Video Closed Captioning:
good morning good afternoon good evening
folks michael’s uber one rental at a
time and we are so lucky to have our
weekly expert and tv star laura morby
how you doing laura
great how are you doing i’m doing very
very well thank you very much for being
a part of this i enjoy our conversations
every week especially because you have a
long history in real estate much like i
do so we’re gonna we’re gonna go back
and
we’re gonna talk about just how fun it
was to be in real estate in like
2005-2006
so before the crash
do you remember just how fun it was
everybody was making money it’s just a
good old time oh yeah if you had
if you were a realtor a loan officer you
were just
swimming in money you sneezed and you
sold five houses
and
also like homeowners were just you know
cashing out all of getting all these
crazy helocs and buying mercedes like
act like when people make jokes about
people getting key locks and buying
mercedes and taking european vacations
um i saw that i sold p-locks so
um and i know what they did with it and
they told me what they did with it so it
just yeah people were just living it up
yeah
yeah it was funny because it i mean i
was in real estate so about that time we
only had like seven or eight houses but
you go to real estate meetups and they
were jam-packed oh yes right i was going
to meet up the same meetup i went to
like 03 that would have 40 people and it
might have had 150 people in it in
october every everybody was making money
people i don’t know if it was the same
in arizona but where i lived in the bay
area
people were flipping contracts because
they were buying like where i live is a
condo community that was built in that
time
and people were flipping the contract
three or four times before the condo was
built and making 50 grand a pop it was
crazy yeah yeah 100
because it was just i mean especially if
you’re going to talk about new builds
too like that’s
something that it was almost impossible
to get you’d have lines out the door
when they were announcing that they were
going to release a couple more lots
and
it was it was just it was just a lot so
and then as we get closer and closer to
the peak to keep the party going what we
what i saw is the debt structure started
to change right you instead of getting
30-year loans because interest rates
were going up you would get adjustable
rate mortgages and interest only and
then you would get the really toxic
teaser you know the 2 and 28 where you
had a teaser eight and then it would
reset
um and that that last year was a lot of
fun but it was all built on bad bad debt
yeah
i mean yes
yeah i’m laughing at the type of
loans that people got that anybody
thought was a good idea or could
oh my gosh
yeah you remember those days it was yeah
it was fun until it wasn’t oh yeah i
mean
and what’s funny is oh my gosh i
yes yes crazy just unhinged almost yeah
well the reason i brought this up today
is um much like you and you and your
husband olivia and i are accredited
investors which means we get pitched
lots of um you know invest in my
syndication invest in my multi-family
all of these things right right
i got a pitch the other day
that screams single family 06 so let me
let me kind of
take the pitch and see if it’s any
similarities to housing because i think
it’s exactly the same
first off the person pitching it to you
oh hi little one is she right there
she said hi hi corbin are you just off
camera yes
if she wants to come on camera she can
but if not it’s okay
she’s okay all right well uh sorry i got
distracted by a cute kid uh so uh the
pitch i got was hey i’m buying this
really big class a class a so let’s
let’s be clear class a apartment
hundreds of units at a 3.5 cap
which in multi-family speak is a very
low cap rate um
let’s just say it’s fully priced or
fully valued
the first line of the pitch was i expect
cap rates to go down to 2.75
i’m like
really i mean you so so first off that’s
crazy second off it seems like single
family because don’t you remember single
family everything goes up i’m buying now
i’ll refi later it doesn’t matter that’s
that’s like the first red flag do you
remember that yeah of course yes okay so
now the
not a coup de grace they are getting
what um in the multi-family space is
called bridge debt meaning very short
yeah they’re getting interest only
and they’re going to be forced to refi
in two or three years i think it was
three years on this one right
and um
and again they keep pitching well cap
rates are going to go down cap rates are
going to go down and they have a bad
debt structure
this just feels we’re just we’re not
doing the same thing in resi or
residential but it seems like the sins
and the stupidity in oh six have now
moved to multi-family and i i’m like
what are you doing you’re you’re gonna
lose all of your limited partners money
it’s crazy
100
yeah
i mean yeah that is what was happening
in
just single-family residential
i mean that to be honest that’s exactly
what my dad did my dad did that same
exact thing he was like i’m gonna
build this big
you know two million dollar house and
i’ll get a construction bridge loan
and he was told
hey this is gonna continue to appreciate
we’re selling these faster than we can
build them
you’re going to be fine
and so as he’s building it he had it for
sale nothing happened nothing happened
and then by the time he had to refi to
permanent financing
the house was worth a fraction of what
was included yeah and then back then you
can mess around with appraisers yes
he just got another appraisal another
appraisal another appraisal that someone
gave you what you wanted
got permanent financing for 2.3 million
and then
by
that was in february and by july the
houses were 600 000. oh
like case yeah like in the toilet yeah
so like he was lucky enough that he
didn’t lose it
from the construction loan but he ended
up losing it after that yeah
and the reason this is so bad is this
general partner who’s out raising this
money is probably gonna get it
and again i did some math on my daily
financial news this morning we assumed
500 knoi we talked about three and a
half going to 2.75 or going to four and
a half which i think is far more likely
what’s gonna happen if it goes up to
four and a half is
essentially there’s gonna be two options
in three years one he’s gonna go have to
go back to the limited partners and
raise an additional 2.3 million dollars
yep which is possible or two he’s going
to have to sell the building and
basically uh after transaction costs
he’ll walk away scot-free
uh the lps will lose 100 of their money
yep
folks
be very careful when you’re
anytime you assume right your model
assumes price appreciation yeah i want
you i want you to remember the housing
recession the great housing recession
yeah if your model is built
on those assumptions and horrible
that structure interest only short term
don’t you dare touch those you are going
to light your money on fire and it’s
going to be painful would you agree
100 yes
yes this is like a double whammy of bad
yeah it’s just and you’re gonna again
this is the crazy thing you are going to
feel so good day one oh i’m a part of
this class a apartment in this fancy
state it’s all brand new 98 occupied i’m
a genius three years later you’d be like
terrible yes where’d my hundred grand go
where’d it go
100
yes this is oh that like that makes me
like almost feel like my heart is racing
i’m gonna have a panic attack and
nothing’s even happened yet but yes
don’t assume don’t make a massive
investment or any sort of investment
based on future market predictions that
you don’t
you don’t know for sure
yeah let’s just go
remember our conversations from zillow
last week or the week before what was
the number one thing they did wrong they
overpaid yep
this is the same thing oh my
god money at acquisition that’s just the
rule you know like how
how well you buy whatever it is
determining whether or not it’s a good
investment or not yeah and if you
overpay that point of acquisition which
again this syndicator was proud of hey i
i got the deal i overpaid i out i out
bid wall street well oh god
really that’s that’s oh no that’s that’s
that’s a good thing really you’re you’re
the highest bidder i know all right and
then he’s gonna be terrible that’s just
bad right and then again people are
going to be so happy to be a part of it
and then a you know three years from now
again it might work out if if cap rates
go from three and a half to 2.75 you win
i don’t know what the odds are laura but
they’re not great yeah they’re pretty
low yeah i mean i was going to say that
i was like maybe you know and then i was
like no it’s like slimming on here you
know the only thing i could say
but yeah
so
yeah i mean seriously i mean think about
that the 10-year treasury is at what 1.5
at one point do you go to one point at
what point do you take zero i mean if
you have an apartment building making
2.75 or a treasury at 1.5 i think i’m
taking the treasure given all the other
risks and apartments let alone if the
ten year goes up to two and a quarter
are you kidding me
what a nightmare i’m i’m nervous for
this person and they feel bad for
everyone who’s investing so well you got
to feel bad for everybody investing
because the general partner’s not going
to have any money in the deal or very
little they’re going to get paid fees up
the wazoo for acquisition and management
they’re going to be fine
but every lp i mean listen to the daily
financial news the last five minutes we
do math and the lps lose 100
if the cap rate only goes to 4.5
oh
nothing like a little something to make
you sick so
good thing that you pay attention and
you knew right away absolutely not run i
mean can you imagine if you got excited
about that my gosh
terrible so yeah folks this is happening
across the board i see many many many
many deals that are like this now
because again the last couple years what
we’ve had so surprise cap rate
compression which means they’ve gone
from six to four they’ve gone from seven
to five you made a lot of money yeah but
but again the fed made you the federal
reserve took rates to nothing they threw
gazillion dollars in the market you got
lucky right fed is extracting themselves
from the equation
you’re not going to get lucky twice so
yeah
and again if you need a reminder go look
and see what happened to residential
because that is the same thing that’s
happening in multi-family today right
laura 100 yes it’s exactly the same
exactly the same awesome so be careful
be careful yes
yeah sorry it’s okay it’s real life it’s
perfectly okay so laura how can people
follow you because you have an amazing
instagram page um my instagram is just
my name more more be no spaces but yeah
i would love that awesome thanks laura
thank you