Video Closed Captioning:
good morning good afternoon good evening
folks michael’s uber one rental at a
time it is thursday and you know what
that means
the three amigos are back how you doing
dion
howdy doing great ready for round two i
really look forward to thursdays yeah
thursdays are a lot of fun for me as
well how you doing matt
i look forward to thursdays as well i’m
ready to go as much as i can be awesome
well guys one of the things that i
i’ve been talking about you’ve heard me
and we’ve all talked about it is i
believe a housing slowdown is coming not
a crash
and sometimes it’s hard to articulate
what a slowdown mean because everybody
hears the word slowdown and they think
crash i’m like those words are not
connected right the slowdown might mean
less transaction but not necessarily
lower prices so lo and behold we have
this private facebook group that’s
attached to my course right uh how to
get started one rental at a time
uh one of my very early students posted
a picture of a house he just got
just closed on and he gave us some
numbers and so i printed it out
i will show it on the camera
i was going to show it on the computer
and realize that my camera is up here
now so
i guess you can’t really see that
anyways here’s the house looks like a
little cute house with a high-pitched
roof but here’s the important part
the house is listed on october 5th 21
for 95 grand
i’m sure the person that listed that was
probably reaching it was still the
market was kind of hot
so they were probably reaching
uh looks like three weeks later
no nibbles no bites they probably they
brought it down to a price that was
probably more realistic
at let’s just call it 90 grand five
dollars short of 90 grand 89.995
this stayed on the market it went on and
off a couple of different times and our
student closed on march 2nd
for 78
000
that’s awesome
so again
first listing in october closes in march
that’s rough and tough six months yeah
this is what a housing slowdown looks
like
because what you’re not seeing behind
these numbers and the fact that i’ve
done this for so long is
somebody bring something out
and they go for the moon especially in
the market we were just out how many of
us have seen a price in anything in our
buy box that you’re like i can’t believe
they’re asking that and then it’s sold
i’m sure you guys have seen that what do
you think
well actually my brain went in like
three different directions i’m gonna
grab one of them
uh
the danger to investing at a distance
is is when you see a deal that comes out
on the market of 90 95 000.
in my area a falling down shack that
needs at least a hundred thousand
dollars worth of repairs goes for 300
- that’s a house for 300 000 would
need a hundred thousand dollars and work
so you look at a market where 90 or 95
it looks really good there is a reason
why all of the local investors whose
investors who are looking at the market
every day have passed on it because its
value was in the 70s
because a house is worth what somebody’s
willing to pay so in this case luckily a
distance investor didn’t find a bad deal
and jump on it yes
and um
the one thing that can lower housing
prices it’s it’s not it’s not rates it’s
not wages it’s not
war it’s not the only thing on the
planet that lowers the price of a house
is time on market
no matter what happens with comps when a
seller lists something the longer it
sits on the market
that’s what causes the price to come
down
so a slowdown
means that
and it can be prices don’t go up as fast
because people were making over asking
offers waiving contingencies that goes
away so now they’re still going up
that’s the slowdown yeah it doesn’t mean
that they drop it it might mean that
it becomes harder to find the right
deals
if rates go up and prices go up and
rents don’t oh that’s the three factors
then it becomes harder to find the deal
and so someone like me who buys one or
two properties a year i might not even
notice yeah exactly it is just that when
it’s time to look for a property it
takes me you know one week to four weeks
and somewhere in there i’ll find one but
that person that’s buying five to ten
fifteen deals a year
they might notice a slowdown absolutely
they might do two or three transactions
instead of ten
yeah
very cool and matt what were your
takeaways from that uh
look you know
yeah i mean we’re seeing and you know
we’re seeing a little bit of inventory
come on
um
and it’s just stupid price it’s just
that’s where i mean why not right i mean
the whole idea is i just need one i just
need one stupid buyer so let’s put it at
20 you know this is like 20 higher than
it ultimately sells for right why not
yeah they just need one
just need one and two is even better
yeah two you know but yeah but and you
find that and so yeah i saw i’ve seen a
couple
um one came on this week and i’m just i
sent it to a bunch of buddies of mine i
was just like
i want whatever they’re smoking yeah
exactly this is some good stuff that is
that stuff is clearly expensive and they
need to sell the house for that much to
cover their expenses
like it’s the number was insanity and
you know the uh the the cost was
i want to say the house was put on the
market for right around 400 and it’s a
duplex and the rents are 1900 bucks
wow
like
yeah
yeah you know and it’s just like i mean
i guess you can try it but that house
will not appraise that house i mean that
house is and and i’ve actually seen that
house i saw the house five years ago
so i’m pretty sure it didn’t get that
much better with age based on everything
i’m seeing from the outside so yeah i
think you look at it and you say
now is the time better than it ever has
been to do the homework understand what
you’re doing really understand your
market
and then when that one sits other people
don’t go back and revisit so that might
sit for 60 days it might sit for 30 days
it might go in another contract a couple
times because i know it has some
inspection issues yeah i’ll you know and
for me
i actually made an offer on that
property probably six months ago at
three and a quarter yeah and to me it
was worth three and a quarter and it
probably still is worth about that so if
i can get a 75 000 discount over
you know over a list price yeah
it’s 25 off yeah so the other thing i
really i love about this example is it’s
somebody that’s just doing the work
you’ve got to be patient right a slow
down is just that you go from 100 to 80
to 60. it doesn’t go to a high it’s not
a rug pull as meat kevin loves to say
housing doesn’t work that way
right it’s listed on the fifth it has
its first price drop three weeks later
when they get the reach price
and then you close at 78. the second is
he’s he knows the dates that the price
drops that’s why you build your
spreadsheet you have a buy box you build
a spreadsheet you add dates when did it
happen when did it come on when did it
come up when did it do this
all of that data is interesting because
when it’s slow down happens
you’re going to find the motivated
seller because one of two things are
happening in this house right in this
house right here one of two things are
going to happen
one the seller needs out some way they
will eventually accept some price and in
this case the right answer was 78 grand
almost 20 below
what he was asking for because he needed
he or she needed out
the other answer could have been
i don’t need to be out that bad you guys
don’t understand my house is special
i’ll wait it’s worth
90 grand and if i don’t get my number i
will take it off the market and sell it
later those are the only two options
we’ve we we saw that we actually watched
a house
um very close to our own
that went on the market first it went on
the market two years ago at 9.95 okay
it just sold for 1.175
same owners
same owners
they chased the market up oh so they
listed it didn’t get it listed higher
they went 9.95 didn’t get it i know what
the problem is the price is too low
let’s do it for 1-1
and then didn’t get that and then they
were offered 9.95 on the 1-1 and they
didn’t take it
and then they were like i know what the
problem is we didn’t raise the price
high enough and so then they raised it
to 1.25 million
and
and then we’re sitting there and i’m
laughing and i was like this just seems
completely counterintuitive to me i
don’t get it but their position was
we don’t need to leave
and when we do leave we’re going to get
our number now you can die on that hill
you could lenny you better be ready to
stay there plenty have died on that hill
but for them it was we know that there’s
a tight enough inventory that will
eventually get what we need and you know
what they got 1.175 million
which is
nuts
it’s not it wasn’t worth the 9.95
it’s still not worth the 9.95 and the
crazy thing is the people who bought it
guess what cash buyer don’t care gonna
be here three months a year that’s what
they bought the house for
they’re not even gonna move into it
full-time it’s a three it’s a three or
four month a year house
and they and they wrote the check and
they’re just like hey that’s great and
i’m just sitting there going
i think we got to sell our house
actually
[Laughter]
so
yeah matt you say this often it’s only
math right yeah okay
but there are there’s there’s
kindergarten grade school high school
college right
when we first look at real estate we
think if i buy cash i don’t have
leverage so i’m i have the safest
position and possibly the best cash on
cash return because i don’t have any
leverage but then we think if i do a
smaller down payment we learn the math i
can gain appreciation on four times what
i put into this because
the bank isn’t getting the appreciation
on the leverage
and then we go
what’s my cash on cash return versus my
cash on equity return so cash on equity
is where biggerpockets just did that
thing of don’t use cash on cash use cash
on equity so they’re trying to explain
that there’s another another level above
that
um that you basically just referenced
and most investors do i look at my
market i know what’s good i’ll buy the
great deals and then that person just
bought a negative cash flow terrible
deal i never would have done so our
brain says that’s a bad deal
north colorado dawn uh in my live stream
the other day basically kind of said
something similar i can’t believe people
are paying this price
the next level of math
is when we recycle capital there are
people who don’t look at the cash on
cash return of the amount of capital
they’re investing they’re looking at the
cash on cash return of that original
investment
if they buy a hundred thousand dollar
house for twenty thousand down
eventually it gets paid off they take
that out and they they take the and the
house is appreciated to two or three
hundred thousand they sell it they ten
thirty one that two or three hundred
thousand into the next property they’re
looking at with a twenty thousand dollar
investment i’m getting a cash on cash
return of six hundred percent that’s
right because the numbers have scaled
they can buy a bad deal and there are
people who do they look at the math that
way
so when we see it
we always talk about the crystal ball of
knowing what’s going to happen in the
future with real estate we don’t have a
crystal ball to see what’s in the mind
of the other buyers and the other
sellers and what their position is so as
an investor when we see somebody else
that took a deal we never would have
taken
there are factors we don’t see
and until that goes away
we’re not really going to see the big
housing slowdown people expect it it
gets harder and harder to find a place
so we talk about people that want to
have their starter home and sell it to
their their next home
but when there’s limited inventory and
they need to because of family size
growth or they need to move the parents
in or whatever the change is
we’ll start to see deals happen more and
more where it looks like that person’s
losing a ton of money
we would lose money if we did the down
payment we would need to buy it
but if they’re recycling capital
and they’re looking at the math that way
i think we’ll see that happen more and
more yeah
i mean that that that house sold in
2013
for 5.85
and it just sold for one one seven
one one seven five a double yeah
so that person who had it has all of
that capital that just came in to put
somewhere else and could
buy what looks like a bad deal because
they’re basing on whatever it took to
buy the five something when they got it
instead of what they’re actually getting
when they sell i’m not saying that’s
smart or the right way to go i’m saying
some people do that
well and it just also shows you too it’s
like these people that bought this house
are out of market
yeah of course right they’re at a market
they don’t they’re not sitting there
going man
that’s crazy for that area
only all of us silly locals are right so
and we saw that a lot like when we put
our house before this one on the market
um that we moved that we sold that i’d
redone we had 13 showings the first
weekend this was two years ago before
covid we had
all these showings and the crazy thing
about it was is that with those 13
showings 12 out of the 13 were people
that were out of state
and so it’s just again what’s really
amazing to me is i think it’s amazing
that people that are even looking to
make the most expensive purchase that
they’re ever going to make in their
lives
don’t do enough research in the market
that they’re buying to really understand
is this historically a oh my word number
that
maybe i’ll never touch it again because
1175 i mean hopefully they’re
comfortable there
because i mean it was on for 1.25 for a
year
yeah and didn’t never sell so clearly
they never got to the one one seven five
yeah
so again what this video really is for
me folks is the housing slowdown is
coming you’re only going to see it if
you’re doing the work it takes daily
discipline write down the dates things
happen
the real estate market does not rug pull
you it takes days weeks and months for
you to see
so track what’s happening track when
things change when they come off and
they go and again you will be able to
get deals and the best thing about this
when you do the work
is you will find the motivated seller
this person clearly got motivated
they clearly want it out
because if they didn’t they just would
have took it off the market
that would they only had two options by
being on the market from february or
october 5th
until sometime in february would close
march 2nd
you learned something you just learned
so pay attention daily discipline look
at your buy box don’t get distracted do
the work talk to more people the housing
slowdown is where you’re going to get
your great deals but it takes work
don’t be lazy
dion how can people find you
right here on youtube dion talk
financial freedom live streams are
tuesday afternoons 4 p.m that lasts as
long as the questions do that’s so
awesome and matt lumberjack lander on
youtube sunday mornings 11 30 a.m
eastern time
for the live stream and lumberjack
landlord on instagram
very cool thanks guys thanks ciao