I'm not learning anymore about RE anymore from the BP Podcast

[Michael Zagorsky]

Just some feedback on the PB Podcast.

Things are really weird right now. Costs of rehabs and new construction are jumping. Risks of inflation are high. CAP rate sucks. There is a backlog of Covid evictions in some states. The old rules of thumb are all saying don't invest right now for most deals. 1031's might go away. I'm debating if I should cash out my property and sit with cash on the sidelines but worried sitting with cash is a mistake too.

All that to say, I want to hear what smart people are seeing, thinking, and doing right now in this market. Instead I'm this I'm hearing more about goal setting and vague advice to take action.  I need to make some tactile decisions where higher costs = higher downside risk. 

Not saying goal setting is not important, but one of my goals is to make good decisions about my investments and I'm not getting that from the BP podcast anymore.  I'm not sure if that is because the smart money is just sitting on the sidelines, or they are not wanting to talk about what they are doing, or that's not what the BP producers want to talk about.  

All that to say, I've learned so much about investing from the BP Podcast and listened to every episode, but I'm skipping it a lot now because I'm not getting the education I once did from it.  

[Joe Splitrock]

I listen to the same podcasts, but maybe I hear different things. Brandon is running a team that manages his existing properties and he has moved into syndicating larger deals with a big fund that invests in mobile home parks. David is focusing on his high dollar real estate brokerage business. He is hiring agents under him and adding services like mortgages to give him an added revenue streams. He has moved away from investing in single family BRRRR's. His reason is that his time is better spent growing his brokerage.

My point is that both Brandon and David have pivoted over time and both of them are having success. I am not saying you need to follow their paths, but to say they are not smart or sharing strategies seems to be an unfair assessment. 

Based on your comments, I can offer some thoughts:

1. Cashing out is a bad strategy, unless you deploy that cash into a new investment. Nobody ever won a race from the spectator stands.

2. Goal setting is very important. Without knowing your goal, there is no way to chart a path. It is like turning on your GPS and not loading a destination. If you don't know where you are going, you will never get there.

3. "Costs of rehab and new construction are increasing", but so are property values and rents. Nobody is going to sell a house for less than they paid or rent a property for no profit just because costs went up. The bigger problem here is often when investors fail to adjust their price model to match their cost model. Simple, you pay more, you charge more.

4. "Risk of inflation is high." If you are an investor who owns properties that can be seen as good. Property values and rents both increase at or above inflation, so real estate is an inflation adjusted investment. The best strategy against inflation is debt spending. That is why the federal government targets higher inflation. As the value of the dollar decreases, you pay back the loan in future dollars that have lower value. If you fear inflation, take out loans.

5. "The old rule of thumbs are saying don't invest right now". Keep in mind those rules were developed when market conditions were different. Rules and laws always change over time. The biggest mistake you can make is applying old rules to a new game.

6. "There is a backlog of COVID evictions in some states". Are those states you are investing in? Are those properties you own? I question if this is a real problem for you. It could even be an opportunity to buy a property from a tired landlord. The eviction freeze will not last forever, so buy their problem from them and get a discount.

7. "Higher costs = higher downside". Cost and upside are not directly related. People have been buying high cost real estate in California for years and doing great. In fact I predict that Florida will see similar upside over the next 20-50 years. Florida is running out of buildable land close to the coast and experiencing population boom. 

There is a lot of uncertainty right now and fear. Smart people know the market is reacting in a predictable way to what is happening. The thing to remember is that opportunity always exists in undervalued assets. Undervalued assets are anything people don't want to buy due to risk, but you see upside in the future. As @Steve Vaughan and @Russell Brazil suggested, commercial real estate has taken a hit. Other people have seen huge gains in crypto. Short term rentals have been very successful, especially in places like Florida.  

There is opportunity, but along with it comes risk. Smart money is always one step ahead of dumb money. That is literally what makes it smart money. The podcast exposes us to a variety of different investment strategies, but often the stories are backwards looking. What I mean is people talk about how they rose to success over several years. A strategy from three years ago may not work today, but listen to how those investors are pivoting for tomorrow.