Financial Independence through Real Estate: A One Rental At A Time Story

Hey, what's up listeners, Jeff Zimfer. Welcome to this episode of the mortgage marketing radio podcast. Thank you. Thank you so much for tuning in. If you're new here, appreciate you finding us would love to know how you found us. Feel free to connect with me over on Facebook on the in the group for the podcast, which is mortgage marketing radio. I'll link that up in the show notes. Continue the conversation over there. And also if you've been here for a while listening, hey, really, really appreciate you as well. If you're so inclined, wherever you're listening to this podcast, grab the app, tap it, go to the reliever review and I'd love if you wouldn't mind leaving us a review if you feel so inclined to do so. Thank you so much. Before we get into this week's special guest, of course, I've got a couple of other success stories from the streets. You know that this is the place that we help originators move from solicitor and vendor to partner and peer when you are seeking agent relationships, conversations and engagement, how you approach them matters. Too often originators start and remain in the position of solicitor and vendor instead of entering the conversation with the perception and positioning of a partner and here. And that's what we do. We help you enter the conversation and the awareness stage with real estate agents in your market as a partner and peer. Why is that relevant for you? Because well, you want trust to go up, you want a resistance to go down and you want conversations to be facilitated that lead to contracts. Conversations equals contracts and if you can reach agents at scale, right, you're going to get to the results that you want to get to that much more quickly. So part of the game here with real estate agents is one, how you approach them, how you're perceived, but then secondly is. You know, the conversation that you have and what is the value proposition that's presented that's why at my agent classes, we help originators lead with education so that they do enter the conversation as a partner and peer. And case in point, one quick case study to share with you from one of our favorite numbers, Carmella, if you're listening, Carmella, shout out to you. Carmella took a little break from teaching the agent classes that we offer in our platform. And she just posted in our Facebook group that she's back and the win of the week for her was that while she was away, right, taking some downtime she needed. She got a call from an agent with five agents on her team. The agent asked Carmella if she could attend the next meeting to do a digital audit for her agents, she said that her team's New Year's resolutions to be more president on social media. And when she reached out to Carmella, she was aware that Carmella was already teaching agent classes and helping agents with their digital presence. By the way, that's one of the things we do in our group is we help equip and how are you to be able to perform these digital audits for real estate agents virtually or in person. And Carmella is obviously proven that building a brand position of leading with education and adding value attracts people to you instead of chasing. How awesome is that that an agent who has five agents on her team recognizes Carmella as doing that uniquely indifferent in her market and reaches out to Carmella and says, Hey, can you come do this for my team. That's called positioning folks. So if you want to learn more how we do that and the other tools and resources we've gotten our platform at my agent classes, you could just go book a call with me go to mortgage marketing.pro and grab a time on my calendar and let's see if it's the right fit for you. Alright, so this week my special guest is author Michael Zuber. If you ever thought about real estate investing. I mean, some of you obviously may already be investing real estate. Some of you may be thinking about it might want some more information or direction on it. But Michael's got an interesting story and he happened to be in Vegas recently and sat down in person. We had a conversation. Michael's the offer author of the book one rental at a time the journey to financial independence through real estate. And Michael had a 15 year journey to his financial independence. He was working a nine to five job as a software sales executive in Silicon Valley and decided he wanted something different, something more. And his goal now is to help 1000 individuals understand the power of rental properties that he understands it as one rental at a time to build positive cash flow. And we're going to go through Michael's journey and how he became a real estate investor and some of the strategies he uses to, you know, be successful and investor. And earning some really nice substantial residual profits on his properties. But we get into all kinds of things right the market, the real estate housing, what's coming. Michael's also the host of a show on YouTube, but you have to check out it is called one rental at a time. And we're going to put a link to that in the show notes as well. Michael has 12,000 videos on his YouTube channel. Pretty amazing. And he's just a straightforward candidate guy and I think what's cool about someone like Michael is because he's in the trenches every single day, both for himself and his own portfolio, but for other people and his students that he has a really great pulse on housing, right. And from from the both an investor, a buyer level, right, just the average every day, potential homeowner, I think it really, really enjoy this conversation. And then if you're someone client, you know, go check out its book, we'll put a link to that in the show notes as well. The book is available on Amazon one rental at a time. And I have read that book and it's a fantastic book about real estate investing as a matter of fact, it has currently 1,355 ratings with a 4.7 rating status on Amazon. So definitely worth go checking out check out his podcast as well and just enjoy this episode. Hope you do without further ado. Let's get into this week's show. Michael, welcome to the show. Thank you. Thank you for making time. I know your busy guy got a lot going on, 50,000 plus YouTube subscribers, a book, one rental at a time. For those who aren't familiar with you, we're obviously going to unpack this. We're going to talk real estate investing. Give us the brief background or who are you? What do you do? So I think my story is probably most interested the audience because it doesn't really start till 30, right? So I magentax, which means I was raised to go to school, get a good job, work hard, climb the corporate ladder, retire 65 and you know life happens. I start investing in stocks in 2000, maybe 1999. I turned seven grand into 200 grand. I think I'm living the dream. Yeah. Unfortunately, some of my later investments in in-ron in world comm did not turn out well. And that 200 grand quickly dropped by 80%. And I was depressed, right? I was 30 years old. I'd accomplished something. I was taking care of my family and now I lost seemingly all of it in reality that were still 40 grand left, but it didn't feel that way. So I remember walking through a physical bookstore and finding the purple book that a lot of my generation found called Rich Dad Portad. And this is still embarrassing to me after all these years. I have an advanced degree. I have an econ degree. I was an accountant. And I never thought about real estate investing. Nobody in my world or my universe owned rental properties. Didn't even know was a thing. And it changed my life. It set me on a new path because I realized that the stock market in today's ilk crypto is all a casino. And I wasn't smart enough or aligned enough or connected enough to make, hey, I was eventually going to bust out. But I knew real estate was physical. I knew it had been around forever. When you hear these stats, about 90% of millionaires make it in real estate. It was just like, okay, I can figure this out. So unfortunately, I lived in the Bay Area Mountain View, California specifically. So I wasted a year trying to invest in my backyard because after you read Rich Dad Portad, which is a mine shift book, it's not a how to book. You read every other book. And all the other books said, invest in your backyard because it's close. It doesn't work. It didn't work for me. After a year, my wife Olivia, who is far smarter than I sat me down and says, we're going to try some different because I'm done looking at houses with you. And we pull out a California map. We find Fresno, California. And, you know, we never stopped. We ended up buying a property there about two or three months later, 18, 18 or strives and, you know, the rest of history. So we've been in one market for almost 20 years. Yeah. What was the year you bought that for 2001, December of 2001, 2001. And then I remember from reading your book, which by the way, we'll link it up in the show notes, but everybody should get a copy of it because I've read a number of real estate investing books. But I think the cool thing about this book is, you know, it comes from the perspective of if I can say like a real human being, you know what I mean? Yeah, yeah. Where it's not like so far up here, like even Rich Dad Poor Dead, like you said, it's kind of a mindset book. But then like, you know, who Robert Kisaki is that whole persona just seems like completely, you know, you're obviously dare I say, you know, a regular guy, right? I'll do respect, right? I mean, a guy who's just done a lot of hard work, right, in building a portfolio. But, you know, so anyway, I think that's what's really refreshing about your book. It's very relatable because you lay out your journey and your path. Yeah, they're good bad in the ugly, right? There are plenty of mistakes discussed in that and really what one rent, what people don't realize is I've written two books. One rent until out of time gets all the press. It's very well received bestseller, you know, 1500 reviews, whatever. But I wrote that book for myself because what I realized after retiring suddenly at 45 is I needed a purpose. And the first thing I wanted to do was look back. I remember I can visually remember walking the borders bookstore in Steven's Creek Boulevard on the corner of Santa Moss and finding the purple book. It changed my, if it's that much of an inflection. So this book one rent until out of time is what happened after that? I never found a book about somebody telling me all the good bad and ugly. I got to remember if my purchases in 2001, that means I did eight deals up to the crash. I did something really, really cool at the peak that not many people did. It saved my ass. And then I was buying all the way down at the bottom and I borrowed a million bucks in private money. I have done all this stuff. It's it's a journey. It's not a how to book. It's here's 15 years in the making. Let's go. Well, obviously there's a little bit of how to sprinkled in there. So back to this timing. That's what was interesting to me as I was reading this was you started in 2001. You bought how many properties before 2008? Yeah, eight houses. So six houses in a duplex. And if I recall the timeline, I guess the big, big picture I got from reading it is. It seemed to be very fortunate timing. Well, yeah, you look like a genius. But here's the deal, right? So 2005, you're from more Southern California. You undoubtedly know a guy named Bruce Norse. Sure. Yeah. I attend a Bruce Norse event 2005 and he has this report called the California crash. So I'm sitting there in the audience. I think I'm, you know, big shot with eight units. Seven figure net worth now. And this guy's telling me my world's going to end. Right. And I don't know who Bruce is at the time. Yeah. And I'm like, hmm, I might want to go look this up. I might want to go look this up. So I do what I always do. I dove in the numbers. I validated what he was saying. I validated what he was doing. And I took action. So from the day we saw Bruce Norse, I think it was a Wednesday or Thursday. It was one of those, you know, San Jose, you know, real estate meetups. California crash. Less than 10 days later, we had Norse drive listed for sale. And it sold. And then we sold one. We would always have one going and we sold all eight or six properties, you know, the houses and duplex within about a six or seven month period. And not only sold, we actually 1031. There's a big difference. Right. So we go from eight units to 80 units. And we sold the last house kind of the last month of the peak if people go back and look at it. And then the world ends. Yeah. And I'm like, damn, that was good timing. Bruce, you're genius, man. Bruce, you're genius. Do you still follow Bruce? Absolutely. I just went to an event. I spoke at an event here last weekend or the week and four. And I said, yes, because he was speaking. I want to. Yeah. I remember seeing him. I didn't go to that. But I'm curious then what's what's he forecasting right now? You had to he's what did he call his latest report. It was uncertain times. Yeah. Because again, right. He's affordability. He's job loss. He's all those things. He's like not this time. He's basically calling for five to 10 years of sideways sideways. Sideways, flat. Interesting. Right price. We're talking price. Yeah. Yeah. Yeah. So no no crash. Okay. Well, that's that's good because, you know, obviously a lot of people want to kind of get some understanding of what where the markets headed. And then that's kind of the general theme we're hearing. We're going to talk more about that. Let's come back into kind of your journey. So you bought, you know, the houses you did during that right time. You saw Bruce Norris. He's like, hey, the world's going to end. You're like, okay, let's sell or 1031. Well, let's validate. Right. Right. So we validate. We're like, damn, this guy knows what he's talking about. Our affordability. A lot of people didn't believe him. No, they didn't. They thought him. Why would you find him? Why did you just go check for yourself? He's got the data. He's got the data. Right. Again, he talks about the experience with the home builders and like the world's going to end like you guys. Anyways, if you hear something from someone from a noted source who has data. Yeah. Just go validate. Right. Because again, he could be reading it wrong. Your different market might be different. He was obviously a so cow guy. I'm central valley. But go get he's got receipts. Go look at the receipts. So I took action very quickly and got out of dodge. That's nice. All right. So you took the bulk of those properties in 1031 right into multi. Yeah. From five to 20 units. So we went from eight to 80 units in about six months. Then if I remember it from the book is you tapped into the REO market. Yeah. So then the market rolls over. Yeah. It was the first time we took a pause for about six months because it was like an earthquake went on like a massive earthquake. And, you know, that pride, the property we sold North Drive for 264 goes to 300 and ultimately goes all the way to 75. I mean, Fresno got murdered from 300 to 75 get out. No crazy. Right. So I'm I start buying again when single families like North Drive start selling for 150. I'm thinking half off. Let's. You know, different. Right. Yeah. So we start buying all the way down. We've started buying again roughly around 150 and the last house we bought was 28 grand. Was there I'm curious to get technical for a section back to North Drive because I know in the book you referenced talking about something about pricing and watching the pricing increases in the MLS. Was there certain metrics in terms of like market timing. This is more so just me asking. What are some of the metrics you look at? Is it days on market? Is it times you know how how quick they sell? Yeah. It's really how it's called inventory turnover. I want to know is inventory turnover accelerating or decreasing it really is that simple. So today, for example, it's decreasing even though we do have net new listings which are below last year. We have months of inventory rising. It's it's the fact that the velocity of the turnover is declining. That's what those are the things I'm looking for. And of course, as you know, it's very specific to the market you're in. I was looking at some data the other day on a website and you know pulling up kind of the local. What is the average? How many homes are sold for over asking? You know, and I'm still seeing in certain markets a lot of homes sold for over asking. Yeah. So there's usually the devils in the details. So one of the things that most people would should do today and this is this is this is because the Federal Reserve broke the housing market. The housing market is just broken. Yeah. So what every investor should be doing or home buyer, frankly, they should be going and finding what their median home prices for their area. Okay. You should draw that line because what you're going to very, very quickly see is the metrics below the median are almost polar opposite above the median. The farther you get away from the median price into luxury, the slower it's getting right everywhere. Yes. The farther you get away from median on the low side, the more accelerated. It's almost like having two housing markets. Right. You're getting turnover first time home buyers and FHA VA buyers. They're buying the stuff below the median luxury stuff is stacking up. So some of these numbers get distorted when you have a balanced leaning towards luxury. So you think that because it's so active on the lower end of the market, that's what skewing the over ask. Yeah. Well, if you're looking numerically, there's, yeah, most likely. And is that because the demand is obviously still really weighted on the lower end? Yeah. There's no inventory and there's almost no buyers, but the fact that there's any buyers means you still have supply demand imbalance. That's funny because I looked at the stats recently for Clark County. And if I remember correctly, I think it was 1200 home sold in the month of September perhaps. It was pretty bad. 1287 or something. Yeah. Yeah. So that's bad. What comparatively to normally 3000 or something? Well, I mean historically speaking, I follow a guy named Brian Lieber who puts out monthly stats and been doing it for 10 years. Yeah. So he's got receipts as well. Yeah. You're down like 50%. 50%. Yeah. From 2019. Right. So even if you strip out 2020 and 2021, which are astronomical. Yeah. Yeah. Even go 19. You're down 50%. That's just wild that the market's broken. Okay. So a lot of the people listening and watching are obviously as mortgage professionals there in the market of originating loans and working with real estate agents and working with potential buyers. Any directional or just just if you could say anything that audience right to give them either the truth, right? Yeah. What is the truth? Let's just go there. So again, I'm in I look every day. I'm making offers almost every day. I'm I'm been in this game for 20 years. When I would tell mortgage professionals and by the happenstance real estate agents. The same thing is the next four months are going to be the slowest four months of my 22 years of investing. That means if you want to look at it that way, you can get all scared. But you should also look at this like, okay, this is the time to grind. This is time to get my experience of this time to look at other things like the 5% down for plexus house hacking. Let's get up a little bit because once you get to the bottom and you survive, it's time to grow and thrive. You can't reverse the trend until you get to the bottom. Great news. The bottoms four months out. Let's get to the end of January. Let's get to the brand new spring selling season. Let's get to slightly lower mortgage rates. Let's get to the fact that unemployment doesn't blow up to 12% it stays at five. Right. It's not that bad. Yeah. It's going to be a much better place come spring selling season, which for most markets starts February 1st. So I'm encouraged, but don't get me wrong. Do the next four months are going to be wicked slow. Yeah. So it's really about survival. The fittest. Oh, it is. It's it's get your it's get your months of life. Right. Right. Yeah. Yeah. Yeah. Your expenses, right. And it's also about growing a lot of people in this game. Don't realize how much you growing networking can do for free. Yeah. Yeah. So it's it's also like prepare for the oncoming windfall. That's that's the pent up demand again. The buyers. So if we do see rates, but by the way, to that point, you see a lot of these, you know, headlines, if you will, about, you know, so what happens when rates come back down? Yeah. Right. Buyers are just going to flood back into the market and prices are going to go up. Sure. Are you agreeing with that? Well, I think there's two things. Let's take the other side first. Right. Because I deal with this every day. So there is a talk track out there that says when rates fall, inventory is going to rise and prices will fall. There's the talk track. Right. Yes. Yes. Yes. That's what they say. So I agree with that to a point. And that the point is how low our rates. If rates fall to 4% again, which again, I'm not calling for. I'm just playing the what if game. Sure. That could happen. Yeah. That would unlock an ungodly amount of band. Because essentially, well, again, the Fed broke housing, the move up buyers out, the move up buyers like right now. Yeah. On the sidelines, not going anywhere. But you take rates to 4% people are like, damn, I got all this equity. Right. I'm going to get that house. Mm-hmm. So if rates go to 4%, sure, that could be that, you know, you could theoretically see a supply build so quickly that impacts prices. Now, is it possible? Sure. Is it likely? Come on. Really 4% again. That was kind of anomaly. Let's hope we don't go back there. So let's talk about what really happens. I think best case for mortgage rates in 2024. We end the year with a six on it. Okay. Six six six seven six eight something mid six isn't above. Could it be low sixes? Sure. But what is six and a half percent mortgage rate do? It doesn't unlock supply because people are sitting on twos and threes and fours and five. So supply doesn't come. But it doesn't lock demand because the consumer is a fickled creature. Why is the consumer locking up today because eight is bad? Why did they lock up last year because seven was bad? Why did they lock up in August before that because six was bad? But the consumers get used to it. Yeah. And the longer we stay at eight, the better seven feels. Mm-hmm. Yeah. The longer we stay at eight, the better six feels. Yeah. It's just a new normal to adjust to. Right. Yeah. So, you know, if we stay at eight for the fourth quarter, that's why I'm telling mortgage brokers. All we've got to do is get to February 1st. Seven's going to feel amazing. Yeah. That's going to move people. Oh, because they're going to feel like everybody wants a deal. Right. Right. And if you stick it around and mortgage rates for eight percent for three months or four months. And, you know, suddenly it gets to seven. I mean, it doesn't even have to go very low sevens. It could go to like seven and a half. You're like, damn. Yeah. Yeah. I know. It's funny how how different seven feels than eight. Yeah. You know, by the way, it goes to seven and a half. Right. I go to seven and a half and I get the seller to kick in half a percent. I'm at six nine nine. Damn. I'm I'm smiling. I'm so dixie. Yeah. Yeah. So we just got to get through the next four months. Clarify a little bit if you don't mind when you say the Fed broke the housing market. Just what do you mean about that? So for two years, the Fed cap rates low. I don't think that's a surprise to anyone. Right. A lot of people look at the home buying market, which we we we had transactions that were above trend. We did about six point six million. Trends more like six million. So we had two years of an extra one point two million housing transactions. Right. So that makes real estate agent happy. Yeah. Why are mortgage brokers happy because you not only involved in those six point six, you had all of the refi business. Right. And some of you had multiple refies with the same bottom borrowers. So let's not get ourselves. Yeah. And so the Fed has everybody locked in at sub three sub four. The real estate market for a hundred years has been entry level, move up luxury. The Fed has taken the move up buyer and crushed them. They're not selling the entry level home because today, I mean, I ask anybody watching this, you bought your entry level home for $300,000 at three percent mortgage. Your payment, I don't know, make up a number $1,500. You just had a kid. You just got a better job. You now have to buy a house in different part of town with an extra bedroom. Now instead of three in a grandage, 350. It's not much more. It's 350, right. No big deal. But unfortunately, your rates not three. It's eight. So your payments double. I mean, do the math. Most people look at that. Like, nope, thanks. I'll come you. Nope. Thanks. I'll get bunk beds. We're good. We're good. The market's broken. And it'll be broken for years. That move up buyers not coming back. Unless to our earlier point rates go sub four rates go sub four. Move up buyers back. They're partying. They're sitting on a bunch of equity. But how likely are rates going sub four? So then if you're talking to a real estate agent, mortgage broker, then where's the market of the future? Is it's going to be mostly first time home buyers? And then, you know, the three Ds, right, divorce diapers. Well, I think there's five Ds, right? Five Ds, right? Ds, right? Diverse death. Diverse diapers and diplomas. Oh, yeah. Those five things still happen. People still graduate. People have babies. So again, there'll always be a market. Even when rates are 18%, we did two million transactions in 1981. So the market never stops. Yeah, I mean, we're still expecting to do roughly four million this year. Right. That's kind of our aside from the anomalies of COVID and everything. That's kind of the running average. It's been for a while. No, I would say the running out. Well, for a while, the average total transactions was far closer to six. Again, that's probably because of the super low rates we've had. No, no, that's pre that's pre 2020. That's like 19, 18. Like if you add new homes and existing. Yeah, six million is. Oh, adding new homes into that. Yeah, yeah, yeah. Okay. Great. Separate out the new homes. I always just do existing. Okay. Yeah, then it's far more like five million. Okay. Interesting. All right. So I'm sorry, I'm gonna have interrupted. But back to the five Ds or the, you know, because I'm always about in these types of markets, you've got to, like, you can't be a generalist. You have to be a specialist. You have to identify the truly motivated. Right. And so those are like the five Ds. But is that if you were, you know, selling real estate, what market would you be identifying to try and find the truly motivated? So if I was a real estate agent today, I would, you would, I would do one of two things. Well, the first thing I would probably do, first thing I would do today is I would create an online presence or booklets of all the new home builders in my area. There was a time where builders weren't paying commissions. Yeah. They are now. And I say this with practical experience. I just bought a million dollar property in Henderson. And I got my agent paid. They weren't doing that a couple of years ago. I registered and he got, he didn't have to do anything. He was showing us around. I was looking at all these other existing homes. And this was just the best deal. So I went to Lanar, registered his name. He got paid. So what I would do as a new agent today, and the reason I would do this is builders will bake in closing costs. They'll bake in interest rate buy downs. How do you get a five percent mortgage rate today? You go to a builder. That's what I did. I got a 499 30 year fixed from a builder. And my agent got paid. So the first thing I would do today is I would go figure out every home builder that is out there. I would create pictures and relationships. And this that I'd have every four plan wired. I would do walk through videos. And if I had to feed my family today, I'd be selling new homes left, right and center today. Yeah, because it's pretty much like guaranteed traffic. Guaranteed traffic. You can get rates. Hey, you can buy this existing home for the exact same price at eight or you can buy this brand new property with a five and a half. How do you like me now? And oh, by the way, oh, by the way, I can get you a closing cross credit. Oh, by the way, I can get you some flooring. Right, right. Did you use the builders lender? I did use the building they didn't have selling alone, but yeah, that was a whole deal, right. Yeah, I'm just thinking about that from the angle of the lender watching or listening makes sense for the realtor. Perhaps depending on the builder, right, because they're often looking at new lender relationships. Depends how big that is if it's a nationwide thing or not, but there's always those opportunities. Your question was builder science. No, I know. I know. I'm just thinking for like for those lenders who are listening, what about me? I know a lot of lenders who who are builder lenders. Yeah. You know, so I would do this again, if I had to sell, I like to go where the where it's easiest to sell. And for whatever reason, there's just this inkling that working with builders is hard or it's not fruitful. And maybe for a long time, it was. Yeah, it was. Yeah, for sure. But again, like the rules change. Right. It's changed. Relationships are always in flux. Yeah. All right. So back to this whole Fed broke the market. You know, part of the reason why rates were so good is they're buying mortgage back securities, right? But they're done. Yeah. And they're selling. Yeah. Exactly. Yeah. And I mean, not that. Yeah. Right. Do you think they should re you know, re up that and start buying? No. No. I actually have a controversial view on this. So the Federal Reserve going all the way back to Allen Greenspan did something called the Fed put simply said for the audience out there, basically it allowed Wall Street to lever up bets to crazy levels get all the upside and none of the downside because we the tax paying public bailed them out. Sounds like Wall Street. It's Wall Street. And that annoys me. I believe capitalism only works best when the winds are counted and the losses. The Fed put made the losses not count. So I believe one of the things that Paul is trying to do and he's he's he's he's come out and hinted at it a couple of times, but never was explicit. He's trying to kill the Fed put. So he's trying to cause pain on Wall Street. Oh, absolutely. He's trying to cause pain on Wall Street. Seems unusual for a politician. Well, he's not a politician. Well, yeah, for. But still he's in tight with Wall Street. Well, no, there's well, I mean, that's that's where he came from. But I, but I, I think Jerome Powell looks at this right now and goes, I can either be Arthur Burns or I can be Paul Volker. And if you don't know Arthur Burns is he's the guy pre-volker that allowed inflation to take off. He doesn't want that reputation. Jerome Powell has had a great life. He is worth a gazillion dollars. He doesn't give an F. Yeah, he's like when people talk about me in 50 years, I want them to think of me as Volker and not Arthur Burns. That's what he's playing right now. Well, it's funny. I've never heard the name Burns though, because Volker's always been the one called out as the guy who did spike rates. Yeah, well, he did that to beat inflation. But Arthur Burns is the guy that lived in fashion run wild. Hmm. Okay. So he has the previous pre the guy had no choice when Volker came in. Yeah, Volker looks like a hero because he took the other guy's playbook and flipped it upside down says, I'll beat this thing. Interesting. Very interesting. Okay. Not to geek out on all that MBS. All right. Let's pivot to investing. So part of what I do during these these interviews is get a little coaching myself. All right. So I was thinking about this question when you showed up here today and you obviously on your YouTube channel, which is one rental out of time. By the way, that's where to find all his links, one rental out of time. Go follow the YouTube channel. Tons of great content. Five videos a day going up on YouTube in sanity. What are you doing today? Investment wise. Let me ask that question first in terms of real estate and buying. So the first thing is I've kind of hit it early. We just picked up a gorgeous property here. So my my focus the next three or four months is tricking that out because when you buy a brand new property, there's no backyard. There's all this. That's not a personal for you. That's investment. No, no, it's a personal property. That's just, you know, I'm I'm enjoying the fruits of my labor. I just want to be clear with that. So not doing anything on the investment front for the next three to four months. But my intention is to build up a new community and I'm going to build up a rental portfolio in Vegas, aka Henderson. Really? Probably starting Q1 of next year. I'll be looking to do that on residential. So four and below. I may look be looking to buy brand new construction because I have a big portfolio in California. I may 1031 out of right 1031 out of 1950s build into 2023 build. Probably a good thing. You know, so there will be a lot of movement. I will be moving plenty of my equity to Vegas. You know, so I'll send over the next one. So your bullish on Vegas? I am. Yeah, what I've seen so far. Absolutely. So the numbers, even though, you know, we've got the well, it's not what it used to be, right? Back to the meltdown in 2008, where it was the infrastructure of jobs and the diversity. Oh, it's completely different. I was here. I mean, I in 2006, when I was selling my homes, Vegas was one of the markets I came to. Why didn't you use Vegas? I'm like, oh, God, you got like kind of one industry year. Right. Right. In 2006. Now, I'll hold everything. Why didn't you use Texas property taxes? You guys you guys research your party tax every year. You're going to kill my cash for every year. No thanks out. Yeah. So it's why we stayed in California. Interesting. Interesting. Okay. Um, all right. Now part two of that question is you kind of answered it in that you're sitting tight. You said earlier, like, like, you know, let's kind of just kind of weight it out, interest rate wise, anyways, until like March timeframe. So somebody's sitting on cash right now. And they're looking at right that read your book. They're like, okay, man, I get it one rental at a time. Slow growth is fast growth. Right. Um, you're sitting on cash. What do you suggest? Most people are excited or buzzing about real estate investing and they've never done the work. So what does do the work mean? I think everybody needs to define a buy box. All right. What's a buy box? So a buy box is a set of criteria that produces an active list of between 20 and 40 properties. Okay. So it's very finite. It's very constraint. And why 20 or 40? I say this is someone who worked a full-time job and a growing family and only had 20 minutes a day. In 20 minutes, you can generally go through a list of 20 to 40 properties. Yeah. So what you should be doing is setting criteria, look at that criteria every day for 90 days and tracking the changes. What gets sold? What comes back? What has a price drop? What are they rent for? What's the property starts? What are insurance? Because at the end of the 90 days, the only thing that matters is what is an average deal in my buy box. Most people have no idea they can answer that question. They're like, they go online, they look at three yellow houses and they buy the blue house. Well, why don't you buy the blue house? Well, I don't understand. I only want to buy the best deal. And I can't tell you what the best deal is until I know average. So most people are not focused enough. Most people don't have the daily display. Most people are all over the place. And the answer is right in front of you. How do you learn a language one day at a time? How do you learn to play an instrument one day at a time? How do you learn to do sport one day at a time and practice? So real estate investing is a skill. Let's go learn the skill. And oh, by the way, if you're out there and you have money, there's no cutting the line. I can't tell you how many people say, no, no, you don't understand. I got 100 grand, 500 grand, a million bucks. What the fuck? You want to lose that faster? I mean, what are you doing? I mean, really? Is that, is that what we're, is it a race to lose money now? No jumping in the light, no cutting the line. So you got to do the work. You got to learn average. So again, back to the earlier point about the next four months being slow. Awesome. Take the next four months, get a buy box, learn it, network, figure it out. You know, I will tell people, I, you know, if I do buy something between Thanksgiving and Christmas, which I've done almost every year, it'll be a flip because I find it distressed property on the MLS and I buy it for 30 or 40 percent off. I did it twice last year. I'll probably do it again this year. But how do I find them? I look every day, 6.30 a.m. every day, like, like, where are you looking? Where do you log on to? I use rillerture.com. I don't have any fancy access. Yeah. I bought, I wrote my whole book on buying out of the MLS. Right. No, don't, don't. Do you, do you have like a good agent or something locally that hunts for you? Well, I have lots of agents to try to hunt for me, lots of people in my network. By now, I usually know the agent or know somebody in the brokerage. I'm calling the listening agent a lot. Yeah. Okay. Interesting. I wrote down something that you mentioned in your book, yield versus cash flow. Oh, yeah. Because what I'm trying to think is you're saying buy box and things like that is give people a sense of how do you know when it's a good buy? There you go. So one of the things you, there's barely three factors and I give this spreadsheet away. It's in the book, I think. You need to know how much cash comes out of your pocket. That's typically down payment, closing cost, make ready. So that's the denominator, aka the bottom number. The top number is expected yearly cash flow, which is just rent minus all your expenses, right? For the year. That produces a percentage. Okay. So I call it yield. Some people call it cash on cash return on capital wherever you want to call it. I don't care. But how hard is my money working? When you do this 90 day exercise, what you'll find is you'll figure out the average, right? My average is 6.1%. Just making it up. A good deal in my opinion is 1.5% higher than average. So in that case, it would be 7.6. A great deal is 1.5% higher than that. So it would be 9.1. It is really that simple. Today, and I'm being very clear, because we don't, I have no idea what's coming next year. We are only doing great deals. So you are only doing deals 3% higher cash on cash than an average deal after you've done the work, right? A minimum of 3% higher. That's a great deal. And we're obviously in Vegas, and I don't know. Obviously, Fresno is kind of where you cut your teeth a lot. To what degree do you think those opportunities exist today? Really hard today. Yeah. The only way to get there today, you can do them either with a distress seller because they have a time problem or better yet. And again, folks, go look up Robert G. Allen. He wrote a book in the 80s. I just bought version one of the 1980s off Amazon. Yeah, it should be showing up today or tomorrow. So it's 40 years old. It's 45 years old, right? 1980. He wrote this. And the only way you got deals done were create a financing. And that doesn't mean sub two and novation and all these other things. This means no. Have the seller take a second. We did 2 million transactions when rates were 18% because sellers were taking seconds. They didn't have an option. So you can take a second. You can say, hey, no payments for five years. You could do that. You could do it. Hey, you'll take a second, but it 1%, or 2%, right? Look up and put it interest in all of that, which I'm sure you guys know about. But you can do, you can get creative. If you can find a seller with equity that needs to move, structure a deal. One of the things that I'm doing now is something called a 50, 40, 10. This is for your like lenders out there. If you have a 90% CLTV, which is combined loan to value, you're in the cat bird seat. I would build content around 90% CLTV all day long. What you do in this situation, you find a seller was half percent 50% equity. You go, you know what? I'm going to come in 50% purchase with the first mortgage. I'm going to have you take back 40% second and then I'm going to bring 10% in. So if you do this right and you structure the 40% second at a below market interest rate, you can actually get 90% leverage with a five handle on the combined interest rate. You just got to be more creative, man. You got to work. Well, yeah, and understand the different financing options because most too many people are vanilla. They stick to just what are the programs that I look at on my sheet every day and that's what I have to sell. Which reminded me earlier, you kind of mentioned, what is it, the new 5% down? All complexes and triplexes, game changing. Now of course, cash loads the issue with that. Well again, if you're going to house hack it, it's not. So this is only for owner ox. It's not investment, right? It's only on a rock. So again, if I had to do one thing in my life over again, I would have bought a fourplex when I was 20 years old. Yeah, house act. House act in the Bay Area, you know what that thing be worth today? Oh goodness. I'm that old. You wouldn't be here. You'd be like, yeah, I'd be, I'd be like my hopscotch to my house in the, you know, Miami Beach or something. But yeah, fourplex, again, if I was in the mortgage business, I would go figure that out and I would do content because again, basically the story is live for free. It's not even cash flow. But it really is cash flow. So let's just take some real numbers. Let's say your rent is 1500 bucks a month. Just it's kind of average, right? Oh, by the way, I could find a fourplex where I could buy it for 800 grand. The mortgage after I put 5% down, which is 40 grand, right? 5% of 800 grand is going to be, I don't know, 50 200 bucks or something. You're going to get, you're going to get rent from the other three units, which FHA is going to take 75% of. So it's going to help pay that. You're going to have your job. You're going to get approved for the loan. So that's cool. But you're going to take your 50 hundred bucks a month. You were paying a rent and maybe now you're going to pay 600 bucks. And you're the owner of an asset. Yeah, plus you get appreciation and you get appreciation and all of that. And what do you do with the other 900? You start stacking. And here, what I would really do again is I would buy a fourplex every 18 months. Probably, I would probably own 16 units and I could be done. I could be done. Never done a fourplex. So maybe you probably know in terms of qualify, right? Is that going to be based on the borrower versus it'll be, it'll be on both, right? So in the loan and people should research this because it's still coming out. I think it's four weeks away. Yeah, you're going to get credit for 75% of rents. Okay. And then your income. Okay, so then they'll use some of the rental income to support that. Yeah, 75%. Okay. All right. Cool. Well, that's good. That's a lot of you. That's almost like, you know, like I know you're into commercial as well, using the property. Correct. Absolutely. Exactly right. Speaking of commercial, let's quickly transition there. I've heard you, if I'm correct, characterize it like this. Maybe be bearish on commercial. Oh, I don't know. It depends on if you own a bunch of commercial and you're in some bridge debt and you're an LP, you're probably in bad shape. Yeah. I happen to have been warning people for a year and a half to avoid that stuff. So I'm sitting pretty again. And my intention in about 18 months is to 1031 out of residential in the multifamily because the level of distress that coming is ungodly. Jeff, you remember the mortgage crisis. People call the great recession. Yeah, we lived it. Yeah. What people don't realize you will, the pain of 07, 8 and 9 was created in 05. The vintage of 05 mortgages was particularly atrocious. Yeah. But we didn't see it blow up until 07. Yeah. And then those didn't get foreclosed because of the timeline until like 8 and 9. Right. We talked like 9 and 10 was all this. It was 05. So commercial 2020, 21 are going to be some of the worst ventages for commercial deals. Just like residential, they have two year, three year IOs, they have unrealistic assumptions, they have brand new operators who are nothing but Excel jockeys. They couldn't operate a building to save their lives. And this stuff's going to blow up in spectacular fashion. And we're seeing some headlines already, but that's nothing. Yeah. Right. We saw that 3200 units in Houston that led 100 million on fire in 10 months. We just saw building in San Francisco that sold for $5.50, $5.49 in 18, retrained at $2.40. The pain's just starting. And I look forward to again, I'm going to do what's in the book. I'm going to sell a house and I'm going to $10.31 into a multifamily, but that's probably 2025. We're like in the very first ending of this. What's what's the hangover that's caused this commercial situations that related to COVID and everybody working remotely? It's the bad debt structure. We got stupid. What we talk about 05 again. In residential, my belief is 50 or the research I've done is 51% of the loans originated in 2005 were arms of some time. 13 or 14% was particularly atrocious pick-up payment nonsense. Oh, yeah. World savings. Yeah, absolutely. Right on that stuff. So what did we do in commercial recently? We got bridge debt, which means short like Uber short term, one in two year IO, because again, you couldn't pay. You couldn't make the deals work full payment. That's only doing. Oh, come on. Ten year IO, baby. Let's go. Then, oh, by the way, you know what? I know rents have gone up historically, one and a half percent here. Let's assume five. And we got five last year. Let's do five again. And oh, by the way, let's get this no name operator. It's got a few tech friends with some money and give him a fully leveraged 80% LT. I mean, we did some stupid things. Right. We just got to pay the price. And by the way, the cakes in the oven, you can't change it. There are going to be billions of dollars lost at LP capital. But again, I'm, you know, capitalism is what it is. And I'll be around the corner to pick up the pieces. So what's the future for commercial? You know, you got a crystal ball there. It's like, you know, with this whole now we're hearing people are being called back to the offices. So, you know, remember the whole vision of like all these vacant office complexes? Yeah, I think so if we just talk commercial office. Yeah. Um, I think the doom loop is still there in some cities like San Francisco's a particular trade lot issues going on there. Yeah, there's a lot of government issues that are doing that. But generally speaking in most, you know, downtown areas, I think the death of office is greatly exaggerated. I certainly think there will be some conversion. I just think, I think for a long time there's been what I'll call C class office that was just outdated that didn't really make sense for the technology worker of today. Yeah. That stuff's going to turn into storage, be torn down or converted somehow. But the death of office is overhyped. Is overhyped. Okay. I want to flip to the book just so I get it right here before we run out of time. Are you still doing pride of ownership rentals? Oh, I love that you asked that. You really did read them. Sometimes people get my book and they didn't really. Oh, no, man. These guys know I prep. I greatly appreciate that. So, um, so let's, what is a pride of ownership? Yeah. So again, I suddenly retired in 2018 out of nowhere. I'm bored off my ass. I write a book. I got to find something to do. So I find a particular passion buying what I call slum lord pop properties. Just discuss. By the way, when I read that, I got this vision of like, you know, Joe Pesci back of that movie. I find some really wreck stuff really bad. I bought one that should have been torn down and we reinvigorated. Yeah. And for 2018, 19 and I think Q1 of 2020, we bought and sold 56 homes, flipped them all. And I sold them to landlords. That's just I wanted to help landlords get started. Today, that's called turnkey. I had no idea what that stuff was called. I was just bored off my ass. But I haven't been able to buy one that made sense since the early 2021. So no, I haven't done one in two years. I don't think. Got it. So are you then also if that's the same thing in your book, you know, you know, where you have this friends and family kind of pool, right? Is that the same thing? Same thing. Yeah, friends and family. So I basically have so again, I'm about exceeding expectations. Yeah. So one of the things I've been able to do because I have a track record is I have friends and family that are willing to loan me. So what I did for them is I did what was called a six and 20. So I would I would borrow the entire purchase price. I would fund the repairs. Now I could have borrowed everything, but that's now how I roll. I want to have my skin in the game first. So I would pay them 6% interest only every month. So just like a credit card or your mortgage payment. And then what I would do is when the property sold, I would give them 20% of the profit. So every deal I was ending out in six months. All of my operators earned about 22 or 23% on blended average on their money when you annualized it. Right. I happen to make 85 or 90% of my money because I was in for a lot less, right? But yeah, we did that, but I haven't been able to use that money. You just don't find those opportunities. I'm not really looking that hard. Let's be clear. So earlier in your book, you know, you were kind of like anti flipping, right? But so is that situational or what's your take on that now? If you have a demanding job that brought you to three different continents in a week, you have a growing family. You have one day off a week, which for me is Saturday, back when I was doing this, flipping is nearly impossible. Yeah, don't get distracted too much risk. Too many things go sideways. Don't waste the brain cycle. Buy and hold. Just move on. But if you happen to be bored and you happen to have a network and you happen to have contractors that you know, trust and respect, flipping is a great business. I did 56 times in like, I don't know, 30 months. So it can be an amazing thing, but it's a lot harder than these shows make it look. I was just going to say, right? Yeah, but you have to know what you're doing. You need to have a team that you trust. I can understand a math. Absolutely. There's a lot of ugly, you don't see on HGTV, right? The huge losses. Absolutely, right. And especially in today's market, like some of your videos on YouTube, so you've had some guests talking about that. About a hundred thousand dollar losses. Not uncommon. Yeah, which is more important to get with somebody who you can trust with their information, which by the way, perfect segue to book, right? How you like that? So hey, if you haven't yet been inspired to get a copy of this book, please do so one rental at a time Amazon or Amazon. Yeah, it's also an audible right or audible or go right to the website, one rental at a time, dot com plus the YouTube channel, Instagram, all the good stuff. Hey, man, this has been awesome. Appreciate it very, very much. Listeners, you know what to do. Get the stuff we talked about. If you like this episode, leave us a review and we'll see you on the next one. Bye for now. Hey, guys, what's up? Real quick. You've heard about the mortgage marketing pro membership before and I just want to quickly remind you if that you're in a place in your business where you simply need more purchased loans. You need to fill your pipeline with purchase business. Let's just face it, agents are still a solid pillar of business and sources of purchase business for you. Well, good news. Our mortgage marketing pro membership helps loan officers like you close more loans without the hassle of chasing agents or cold calling. 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