Video Closed Captions:
good morning good afternoon good evening
folks michael’s uber one rental at a
time yes i say that all the time and i
still messed it up but anyways we do
this one time only live so uh let’s
welcome greg dickerson to the show how
you doing buddy?
Doing great Michael, good to see you nice
to see you as well thank you for being
back every Monday. Uou are one of my
original experts, we’ve been doing this
now seemingly I think almost two years
together so thank you very much for that
oge that’s right that just means we’re
old man that’s all that means
you and me together hey uh i don’t
know if you saw this I’m sure it crossed
your radar at some level but uh
Zillow has exited the flipping business
they are going uh no longer going to be
an eye buyer and uh as expected there
are lots of channels out there talking
about this is the sign this is the
canary in the coal mine the real estate
market is over get out disaster coming
and i just wanted to ask you what you
thought what
what uh do you have any opinions on yeah
yeah a lot of people are still calling
for a housing market crash and you know
zillow was never profitable with their
home buying program and
you know i think they’re one of their
issues obviously is their their
valuations everybody knows or most
people should know that you know the
zillow z estimate
zestimate as people call it I mean it’s
it’s pretty meaningless
it’s very inaccurate
in most areas I mean, there might be some
areas of the country where
you know they’re relatively close but
for the most part they’re very
inaccurate because it just takes an
average of everything within a radius
and you could have any number of values
within a radius. I think number one
that was their biggest problem was they
were just overpaying for houses they
you know went on a spree and just bought
too many of them and you know I read a
the story the other day where somebody said
hey you know I sold my house to Zillow
for 850,000 last year they called me
back asked me if I wanted to buy it back
and I just bought it back for 550.
You know so uh you know they’re trying
to dump and unload but you know
they were trying to own and be the
one-stop shop for anything and
everything real estate so that was
zillow’s plan and program and you know
they took their eye off the ball in
terms of what they really are
which is you know a resource for
retail customers to find real estate to
do for sale by owners rent you know
things like that and then sell leads to
real estate agents i mean that’s what
their business is that’s what their
business model is they own real estate
search yeah so they took their eye off
that ball you know be the equivalent of
google you know abandoning search and
trying to go you know buy every internet
company out there and try to own
everything and be a one-stop-shop for
everything internet it just doesn’t make
any sense but that’s really what
happened it’s not that it’s an
an unprofitable business they just didn’t
do it the right way i mean open doors
making money at it you know there’s
other companies you know high buyers
that are making money and the key is you
know to buy and value the properties
correctly and you know the day that’s
where they messed up
yeah i’ve done a lot of reading on this
uh here recently i think they’re i think
you’ve hit they broke cardinal rule
number one and that of course is you make your
money when you buy when you flat out overpay it’s hard to
recover from that and um you know they
actually had an internal they had an
internal cold name code name called
project ketchup
right like mayonnaise mustard ketchup
because they wanted to catch open door
right so they actually not only took the
eye off the ball as you’re saying but
then they had the wrong metric they were
they were rewarding teams on margin or
on market share this is like the dot-com companies
trying to make up losses on volume right
so they just started they they were
already unprofitable and you can go back
and look at their earnings announcements
from years ago or a year ago
and then they stepped on the gas and
they got more unprofitable so
it was um
yeah never break rule number one and
again the other thing i think is pretty
obvious is zillow um
they had a lot of cash
and they thought cash would fix it right
so they they’re gonna go they’re gonna
go down as the worst flippers ever
they’re gonna lose somewhere between
five and seven hundred million dollars
flipping homes yeah but it doesn’t
matter you know in this economy and this
market right now they can just go sell
debt to the to wall street you know sell
more shares of stock and raise all kinds
of money and nobody cares yeah you know
because you know stock go up you know
price go up everything yeah
yeah yeah so let’s talk about that
because again i think i i have no
problem i i was in tech i tried to
launch products all the time for for
many years some work some didn’t
i don’t mind taking the risk i just i
actually think the ceo of zillow is
making a strategic mistake on the exit
and as an entrepreneur yourself as
someone who built a nine-figure business
i wanted to ask you
so okay he’s sitting here he’s now the
you know the 8 12 15 most powerful
people at zillow in a room and they’ve
now recognized they’re not good at
flipping homes fine
then you know then they look at the
inventory of homes they already own it’s
18 000 deep so it’s it’s bigger than was
initially reported
and now the ceo comes out and i’m sure
it’s him and says i want these off my
books i don’t want to be in this
business blah blah blah make it go away
in q4 which is the the quarter right in
now i think that is short-sighted i
think that only guarantees losses
and where i’m going with this greg is i
think there was a better way out
they could have just become instantly
one of the largest landlords
for single-family homes or b and
probably more likely because again that
they took the eye off the ball they
could have partnered with american homes
or
invitation homes or whatever there are
and become you know a 50 50 51 49
partner in a portfolio of rentals
that would have been a better way to
exit because one cure for overpaying is
holding what do you think
yeah
you know but again they didn’t make it
on the buy you know how are they going
to all of a sudden turn into an
efficient property management company so
you know the internal discussions were
probably you know the carrying costs
were eating them alive it’s one thing to
buy the property and overpay values may
have caught up to a point depending on
when their last acquisition was because
you know real estate’s been going up 20
30 percent a year so it depends on where
they purchase these properties but the
market is slowing down the big thing
they saw was the market’s slowing down
we’re not going to see much more upside
on these properties and they’re carrying
costs between taxes insurance and
maintenance
you know was really costing them i just
don’t understand what their
model was because they could have
immediately flipped these properties
that they bought because their whole
thing was to be a one-stop shop so
instead you have to go through a real
estate broker this that and the other
you can just sell your house to zillow
go buy another house somewhere else i
don’t know why they didn’t just put
these houses back on the market that’s
what i don’t know that’s what i don’t
understand what i’m not understanding
you know what their business model was
behind that um and you know they are
trying to unload these you know in bulk
to some of the you know rental uh rental
property hedge funds out there that are
buying you know properties in bulk and
things like that so yeah you know are
they gonna actually take a loss you know
what’s it gonna look like at the end of
the day you know i don’t know but for
them to just all of a sudden they
couldn’t get it right buying them to all
of a sudden switch to managing them no
that would have been that would have
been a nightmare for another nightmare
yeah okay that makes total sense and
yeah uh last thursday i believe it was
reported they’ve already organized a
sale of 2 000 units so yeah they’re
going to just chunk them off and yeah
you know flush and get behind them so
very very cool so again uh
when people look at so i guess the last
thing to talk about here is this a sign
that the housing market’s going to crash
it’s all over time to get out of the way
just because zillow can’t make money at
it
yeah the videos are out there again
everybody’s calling for a market crash
and again right now you know i mean
there’s so much demand pent up demand
out there i mean we are seeing it slow
down you know rates went up we saw a
pullback you know buyers are getting
fatigued so we’re seeing
some markets you know are starting to
you know reach critical mass and you
know they’re getting pushback from
buyers other markets not so much you
know some markets are still very
competitive and prices are still going
up and there’s still a lot of demand so
you know at the end of the day it’s
supply and demand until the supply
outpaces demand you know not a whole
lot’s going to change and the catalyst
to that is you know payments interest
rates yep uh the ability to borrow money
if we have a if we have a you know a
market accident and you know some of
these other things we’re going to talk
about happen
that’s going to you know put a put a
problem you know in the liquidity uh and
in the mortgage you know markets when
the fed stops buying mortgage-backed
securities and things like that you know
when the credit markets tighten up a
little bit it’s gonna get a little
harder to borrow money there’s gonna be
less of it available so you know that
will impact demand and then you know
there is
you know
some areas where they say construction
is over supplying in certain markets and
we’re going to reach that i mean in the
past it’s always happened where we go
through these periods this is very
unique and very different than any other
period before but we’ve gone through
periods in the 70s you know in the 80s
and the 90s where we built too much
and we ended up building this building
right
yeah yeah and then you know supply
catches up and the market shifts so you
know it’s it’s always been cycles and
it’s always been 10 to 14 year cycles
you know we’re right at that point you
know where you know the pandemic was
very unique created a very unique you
know condition in the economy in a lot
of ways a lot of things are going to
change forever moving forward um you
know so it’s it’s very interesting times
and you know nobody knows when or how or
what but
you need if interest rates all of a
sudden shoot up because of inflation
everything we see going on if the fed
decides to finally actually do something
you know about inflation the only thing
they can do is raise rates and stop you
know pushing money into the economy so
when that happens rates rise you know
people stop buying because payments go
up they’re already stopping the refi
which puts more liquidity into the
economy when people refinance their
house pull the cash out and then it’ll
get harder to borrow money because the
banks will pull back because people less
people will be qualified at these
payment levels at the income you know
so everything resets at that point um
you know depending on how fast that
happens that you know that could create
a crash but generally
the way we’re we’re operating right now
we could probably work our way through
it yeah i i’ve been calling for a
housing slowdown for i don’t know the
last six months or so i see it in the
data again
people just want it to be a crash they
just i don’t know whether they i don’t
know when when i see all these crash
videos i don’t a are they doing it for
the clicks right they make a penny a
video maybe
b do they want it to be a crash because
they missed last time or they weren’t
ready or c
they want to they want it they want to
see other people suffer
uh because they didn’t they can’t they
haven’t taken advantage of why do you
think why do you think everything has to
be a crash versus slow down
clicks man it’s it’s like it’s not easy
yeah
that’s what it is it’s you know for
attention right so you know they got to
get people’s attention and you know it’s
feeding on fear it’s like the media you
know you look at the headlines and you
look at magazine covers and you know
headlines of news it’s always doom and
gloom you look at magazine covers it’s
all about you know how to get this how
to get that three steps to this seven
tips for that you know so it’s just you
know it’s just hooks and click bait you
know but again when you’ve laid it out
when you look at the history of housing
you know housing has always gone up
we’ve never seen housing prices really
go backwards until when was the first
one was it
well we saw five years in a row of
negative growth it was i think it was
2007 to 2011 i think so that was it so
other than that prices have gone up so
that so again you have history to show
you
what will what will reverse prices and
price action you know it’s it’s an
overheated housing market and i think
we’ll see a correction so there’s a
difference correction 10 20 percent
that’s pretty healthy crash what does
that mean well oh 809 is the only
example we have of a housing market
crash that’s when values dipped you know
50 or more in some markets yeah the
markets still did relatively well
and uh there’s already markets that are
seeing decline in pricing because we
reach these you know unsustainable
levels
um you know income to you know debt to
income ratios really is what it’s all
about at the end of the day unless
you’re paying cash it’s a debt-to-income
ratio yeah absolutely it’s all about
yeah
you could have said it better and again
yeah i was in a market that fell 75
percent peak to trough so i know what
it’s like i know what it feels like it’s
none of the signs are there but yeah
this this is very interesting i do not
see zillow as the sign that uh flip i
don’t see zillow as a sign that flipping
is a bad business they broke rule number
one
i don’t see it as a sign is a bubble i
don’t
uh you know if zillow suddenly put all
of their inventory on the market at the
same millisecond across the board
it would be like
three days of inventory in some markets
you know open door is very profitable
still their business model still works
i’m coaching people all over the country
that are flipping houses and they’re
making money and doing well and you know
at all different levels and you know i
mean
you you still buy houses you know so the
model works again you got to know your
values and it’s all about knowing you
know what to pay and you know having an
exit at the end of the day and or cash
flow so that you can pay again you can
pay whatever you want as long as the
property cash flows but if you’re
straight up
you know flipping i think they forgot
the other half of their business they
were going to buy and sell they just
forgot to sell yeah just kept yeah yeah
it’s pretty bad so again greg how can
people find you get part of your world
because you put out a lot of amazing
stuff
yeah gregdickerson.com all of my social
media channels youtube podcast
gregdickerson.com yeah do yourself a
favor and follow him he is a realist or
he is an entrepreneur through and
through he talked about a lot of things
that i don’t have experience and thus i
do not cover so gregdickerson.com thanks
bud yep