Was 2006 Housing Market Crazier than 2021? Does Job Loss Lower Wage Inflation? Buy a House or 4 Unit

Closed Caption:

good morning good afternoon good evening

folks michael zuber one rental at a time

back with the man myth the legend

somebody doing something for all of us

which we must thank him for millennial

mike how you doing sir

i’m good thanks for having me on as

always i still can’t believe you

volunteered to go through all of my

comments to find the ones that we need

to go deeper on i greatly appreciate it

uh as somebody who does watch all the

comments i don’t have time to give

detailed answers so the fact that you

will go through find the good ones the

heaters the ones that we should go

deeper on uh means the world to me so uh

what’d you find this week

yeah so we actually have uh we’ve got a

good list of questions this week some of

them projections you know for all the

people out there always like mike why do

you make projections

because people in the comments want to

know your opinion so we’ll get to those

we’ve got some projections some

questions about the economy um but i

actually thought this was a great way to

start so you always talk about doing the

work developing a buy box this applies

to investors looking to buy their first

deal but

the youtube user lo sierra she asked and

she says i came over to your channel and

the buy box concept intrigued me i tried

to do one with an excel spreadsheet but

i’m not sure how a first-time home buyer

can use this so how do you think a

first-time home buyer not interested in

owning rentals

can use the concept of a buy box to get

a great deal on a home purchase

that is a very good question uh so i do

think the buy box idea plays through uh

again i’ve only ever bought

one home to live in right we bought a

home in 99 and we’ve never moved but we

had a buy box for us it was a uh we had

two school systems

that we were willing to live in uh and

we had a price point right we had a

can’t go above right because we were

tapped out right we were making 40 45

grand a year or something in in 99.

so that was that was it for us and we

wanted three bedrooms i’m sorry there

was a third right we we wanted a bedroom

for olivia and i one for our daughter

and then an extra one for guests or

office or whatnot

so that is a buy box and

so i do think it applies i think most

people probably have a bigger buy box

than we did because we were i mean let’s

not let’s speak very very very clear our

number one thing uh was a school system

we we were renting in the best school

system

uh in our area cupertino california and

we would have we would have rented the

whole time to be in that school system

for our daughter

uh unless we were able to buy something

which we struggled for for for a couple

of years to to make happen

but i think everybody does

i think every homeowner has a buy box i

think

and you know if you look at my

spreadsheet the the

the all the expenses and all of that

yield calculation doesn’t matter but i

think you have a search criteria i think

you should look at it i think in a

market that’s slowing down you should

see trends i think again i would tell

every homeowner

uh i would not look at first day

listings unless you’re in a super hot

market for me days on market i want

motivation i can tell you as an investor

or a homeowner when you could deal with

a seller that’s motivated

it’s better right get don’t pay list pay

less than list get closing costs credit

get rate buy downs

um the market is slowing down

in most areas some florida still hot

some other areas still hot but

yeah i think i think i think it applies

it’s obviously not as much a math

equation but the daily discipline

that is built behind the buy box i think

it still plays at least it did for us

yeah i mean you know the reason why you

have a buy box so you can start to

figure out and accurately compare and

contrast the yield of a property versus

the yield of another property and so you

can find the best deal from a yield

perspective well if you’re not

interested in yield instead you just

name your own most important quality you

know for you it was a school district so

okay well what what’s the best value i

can get and still be in this school

district i mean so yeah but but at the

end of the day doing the daily work

looking at the market every day those

principles are going to help you

recognize the good deal the great value

in the neighborhood you want when it

comes your way so well that’s not let’s

not forget the last part of a buy box it

also tells you what to avoid

i can’t tell you how many homeowners

like hey i want to live in this area

and then they hear somebody say oh a new

development is springing up over there

well that’s not over i mean yeah so a

buy box is is focus and daily discipline

but it also is permission not to get

distracted

nope agreed okay so let’s move on to uh

the topic of a wage growth versus

inflation you’ve touched on this a few

times jt12 asks he says you’re literally

the only person i know who thinks wages

are keeping up and your response was to

say i didn’t say that they were keeping

up

six percent wages with eight and a half

percent inflation is not keeping up can

you elaborate uh for us your opinion on

wage growth yeah i’m glad you i’m glad

you caught this one um

so again i’m gonna be very clear

in a world of eight and a half percent

cpi and wage inflation of six percent

that is not keeping up in fact you just

do this math you’re everybody’s falling

behind if you’re not getting a 10 raise

you’re falling behind

my point about wages is to look out

years from now

i believe the wage spiral inflation i

believe

um i believe it’s just started i believe

cpi is going to keep coming down

headline

um

and i do believe wages maybe next year

maybe the year after wages will be up

six cpi will be four so you will be

getting ahead but you’re not getting

ahead today

i believe

housing affordability is a problem it’s

near record lows

if you follow affordability there are

three factors

that affect it

most people on youtube

scream price

and believe me i want them to be right i

would love a 50 crash i just don’t see

it and i can’t be intellectually

dishonest

just to earn a penny with crash videos

others can others will sell their soul

for a penny i won’t

um

so price is one

next is rate

i actually think rates are going to go

up at least in the short term meaning

the next year or so which means

affordability gets worse

and then there’s number three wages

i believe over the next decade

wages will be above trend right trend

inflation is one percent real right

going up

i think it’s going to be above that i

think we are going to bring

manufa i just i want to believe we’re

going to bring manufacturing home we

have more jobs than people which means

you have to pay them i think we’re going

to have a good year i think unions

unions are picking up right starbucks

and amazon

all these other places and unions will

drive wages higher

so i think wages go up i think

i think real estate generally speaking

is flat

uh for five years and wages increase

which will mean affordability slowly

gets better and then if wages if prices

are flat

wages go up and then rates eventually

come down

magically affordability looks better

everybody wants to talk price crash and

dude believe me i would be such a much i

would be so much bigger of a channel if

i

could intellectually see that

i just don’t and won’t won’t sell out

for a penny

right right well one more question on

wage growth this one’s from jeff m and

he kind of touches on some of the topics

you mentioned he says hey i thought of

something you said that housing will

probably stay flat for around five years

until wages catch up

oh uh over those five years at a rate of

five point five percent a year wage

growth or you said maybe six percent

wage growth year over year um but he

goes

you said that that would make housing

affordable but why would wages continue

to go up if we’re about to hit a

recession do you think that’s going to

possibly counteract any of your theory

if we start to see layoffs

so again it’ll be the question so

the question really is where will the

layoffs occur

right again i think i think

i believe what we’re heading into is a

white collar recession not a blue collar

recession

i believe if you go back and you really

peel back the numbers where

where really the jobs are

they’re more blue-collar service

job-oriented and that’s where the wage

inflation is actually most meaningful

and well is accelerating the fastest

so

i see a recession that’s very much

white-collar

recession

uh not blue-collar uh i don’t think i

don’t think a recession

at least by the one that i see coming is

big enough

to really pull back right we’re at three

and a half percent unemployment right

for most of my adult career economists

were trained at six percent with full

employment

think about that we could almost double

and be at the historical full employment

so

i do think a recession is coming i think

recessions are natural i think one is

required i think this should be deeper

and longer than most

but that doesn’t mean wages have to go

down in fact i think i think wages go up

from here so

i don’t i there’s not a one-to-one

relationship i think i think it’s it’ll

be a white-collar recession and i i

think there’s

wage inflation in blue-collar in trades

and

uh for years to come i think

yeah and on unemployment it peaked at 10

during the great recession so we would

have to triple where we are at right now

to get to where we were back then

okay so here’s a scenario based question

about how to properly scale i thought

this was a good one but it’s a little

bit longer but um you’re one of your

subscribers denzel falcon he says

i’m currently in a duplex house hacking

with my wife fantastic great start um

we’re currently saving for our next

rental we have opportunities to either

house hack a triplex or

purchase a single family and slowly

build up and buy a new single family

every year for around a hundred thousand

dollars a single family home the triplex

is over three hundred and fifty thousand

000

but the rents will pay the mortgage and

we can cash flow the unit we’re

currently living in

so his question is

we are hesitant to take on so much debt

so quickly to the point where we can’t

be flexible what do you think is the

best way to scale buy the triplex now

for 350 or single family houses one at a

time for a hundred thousand a year

so i think i replied to that comment

do you have my reply i didn’t keep the

reply was long so sorry about that

that’s okay no i i did yeah

every once in a while i go i gotta

answer this one better

um so i think my net answer was

i buy the best yield

yep right that is what it was i remember

yeah because again

the debt level doesn’t bother me it’s

it’s it’s return on capital

that that’s that’s what the game is as

an investor

you know if i’m gonna put out

30 000 am i getting

10 back

that’s 3 000 bucks it might if but if i

put out 15 000 and i only get 500 back

that’s a percent return

you might feel better

buying the house but your return is way

less

so historically speaking and i don’t

know this example or their market or any

of those things

i don’t think the answer is buying a

house or triplex i think the answer is

go buy a fourplex every every time i’ve

done the math

a fourplex house hack you get paid to

live there

that’s that’s the best return so again

with those two comparisons without

knowing them or their situation or their

market or anything

if the debt level doesn’t bother me it’s

what is the best return on capital i

call it yield cash on cash

that’s all i drive

it’s

that’s that’s my driving factor but you

know in closing

i never want an investment to stress you

out

so if you are dave ramsey-esque

and having a 270 000 mortgage will freak

you out on a triplex but you feel better

at 80k

well then it doesn’t matter what i say

it doesn’t matter i don’t want you to

not sleep at night because you got this

270 grand even if it has a better yield

i don’t care about the debt level but if

you do then you do you

yeah i think as someone myself who’s a

lot closer to the beginning of their

real estate investment journey than you

are you have built up the muscle

to to

not be afraid of

taking on too much but when you’re just

starting out as i was in my first duplex

house act it’s intimidating yeah to

start to stretch yourself and well what

if something happened you know but you

get to a point where you recognize that

the rents cover the mortgages you’ve

done the work up front you’ve done the

due diligence the property’s gonna cash

flow it’s just hard to take that next

step so like mike said

if you’re too stressed out and too

nervous then don’t do it absolutely

but if you want the mathematical on it

dude the four plex is going to be the

better investment go find a fourplex

alrighty next question

quick one on retirement accounts

from e south he says do you recommend

investing into a 401k with employer

matching six percent or

should i use that money to purchase a

home

so again i can i don’t give financial

advice i can only tell you my experience

in this situation i always wanted the

company match

my companies did allow me once you’ve

worked there a year to borrow 50 or up

to 50k

so i did that i i used my 401k probably

six times to buy properties i

contributed they matched i borrowed 50

tax-free i paid myself back interest it

was magical i thought it was free money

um

so that’s what i did uh i you know i

would i have done that if i couldn’t

take a loan out probably

taking a loan out made it a no-brainer

for me

um but i probably still would have taken

the company match

yeah i probably yeah you know that’s 100

game just

but because i could get the gain and

borrow it was a no-brainer that’s what i

did

right right yeah um

so

there’s a lot of different things roth

iras 401ks you know some people have

deferred comp through a government

pension plan like i do ultimately you

know you kind of need to be an expert on

your own options out there it does seem

a little foolish to leave 100 gain money

on the table but that being said with

what i’ve got with my retirement program

i could put a lot of money in and i know

that my money will better be served if i

save it keep it and put it into real

estate so that’s one of the things that

i’ve chosen to do nice

okay predictions predictions karthik heb

where do you think interest rates will

be in a two to five year time frame if

feds keep raising above three and a half

fed fund rates so mike crystal ball what

do you think yeah my crystal ball is

broken everyone else i do love taking

these guesses because i like frankly why

do i do this all the time because i like

to beat the experts right all these

talking heads on tvs i like to beat them

beat them so

i’ll kind of give a couple of answers so

i think i think we end the year close to

six or six one

uh which is up from where we are

uh i think we probably peak somewhere

next year in the high sixes

and then i think we naturally end up

three to five years in the fives

that’s kind of where i’m at

okay so i got a follow-up question from

me about those ones please so if you’re

if your prediction is we’re going to be

six and a half you know maybe five and a

half to six and a half as we move

forward

for those individuals who are

considering sitting on the sideline not

buying or maybe they took advice to sit

on the sidelines and not buy real estate

how will the inc the doubling of

interest rates from last year to your

prediction of what it’s going to be over

the next five years affect their

affordability and monthly payment when

it comes to overpaying for real estate

well let’s just let’s just play it out

right let’s say a four let’s say rates

are five percent

um

i don’t know three years from now

and

prices aren’t crashing right maybe

they’re maybe if you’re in boise or some

other markets are going to be down in in

reality um

it’s just going to be more expensive it

just is uh unfortunately people who are

calling for a crash last year don’t

understand math it was the best year

ever to buy

mathematically saying um

the year before that was the second best

year to buy

these people owe you money for telling

you a crash was coming

um

trying to time the market is rough make

sure you get 30-year fixed rate debt

make sure it’s locked in make sure cash

flows day one

make sure you can afford the payment no

stretching

um don’t don’t you know back to the

earlier question don’t stress yourself

out

and um

yeah

it’s it’s

housing it’s it’s we’re not going back

to 2010 i’m i’m sorry it’s not gonna

come not gonna happen even though i wish

it did it’s just not gonna happen

i did a little bit of math

which is a scary concept as a police

officer but i did a little bit just a

skosh

and a 500 000 house at a three and a

half percent interest rate is a twenty

four hundred dollar a month payment

a four hundred thousand dollar house

at a six and a half percent interest

rate is a twenty five hundred dollar a

month payment

so even if prices crash twenty percent

which is what most people define a crash

500k to 400k crashed 20

because interest rates went from three

and a half to six and a half which is an

actual factual thing that has happened

unlike the crash of prices the monthly

payment went up so who’s really

overpaying

yeah i agree

okay um couple questions left this one’s

just a

pretty easy rapid fire from monica

goldemaz she goes how

can i grow my circle you talk about

networking all the time

yeah the beauty about real estate folks

in the game

we all like to talk and share and

experience so the biggest thing i would

do is is uh put yourself out there if

you if you can go to local meetups go to

local meetups join facebook groups uh

join bigger pockets groups in the areas

be a someone who contributes

and then just ask for referrals don’t be

a taker first

uh give what you can even if you’re a

novice you can answer questions at least

with your opinion and then ask for

referrals that’s that’s the biggest

thing that i tell people i think it’s

number four number five of my seven

rules is you gotta meet two new people a

week and the easiest thing to do is ask

for referrals if you’re in gary indiana

and you bump into millennial mic in a

facebook group ask them for a referral

hey who do you recommend for this or

that

people in real estate generally will

help others

so just ask be a good person don’t just

take give first

simple

totally agree

all right uh another question from jeff

m and this is a good one okay for those

of us out there mike who uh

were just kids during the last crash

right i was 17 in 2008. so jeff m asks

he goes mike you talk about consumer

sentiment how was the atmosphere in 2006

i was too young i know realtors were

saying oh it’s a great time to buy but

were there people at that time saying

that the market was overvalued then like

we’re currently saying today

uh i would say so if we if we put in my

2005-2006 hat it was the it was

it was bananas there was money

everywhere

um

[Music]

i’m trying it it was it’s it kind of had

a game stop

amc

meme it kind of had a meme stock feel

everybody thought it would go up forever

they were lending you didn’t actually

have to have a loan i mean you could

almost i remember filling out not

filling out signing a blank loan

application

that’s how stupid the lending was

um

yeah it was it was it was unhealthy it

was really bad and

it had to it had to explode

it just had to the movie the big short

people look at that like that didn’t

happen it happened

you know fight you know strippers exotic

dancers gardeners having five six seven

homes all on these stupid teaser loans

it was it was bad it was really bad and

there was only a few voices

bruce norris saved us i wrote about it

my first book i go to a meetup all

excited we have eight houses michael

and um we’re trying to buy number nine

and can’t cause again 30-year fixed cash

flow so i never did one of those exotic

loans

and um

[Music]

yeah bruce norris saved us

he was one of the few voices screaming

caution caution caution

he actually created a report i think you

can go google it called the california

crash

people should research this

um california crash he did it i think he

did it like 2006. and then he did

another one in like 2010 called the

california comeback

bruce norris is the o.g

and um

yeah he he saved us he saved us for sure

he was crazy in 06.

yeah i was going to say the only one i

could think of was peter because

he’s been calling for a crash for the

last 40 years yeah yeah i don’t know if

he gets credit

broken clocks broken clocks

uh okay rapid fire uh mario a asks

michael where can i find your 52-year

history chart you keep referencing i

appreciate the help

yeah so i had to put it somewhere where

everybody can get it and i’m not a

techie so teachable is where the

who hosts my courses

so i have a free course anybody can get

and it’s right there in the bonus

section so don’t pay me a dime you do

have to log into teachable and get it’s

my in my free course it’s in the paid

courses too but

go to the free course it’s right there

right right okay very last question this

is a good one this is what would young

mike say

so holly’s buddy

asks you’re speaking to over 200 people

at the event that you went to this last

week and your favorite course in college

was public speaking how would the

freshman in college young michael zuber

think if he knew this is where you would

end up and this is what you would be

doing so what would younger you think of

where you’re at right now

yeah

he wouldn’t believe you

i was an introvert i mean people may not

realize that i i i could i could be in a

room of 200 people and not say a word

and be totally okay all right i was the

fly on the wall not very social didn’t

have a lot of friends

or just

you know the only time i would ever get

engaged if there was a ball involved

right soccer basketball football

baseball

that was kind of my jam

but even that’s really a solitary thing

right you’re not really interacting

so i was this i was i would not have

believed you you were if you were told

me i’d have been up in front of 200

people and and and talk

i had no power i had no powerpoint i was

just talking

i would have not believed i would have i

would have bet thousands of dollars that

i didn’t frankly have at the time that

that wouldn’t be true

well those are all the questions that we

have for this week there weren’t any any

that were too particularly spicy so to

those folks down in the comments section

leave us something controversial or just

keep the good questions coming that’s

all we got mike so

sign us off i appreciate it mike again

thank you for doing this uh i look

forward to this session i know the

audience does uh where can people find

you

yeah if you just uh google or instagram

or youtube millennial mike oh and thank

you because thanks to you this morning

business insider just published an

article about me

little old me i made it ah we will make

that topic number two thanks buddy

sounds good

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