that book. Yeah.

Rob:
Or Rob.

David:
Not available to order yet. This is going to be a book I think that changes the entire approach that we take to building wealth. Everybody’s here to learn about real estate investing, that’s what you guys are doing, that’s what we do. That alone is not enough to make it when the market’s working against you. Now you have to focus on budgeting your money, actually living within a budget, living beneath your means, which is defense and making more money. You have to approach your business like a business. You have to approach your wealth building opportunities like a business. Offense matters now. It’s not just pure buy properties and makes sense. So that book sort of shows that three pillared approach.

Rob:
Awesome. Awesome.

David:
You want to move us along?

Rob:
Yeah. Last one, Wendy, for old time’s sake. Is there a hurdle that you are facing right now that we can help with?

Wendy:
Yes, absolutely. So I feel like my real estate venture has been like a bag of marbles and I gave away a lot of marbles early on and now I’m just staring at a few last marbles that I have and my decision is difficult to make. Whereas I was very easily buying rental properties here, rental properties there.

David:
Yep.

Wendy:
Now I’m like I’ve got to really make these last ones work because I want to scale up through that process. And I know, David, you were really adamant, and rightly so, that I should look at house hacking and I want to look at house hacking desperately. So my challenge though is identifying this buy box as to where I should do this house hack. I know the things that I do want. I want it to be a multifamily or available to be some kind of a multifamily, an ADU. I would like to do either a house hack within the house or house hack in a quad somewhere. And I’ve just been struggling to pick the right market and that’s really where I’m stuck. And yeah.

David:
How many markets are you looking at?

Wendy:
Well, let’s see. I looked at Vegas and now I’m thinking maybe Reno, but I haven’t looked at all in Reno. Kansas City has got some hospitals going to it. I looked in Long Beach. I live in Long Beach, I thought let’s try to make that happen. But I couldn’t find anything under a million dollars that was next to the freeway, just was never going to be anything any better. So I would love to invest in California again, but I just think that’s not maybe the right approach.

David:
What’s the reason you think it’s not the right approach?

Wendy:
Well, I don’t know. You do all your work here in California, so I know you love it here. I just feel like the taxes are so terrible.

David:
Okay.

Wendy:
It’s a terrible place to retire. I’m an old bird now. I don’t want to…

David:
So you see house hacking like you’re going to have to live in it and you don’t know if you want to live in California.

Wendy:
Oh, well, I would love to live in California temporarily as a house hack, but I don’t want to have that be my primary residence because for tax purposes, I guess, really. Tampa is one I’m looking at, San Antonio, but I don’t really know those markets very well. Or yeah, so that’s my challenge I guess I just can’t figure out.

David:
Do you think mentally you’re looking at house hacking and your primary residence as sort of like an anchor that’s tying you to a place that you don’t want to live?

Wendy:
Maybe.

David:
Could you live in California for a year?

Wendy:
Yes.

David:
Could you live in California for two months?

Wendy:
I do.

David:
So what if you lived in California, you bought a house hack, you lived in it and you decided, “I hate this place. I don’t like the smell. I’m too close to Rob Abasolo. He’s got this glow that makes me feel bad about myself because he’s just like in a glow up stage.” You realize that you can leave a primary residence after you’ve bought the house if just something came up, the lenders can’t force you to live in the house if there’s unforeseen changes.

Wendy:
Yes.

David:
So I think there may be a mental block where you’re thinking, “I don’t want to stay in California. I may not want to live here longterm, so I can’t house hack.” I would advise you buy a house hack that works for you, that would also work as a rental if you left. So maybe you love a home that has three bedrooms, but there’s another home that has five bedrooms with a dining room that could be turned into six.

Wendy:
Yeah.

David:
It’s got three bathrooms, so two people can share a bathroom. That’s a great house hack. Buy that thing with three and a half percent down, 5% down, live in it. If you don’t love it…

Wendy:
Move.

David:
Yeah. They can’t force you to live in a house that you hate. Now, don’t buy it with the intention of never living in it.

Rob:
Right.

David:
That would be breaking the law.

Wendy:
Right.

Rob:
Big mistake, for sure.

David:
Right. But if you intend to live in it and then something happens, the neighbor’s dog barks too loud, it could be anything, work wants you to move somewhere, you just feel the call of the sea like Moana and you just want to go somewhere else, you don’t have to stay inside that property. So that’s probably not as much commitment as you’re thinking. And I feel like house hacking, I know I never wrote a book on house hacking, but I’m constantly telling everyone this is what you should do. Because if you commit 20% down to a house in Vegas, like you were looking at, that’s a hundred grand on a $500,000 house. You commit 5% down to a house in Southern California in Long Beach, that’s $40,000 down on an $800,000 house. You keep way more of your capital that you can go buy something else if you don’t like it. When you’re shooting a 25% down, you have to hit your target. If you mess up, it takes forever to get that money back. House hacking really gives you a wider target to shoot at. Does that make sense?

Wendy:
Yes. But then is it better to buy in an expensive market here or somewhere where I don’t have to put as much down and I can still live there? I’m also not tied to freedom.

David:
You’ll put more down living, oh you mean house hack in a different market, right?

Wendy:
Yeah.

David:
Which one’s going to be worth more in 10 years?

Wendy:
Well, I think you guys are saying California is a winner.

Rob:
[inaudible].

David:
I’m not trying to be a home rep for California, but in general, if you have two different markets to look at, which one will be worth more? Right?

Wendy:
Well, California does tend to…

David:
Which one’s going to have higher rents?

Wendy:
California for sure. That’s the problem.

David:
Okay, so we’re saying California, but what we really mean is a more expensive market. Right? So if you can rent out bedrooms in California for what do you think you get in Long Beach per room?

Wendy:
Oh, $1,800 or more.

David:
All right. And what would you get in, let’s say Vegas per room?

Wendy:
A thousand max.

David:
Okay, so let’s make Vegas 900 just so the math is easier. Vegas is 50% of what California is. Okay, if rents went up evenly percentage wise, which they won’t, they’ll go up disproportionately more in areas that people make more money. In five years, no, let’s not even say in five years, if rents go up times 10 over a 30-year period or something, you end up with $18,000 rooms in California, you end up with, what would the, we said $900, $9,000 rooms. So you have a $9,000 difference per room times five rooms in a property. What’s nine times five? It’s 45,000?

Rob:
45,000.

David:
I’m a little tired right now. $45,000 per month.

Rob:
Per year.

David:
Per year. Thank you. That one property. Multiply that times 10 properties you bought, that’s the difference of almost half a million dollars. And that’s how the math sort of scales. So when you’re trying to figure out, do I want to go here or there, if you lean towards where rents are going to go up more and you lean towards where property values are going to go up more and then you don’t tie yourself to the property, you keep the freedom to move where you want to move, you could buy great property in California and then just live in Las Vegas. You could rent a room from someone else. You could rent a house from someone else so that you’re not tied to it. You don’t have to own the house you live in. I did that for a long time. I owned nine properties as rentals and rented a room from someone else before I ever bought a house.

Wendy:
Yeah.

David:
What do you think, Rob? You think I’m giving her bad advice?

Rob:
I don’t disagree with it. I think personally, this actually works out for you. I used to live in Kansas City. I lived there for three years and I love it and I think it’s a really great city. I think it is exploding.

Wendy:
Yeah.

Rob:
I think the values are going up, certainly not in the same way as California. I think you’d actually have an easier time making the numbers work there because you can get a house in Kansas City for two, three, 400,000 bucks. In LA, you’re going to be looking at a minimum of 700k. I mean, I guess in LA there’s other cities and stuff like that. So I think…

David:
Why couldn’t you do both?

Wendy:
I could. There’s no reason not.

David:
If you get an awesome house in Kansas City for 400 grand, you put 5% down, $20,000 plus closing costs, get the seller to pay those, maybe give them 410 for the house and have them pay $10,000 towards your closing costs so you’re just coming out of pocket 40 grand. Figure out a rent by the room scenario, then do the same thing in Long Beach. The downside to you is just a little bit more work managing the rooms of two different properties.

Wendy:
Sure.

David:
The upside is…

Wendy:
That’s fine. I’m trying to get to the point where real estate becomes my job as opposed to the job I’m in.

David:
Yeah.

Wendy:
And I might have to do it slowly.

David:
I think you could do both. Especially if you’re using primary residence loans. People underestimate how slow it is to build a portfolio putting 25% down. You can literally buy five houses for every one house if you put 5% down on a primary. You could scale five times faster.

Wendy:
Wow. I mean that’s amazing. And that’s what I haven’t done till now. I’ve got these little, my little crockpots stewing all around the country of 20% down, 20% down, 20% downs of those turnkey houses that I bought. And those can stay and do those things. And maybe I also will, on another vein, turn some of those into some more midterm rentals or house hack some of those in the future. But right now they’re working, I’m just going to let them stew.

Rob:
I think it’s quite a gift that you’re willing to house hack and willing to move. You’ve got the most flexibility ever.

Wendy:
Right.

Rob:
So exploit that. Try it. Experiment. I think my advice to you is if you have a little bit of money to invest here, plan a six-week trip across the country, stay in Tampa for two weeks, stay in Kansas City for two weeks, stay in Long Beach for two weeks and understand the city before you’re there. LA is a very glamorous place on postcards, but the reality here, it’s tough. I lived here for five years. It’s not an easy city to live in. It can be a pretty lonely city.

David:
If you can make it here, you can make it anywhere.

Rob:
That’s true. But as long as I’m here, you’ll always be second best. You hear? But yeah, I think travel around and live in the city, stay at couple of Airbnbs, and then decide.

Wendy:
Yeah.

Rob:
Because ultimately, your happiness in the city matters too.

Wendy:
Right. Okay. That’s great. I love it.

David:
What can our listeners do to help you?

Wendy:
Well, gee, I guess if you have any great, I need a great realtor. This is something I learned at the meetup last night. Boy, I talked to this guy from Bakersfield and he has got 13 rentals and all this, and he just couldn’t say enough great things about his realtor who connected him to all these things. And here, I’ve got my contractor and I’ve got this, and I know all the realtors say they do that, but I just haven’t had that kind of a rockstar realtor. So I need a really good realtor.

David:
Where?

Wendy:
Oh, Kansas City, Tampa and either San Diego or Long Beach.

Rob:
Perfect.

David:
You’d have a much easier time finding a rockstar realtor if you had one city that you were committed to buying in.

Rob:
Because you’re about to get hounded by 50 realtors.

Wendy:
Uh oh, uh oh.

David:
Right? If I said, “I really want a knockout wife,” and I said, “but I’m dating these six other girls at the same time,” right, the knockout wife’s probably like, “Yeah, I’m not interested in that.” You’re going to get the same thing from the agent. So if you can narrow it down, you’ll have a much easier time getting the attention of the best talent out there.

Wendy:
Okay, great.

David:
All right, last question. We’re going to get through this pretty quickly, so thank you guys all for being here. But very quickly, Phillip, we’ll start with you. What’s the one thing that you learned that may help someone else listening?

Philip:
Focus, the nail down your deal criteria and due diligence. Money is made in due diligence.

David:
There we go. Beautiful. Danny?

Danny:
For me, delegate as early as possible. Treat your business as a business. Don’t become an employee. It’s really easy to get sucked into that.

David:
Bro, you really hate anyone bugging you with questions about toilets and light bulbs. I can see this has come up like five times.

Danny:
Yep.

David:
Has that deterred you from wanting to go deeper in on real estate investing, all the little paper cuts of annoying things that need to be done?

Danny:
Not at all. What it has forced me to do is use property management upfront. Actually haven’t honestly experienced much of that. Toilets, I have some stories from my condo, self-managing it for a little while, which is terrible.

David:
Yes.

Danny:
But really, when I started this education, where I overeducated myself, I said, “You know what? This really needs to be a business upfront.” So just kind of frontloading and having that mindset even before I got those cuts and just actively avoiding them because that’s what I’ve learned.

David:
Awesome. Wendy?

Wendy:
I think I’ve learned that I need to do some better networking. I don’t go out to meetups enough. I stay at home and I read my books and I surf online and I look at Zillow and I feel like I’m making progress, but sometimes it’s just talking to people that’s part of the value. And I heard you say some things, Rob, about when you go to the meetup, make sure that you have a goal in mind of what you want to get out of it and work the room with that prospect in mind. Because I’m just like a Labrador, I’ll go to a meetup and I want to talk to everybody, “Oh, it’s nice to meet you. Oh, you’re fun. Oh, I like your hair,” but I never really thought about having a purpose when I show up there.

David:
What’s one thing you learned from watching me at the meetup interacting with people?

Wendy:
Well, you were always very quick with your advice and your networking and you definitely, I mean, you didn’t have to work the room. The room came up to you. There was a line to come to talk to you all night. So what I learned is that you get in quickly, you have your conversation with them and then you find a way to delicately exit and move on. And I think I heard you say earlier that you try to give something back to them as an exit strategy.

David:
Did you see me connecting them with Lindsay or Christian or any of the other agents on my team?

Wendy:
Yes.

David:
Why do you think I was doing that?

Wendy:
Because then you gave them a next step.

David:
Yes, that’s exactly right. I was also being intentional. So like Rob said, you’re going there for a purpose, you’re going there to find people that are going to help you. I’m going there to find people that need a loan from the one brokerage, people that need an agent for Southern California. That’s why we put this whole event on, was we’re going to look for clients. We’re not just going to get my ego boosted because everybody wants to come talk to me.
So I showed up with a purpose and I had a plan. Find the person, make a connection, connect them with them. And then when someone does close a house with us, you might’ve heard me say, “You’re in the family now. Whatever you need, I’m here for you,” because I really value the people that are supporting me and the things that I have, now I want to support them. I think that same energy can be used at any meetup or in any situation. So thank you, guys. This has been fantastic. It’s nice to see you all again and I’m glad, I know that you mentioned that you tried to come talk to me at the meetup a few times and you’re like, “Every time I tried, somebody else was cutting me off,” and it [inaudible].

Rob:
Got to be assertive.

Wendy:
He’s super popular.

David:
Yeah. So thank you guys for being here. Rob, do you have any last words before we get out of here?

Rob:
No, I love it. I love to see the journey and it doesn’t always go the way you plan, but as long as you keep going, then you’re going to be happy that you stuck to it. So keep rocking and rolling and I can’t wait to check in again.

David:
Philip, for people that want to find out more about you or bring help for the wholesale deals that you’re looking for, how can they do so?

Philip:
Yeah, on Instagram, educatedinvest is my Instagram handle and my website is educatedinvest.com.

David:
Also, make sure I connect you with Charles because he’ll help you find some flip opportunities in East LA if that’s what you’re looking for. He’s kind of our specialist of finding those.

Philip:
Oh, cool. Let’s get it.

David:
Danny, where can people find out more about you?

Rob:
And help you?

Danny:
Yes, on BiggerPockets, Daniel Zapata. And Instagram, investoronfire.

David:
And did we ever ask you if you have any relation to Emiliano?

Rob:
Relation to, yeah.

Danny:
I think we’ve broached that subject and some shoes came up and some stuff I still get crap about.

Rob:
What’s one thing that you’d like for someone to reach out to help you with?

Danny:
For me, I think deals. This 10 to 20 unit market is actually not as big as I would’ve thought as I dig into it. So I’m thinking I’m going to have to start digging deeper into off-market deals.

Rob:
In Sacramento?

Danny:
In Sacramento.

Rob:
Okay.

Danny:
So if you have those, please bring them to me.

Rob:
Wonderful.

Wendy:
I’m Wendy St. Clair on BiggerPockets and I’m also on Instagram at wendysc_invests.

David:
And how can people help you?

Rob:
Yeah.

Wendy:
How can people help me? I am looking for a triplex or quad in Kansas City or Los Angeles.

Rob:
There you go.

David:
I love it.

Rob:
Long Beach.

David:
Rob’s selling the Kansas City market.

Rob:
I love it.

Wendy:
Or Tampa.

David:
That’s an emerging market.

Wendy:
Yeah.

David:
I think that that is a market that’s going to grow to be perfectly fair. Over the next five, 10 years, I think you’re going to see rents increase and values increase in Kansas City. People migrate to where housing is more affordable.

Rob:
It’s true.

David:
There’s no way around it.

Rob:
Where can people will find you?

David:
They can check out my newly revamped social media that is now shiny and awesome at davidgreene24. I’m putting out a lot more content there as well as all the other different socials. Davidgreene24.com is the website and YouTube is at DavidGreene24. Rob, how about you?

Rob:
You can find me over on Instagram at robuilt or on YouTube at Robuilt. I put out a lot of free content. Most of my content is free where I teach you all how to do the whole short-term rental real estate thing.

David:
Awesome. This is David Greene for Rob. If you can make it here, you can make it anywhere, kid. Abasolo, signing off.

 

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Recorded at Spotify Studios LA.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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After years of discussion, the U.S. Treasury Department is expected to propose a rule that would effectively end anonymous luxury home purchases in the coming weeks, according to the Financial Crimes Enforcement Network’s (FinCEN) regulatory agenda.

The rule, which department officials first said they planned to implement in 2021, would require real estate professionals, such as title insurers, to report the identities of beneficial owners buying real estate in cash to FinCEN. The department believes the proposed rule will close a loophole that allows corrupt oligarchs, terrorists and criminals to hide illegally obtained funds in U.S. real estate.

According to a state from Treasury Secretary Janet Yellen in March, as much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020, a trend that she said has been going on for decades.

The new rule would replace FinCEN’s current reporting system known as the Geographic Targeting Orders (GTOs).

The GTOs require title companies to identify the people behind shell companies used in all-cash purchases of residential real estate.

As of mid-August 2023, 34 cities and counties throughout the U.S., including Litchfield and Fairfield Counties in Connecticut; Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties in Colorado; Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle; Washington, D.C.; Northern Virginia and Maryland (DMV) area; the city and county of Baltimore; the Hawaiian Islands of Honolulu, Maui, Hawaii and Kauai; and Houston and Laredo, Texas.

In all of these GTOs, except for the city and county of Baltimore, which has a threshold of $50,000, all cash purchases of $300,000 or more must reported to FinCEN.

Officials have also been working on implanting a related rule that would force real estate professionals to report the identities of shell company owners who purchase real estate in cash through their shell company. While the American Land Title Association has expressed support of the new rule, it has also stated that its implementation should be delayed until the shell company rule is also complete.

The proposed rule will be open to public and industry feedback once it is announced



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AG Mortgage Investment Trust, Inc. entered into a definitive agreement Tuesday to merge with Western Asset Mortgage Capital Corp., beating its competitor Terra Property Trust, Inc.

AG Mortgage, a pure-play residential mortgage REIT controlled by Angelo, Gordon & Co. and owner of mortgage lender ARC Home, made a stock-and-cash offer for its peer Western Asset, managed by Franklin Resources, Inc. As a result, Western Asset terminated its previously-announced acquisition agreement with Terra Property. 

The AG Mortgage deal includes the payment of $10.11 per Western Asset common share and $1.12 in cash per share, representing a transaction value of $11.23 per share, a 34% premium on Western Asset’s closing stock price on the NYSE on July 12, 2023.

“Combining these highly complementary portfolios will help scale our platform, generate greater operational efficiencies, cost synergies, and accretive earnings growth, and benefit all stockholders,” T.J. Durkin, president and CEO of AG Mortgage, said in a statement. 

Last year, Western Asset, a non-qualified-mortgage player, announced it was exploring a potential company sale or merger after posting a $22.4 million net loss for the second quarter of 2022.

The dispute between AG Mortgage and Terra Property began two months ago. 

On June 28, Terra Property, managed by Mavik Capital Management, and Western Asset announced that they entered into a definitive agreement to merge in a book-for-book deal. The transaction valued Western Asset at $17.30 per share, but the REIT’s stocks traded down after the deal became public. Investors were skeptical about Terra Property’s share value since it’s a non-traded REIT. 

On July 13, AG made its first offer for Western Asset at $9.88 per share, including $0.98 in cash. The bid included an implied value of $8.90 per common share ($54.5 million in total) and $0.98 per share in cash to shareholders ($6 million in total). AG Mortgage waived $2.4 million in management fees in the first year after closing.

Terra Property then enhanced its proposal, offering an implied share price of $15.96 per share, including $1.43 per share and $8.75 million in cash, but Western Asset declined. 

Vik Uppal, chairman & CEO of Terra Property and Mavik Capital Management, expressed disappointment with the response to its proposal that he felt demonstrated “superior value.” “

“[Western Asset] requested additional changes that we were unwilling to make because they would not have been in stockholders’ best interests, ” Uppal said in a statement.  

Bonnie Wongtrakool, Western Asset CEO, said the merger with AG Mortgage delivers immediate cash value to Western Asset  stockholders and will let them continue to participate in the upside of the combined company.  



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loanDepot has agreed to settle a securities class action lawsuit filed by shareholders that alleged the company, its executives and investment banks made false or misleading disclosures before and after the lender’s initial public offering in 2021. 

According to court filings, the parties agreed to settle and release all claims against the defendants in exchange for a cash payment of $3.5 million. However, the defendants deny any fault, liability, wrongdoing or damages.  

“On July 26, plaintiffs filed a motion for preliminary approval of the settlement, which is pending approval,” loanDepot disclosed in a 10-Q filing on Thursday morning. 

loanDepot declined to comment on the case, which was filed in California. A representative for the shareholders did not respond to a request for comments.

Defendants include loanDepot, its founder Anthony Hsieh, former chief financial officer Patrick Flanagan and former accounting officer Nicole Carrillo, among other executives. Bank underwriters of the IPO, such as Goldman SachsBofA SecuritiesCredit Suisse SecuritiesMorgan StanleyBarclays Capital and Citigroup Global Markets, were also named. 

The class action was filed on behalf of investors who purchased loanDepot’s class A common stock in connection with the company’s initial public offering on February 16, 2021. It also includes investors who acquired company stock between March 16, 2021 and September 22, 2021.

loanDepot debuted on the stock exchange in February 2021, raising $54 million. loanDepot stock was trading at $2.14 on Thursday around noon. 

The shareholders allege loanDepot improperly collected double daily interest from refi borrowers, inflating its interest income. The plaintiffs claimed the matter was brought to Hsieh’s attention in late 2019, but he returned improperly collected interest only to borrowers in states with active attorneys general. Ultimately, the lender misrepresented its compliance practices and omitted to disclose its “years-long improper collection of double interest payments,” the lawsuit alleges. 

In addition, the shareholders claimed that loanDepot’s registration statement for the IPO misrepresented to investors exactly when—and how quickly—the company’s “gain-on-sale margins” had begun to erode. 

The plaintiffs also alleged that loanDepot’s registration statement misleadingly omitted to disclose “Project Alpha” and “Project Beta.” These projects systematically violated mandatory loan origination and underwriting requirements to allow the lender to close loans as quickly as possible and boost the lender’s performance, capturing additional market share, shareholders alleged.

The shareholders’ complaint mentions another lawsuit filed by Tammy Richards, formerly loanDepot’s chief operations officer. In September 2021 Richards alleged that loanDepot and its subsidiary Closing USA had engaged in interest overcharging between 2016 and 2019. Richards also claimed that the lender closed 8,000 loans without proper documentation, at the behest of Hsieh. 

loanDepot’s 10-Q filing says that the company deposed Richards and “anticipates filing its Motion for Summary Judgment, or in the alternative, Summary Adjudication on or before November 15, 2023.” Richards is seeking damages north of $75 million. 

A representative for Richards did not reply to a request for comments. 

Lawsuits had an impact on loanDepot’s financials in the second quarter. In a call with analysts on Tuesday, executives said the company sustained $8 million in costs related to the “settlement of legacy litigation” during the second quarter of 2023

“Excluding volume-related expenses, Vision 2025 related charges and the litigation settlement accrual, our adjusting operating expenses decreased by $10 million compared to the previous quarter, reflecting the ongoing benefits of our efficient improvements,” David Hayes, loanDepot’s Chief Financial Officer, told analysts.

The lender narrowed its losses in Q2 2023. It recorded a non-GAAP adjusted net loss of $34.3 million, compared to a $60.2 million loss in the previous quarter.  

There are two separate shareholders lawsuits still pending against loanDepot, in California and Delaware. Beginning in June 2023, three similar shareholder derivative complaints were filed in the Delaware Court of Chancery, and actions are in their preliminary stages.



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The words “think” and “guess” have no place in your playbook for how to avoid margin compression and keep profits up in 2024. With regular reports and data coming out on what’s blocking inventory growth, the biggest factors impacting rates and the latest shifts in home sales, there’s a lot of information out there to help you inject more confidence into your business strategy. This is why we brought HousingWire Lead Analyst Logan Mohtashami, Kate Amor, senior vice president and head of enterprise products at Guaranteed Rate, and Arjun Dhingra, who lead sales and business development at All Western Mortgage, together for a preview of the information you can expect to hear at HousingWire Annual in Austin Texas, from Oct. 10-12. 

These three speakers, along with others in our agenda, are focused on providing the reassurance you need to be competitive next year through open conversations on how they’ve crafted their playbooks. Click the button below to register for HW Annual, and don’t forget to reserve a room in the hotel block before it closes in September. Spaces are limited and filling up fast! 

Register

HousingWire: Logan, starting broad, I want to set up this discussion by starting with inventory and where it stands right now.

Logan Mohtashami: Inventory is still savagely unhealthy. There are 484,000 active listings in the nation. We’re giving you the data for single-family homes, and  these are the homes that are just available for sale, not in pending status or anything of that nature.

As of last week, that’s all we have in a country of 335 million people. But, the really painful trend is new listings data. That took another downfall toward the middle part of last year. New listings data is trending at the lowest levels ever recorded in U.S. history for the last 12 months. Last week there were only 62,000 new listings that came to the market. When you have a total lack of listings and new listings data at all-time lows, what happens is if demand is stable, like we’ve seen, it’s no longer the crashing market of 2022. Instead, homes get off the market very quickly. The National Association of Realtors (NAR) data for days on the market — to give you an example — is normally between 30 to 45 days. Back in 2011, it was 101 days. Just this last month it was 18 days. 

I have a rule of thumb that whenever the “days on the market” is a teenager, it’s not good.  You want people to have choices. And unfortunately, we just don’t have a lot of products out there. The new listings data trending at all-time lows does not help that at all. 

HW: Kate, switching now to you as a product expert at a big lender. What are you seeing on how the housing data Logan just covered is impacting affordability across all life stages? I also want to add that the meaning behind affordability has changed, and affordability goes way beyond describing homebuyers at a low- or moderate-income. It is about helping the average millennial or Gen Z wanting to get into a home. 

Kate Amor: Oh, I totally agree with you. I think affordability is really something that’s hitting everyday Americans and Main Street America. But, I would say there are three main groups. There’s obviously the first-time homebuyer who has been priced out, especially in the 50% median income segment. We’ve really seen that fall off a cliff, which has been unfortunate. The trade-up group who are locked in because they don’t want to do anything until rates get under 5%. Then of course, there are people who want to retire and are looking to downsize. 

There are all these different ways in which people are being impacted by affordability,  and we’re having to come up with creative solutions to help get them into houses. You’re seeing a lot of different people struggling to make those payments. 

HousingWire Annual

Get ready for HousingWire Annual 2023

Get ready for HousingWire Annual 2023

Improving your bottom line at HW Annual

Improving your bottom line at HW Annual

Catch the No. 1 purchase mortgage originator on stage at HW Annual 2023

Catch the No. 1 purchase mortgage originator on stage at HW Annual 2023

HW: Arjun, you have a specialty in taking the weekly data from Logan and distilling it so others can grow their business. So, how are you taking this data and communicating it to help change the narrative of the market? 

Arjun Dhingra: I think the common — and sometimes the more popular — route for people to create excitement online is to fearmonger. They don’t have anything backed by data or numbers. That’s how I actually got connected with Logan, through a mutual friend who’s in private capital. My friend said, “you need to follow this guy because he is literally the smartest man in the country when it comes to housing.” 

I had been in the business for a while, so I was just getting started with creating an online presence and putting out content. I started following Logan, and the first thing I noticed was that he has amazing hair. The second thing was that this guy is incredibly sharp. He very much sticks to data and he backs everything up. I’ll debate anyone, anytime, anywhere, bring your facts, bring your data and you won’t be able to stand up. 

HousingWire, Logan, and the resources available are able to provide that type of information to us as knowledge brokers. I want to try and get lenders to start viewing themselves as information brokers, taking the data and numbers that we all understand and love to geek out over. But then, how do we take that and translate it to the marketplace? 

How do we make this sexy? How do we make this appealing? That’s where science comes in, and I am by no means an expert. But, I’m fascinated by taking what people are afraid of, translating it and then addressing that it’s a massive opportunity for originators to become knowledge brokers because there’s so much BS out there. It’s absolute literal garbage. 

The audience is there because if you look at the garbage, you’ll see how many people are actually watching this stuff. There are people with their hands in the air who are thirsty for anything. If you step into a microphone, you can make things appealing, which is what I try to do, answering the question of what this means for you.

I’ve got a phrase that I use when talking  to a lot of our fellow marketers and everyone. It’s that you don’t want to talk to a boardroom, you want to talk to a classroom, which is really dumbing this down.  Take all this high level information that is sophisticated and backed by numbers and  then translate it. 
HW Annual is HousingWire’s capstone mortgage event, connecting leading professionals from the housing economy seeking to grow, innovate and win market share. This is where strategies are formed, deals are inked and lifelong relationships are solidified. Remember, HW+ members receive special perks like 50% off your admission to HW Annual, so go here to become a member. Haven’t received a discount code yet? Reach out to us at events@hwmedia.com. Join us in Austin, Texas October 10-12 for community, content and commerce.



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Wells Fargo rolled out a down payment grant program that will offer $10,000 to eligible buyers or homeowners who currently live in or are purchasing homes in underserved communities in eight metropolitan areas.

The Homebuyer Access grant program is available to those who have a combined 120% or less of the area median income (AMI). The grant funds can only be used toward the down payment on a Wells Fargo fixed-rate conventional loan secured by a property that will be the purchaser’s primary residence.

“Homeownership is central to building wealth but has been out of reach for many minority families as a result of systemic inequalities in housing and finance,” Kevin Reen, head of Wells Fargo Home Lending, said in a statement. “One of the biggest barriers to achieving homeownership is coming up with the down payment.”

The property must be located in the following metropolitan areas: Minneapolis–St. Paul–Bloomington, MN-WI; Philadelphia–Camden–Wilmington, PA-NJ-MD-DE; Dallas–Ft. Worth–Arlington, TX; Washington–Arlington–Alexandria, DC-VA-MD-WV; Baltimore–Columbia–Towson, MD; Atlanta–Sandy Springs–Alpharetta, GA; Charlotte–Concord–Gastonia, NC-SC; New York–Newark–Jersey City, NY-NJ-PA.

Eligible buyers can combine the bank’s grant with other programs including — Wells Fargo’s Dream. Plan. Home. Mortgage, and/or Closing Cost Credit. 

For eligible borrowers at or below 80% AMI, the mortgage program allows a 3% down payment on a fixed-rate mortgage and the closing cost credit program provides up to $5,000 to use toward closing costs. 

Home prices are on the rise again, mortgage rates are over 7% and the lack of existing homes for sale continues to put pressure on first-time homebuyers.

Lenders — already struggling with the mortgage industry rightsizing — have rolled out down payment assistance programs in recent months.

United Wholesale Mortgage (UWM) Rocket Mortgage and Guild Mortgage rolled out conventional 1% down mortgage loan programs in the second quarter of 2023.

Generally, the programs allow eligible customers to buy a home with a minimum down payment of 1% of the purchase price and lenders provide 2% of the required 3% minimum down payment for a conventional loan.

Wells Fargo’s Homebuyer Access grant program is an extension to the bank’s Special Purpose Credit Program (SPCP), announced in April 2022 – when the bank committed $210 million to help minority families at the time of the launch. 

Wells Fargo has been accelerating efforts to expand its SPCP to serve underserved communities this year following a series of consumer scandals

Following the bank’s announcement to exit the correspondent lending space in January, Wells Fargo invested an additional $100 million to advance racial equity in homeownership and deployed additional home mortgage consultants in local minority communities.

Wells Fargo’s mortgage originations reached $7.8 billion in Q2 2023, down 77% year-over-year but up 18% from the prior quarter. 

The bank recorded $847 million in revenues related to its home lending business in the second quarter, a decrease from $863 million in the prior quarter (-2%) and $972 million in the same quarter in 2022 (-13%).



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Has the recent inflation data given the Federal Reserve a pathway for a 2024 pivot? The Fed has whispered about what can happen if the inflation growth rate falls more into 2024 and it’s a positive take. Some have thought the Fed would need to keep the fed funds rate elevated for years until they see 2% core PCE data. However, I believe there could be another path for 2024. 

First, let’s look at today’s CPI inflation data. It came in a bit lighter than expected — no real surprise here.

From BLS: The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in July on a seasonally adjusted basis, the same increase as in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 3.2 percent before seasonal adjustment.

IMG_6252

However, once you strip out rent — which is what the Fed has told us they want to focus on because of the lag in rent data — the growth rate of inflation is falling more noticeably. The Fed is focused on core service inflation less shelter. If you take CPI data in total and subtract the shelter data, inflation data has collapsed.

90% of the inflation growth came from the shelter data, which we know needs to catch up to the reality that the data line below is much lower in real terms.

How can this lead to a 2024 pivot if we don’t have a job-loss recession? This is a good question, as I am not a Fed pivot person until the labor market breaks. For me that means jobless claims data gets above 323,000 on the four-week moving average. Today we did see a spike in claims data. However, the four-week moving average is still 231,000, far from my Fed pivot level.


So why would we see a Fed pivot if labor is still good? In a recent interview with the New York Times, the Fed mentioned something that can set the groundwork for the Fed to cut rates without a job-loss recession. They talked about real yields being restrictive. A simple way to think about this is that with inflation falling and rates up as much as they are now, the Fed believes their Fed Funds rate is at restrictive levels currently.

At first, that could make it sound like they don’t want to hike again. However, if the growth rate of inflation falls even more, then the Fed can change its tune in 2024, even cutting rates next year to make policy less restrictive.  

Of course, economic data matters here; if the economy picks up steam and inflation picks up again, this variable changes. However, if the labor market weakens, they have given the marketplace a signal that fed rate cuts will happen. Even if the labor market stays firm, cuts could happen next year if inflation’s growth rate falls. This doesn’t mean we will see massive rate cuts soon, but it does lay the foundation for a less hawkish Fed going into 2024.

So far the bond market has had a mild response to today’s data. Even with the weaker jobless claims data, we haven’t seen any significant moves this morning. As of this second, the 10-year yield is at 4%.

My 2023 forecast range for the 10-year yield was 3.21%-4.25%, meaning mortgage rates between 5.75%-7.25% for 2023, and that the labor market would be the big driver on bond yields, not inflation. As we can see in the chart above, the growth rate of inflation has fallen, but bond yields are near the highs, not the lows. The economy has stayed firm, and labor hasn’t broken. So far in 2023, my premise of bond yields and labor has held as the economy has stayed firm.

The inflation report was slightly better than expected: we see how much rent inflation now holds up the core side of the CPI data. However, I believe the more critical storyline here isn’t the inflation report today, it’s what it can mean next year if this trend continues. I discuss this topic with HousingWire Editor in Chief Sarah Wheeler on today’s HousingWire Daily podcast.

One of my economic themes over the past year is that you don’t need a job-loss recession to have the growth rate of inflation fall — this isn’t the 1970s. We had a global pandemic, and historically global pandemics are very inflationary early on and then things get better over time. I hope the Fed sticks to this theme for next year and that we don’t need jobless claims to get worse for the Fed to pivot.



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Want to build a million-dollar real estate portfolio? We’ve got good news for you! You DON’T have to rush full-steam ahead, buying every property that crosses your path to reach financial freedom. That’s right, instead of buying dozens of units a year, you can buy a dozen units within a couple of decades, taking the slow, steady path to building wealth instead of ferociously racing to rack up as many rentals as possible.

While it may sound like every real estate investor is constantly on a buying spree, this is far from the truth. Investors like Andy Gil have been able to build seven-figure real estate portfolios without sacrificing time with family or infringing on their morals to make more money. Far from it, actually; Andy is outwardly trying to make it easier for often neglected renters to find a safe place to stay.

Through the past two decades, Andy has been building his rental property portfolio up to the twelve units it is today. He never thought he would be the person to buy a house, let alone own a rental portfolio. Still, thanks to his differences that make him a superhero in aspects most investors would dread, he’s built serious wealth without sacrificing what’s important. In this episode, you’ll hear precisely how Andy did it, his “T-Rex” policy that entices renters, outsourcing your weaknesses, and using your differences to build wealth.

David:
This is the BiggerPockets Podcast show 803.

Andy:
I’ve been doing that for 20 years, but I didn’t know I was doing that. I was always doing it for clients. I’ve always like, if you’re going to do a renovation, it has to make sense. If you’re going to renovate something, people are either doing it emotionally or as to keep pace with inflation. So anytime you’re doing as a builder, you have, things have to be, they have to appraise in order to be funded.

David:
What’s going on everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast. Here today with my co-host Rob Abasolo, looking even more handsome than usual. If you guys are not following on YouTube right now, you are missing out. Or maybe you’re not. The distraction might be so great, it’s going to stop you from getting your key performance indicators done. So maybe listening on Apple Podcast or Spotify is going to be better for your productivity.
Today’s show, fantastic. We get into it with Andy Gil, who is a real estate investor who has slowly built a portfolio based off his strengths, not his weaknesses, at a pace that he’s comfortable with and has overcome some challenges that he had early in life and is very open and authentic about sharing what those were like that many of you listening may relate to. So before we get into this any further, I’d just like all of you to consider leaving us a comment on YouTube and letting us know if you can relate to anything that Andy, Rob or I shared about personal struggles we have that has stopped us from being successful in business and how we overcame them. Trust me, you are not the only person.
Rob, what do you think that investors are going to find most valuable about today’s show?

Rob:
Honestly, I think probably that it’s okay to be weak. It’s actually kind of fun to figure out your weaknesses. I think a lot of people are ashamed of the things that they’re not good at, and so they’re scared to really tell people about their weaknesses and stuff. But we kind of unpack this a little bit with Andy and really talk about, once you figure out those weaknesses, it’s actually becomes a strength because you can start delegating them out and outsourcing it to people that are better than you at those things. And I really feel like that’s when you really hit the turning point in your business. So we get into that quite a bit. We talk about the ADHD component of our brains, me and Andy’s, and yeah, I don’t know. I feel like we haven’t really ever gotten deep like that before, or not at least in a long while. So I really enjoyed this conversation with Andy. He is a rare mind and I love it.

David:
Before we get to Andy, today’s quick tip is if you’re procrastinating doing something that you hate, try body doubling. Rob, what is body doubling?

Rob:
It’s basically when you ask someone to sit in the same room with you as you do something that you don’t like, so that you feel supported doing the thing that you hate.

David:
That’s a very good definition. Let’s get to Andy. Andy Gil, welcome to the BiggerPockets Podcast. A quick review of your portfolio. You’ve been investing for 20 years, have done 10 deals and currently own 12 units all in eastern Connecticut. You have a strict no T. rex policy for your tenants, and you seem like a fascinating individual that I’m interested to interview here. So tell us about this. How is that no T. rex policy working for you?

Andy:
That’s funny that that came up first. Yeah, well, the no T.rex policy, well, first, I’ll just tell you, T.rexes have horrible gas. And not only that, they’re incredibly rude, which is why we don’t allow them. But when I was listing the units, I dug into marketplace and hated the way that people were presenting themselves as landlords, as like, “I’ll only reply if don’t…” Et cetera. And so I went to ChatGPT thinking I could… I was looking to curate a specific clientele or a specific group of people for these units. And I really like dogs, and I think that people that take… I found that people take very good care of their dogs also are pretty, like they’re going to be good tenants. They’re able to curate the life that they want. So ChatGPT came up with this no T. rex policy after several, and it’s working out pretty good. No T. rexes have shown up.

David:
Okay, wait a minute. ChatGPT came up for the idea of not allowing T. rexes in your home?

Andy:
It sure did. Yeah, I’m not that creative.

David:
Oh, that scares me that ChatGPT not only can be practical, but it can also be creative as well.

Rob:
Yeah, because you were skeptical. You’re like, “Oh, no, it’s not that good.” And then I was like, “Hold on, let me just write a BiggerPockets intro really fast using ChatGPT.” And then you’re like, “Oh, it can’t be good.” And then I read it and you were like, “Wow, that sounds just like us.” And I was like, “I know. It’s weird.”

Andy:
Yeah, it is. It’s creepy. Yeah, ChatGPT. But if you use it as a tool and just kind of keep on pushing, you’ll get to your own authentic voice, which is scary, right?

David:
It worked in your case. So basically what happened is you came up with a way of advertising your units to tenants in a way that was less threatening, less demanding, not, “No this, no that.” I always see those posts where they put exclamation points, “Absolutely no smoking, parties, dogs, fun, cooking.” Whatever the case would be. And I think landlords can get away with that because in general, the limited supply in both housing to buy and housing to live in puts the power in the hands of the landlord. Of course, depending on the state, the power can ship back into the hands of the tenant depending on what the laws are like. But if you’ve started the relationship off by kind of jerking them around that way, you’re increasing your likelihood they’re going to do the same thing back to you when they get the power. Was that kind of what was behind your thought process for why you wanted to show yourself differently?

Andy:
I wanted to show up as my authentic self. We’re a family business and I wanted to… I know that if you… I mean, a couple things. I know that if I show my real self to people, then they’re more likely to share their actual situations. And so we also wanted to be able to, it’s not just revenue producing. This is housing, which fulfills a community need. So I wanted to be seen as an individual and not so much as a corporate entity. So I thought that if I presented myself in the ad this way, then I would be able to bring some guards down and have real conversations, which has been really, it’s been great to be your real self, show up and people show up as their selves.

Rob:
What has the tenant reaction been? Because obviously, this is very different from the norm, right? Well, what do you hear from the people that are actually renting from you?

Andy:
Yeah, lots of LMAOs in messages and then, “Hey, let’s get on a call.” And so it brings guards down immediately and then you have real conversation. So really, if I’m me, people can be themselves. So it is very different, but I’ve created a career that way. Most everything I’ve done is a little bit outside box.

Rob:
That’s awesome, man. Can you just quickly, all right, give us a sentence of like in your Craigslist ad when you’re writing this out, what do you actually say?

Andy:
I think it said something along, I wanted to be dog friendly. I wanted, and so I wanted to have that displayed. It was something about fur babies and whatever, fur parents, something along those lines. Sorry, no T. rexes allowed. Something along those lines. So it was like a punctuation and it worked really well.

Rob:
That’s awesome.

David:
Now, Andy, we often talk about people’s why in real estate, but I want to know, tell me about the impact that you want to have on other people.

Andy:
Well, that’s a loaded question. There’s a lot to it, but I think that my why is I really love the conversations that have entered my… I’m actually, you’re on my kitchen table right now. I love the conversations that have come into my home and that I’ve had with my wife and my children as a result of real estate investing. I think that financial freedom, searching for financial freedom is the end goal, but the leadership that I show within my house and the way that we can intentionally do business together and grow as a family and then also bring along, create win-win situations for others to come along, that’s more, I mean, the why.
I’m in my mid-forties. A couple more decades and it won’t matter to me. So when I’m in my mid-seventies and eighties, it all is going to go to the kids anyway. So I think that if you enjoy the journey, if you enjoy the process of it and you’re able to do what you want to do with the people that you love and bring them along, that really is the why.

Rob:
Very cool. Do you think you’re going to teach your kids how to do this too? Is the idea to empower them? Because you said you’re leaving it to them, so I know that this is sort of a, I don’t know, 50/50 in the community. Some people are like, “No, my kids get nothing. They have to work for it.” And then there’s the other half that’s like, “Yeah, I’m doing this for the kids.” So yeah, tell me about that.

Andy:
Yeah, so I have two children. My son is 17, he’ll be 18 in a couple months, and my daughter will be 20 in a few weeks. And yeah, my son is… I have ADHD. He has ADHD, and he struggled in a similar way I did in school, but he really excels as an entrepreneur. I’ve known I was an entrepreneur well before they had a name for that. And so he wanted to run numbers, and so that’s his part of… We want to help him buy a home when he is, by his 19th birthday with an FHA loan or 5% loan, whatever and so we’re kind of putting the groundwork in place for that. Him running numbers has helped him in school. Just the other day, he sent me a text message saying, “Dad, thanks so much for helping me with this. I have never had a real connection to the work.” And he was able to actually pass math as a junior in high school because of this, because of us running numbers together.

David:
You mentioned that you had ADHD. I’m sure that that had an impact on you growing up. Tell us about your early life. Did you have someone in your life to play the role that you’re playing for your son to help him navigate some of these challenges? What was your life like growing up?

Andy:
That’s a great question, and I’ll acknowledge that. When anyone says, “That’s a great question,” they’re buying a couple seconds, so I’m buying a couple seconds. So.

Rob:
Hey, it’s what us ADHD people do though.

Andy:
That’s a wonder, Dave, David, that question. Wow.

David:
We say all the time, “That’s a good question.” What we really mean is, “That is a question I was not prepared to answer.” I had that thought a couple weeks ago. I heard someone say, “Man, that’s a great question.” What that you usually mean, “I don’t know what I’m going to say to that.” Because it often isn’t a great question. Sometimes we say that in reply to like, “I just wasn’t expecting that.”

Rob:
What does it mean when someone says it’s a bad question? “That’s a bad question.”

Andy:
Yeah, that’s a hard one.

David:
And now I need extra time to think about how to answer your really poorly-worded question.

Andy:
I will answer your question. So I didn’t know. I grew up in a… I was raised by a single mom for most of my childhood and there was a lot of… I grew up in a traumatic environment. A lot of stuff went was going on, and so ADHD was kind of secondary. My mom was struggling to keep food on the table and the bills paid. There was a lot of things going on. So it wasn’t until I was later teens that… I knew I had ADHD, but I didn’t, and I knew that I was… I’m also 45, so this was in the nineties and eighties, so it wasn’t what it is today. I didn’t have… And I think that the result of me doing this work and trying to bring attention to neurodiversity is a result of being what I needed when I was a child. So I’m a scout leader, I’m a dad, I’m a husband, and so a lot of the roles I play primarily is to be what I needed when I was a child.

Rob:
I get that, man. I’ve been there and it’s always really interesting to talk to a fellow real estate investor with ADHD because it feels like for me, the thing that is so clear that I need to do more than anything ever is just delegate because I just am not a detail-oriented person. I just get too scatterbrained. Is it the same thing with you when you’re managing your rentals? Are you a relatively organized person or does the ADHD side of things ever get in the way?

Andy:
Yeah, the ADHD thing gets in the way all the time for essentially everything, and I think that I spent a lot of my life trying to mask and to present myself as neurotypical in the different roles and the different… I’ve been an entrepreneur for my whole life and I’ve gone in and out of employment due to circumstances, but even when I was an employee, I was an entrepreneur. So hiding that from people, that I struggled with organization, took up a lot of my energy, and it wasn’t in the last decade where I start to have this self-awareness of what my strengths are, that I was able to let the curtain down a little bit and tell people where I was struggling and where I needed help. And so the organizational component of it, I rely heavily on different apps and outsourced accountability, I suppose is the best way to do that, which allows me to shine in the areas that I’m great at.

David:
You mentioned neurodivergence. How did you lean into some of these strengths that you just mentioned, things you found out you were really great at?

Andy:
So I’m an excellent… I’ve developed skills at different intervals of my career, and when I realized what had been going on with and the impact that neurodivergence or specifically ADHD has had on me, then I recognized that I’m strong in strategy. In due diligence, I’m a machine. And so the hyper focus component of ADHD has really, really helped me to rapidly learn and take on new skillsets, like the skillset of developing skillsets I’m a master at. So it’s like creating systems and processes so that I can forget that this stuff goes on in an automated way is crucial for me because I’ll move past and once I master something, I need to pass it off because I need to go conquer the next hill. That’s really the hyper focus component of ADHD has been, once I named it and called it out, it’s my superpower.

Rob:
And you did mention in your corporate life you were sort of hiding this and everything like that. What did you do before real estate?

Andy:
So I think it’s really funny and I’m going to say that’s a great question because it is a great question.

Rob:
Thank you.

Andy:
Because I didn’t realize that I wasn’t actually in the game until recently. I didn’t realize that real estate, like owning the asset, the cash flowing asset was the end game. So I’ve been a builder for over 20 years. I was developing the skills around. I’ve been a remodeler and a builder. I’ve built, I don’t know how many homes from ground up, getting the permitting in place, zoning, designing the plans and selling the contracts and doing all the project management and et cetera, et cetera. But I never… And we did flips and we bought some different properties, but never with the intent to hold. So I guess before… I would now say the real estate component of my career is more recent, but it was like this, we talked about Jim Carrey before, Finkle is Einhorn, Einhorn is Finkle. It was like this aha moment for me where I was like, “Oh, I’ve been sharpening the ax and I didn’t…” A lot of people get into real estate and try to develop the skills. I had the skills already and then realized that I wasn’t in the game.

Rob:
Yeah. So tell us about that. Tell us about your first deal. At what point did you actually get into real estate?

Andy:
Well, I’ve owned a lot of different things, but this most recent… I mean, my first house, I guess my first house hack, we’ll talk about, so which kind of gives mindset. I bought it in 1999, and so I was a nurse at that time, and the lady at H&R Block told me that I was paying way too many taxes and I needed some write-offs, so I either needed to get married or buy a house. And this was in 1999, so I said, “I don’t have any credit.” Or I told her I had bad credit, and then some mortgage broker somewhere told me, “No, you can qualify for a 3% loan.” And so I didn’t want to pay rent anymore, so I found a house in Rhode Island and I bought it, and I rented out the rooms and actually rented out the basement, which was, when you talk about a basement, I’m talking about a stone foundation that was wet. So I house hacked, and I rented it to my brother, which was horrible of me.
But yeah, that was my very first. I bought it for $83,000. It was 7% interest. I went from $133 in rent to $750 mortgage. I remember being terrified. I didn’t know how I was going to do that, but then the little boom happened and we made some money.

David:
When you paid $83,000, was part of you thinking that you were paying too much?

Andy:
Hell yeah. Hell yeah. Yes. Yeah.

David:
Never goes away.

Andy:
It was… I was like, “Are you crazy? $83,000?”

David:
It’s funny because when we hear that, we’re like, “Well, I’d have bought a house for $83,000. I’d have felt comfortable buying it for $83,000.” But at the time it was $83,000, you were probably wanting it for 71. You’re like, “This is just way too much.” And now we’re looking at $500,000 house saying, “Half a million dollars for that?” But 20, 30 years later, we’re going to look back and it’s going to be worth 4 million. We’re going to be like, “What? You could buy a house for under a million dollars? How’s that possible with that? It’s a million dollars to use a payphone.”

Andy:
Yeah, it probably will be. You’re probably not wrong about that. Yeah, they’ll probably bring them back as novelties and they’ll be a million dollars. Yeah.

David:
You just got to remind yourself all the time. Things always seem expensive at the moment you buy them.

Rob:
That’s true, man. So many people will, they always like to say, “Well, yeah, I mean you got in easy and blah, blah, blah.” And I was like, “You could literally say that about any real estate investor 10 years ago relative to the time that you said that.” Everyone looks like a genius in real estate when they do it for 30 years because they just kept buying it. Yeah, it’s like stuff is a lot more expensive than it was just like you said, but yeah, we’re going to be so smart in 20 years and then it’s like, “Man, I can’t believe you got that house.”

Andy:
Yeah. I mean, if listen to this podcast, if I go back 10 years from now, or if I listen to this in 10 years, the perspective I’ll have then will be so much different. I mean, I’ll listen to this and I’ll think, “Wow, that kid had so much to learn.” And it’s true.

David:
You look back and see a lot of things you wish you would’ve done different. The number one thing is I wish I’d have bought more of it. At the time I was buying it, I thought it was too expensive and I shouldn’t buy it. Now I look back, I’m like, “Man, why didn’t I do that every year? I could have house hacked. I didn’t have kids. I didn’t have a family. I could have went gangbusters.” But all right. So you mentioned hyper focus is one of your strengths. Is there an example of a time that this has paid off for you specifically within real estate?

Andy:
Oh, yes. Oh my gosh, yes. I mean, we could talk about the deal I just did or there’s… So due diligence is fun for me. Anytime that there’s, if you ever want someone to solve a problem and you’re in my proximity, you just go like, “Hmm, that’s weird.” And I’ll just jump in and I’ll come in and do all the research. I really love, I love tracking planning and zoning commission meetings. I know it’s really weird, but I hyper focus on… I actually, I love zoning because it’s what you can do with land. So I read zoning regs. I read planning and zoning commission meetings like they’re a romance novel. Actually, I see the storyline in it. And it’s funny because I was just telling my wife like, “Hey, this guy’s an (beep). Watch what happens in this next month.” We’ll talk about the different… Oh, I probably wasn’t supposed to say that.
But following things from month to month and the storylines in them, the hyper focus of getting into and immersing myself in something to find, to rapidly learn has been very helpful.
I’ll say actually for this property that I just bought, I went into hyper-focused mode and learned everything there is about. They give the tenants, we look up who’s in there, we look up what’s going on. I had to actually reconstruct the… I bought this fractured condo association, so I was buying them as individuals, but essentially owning a majority percentage of the HIA. So I had to involve myself in the… I had to reconstruct the business model of the HOA without actually having access to it. So that hyper focus, rebuilding their business with certainty certainly paid off.

Rob:
Did you know that it was a fractured HOA when you bought it? I don’t think I’ve even heard that term specifically, but yeah. Was that not a scary thing?

Andy:
Not for me. So your careers are built upon different pillars, and so as I lost my shirt in the great recession and learned to be financially… I learned financial literacy through necessity. And then at the next place I really was, I had this mentor at my last job that really, really instilled in me solid business principles. And so the specific component that I did, I ran a construction department and we did about $6 to $8 million a year, and so I was always hunting repeatable bit. I always knew that if I could find something and in large quantity, it gave me enough rope to make some mistakes and correct it. So I was always looking for repeatable ways to lean out the process. So when I was looking at this business model, it’s essentially 12 units of kind of the same thing, and that HOA is just a business that has income and expenses.
So it really, it wasn’t… A fractured, it wasn’t scary for me and I didn’t, when I originally decided to do investing, I bought, David, I bought your book. Actually, a friend sent it to me. I’d never heard of you. And so I listened to it all and our intention was to buy single-family homes. But then once we got into it, and then with my experience in commercial construction and estimating in the type of construction I did, it became pretty apparent to me that multifamily was the way that I was going to be going and where my strength was.

David:
Well, especially if you love analyzing things, right? Multifamily is a playground for people that love to a analyze things. I understand that you recently did a deep dive for your sister on one of her properties. Can you tell us what you did there?

Andy:
Oh, yeah. Yeah. So it’s actually my wife’s sister, my sister-in-law, but I consider her my sister for sure. Have you guys ever heard of Mystic, Connecticut? You guys ever spent any time over here? Foxwoods Resort Casino? You heard of it? Yeah?

David:
No.

Andy:
Wow.

Rob:
Not yet.

Andy:
Yeah, well, come on down. You should. You guys should come to Foxwoods. Yeah, so Mystic, Connecticut is an appreciating little mecca, little town in New England, and so the real estate is going crazy. My sister-in-law loves the area, and a house came on the market that had been neglected, and it was like anything that goes up in historic Mystic is gone in days regardless of its condition. So I had to jump in and really learn the specific zoning laws.
So she wanted to acquire this property. We were going to rehab it, and then we were going to build an ADU in the backyard, and really we just had 24 hours to do this, and this is where I excel. I came in, learned the zoning laws, learned quickly if it needed a special permit and not a special permit, but the definition of special permit or not, or if it can be done administratively, what that criteria was. And I was able to say with certainty that yes, we could do what she was planning to do to project a realistic ARV of what that would be and how much income that Airbnb or short-term rental could generate in a very short period of time.

Rob:
Up to that point, how acquainted were you with that process in general?

Andy:
I’ve been doing that for 20 years.

Rob:
Okay.

Andy:
But I didn’t know I was doing that. I was always doing it for clients. I’ve always like, if you’re going to do a renovation, it has to make sense. If you’re going to renovate something, people are either doing it emotionally or as to keep pace with inflation. So anytime you’re doing as a builder, things have to be, they have to appraise in order to be funded. So I was always doing that and learning how to… I see the episodes on how to kick back on an appraisal since the crash. I have a PhD in that. We’ve been trying to get loans funded on things that aren’t yet built is… I’ve been doing that forever.

Rob:
Yeah. Well, that’s good. That must have helped. I remember the first time I ever built an ADU. I submitted the plan. I mean, it was a six-month process to get the plans ready and submitted to LA County, which they don’t have a lot of regulations there. Just kidding. It was awful. And so I’d submitted it, and I remember they gave me the plans back three weeks later and the entire, I mean, it was 10 pages that were all just redlined, just so many comments, and it had never done anything like that before. And I remember just that is one of the moments that I felt probably most defeated in my real estate career. I wanted to cry. I was like, “I cannot believe I don’t understand any of this.”
And I remember going to sleep and waking up the next day, and then I read it again, all the marks. I was like, “Okay, that actually makes more sense than I thought, but I still don’t get it.” Then I went to sleep and I read it again, and then all of a sudden it really wasn’t that bad, and it’s like you don’t really realize it, but sometimes you really need to take it incredibly slow, sleep on it, come back to it because the stuff really does start to get easier once you realize that it’s not as scary as it seems on the surface.

Andy:
The thing of these things, so when you’re getting these things through zoning and you’re getting permitting in place for different projects, you have to think of it as playing tennis. You’re doing a volley, so if you’re expecting a home run right out of the gate, you’re going to be disappointed. So realistic expectations on this in timelines, so you’re going to go back and forth on some different things and you’re going to learn the specifics of each town and county and what they’re looking for. So no one gets through on the first time.

David:
That’s a great, great point. Yeah, and that could cause a lot of frustration. If you’re the type of personality that says, “I just want to look at it, make a decision, be done, move on, check the box.” That’s not a box checking thing. That’s almost like you’re sending scouts to do recon. They’re coming back and they’re saying, “This is what the other side has.” You go, “Okay, how are we going to strategize here? What could we do? Let’s send out that and see how they reply.” It’s much more of a game like that. So your brain likes that type of stuff?

Andy:
I love that stuff. I love development. Yep. I love, yeah, anything that if you can change the use of land and you can value add, I’ve been doing this stuff for a very long time, and I love the strategy of it. I love creating the relationships and going back and forth and creating something that previously… God’s not making any more land, but what we can do with that land is still up in the air and how much revenue you can generate with it. So that’s where I love zoning.

David:
All right. So what about some weaknesses that you outsource? What are some things that you don’t enjoy doing or don’t like that you outsource to other people?

Andy:
So this is like, these are… David, that’s a great question. Yeah, so I have the propensity to be a poor manager, and I’ll clarify that. The difference between leadership and management in my brain, and I don’t know what the actual definition of it, but management is executing the plan and then measuring that. So if I don’t have breadcrumbs along the way or notifications or accountability for what the original business plan was, then I can lose sight of that. So I have to create external accountability. So I do that with, I work as a consultant as doing some commercial estimating still, and I do three or four different things, but my wife is my partner, not just in life and in business, and so she really, she’s like my metronome. And so I’m not going to remember any recurring event that doesn’t have structure or accountability around it is in the danger zone for me, and I know that I have to externalize that and vocalize. I’ve learned my brain, and so I know that I don’t need to be, I don’t have to shine bright. I don’t have to be the center of it all in the… We can shine the light on other people, and the more we do, that’s leadership.
And so for them to grow, you’re trying to get people to where they’re going. That’s how I view leadership and the different…. I can’t, differentiator. I’ll leave that there. Yeah?

Rob:
Yeah. We’ll trademark it if it doesn’t exist.

Andy:
Yeah. Thank you so much. Yeah. Yeah. Hashtag Andy Gil. Yeah, so I outsource routine accountability and management things. So I do that through notifications, through different apps on my phone, through having people check in on me, through creating body doubling. I don’t know if you’re familiar with this or not.

Rob:
Yeah, yeah. It’s effectively… So I tried this one time and it works well. It’s basically you’re asking someone to effectively sit in the room with you while you work through something just so that you feel like there’s camaraderie or support in that moment. Is that right?

Andy:
Yeah, that’s exactly it. Yeah. Tell someone what you’re doing and sit with you, and you’re like, “All right, I’m going to do this thing that’s hard for me.” So I mean, I may have the skill set to do it, and as long as I externalize and say, “Hey, this is what I’m going to be doing this time period,” that time period passes, and then state what you were able to accomplish. So for the hard things that are boring or that I don’t want to do or whatever. So that really is, and to be able to say vocally that I have the propensity to be a poor manager if I don’t plan well and externalize my weaknesses like that, that’s so empowering because I can say it and now we can all shine and move forward.

David:
I think when we see examples of success, we see LeBron James, we see Michael Jordan, we see Tiger Woods. We only see the strengths. This person can jump higher than everyone else, run faster than everyone else, does something better. What you don’t see, but is maybe even more important is the coaching staff, the general manager, the other players that see the weaknesses in that person’s approach and are actively going to fill that in, right? The coaches are probably spending more time thinking about weaknesses of their best players since the strengths are obvious. You don’t have to wonder what someone’s good at. That jumps out at you right away, but we hide our weaknesses. Owning that we have a weakness allows us to sort of coach ourself. That’s what I hear you saying, right? I know I operate best in these environments, so let me bring someone in to do it.
I know that I will mess this up. Let me put a person around me. It doesn’t matter how well you do at something, if you go crush it at your job and then you forget to pay the mortgage every month, like you said, it’s a reoccurring thing, and you’re like, “What does it matter?” And it gets foreclosed in two months. It doesn’t benefit you, right? You have to know what your weaknesses are if you want to be able to capitalize on your strengths.
And I know that there’s a trend right now, which is good and positive of people seeking to understand why am I like this, right? There’s a lot of podcasts, there’s a lot of books, there’s a lot of self-help stuff that talks about things we went through in childhood. The word “trauma” gets thrown around a lot, which is nothing against people that have legit trauma, but now it’s like, “Oh, my husband forgot to put the trash out” and now we call that trauma, right? But understanding why there’s a problem is not the same as coming up with a plan to work around that problem, to become more successful, right? It’s like, “Once I know why I’m like this, then we stop.”
We’re like, “Okay, job’s done. I understand what happened in life.” No, now you have to take that knowledge and you have to come up with a framework that will allow you to be successful, which it sounds like is something that you’ve done. I’m going to guess growing up, you didn’t have a whole lot of examples or people that were coaching you in this way. Is this something you sort of had to stumble into yourself?

Andy:
Yeah. Yes. When you grow up in an environment where everyone’s trying to survive and we grow trying to get to the next thing, there’s not a lot of thought process on future planning. And so even though I was around and even in my career, I was around a lot of real estate, we were building a lot of it, no one was investing in it and keeping it. So it didn’t occur to me to do that. So I didn’t have an example. I had, well, I had great role models in my life as a young man. I joined scouts early and my mom did the very best she could, and I’m at peace with that, but I didn’t have the growth that I’m able to afford my kids. And to be able to really, at this point in my life at 45 years old, legacy is very important to me. And that I’m able to provide for my children the framework to be successful in how they define that. And that in turn makes me successful.
And as a byproduct, we’re going to generate revenue and generational wealth. So it’s really, as younger man, I wanted to get away from poverty and I wanted to get away from, to be anything but the poor kid. And so it was ego driven. And at this stage in my life, I really could give a rat’s ass what anyone thinks about me. If I’m not your cup of tea, that’s cool. Move on, scroll and get to the next thing. I really just want, I have my why is really clear at this point.

David:
That’s fascinating. Rob, what are you thinking as you hear this? Because I feel like you can relate to Andy, you just haven’t said anything yet. You are a detail person. We had this experience buying the property in Scottsdale where we each got to bring up our individual strengths and weaknesses. Seeing how you work with decor. I mean, I was literally thinking some of the things Andy’s thinking, like, “If I had to pay attention to this much detail, this thing would’ve been screwed up in the first 12 minutes of doing.” I never would be able to hold my focus on Bed Bath & Beyond and thinking of, “How would this look in a picture?” Your whole brain processes information completely different. What would this look like? Would a guest want to book on it? Would they likely complain about it?
I’m at a 30,000-foot level from so many things that I need the people like you. I’m curious, is that a thing you’ve always been like? Is that part of why you have such a big YouTube channel and why you worked in marketing is you have this angle to see details that other people miss? And how has that served you and how has it worked against you?

Rob:
Yeah, so there’s this funny thing that was going around a couple years ago, I want to say. It was like a meme. And so basically, it was saying that there are two types of people. There is someone who their inner monologue is dialogue, and then the other type of person is their inner monologue are abstract thoughts. And so a lot of people saw this and they’re like, “Wait, what? Not everyone thinks in dialogue and not everyone…” And then the other half was like, “Wait, not everyone thinks in abstract thoughts?” I think in abstract thoughts. I’m scatterbrained. When I walk into a place and I’m analyzing it, I’m not like, “Oh, the couch would go here, blah, blah, blah.”
I don’t have that inner monologue with myself. So it, for me, I walk into a place and when I’m inspired, I can definitely focus on one thing, but it really is like I’m grabbing stuff out of the air and basically pulling it down. And so as much as I love that aspect about my creativity and what I do, I mean, my YouTube channel is very… I don’t script it out. It’s all ad-libbed. I have five bullet points, and it’s ADHD madness.
As much as I love that side of my creativity, there are times when I’m like, “Okay, it’s time to grow up and own some of these things.” I complain a lot about how I don’t have enough time in my day, and this has been a big business failure for me. It’s like I close my laptop at 6:00 PM, frustrated that nothing got done. That’s what it feels like. And so at a certain point, I have to just kind of own up that, yes, I have my strengths and weaknesses, but I can’t always use, for example, my ADHD as an excuse for why I’m unorganized or why I’m not able to advance. And so I’ve been making a lot of changes to my life in the last two months.
I’ve kind of talked about it a little bit on air, but I’m not a morning guy at all. Waking up at 9:00 would be the best version of myself, but I’ve been waking up at 5:30 every day for the past two months. And it sucks, but it’s this, an action step that I needed to take to actually be successful. I have employees now. I have 20 or 25 people at this point that are on my payroll, everything. I have a family that I have to support, and so I have to just keep myself accountable. And payroll keeps me accountable. So I’ve just sort of, I don’t know, I’m changing in a lot of different interesting ways.

Andy:
Are you guys familiar with EOS? Entrepreneurial Operating System? Yeah? Yeah. I worked at, the last place I worked at was where I was introduced to it, and we ran the company on that. I was on key staff and there was about a hundred employees there. And the difference between the visionary and the integrator are really, it’s really remarkable. So what I’m hearing you say, Rob, is that you’re a visionary and you are trying to become the integrator as well. And so I’d love to see how that turns out in the way because it’s really hard to hold space for both and to be successful in both areas. Your creative mind is what created your empire. And so executing that business plan, how you hand that off is really… And you’re able to, because you have to be, the product is you. And so as you release that and be able to chunk out different parts of it, I can’t wait to watch your story unfold.

Rob:
Yeah, it’s been fun, man. I think it’s, someone convinced me just under a year ago to hire a COO. They’re like, “You need to hire a COO. You can’t, you’re doing everything, and it’s obviously spreading you thin.” And so I did. And when I did that, I was like, “Okay, that’s great.” It really was a source of empowerment, but I still find myself failing the COO for what he needs to do by not getting him what he needs to run the business and stuff. Yeah, I mean, it’s like I can stay very comfortable at where I’m at, but where I want to be in a couple years from now is I want to have thousands of units that are very cool, unique places. And the only way I’m going to do that is I have to sort of hunker down and get in the weeds a little bit with my own business versus always trying to delegate it out. So it’s probably not the correct way. I don’t know. I’m trying to figure that part out.

Andy:
I mean, the wording that you used, the verbiage that you used along the lines of not using ADHD as a crutch as an excuse for everything, and that kind of accountability is really, it’s really empowering to… Once you own it and say like, “All right, well, this is an excuse, it’s a reason.” And then you fill in around that to be successful in the way that you define it. Really, I love the way that you described that.

Rob:
Yeah, man. Well, honestly, I feel like we kept this together pretty good for a couple of ADHD blokes. And David, you’re keeping us on the path.

David:
Yeah. And on that path, we are going to transition from ADHD to DDD. The next segment of our show is the Deal Deep Dive. In this segment of the show, we dive deep into a particular deal that our guest has done. And Andy, I understand that you’ve got a 12-unit property to talk about, is that right?

Andy:
I do, I do. Yes.

David:
All right. So we’re going to fire these questions at you. I’ll start. First question, what type of property is it?

Andy:
It’s a fractured condo community. 18 units, and we bought 12 of them.

David:
And before Rob asks his question, do you mind repeating what the definition of a fractured condominium?

Andy:
A fractured condominium complex is one that was intended to be single, owned by individuals with an HOA, and at some point turned towards investors and became majority investor owned. So there’s a lot of potential upside, yeah, as I see it.

David:
So the complex was owned by the people, sorry. Every unit of these 12 was originally owned by someone different, and then they had an HOA they governed to make sure your neighbor didn’t paint their house, Pepto-Bismol pink or played loud music or whatever. Then the people who originally owned them, sold them, investors came in and bought them. Then they started renting them out. So the HOA rules had to be adapted to accommodate for the fact that a lot of tenants are going to be involved. Is that basically?

Andy:
Not really. Yeah. So that’s where the opportunity was, is I don’t want to… Is that as a majority owner, I essentially get to dictate what the bylaws are and if at some point to change the declaration, the condo declaration. So yes.

David:
You own all 12 units that were originally owned by individual people?

Andy:
We’re closing on the 13th next week, but yeah, we’ll own.

David:
There we go.

Andy:
Yep.

David:
Okay. So 12 units in a complex that has more than 12.

Andy:
Yes, 12 units in a complex of 18. I’m sorry.

David:
All right, there we go. All right.

Rob:
How did you find the 12 units?

Andy:
Through a real estate agent that is a friend of mine, and he was posting a completely different property that I engaged with, and we got on a call and it was a pocket listing, and which essentially meant to me that the seller was not willing to commit to any particular agent, and I was correct about that. And-

David:
Commitment issues.

Andy:
Yep, commitment issues.

David:
That’s right. I bet you that’s part of why you got such a good deal on this thing. It doesn’t always serve you well to try to be in an open relationship with your agents. All right. So how much did you pay for this thing?

Andy:
$1.2 million for the 12 units.

Rob:
And how did you negotiate it?

Andy:
So this is really hard to buy actually. The seller who is, I still talk to three times a week. We’ve become good friends. He had it teed up for a cash-out refi through a local bank here. And so he really didn’t care if he sold it or not. So I offered asking and he said no. So then when we got into the details of it, he didn’t want anything, any item less than $500 was on me. And I was like, “Let’s get to a definition of item.” And then he was like, “No.” And so then I couldn’t see it. And so I said eventually like, “Hey, let me see the units and I’ll buy them as is.” And so we were able to meet, he’s a builder like me, puts his pants on one leg at a time. We became fast friends. He realized that I wasn’t going to lock him up in a P&S and then start chipping away. I intended to pay what we were. And we did that.
And the negotiation was tough. It was, but once we got in, I realized it wasn’t a real problem that we were fighting. And once we got into, if I could get him into the room to have a conversation that we could learn if this was a good fit or not, and I was spot on.

David:
I like what you said about it wasn’t a real problem. He was trying to prevent something that he thought could happen that you didn’t have any intention of doing. That’s beautiful.

Andy:
Right. Yeah.

David:
Rob?

Rob:
Oh, is it me? Sorry, this was such a great conversation. This is the ADHD. How did you fund it?

Andy:
All right. Yeah. So he had it teed up for a cash-out refi at the local bank. So the appraisal was already done. I didn’t know this at the time when we were negotiating it. So I have a partner in this deal. And so we went to the bank and we essentially, there was already a commitment letter that was issued to them. So we just requalified it within two or three days and we got a commitment letter and we went off to the races.

David:
All right. Now, this is probably the most fun question. What did you do with it when you bought it?

Andy:
Well, it had tenants in it, so the seller and I hit it off really, really well. So I really take my head off to the agent because he essentially stepped aside and allowed this to just happen because we were going to solve the problems together. And a lot of people, their ego get in the way of that, and he really did a great job by taking them back. And so we filled the units. There were a few empty units, but he really wanted me to, he knew that this was going to be my launching of this, and he really wanted that to be successful for me. So he filled the thing up, and so we took it over and was able to introduce myself to the tenants. Not everyone was happy I was there. And we’ve switched over a few of the tenants. I think at this point we’re going to be, I think we’re up to five that we’re qualifying ourselves.
But yeah, it’s a really great property because it’s one bedroom, one bath. It’s in, are you guys familiar with Electric Boat, the submarine capital of the world? Connecticut? I don’t know if… So we have 20,000. The EB is, the government is launching a new submarine line, so they’re doubling down. There’s 20,000 employees and they’re adding another six, 7,000. So any units within a 25, 30-mile radius is pretty much insulated from this recession that potentially is coming because all the trades people are being picked up there. So we’re kind of being propped up in that way. So I know that there’s a huge shortage of these rentals and I’m marketing to professionals that will be buying in the next two years. So I understand there’s going to be a lot of turnover.

Rob:
Wow, that’s good intel. You’ve just ruined that market for yourself. I hope you know that. Everyone at home’s like, “Oh yeah.”

Andy:
Well, no one listens to this podcast, right? You guys have a small-

Rob:
It’s pretty, it’s up and coming.

Andy:
It’s a small niche thing, yeah.

David:
What lessons did you learn from this deal?

Andy:
What lessons did I learn? I learned that, so this is deal probably put me on a path for multifamily. I learned that if I take on, like I took this property on and the rent roll was 13,200. It’s currently at encroaching 15,000, so that’s like a 12% increase. And I learned that anything over five family, I can generate my own… I can increase my valuation, I can create wealth this way. I learned about the five-year arm. That can be a bit scary, but if you are super analytical, I learned this is where I want to be. I’m going to do renovations and flips and things like that to fund these multifamily deals. I learned that this is where I want to be.

Rob:
That’s awesome, man. Well, final question. Who is the hero on the team for your deal?

Andy:
This would be my wife. I have this squirrel brain, this crazy, and I mean it too. We’ve been together for 23 years and we met as kids at 22 years old. And we’ve been through an awful lot of ups and downs, and we have a child with cystic. My son has cystic fibrosis. We’ve really been through it all. And she is the timing for me. She sets the pace, she sets the standard for our children, for myself and her belief in us, in what we can do together really, none of this would happen.

David:
Awesome. I mean, I don’t know if I’ve ever heard anyone say that their wife was the hero of the deal, but that’s very cool to hear. Especially because if you think about it, in order to keep you operating at your best, she’s got to figure out, “Well, what are the weaknesses that we talked about? How do I cover for that?” Right? So that is what heroes do. That’s awesome.

Andy:
Yeah. I don’t know. My wife is a therapist, a mental health therapist, and my daughter. So it’s great to have a live-in therapist. That’s awesome.

David:
I need to marry a live-in masseuse. My body’s always sore all the time from all the various sports injuries. Now you got me thinking here.

Andy:
Yeah, no, you put that out to the world. Hey, all masseuses. David’s looking.

David:
All right. So what’s next? You mentioned that you have some tenants in the pipeline that are contracting for work and you recognize there’s going to be turnover. Have you already started thinking about systems in place that you’re going to use to handle the vacancy that you know should be coming?

Andy:
Yeah, I mean, as we grow, I think I don’t have a specific quantity of units I want to get to in the next couple years, but as we grow the systems, we’ll probably outsource that to agents to fill those vacancies. But I think that a really well, I have a pretty good following on Instagram, and that’s from being relatable. And so I think that if we reach out to people and advertise the units, well, like really show them creatively, then I think that they’ll fill. I’m not really all that concerned about vacancy as long as we act. If we don’t know they’re coming, communicate with the people that are leaving, make sure that we have our runway and people in place to do that in a timely way. I don’t think that we’re, I’m not that worried about vacancy from the experience I’ve had so far.
And as far as what’s next? Like I said, I really love zoning. And I have a couple deals in the pipeline right now that are potentials but no contract. Connecticut has this 830G law for affordable housing where it essentially overrides local zoning to allow for zoning rechange for affordable housing. And actually today I think they announced almost an 8% increase of what, 80 to a hundred percent affordable housing income levels are. So that expands the amount of people that fall into that. So we’re looking at a property potentially to develop into 20 to 30 units. I don’t know that it’ll go anywhere, but this is the pipeline along that I’m thinking. We want to eventually get to a short-term to mid-term rental hosting to get to a percentage of that to kind of… And that’s where my wife wants to come in. But yeah, we’re looking. We’re looking.

Rob:
So Andy, before we wrap up, can you give us a general idea of your portfolio numbers and where you’re heading with your current portfolio? How fast is it growing, all that kind of stuff?

Andy:
Yeah. We’re currently at 12 and we’re going to be adding the 13th unit next week through a creative financing deal. And my goal, I don’t have a goal number, but I have an aspiration. I think we’re going to get to about 30 units in the next 18 months or so if things go well. I think depending on what interest rates do, they pause today, but they’ll probably come up a little bit, a couple more times. What cap rate is attractive is to be seen. So I don’t really know exactly. I’m going to stay in touch and connected to it and move fluidly. We will find the deals, the value-add deals in my local market. I’m not quite comfortable reaching out yet to outside of this area, but I’m starting to play in that.

Rob:
And what would you say your total portfolio worth is now after years having built this thing and expanding it?

Andy:
I think about 1.8 I think is where we’re at right now.

Rob:
Nice.

Andy:
And half of, I have a partner on one of those deals. So I think that will be to… My goal is to be, and it sounds, I hate to say this out loud, but I think it’s important too, because the relationship people have with money is important. I think that a lot of listeners, it’s a dirty word. I think in the coming two to three years, I want to have a net worth of $1 million. I want to cross the $1 million mark in the next two to three years on my personal financial statement. And I don’t even feel like that’s aspirational. I didn’t think that something like this was available to a person like me. I didn’t think that… I knew I knew how to build, I knew how to run a business, knew how to do all the stuff, but I didn’t think I could get in the game. So that’s where I don’t really care about the unit count so much.
I think that’s where I want to be, but it’ll create some freedom. And honestly, if it’s available to me, if a guy like me can be doing this, really, if you just add on one skill at a time, develop the skill of developing skills, I feel like almost anyone can do this.

David:
And you’re still working for a builder while this is going on?

Andy:
No, I’m a consultant. I work as a consultant. I don’t have a… I’m self-employed. I do ADHD coaching. I’m a contractor. We do rehabs, remodels, and then I also work, do a bit of consulting for estimating and development, staff development in that area.

David:
What I love about, I mean, there’s many things about this show that are awesome, but one of the things that I love about it is that you didn’t feel this need to jump in and work 90 hours a week just trying to accumulate assets without picking your head up and looking around and asking, “What is the point of doing this?” You just stayed in the race like the tortoise, just slow and steady. I know what I like. I know what I don’t like. I know I’m doing this for my family. It makes no sense to sacrifice my family to get all these units and then brag to my kids about how they’re going to own a portfolio that they never wanted and they end up screwing it up because they didn’t get enough time with dad to learn how to manage it once it was handed to them or that was never their dream.
You didn’t overly stress yourself out from what I’m hearing, right? You weren’t like, “I don’t know how I’m supposed to handle all these rehabs that I have.” It can get easy to become obsessed with real estate, but real estate is not a asset class that really favors or rewards the people who sacrifice everything else just for this. It takes time to do. It is a get rich slow scheme. It is. Every property becomes more valuable every year that you have it, as inflation does its thing and rents continue to increase and you build better systems and you predict problems better. So you have to run the marathon. This is not a sprint.
And so many people, they listen to these shows and they say, “I just want the information in 12 minutes. I don’t want to listen to an hour-long podcast of a story. Just give me the answer.” Because they think that they’re just going to work really hard for two years and then be done and never work again. And this does not work that way. And I think you’re a great example of the right way to do it. What are your thoughts on that?

Andy:
I think that anytime someone apparently appears as a success overnight, so I got a lot of…. When we were posting, “Hey, we acquired this thing.” A lot of people didn’t think that we were in a position to do something like that. So I think that anytime someone appears to be a success overnight, there’s a lot of, there’s years and years and years of background work to get to that. I really… the Great Recession really scarred me, so I was really… I mean, we took a huge hit during that and I used to be called a gun slinger, and then I became extremely conservative to where the strategy, the strategic component of me, which is my asset, was refined. So yeah, I 100% agree that these things, your skills are developed day over day, one item at a time and until you become technically competent, technically on various different skills and that just builds.

David:
Thank you for saying that, Andy. Thank you for acknowledging building skills is important. You have to do that if you want to be good at this. It is not a secret backdoor to success that doesn’t involve having to get good at something. You got to build skills here just like you had to build skills at the job you hated that you quit to get into real estate. I mean, that’s some great advice. So many people get in and they’re so angry and they’re frustrated and I get the hate hateful DMs or they come to a meetup and they just want to, like, “You said that I was going to get passive income and I was never going to have to work.” I said, “Well, first off, I didn’t say that, but you have heard that. I don’t know why you believed it. There is no diet where you can eat a bunch of donuts and they’re not going to go to your hips or whatever the case is. It doesn’t work that way.” Right?
Rob’s waking up at 5:30 in the morning because that’s the only way that he can do it with the circumstances he has. He’s building skills. So thank you for being honest about that and not portraying it in a way that makes people want to go pay for your course or pay for whatever you’re doing because you’re selling a dream that they’ll never accomplish.

Andy:
No, it’s not real. Yeah, passive income is not passive.

David:
Yeah, it’s a great. It’s passiver is what I tell people. It is not passive. That’s it. It’s better.

Andy:
Passiver. I like that.

Rob:
It’s passish.

David:
Passish. There you go. The Passish Investment Podcast. All right, Andy, if people want to find out more about you or even if they want to connect, I’m sure your story’s going to inspire a lot of people. Where can they get ahold of you?

Andy:
Well, on Instagram at Coach Andy Gill. That’s G-I-L. A-N-D-Y G-I-L.

David:
Awesome. Rob, what about you?

Rob:
Yeah, you could find me over on Instagram and YouTube at Robuilt, and if this story was inspiring and you’re like, “Wow, I’m going to take action.” Or like, “Hey, I’ve been dealing with ADHD and I didn’t know that I could do this real estate thing.” If that was something that resonated with you, consider leaving us a five star review on the Apple Podcast platform. That way we can get served up to many other real estate entrepreneurs and help them achieve financial freedom. How about you, David?

David:
Find me on DavidGreene24.com or DavidGreene24 at all the social media profiles and let us know what you thought about this interview so you can DM any of us. Let us know what you thought. Definitely reach out to Andy and then leave us comments on YouTube if you’re watching there. We read those.

Andy:
I appreciate you guys.

David:
Andy, you did great, man. I really appreciate you being here. You have a great story. Thanks for being so authentic and sharing what really goes on in the real world of real estate investors. Not the glamorous, shiny TikTok videos where people are being taught how to become millionaires in a seven-second video.

Andy:
No, it’s just a lot of scars. I love, listen, it’s really a… It’s surreal to be meeting and talking to you guys after the amount of hours I’ve listened to you, to both of you and-

Rob:
Awesome. Man.

Andy:
… so I super appreciate the…

David:
Of course. Rob, what about you? Any last words here?

Rob:
That is a bad question.

David:
This is David Greene for Rob, the bad boy of real estate Abasolo, signing off.

 

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Recorded at Spotify Studios LA.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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Large banks have historically been the rulers of the jumbo market. Economic conditions, however, are opening up space for new entrants eying market share. This is because surging mortgage rates, upcoming regulatory changes and regional bank collapses have forced large depositories to pull back. Their retreat opens up opportunities for rival firms to grab market share.

In Part II of our two-part series, HousingWire crunched the numbers to reveal which lenders have pulled back or exited the jumbo market, and which nonbank lenders and Wall Street firms are moving into the jumbo space. (Part I explains the jumbo market’s decline.)

Our analysis of Home Mortgage Disclosure Act (HMDA) data focuses on conventional, non-conforming first-lien mortgages used to purchase or refinance single-family dwellings. We also sought input from industry experts, lenders and loan officers. 

Nonbank lenders are positioning themselves to gain some market share left by depositories, though they aren’t expected to make major inroads anytime soon. In the secondary market, Wall Street firms have shown more appetite for these mortgages.

Who’s at the top?

Wells Fargo was No. 1 when it came to jumbo originations in 2022, with $28.7 billion originated, per HousingWire’s analysis. Wells was followed by First Republic (at $20.5 billion), Bank of America ($20.4 billion), JPMorgan Chase ($17.9 billion), U.S. Bank ($15.9 billion) and Citi ($13.7 billion). PNC Bank ($7.9 billion), Morgan Stanley ($7.5 billion) and MUFG Union Bank ($5.8 billion), later acquired by U.S. Bank, rounded out the banks in the top 10. Pontiac, Michigan-based United Wholesale Mortgage was the only nonbank on the list, in the ninth position with $7 billion in volume in 2022.

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Yet much has changed since the start of the calendar year.

Inside Mortgage Finance (IMF) data shows that First Republic held the jumbo crown in the first quarter of 2023, with $3.7 billion in non-agency jumbo mortgages. Its volume declined 37% quarter over quarter and 55.8% year over year. Wells Fargo’s jumbo volume of $3.2 billion in the first quarter was down 43% compared to the previous quarter and 79% compared to the same period in 2022. 

First Republic’s reign was short-lived, largely because of its unique and risky jumbo mortgage strategy.

The regional bank focused heavily on jumbo loans, serving interest-only mortgages at super-low rates to wealthy individuals in Silicon Valley. First Republic went from $6.3 billion in jumbo originations in 2018 to $20.5 billion in 2022. Borrowers last year had a median income of $495,000 and properties had a median value of $2.4 million, per HousingWire analysis. Median rates were at 3.2%, compared to 3.25% for conventional loans.

Typically, borrowers didn’t have to start repaying the principal for a decade. The strategy enabled it to grow its assets during the pandemic, but left First Republic severely undercapitalized following the failures of Silicon Valley Bank and Signature Bank.

First Republic’s stock bottomed in March in the wake of the bank failures, and depositors rushed to pull their money out. The nation’s biggest banks stepped in to stabilize the lender with $30 billion of their own money, giving the Federal Depository Insurance Corporation time to find a buyer. After a weekend of negotiations, the FDIC sold First Republic to JPMorgan. It was the second-largest bank collapse in U.S. history. 

JPMorgan quickly said it would kill First Republic’s low-rate jumbo mortgage program.

“The loans themselves are… really creditworthy and being marked. They’re obviously going to have a much higher return going forward. But we’re not going to be putting a lot of jumbo, cheap jumbo mortgage loans in our books. And we’ve already incorporated all of our numbers into potential runoff,” the bank’s CEO Jamie Dimon told analysts. 

JPMorgan itself reduced its jumbo volumes to $2.9 billion in the first quarter of 2023, down 31.6% quarter over quarter and 75.4% year over year. 

First Republic’s ascendency in the jumbo market also reflects Wells Fargo’s decision to reposition itself, exiting the correspondent channel and focusing on minority homebuyers through its retail operation.

Bank of America, which ranked third on the HousingWire’s list, said despite competitors reducing their footprint in the jumbo market, it hadn’t seen a significant increase in volume. IMF data suggests BofA’s production in Q1 2023 was $2.8 billion, down 29.5% quarter-over-quarter, the lowest drop among the country’s top five banks. Its jumbo volume also declined 76% year over year. 

Bryan Sherman, senior vice president and regional sales executive at Bank of America Home Loans, said the bank, which exited correspondent and broker channels to focus on its retail branches, never targets a particular product or program. BofA, however, recognizes that the current landscape benefits adjustable mortgage rate products, especially in the jumbo market. 

“In a rising rate environment, ARM products are definitely more popular for clients than fixed-rate products because they’re going to take the lowest rate they can, typically in ARM. They’re going to secure it until the market rebounds, and then potentially, they’ll look at refinancing into a lower rate,” Sherman said. “Some people are still choosing to lock on a 30-year fixed rate, but in a rising rate environment –- typically in the jumbo space – ARMs are the preferred option for those clients.”

U.S. Bank originated $2.7 billion from January to March, down 34.6% quarter over quarter and 58.8% year over year, per IMF data. The bank closed its wholesale mortgage businesses it inherited through the acquisition of MUFG Union Bank in December 2022 and laid off staffers in July.

Citi expects the jumbo market to remain challenging for some time. The bank originated $1.9 billion in jumbos in the first quarter, down 23.6% compared to the previous quarter and 47% than the same quarter in 2022. 

Liz Bryant, head of retail mortgage sales at Citi, said recent financial sector stresses and tighter liquidity conditions caused lenders to pull back from leveraging their balance sheets. 

“Rates will likely remain elevated in today’s range in the coming period, regardless of federal monetary policy. If builders are adding more homes, we should continue to see purchase demand hold throughout the buying season,” Bryant said. 

Customer demand for jumbo loans remains strong, she said, driven by property appreciation, material and labor inflation low inventory in new developments and limited resale listings.  

The bank provides a high number of 30-year fixed-rate jumbo products, a good option in a rising interest rate environment, she said, noting that it’s not selling them on the secondary market. “We’ll explore the secondary market as opportunities arise,” Bryant said. 

Nonbanks enter the field 

HousingWire’s analysis of 2022 HMDA data shows that two large independent mortgage banks are capitalizing on big bank pullback from jumbo portfolios, including UWM and Guaranteed Rate.

Rocket Mortgage was the top nonbank lender in non-agency jumbo loan production in the first quarter of 2023, per IMF estimates. Rocket originated $1.2 billion in volume, down 59.5% quarter over quarter and 64.7% year over year. UWM was the 9th largest jumbo lender by loan amount in 2022, with $7 billion in volume. The company was the seventh-largest by number of loans, with more than 6,690 loans. IMF estimates that UWM originated $651 million in non-agency jumbo mortgages from January to March 2023, up 70.5% quarter over quarter but down 71% year over year. 

“Across the board, we’ve seen banks back off of mortgages… which is a great opportunity for us and our brokers,” Alex Elezaj, chief strategy officer at UWM, told HousingWire. “But I still think banks like the jumbo product because of the customer acquisition play.”  

Starting this year, UWM changed its approach related to jumbo offerings, which resulted in the launching of six fixed-rate jumbo products in May. When announcing the new products, UWM said brokers would have access to “more competitive jumbo pricing, along with transparent investor guidelines and loan qualifications.”  

“Historically, we’ve kind of gone out to market with basically one product or one price, [and] then we tried to fit with the specific investor guidelines,” Elezaj said. “We took those same investors that are our partners, and we just aligned specific products to them.”

The new strategy offers a wider range of products, he noted. Elezaj said the new jumbo offerings are not “a big needle mover for UWM in terms of originations or profitability,” but help put brokers in a position to compete with big banks and retail lenders. UWM can’t beat the banks’ low cost of funds, which is their clients’ deposits, but the wholesale lender has its overall cost structure and competitive margin in its favor, he noted.

Meanwhile, Guaranteed Rate, which was the 10th largest lender by number of jumbo loans in 2022, is also looking for a piece of the jumbo pie, with 4,410 loans, according to HousingWire data. IMF estimates bring the company to No. 12 by volume in the first quarter, when it originated $690 million, down 37% quarter over quarter and 72.8% year over year. 

Kate Amor, senior vice president and head of enterprise products at Guaranteed Rate, said the lender remains “hyper-focused on being the best fintech retail originator in the country,” developing products that meet the needs of jumbo borrowers. 

“Nonbank jumbo is as competitive as it has ever been,” Amor said. “Guaranteed Rate continues to be a trailblazer in the jumbo market, having issued our own jumbo securitizations, and remains hyper-focused on offering a diverse range of products that serve all jumbo borrowers.”

Amor said retail banking failures created uncertainty in the market, with most depositories not active in the loan acquisitions space. Meanwhile, Wells exiting the correspondent channel created volatility in the secondary market, which smoothed out after a couple of months. 

The trend of retail banks underpricing 30-year fixed jumbos (non-economic pricing) has dissipated as deposits run off or pending capital requirements causing them to pause. However, “relationship pricing” is as strong as ever, Amor said. 

Do Wall Street firms have an appetite?

Large Wall Street firms see market opportunities with jumbo loans. For example, jumbo loans represented 96% of Goldman Sachs‘ total mortgage volume in 2022, the most of any lender.

Meanwhile, others taking an interest in the market are Northern Trust Co. (94%), Redwood Residential Acquisition Corp. (90%), BNY Mellon (88.8%), Charles Schwab Bank (87.9%) and defunct Silicon Valley Bank (87.7%). SVB originated $2 billion in jumbos last year, compared to $524.4 million in 2018, per HousingWire’s analysis.

Real estate investment trusts have also capitalized on banks’ retreat from the jumbo space.

In a recent call with analysts, Christopher Abate, CEO of Redwood, said the REIT will take advantage of Basel III rules by engaging with more banks to acquire their jumbo loans. Abate said the REIT had started conversations with more than 70 banks.  

“Over the past few months, we’ve completed onboarding and have already activated a number of regional and mid-sized banks with aggregate assets of over $2 trillion, and we’re in various stages of bringing many more online in the coming weeks and months,” Abate said.  

Before the onset of the regional bank crisis this past March, depositories originated two-thirds of all jumbo mortgages in the first quarter of 2023, Abate said. 

However, with so many changes in the market, including the Basel III proposed rules, Abate believes the future can be different. 

“We expect that through the benefit of hindsight, these regulatory changes will mark a major turning point in how most non-agency loans are owned and distributed in the United States.”

Flávia Furlan Nunes, a Mortgage Reporter at HousingWire, reported this story. Will Robinson, a Data Journalist at HousingWire, analyzed the data and created the visualizations. They can be reached at flavia@hwmedia.com and will@hwmedia.com.



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Homeowners in the United States have experienced a precipitous drop-off in the availability of home insurance policies this year, with the availability of certain policies having dropped by more than half, according to a report commissioned by insurance agency Matic Insurance.

“The report illustrates a homeowner searching for coverage from 10 national carriers in March 2022 may have been eligible for an average of 6.08 home insurance policies, whereas in 2023, they would have only been offered an average of 2.87 policies, representing a substantial 53% decrease,” the report said.

Homeowners in the U.S. experienced a 35% decrease in available policies per homeowner, according to the report. It also detailed the difficulties that homeowners in various states have faced when it comes to home insurance, notably Florida and California. The exodus may be spreading to other states, as data shows that areas prone to natural disasters are seeing a spike in homebuying activity.

“For states where insurance companies are experiencing premium change request delays, denials, or caps from insurance regulators, carriers are limiting or ceasing the writing of new policies, as a means to counter unsustainable loss ratios,” the report said. “While this trend has been a longstanding challenge in Florida, it is now beginning to impact other states such as California, Georgia, South Carolina, New Jersey, New York, and Arizona.”

Insurance carriers are also becoming more likely to exit states where they have an acrimonious relationship with state regulators, according to Ben Madick, CEO and co-founder of Matic Insurance. The 53% decrease in policy availability for homeowners seeking coverage adds to supply woes, as well.

“This supply and demand issue makes securing an insurance policy, especially in problematic states, a major challenge facing homebuyers and mortgage lenders,” said Madick. “The notable decline in policy availability can lead to loan closing delays if insurance is not in place.”

The lack of binding policy availability entirely online may also be adding to certain challenges, he added.

“It’s important to note that less than 10 home insurance carriers offer the ability to bind a policy 100% online,” Madick said. “Homebuyers and lenders need to prioritize insurance from the start of the loan closing process to account for wait times, especially for consumers bypassing a digital agency and working directly with carriers.”

This is all before addressing the rise of rates themselves. In regions where rate increases are approved by states, carriers pass those increases onto consumers, and rates have increased at an average of 9% in the first half of 2023 when compared to the prior year.

Matic’s report is sourced from an average of a random sample of nine million quoted and Matic-insured properties from June 1, 2018 through June 30, 2023. Additional data regarding declination and policy availability was gathered from 30 million quote requests to Matic, as well as third-party quoting engines and carrier direct quotes.



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