Live Coronavirus Q&A: Resources, Tactics, and Mindset Shifts for Today’s Real Estate Investor

Speaker 1:
This is the BiggerPockets podcast show 375.

Justin:
As an investor and a businessman, one of the most important things we can do is still continue to pay our vendors on time, and also pay our investors on time. Because I don’t want to come out of this known as the guy that called his hard money lenders and asked for 12 months forgiveness. I want to be the guy that was, “Oh damn, when everything shut down, we did work for Justin and he still paid us.”

Speaker 2:
You’re listening to BiggerPockets radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

Brandon:
What’s going on everyone? It’s Brandon Turner, host of the BiggerPockets podcast here with my cohost Mr. David Green. What’s up, David Green?

David:
Another day in quarantine. Quarantine for green. It’s been … I haven’t left my house for four days, but we are taking advantage of this time to create some great content for BiggerPockets fans.

Brandon:
Yeah, we’ve been doing a lot of that stuff. A lot of video creation, Facebook, Instagram live stuff. And speaking of live stuff, today’s show was actually recorded live. And what I mean by that is we did a …We’re doing a call in show. So today we’re bringing in both expert guests who are going to jump in and offer us their perspective, and questions from the community itself. So we did an actual Facebook live, hundreds of people were there. It was awesome. We recorded it just a couple days before this episode now is coming out. We recorded on Monday, March 23rd, and it’s got a lot of Up to date, just information and conversation. So make sure you guys listen to all the way through this. But before we actually bring in the actual guests onto today’s show and there’s a bunch of them, let’s get to today’s-

Speaker 3:
Quick tip.

Brandon:
Hey, this is my quick tip. As people are going through quarantine and social distancing and all that. Remember that it’s easy to get lost in this world of I’m just on my phone all day and I’m just watching TV all day. Here’s the want I encourage you guys to do is, this is coming from somebody who has worked from home for years and years and years. You’ve got to build structure into your life. And what I mean by that is grab a journal. If you have a journal like the BiggerPockets journal or just a piece of paper, what’s your schedule? What are you still going to get done?

Brandon:
Get your checklist, get your, here’s what I’m going to accomplish today. Don’t just let the next month of your life just go by in this blur. Like that weird blur between like Christmas and New Year’s every year? It’s just, “What am I doing?” It’s 10:00 AM and I’m still in my pajamas. That is just going to make you depressed and sad and lonely and whatever. Act like you’re going to work, get up, get your coffee, get to work and have some structure in your day. That’s my quick tip.

David:
Yeah. And don’t get a whole bunch of weight. How about that one too? I’ve been seeing all these memes about people that are … They’re just snacking all day because there’s nothing to do. So I’ll add onto the quick tip. What I’ve been doing is if I’m watching TV, at the commercials, I get up and I do some kind of exercise. You do air squats, you push ups, you do sit ups, you do … I’ve done shrimp drills, the stuff Brandon should be practicing these at jujitsu. Anything to keep your blood flowing because it really does work. If you’re exercising and blood’s going to your brain, you’ll feel more enthusiastic, you’ll feel pumped up. You get out of that sluggish state of what am I doing with myself?

Brandon:
Yeah. Very good. That’s a good quick tip. That’s a double quick tip. Double quick tip. Yeah. All right, well thank you everybody for listening today show. Like I said, it’s a long, good, amazing episode full of a lot of different insight and perspective and questions that you’re probably asking as well, so we’re going to cover all that stuff today and now it’s time. Let’s get to today’s interview with a whole lot of people.

Brandon:
All right, so hello everybody and thanks for chiming or joining in today. Chiming in today. Thank you for joining us on this. Today is, this is an actual recording of the BiggerPockets podcast. It’s going to be coming out this week, but if you’re watching this right now, live on our Facebook page, BiggerPockets, Facebook page, we’re going to do some, a call in show. That’s right, like a radio college show.

Brandon:
You can actually call in or technically use your computer to come into the conversation. I’m not exactly sure how that’s even done technology-wise, but Kevin and Nicki, both from BiggerPockets are in the chat area right now on Facebook, they can hook you up with information on how to actually know what the next step is. But basically we’re going to talk today. We’re going to talk through this pandemic and how it I guess involves real estate, or how real estate should be able to be navigated through this pandemic.

Brandon:
And obviously we don’t have all the answers. This thing is changing every single day, but we thought it’d be great as a community to come together to talk through what other people are doing, what we’re doing. And we’re going to actually start here bringing in our buddy Justin Stamper. You guys might remember him from episode, I think it was … Justin, what episode was end of the podcast you were on? 201 of the bigger pockets podcast. Well, thank you for joining us today again. And this is Justin from Zombie House flipping also, which is an awesome show.

Justin:
I remember listening to that show before I was the actual host and I was just like one of the people, Brandon was dating.

David:
Nice. We’re all in an open relationship with Brandon at this point.

Justin:
I knew. I knew it.

Brandon:
It’s 2020, man.

David:
Justin, I got to ask you, because this is my first time seeing you. Have you always looked like a clone of Brandon, or is this a new thing that you put together just for the podcast?

Justin:
That’s a good question man. You know how people say you start to look like your dog? Dogs look like their owners. It’s the same when you’re in open relationships with someone, it’s just how it goes, dude.

David:
Love that.

Brandon:
Yeah. All right, so-

David:
Now that Brandon is blushing and completely off of his game, Think of something off the cuff, Brandon, make it good.

Brandon:
I will. Hey Justin, let’s talk about your real estate because you’ve done real estate at number one, you flip houses, you own rentals, you own a couple of restaurants. So you’re in the business side of things. You also have some Airbnbs and you’re down in the Florida market. So I want to know first of all, what are you seeing right now? Let’s just start with that. Where you are, what are you seeing in your real estate investing right now? What’s going on?

Justin:
Okay, so Orlando, my main market, we are so tourism and travel driven that COVID has really cost us … So shut down, essentially in the city. All of our restaurants are closed. We can only allow take out, delivery. Hotels are shutting down. I have a couple Airbnbs that were booked almost every single day in March, that instantly overnight it seemed like all of our bookings got canceled. Since then we’ve modified and both units are actually occupied right now as we speak. But that was the only due to circumstances and also adjustments. We’re shut down, man.

Justin:
So I just had a meeting with SVG Media, the company that handles all of our online branding and exposure and whatnot. Because we also have a real estate brokerage here, so they handle a lot of our behind the scenes internet stuff. And we just had a six foot distance apart meeting on what our strategy is for a quarter two, three, four of this year. And kind of the biggest thing that we’re thinking right now is raise capital, and kind of sit on the sidelines and see what happens because we don’t know where the bottom is.

Justin:
We do know that people are super effected. The other day I went through, because I reached out to all my tenants in central Florida just to make sure everybody’s good, “Hey do you guys have supplies? How are you doing?” Et cetera. And by going through doing that, I also realized that every single tenant I have is service industry. So we’re going to have a crazy wave as landlords because we’re going to have a lot of tenants that cannot pay their rent coming up soon, as well as some of my notes that I have on these properties, they’re private notes.

Justin:
So private notes need to get paid. I doubt private lenders are going to be doing a forgiveness like the banks are. The banks are letting you, I heard today that you can defer payments up to a year and they’re not going to process any new foreclosures. That probably isn’t the case with hard money lenders. Right now, it’s kind of make sure that we’re not bleeding. So we went through all of our finances this last week and we stopped some subscription based things that are no longer being used.

Justin:
Just like find where you’re bleeding and stop that. Because in my opinion, the most important thing we can do right now, aside from be community, stick together, and quarantine so we can beat this, as an investor and a businessman, one of the most important things we can do is still continue to pay our vendors on time, and also pay our investors on time. Because I don’t want to come out of this known as the guy that called his hard money lenders and asked for 12 months forgiveness.

Justin:
I don’t want that reputation. I want to be the guy that was, “Oh damn, when everything shut down, we did work for Justin and he still paid us.” You know, I’ve just put a new roof on a house last week. On the spot, $15,000 check. I mean, obviously I don’t want to write that right now, but at the same time I respect my roofers and I still want to do business with them. So right now we’re consolidating, trying to keep a bird’s eye view on it. I hope a lot of it … And I think people are, if they’re listening to this they’re obviously engaged, and trying to see what’s going on. But what I’m also seeing a lot of is people giving wild financial advice on Instagram and Facebook, and telling people, “Now’s the time you need to get in and look at these 4X moves we’re making. Look at what we’re doing here, get involved, get-”

Justin:
And I’m, “No, that’s bad advice man. Don’t tell that to people right now.” People need to … I’m not saying everybody needs to shut down, but you don’t want to get … You don’t want to catch a falling knife, and that knife hasn’t hit the ground yet. So I think for us what we’re doing is just trying to stay involved, trying to stop the bleeding and keep a bird’s eye view on things. But definitely not rushing to buy any new rehabs right now because our market went from being one of the hottest markets in America, sell a house day one on the MLS, to now who even knows who’s even looking at houses at the moment.

Justin:
So we don’t want to get caught paying prices that might’ve been fine a month ago that in two or three months it could be … Not saying it’s going to be 2009 all over again, but I don’t know man. So in my advice, the best thing, and what I’ve been telling my team is we’ll survive, but we don’t need to rush to get involved in anything new at the moment. We just need to make sure we don’t have any loose ends that are going to accidentally sink us if we have to carry on for six months just on the sidelines.

Brandon:
Well I really liked the point you made about going through your finances right now. That’s a great thing people should be doing right now is going through their finances and saying, “Hey, before it was kind of, the market’s going crazy. Everything’s going up and up. Yeah, get that extra subscription service, get that thing, pay for this thing, do whatever you want.” And now it’s a good time to go, “Whoa, whoa, whoa, let’s conserve cash a little bit here and make sure we can weather this thing.” And so yeah, okay. So, hey, quick question from the audience. Somebody asks, “What markets are you actually in right now, Justin?”

Justin:
So I am in central Florida, Cleveland, Ohio and the Tampa Bay area. So those are the three markets that I focus on. We have a pretty decent size rental portfolio in Cleveland that are a lot of good just cashflow properties, and just blue collar neighborhoods such as Brooklyn. And then in central Florida I’m super involved with transacting real estate. We have a brokerage here that has, I think we have 11 agents with us. I have a semi-decent sized rental portfolio here, and a lot of them are hipster, trendy neighborhoods. A lot of just expensive property, but they rent high. And also it’s a big appreciation play. Orlando is a good appreciation play with rentals. You don’t have like the crazy 20% ROIs that you can in cash flow areas, but you can have massive appreciation because neighborhoods change and grow here pretty rapidly.

Justin:
And then Tampa Bay, I have some commercial buildings down there, and two restaurants, and I’m also building my rental portfolio down there as well. So those are the three markets that I’m in, and they’re great markets. I really enjoy Florida, but COVID’s got it shut down. And Florida’s tough because we have a huge 65 and over population. This is literally where America comes to retire, and we’re also tourism, and travel, and hospitality driven. So not only is it super dangerous because we have an old population, but also everybody is, I don’t want to say out of work because we don’t know what that looks like yet, but people are definitely paused on work. So Florida is getting hit hard, so who knows what’s going to happen with the market.

Justin:
But at the end of the day, and this is what I keep telling my staff that have been paranoid. We’re going to get through this man, like we’re Americans. Don’t bet against America. It’s a bad bet. So things, I don’t want to say things are going to go right back to normal, right off the rip, but we’re not going to get destroyed from this. It’s not like we’re not going to come back. People are still going to come here, they’re still going to go to Disney World. Now granted, Disney World is closed at the moment for the first time ever, but that’s to be smart and flatten the curve as quick as possible, which is the main goal at the moment.

Brandon:
All right, next question. Nick B. Angel jr. This is a really good question, “Should I be worrying about the ARV for flips and BRRRRs?” Because we’re assuming prices are going to be dropping.

Justin:
I mean I would. Now granted, if you bought it right, you should still be able to get out, because I don’t think we’re going to lose 50% value like we did last recession, but I could see a 20% pullback, especially in the next upcoming quarters when things are still adjusting. I can see a lot of pullback, and also there might be a flood of inventory soon. I don’t know.

Justin:
But you know when people do panic they make brash decisions. So you might have landlords that couldn’t collect rent that now are just super frustrated. They just want to dump their houses. You might have people that like panic sell, you just don’t know. But hopefully, if you are buying houses to flip, you already have your 30% built in, and I don’t think we would have a 30% pullback. That would be a massive, massive pullback.

Brandon:
Yeah, I would hope not. I would definitely, yeah, just be more conservative than usual on all those things. If you’re trying to do a BRRRR right now, trying to do a flip, and having a backup plan, like I mentioned on the podcast last week, I’m in the middle of buying a flip right now, and I’m still going forward with it. We’re still going to buy it. But I think there’s a very real possibility that I’m not going to be able to make money on that flip. And I’m still going to do it because, I mean this sounds like a stupid reason, but the lady who I’m buying it from has to sell this to be able to 1031 on a deal she’s closing next week. So she … Again, I’m not trying to, this is not humble brag and look how good Brandon is, but I just feel bad that she wouldn’t go to close.

Brandon:
And so I’m going to close cause I believe, because here’s the point I’m making, I can rent it out and about breakeven, is what I think. I ran the numbers, it looks like I could about breakeven. I might lose a little bit, but again, I’m betting on Maui, and I’m betting on America, that 10 years from now, even if I did buy … I mean I would never tell somebody to buy property and lose money on it, but even if over time because of repairs and maintenance, I end up losing a little bit of money on this property at least 10 years down the road, I’m betting that American real estate is still going to be better off today than it is before. In fact, David, you’re the one that convinced me this when I bought my house here in Maui, was 20 years from today, is that house in Maui with an ocean view going to be better than it is today? I’m, “Oh yeah. I guess I think that’s a safe bet to make.” So again, having that backup plan is what I’m working on.

David:
What’s the scenario look like where you rent it out for a year, now you’re not short term capital gains, then you sell it, you’re I have a much better, right? If you lost $200 a month, how much would you save in capital gains?

Brandon:
Dude I never thought of that. That is such a good thought. Dude, I might even just not … Right now, just you saying that it makes me think, I might not even try to flip it. I think I might just buy it and just plan from day one, I’m going to rent this thing out for a year. And by then we should be sorted through all this stuff, and then I’m going to save more in taxes than I would’ve saved on … Yeah, that’s a great idea.

David:
Oh that’s that. That outside the box thinking it really comes into play when you’re in an economy like this, because you can’t just do what was always done. So one complaint I hear a lot of people say about the BRRRR method is they’re, “Well I have to wait six months in order to get this loan, so I don’t want to wait six months.” Or, “What do I do if the ARV comes in really low?” Well, BRRRR is a principle. There’s nothing that says it has to be done in a two month window. There’s a property that you could buy, add value to, rent it out for three years, then when you need capital and it’s appreciated for three years, you go refinance it then. There’s nothing that says it has to be done at this rapid fire rate. Now that rapid fire rate has worked really well in a rising economy, but if you understand the principles that we’re talking about here, you don’t have fear, right?

David:
The fear comes from, “Wait, that’s not what we always did. It’s changing. Now what do I do?” When you understand the principles, Brandon just says, “Okay, I’m going to pivot. I’ll hold it for a year.” Is Maui real estate going to tank in a year? It would take an incredibly strong systemic problem with our economy before Hawaiian real estate is going to be significantly affected, right? What we’re looking at here, at least based on current data, is some months of reduced income and people not spending money as much, not an absolute crash of the entire economy. So there’s no reason for him to panic. And I would think in almost every situation that we encounter for this show and for other shows, if you zoom out and do what Brandon did and look at it from a 20 year period, answers will become apparent and then all of a sudden the anxiety will go away. Justin, can you share a little bit about like what you’ve been doing in your business specifically with moves that … Small pivots that you’re making to get through this?

Justin:
Yeah. Okay. So one that I wanted to elaborate on and when Brandon and I were talking, when we went live a couple of nights ago, I was talking about how my Airbnbs, they got crushed for a second, but a big pivot that we made … And I was telling Brandon I got 90 DMs about this and I actually pulled it up on my phone to share with the people that are listening. So there are traveling nurses and doctors that are going to be going all around the country. They already do when there’s not a pandemic, but at the moment they’re going to be going all over the place. So places like Orlando especially, we don’t have the tourism that’s bringing people here, but we definitely have the elderly population that’s going to need assistance, so they’re going to be bringing nurses and doctors here. So here, for the people listening that want to know how to get involved with this TravelNursing.org is a place that you can apply.

Justin:
Also FurnishedFinder.com is a place you can apply as well. And these are essentially staffing agencies that will … The first day I logged … That I joined, Travel Nursing, you pay, it’s a small fee, but literally within a couple hours they had sent me 15 eligible people that needed minimum 30 day, up to some of them needed six month furnished housing, and they pay higher amounts because they’re renting a furnished house short term. So also some agencies that they can check out, RNVIP, Trusted Health Cross Country Nurses, and AYA Healthcare can also … I sent them all emails and was, “Hey if you guys have anybody coming to Orlando, I’ve got a couple of furnished houses that are near the hospitals, let me know.” And I’ve been in constant contact, and actually both of my Airbnbs are now booked.

Justin:
So that is a good move that we can do to ensure that we still have cashflow at the moment. Which is good, because actually both of my Airbnbs are also BRRRRs, and I use that short term cashflow, or I’m currently using that historical short-term cashflow to prove the cap rate to my lenders so that I can get like an 80% re-fi. So it’s really important to me to not have March destroy that average, because you can be rocking and rolling and doing 5,000 a month, and then you do zero in a month and that really changes what your average is. So that’s a big pivot that we’re doing. And also right now I think we’re kind of taking this time to get more into trust. Now, if you think about, everybody’s at home on their phones. Now, if you have a business, now’s a great time to … If you’ve been like me, I don’t pride myself in being great with computers.

Justin:
I don’t think I’m very good at the internet. That’s just, they’re not things that I’m passionate about. Therefore, I’ve never gotten good at them. That being said, now’s the time to do it, so I have been learning. I mean look at us right now. We’re podcasting and I can see my face on the screen. Ooh, technology. Now’s the time to, if you have a small business, a small brand, get out there, build your Instagram, build your social media following. If you do buy houses, let people know. Because right now you might have a lot of eyes and a lot of traffic that you otherwise wouldn’t. So this is a great place for people that are, “Oh I want to get started wholesaling,” or fix and flipping, or whatever they want to get started in, “But nobody knows what I do.”

Justin:
Now’s the time. Get on Instagram, tell people what you’re doing. Get on BiggerPockets, tell people what you’re doing, talk about your goals. I think now is a great time for people to consolidate what they’re doing, and really come up with … I know Brandon you’ve been talking this a lot, your 90 day intentions. Now’s a great time for people to start doing the exact same thing. Because my advice isn’t to rush in and just all of a sudden pick up a project. I think everybody needs to sit tight on the sidelines if possible to see what happens. It’s the fool that rushes in when we don’t know where the bottom is. Thant’s just my 2 cents on it.

Brandon:
Man, Justin, this has been really, really good information. I mean, you’re a rock star. Obviously you and I did, what, and hour … Over an hour long Instagram live the other day. I know you’ve been doing more of those. So make sure you guys are following Justin. What’s your Instagram?

Justin:
Yeah, so my Instagram is Flip Orlando and my website is my name. It’s JustinStamper.com. I check my emails daily, I’m pretty easy to get ahold of, so if anybody has questions or wants advice or just to talk because you want to talk to somebody because you’re in quarantine, I feel you. And I’m happy to chat. So we’re all going to get through this and we’re going to get through it together. So let’s all stay connected and that’s how we’re going to do this. And we’re going to do it smart because it’s not every day that we have a change in a market cycle. That, not saying we could have planned for this one, because nobody could have planned for this, but we all went through 2008/2009 and I feel like most of the complaints I hear from people are, “Oh if I only knew what I knew now, I could have crushed.”

Justin:
Well now’s the opportunity, and let’s do it together, but let’s do it the smart way. Let’s not gamble, if we want to gamble than just let’s put a hundred on black, see what happens. But now’s the time that we really have a chance to also solve some people’s problems, because a lot of people are going to need to sell their houses quickly for cash. And that’s where people like us come in to solve their problems. So we can keep the gears turning of America if we all do it together. So please holler at me. I’m easy to get ahold of and I’m happy to help.

David:
Wise.

Brandon:
Wise words from Justin Stamper from Zombie House Flipping, Flip Orlando Instagram, and everywhere else. So make sure you guys check out Justin. Again, thank you Justin very much for coming on today. Oh, we’re going to bring in a few other guests today. Right now, in fact, we were just talking about Airbnb a little bit. That’s something that’s been really popular last few years. In fact, just recently on the BiggerPockets podcast, we brought in .. We interviewed Avery Carl, episode 364. It was snowballing six figure short term rental profits into passive investments. But Avery is a real expert at Airbnb along with other types of real estate. So we’re going to bring her in right now. Avery, welcome to the bigger pockets podcast. Thanks for coming back on.

Avery:
Hey guys, thanks for having me back.

Brandon:
Yeah. Why don’t we start with the same question we asked Justin. It’s, what are you seeing right now? What’s your investments doing? Where are you at right now? What’s going on?

Avery:
Okay, so obviously short term rentals are being one of the hardest hit types of rentals in this market. What we’re seeing is that the metro areas are, especially the big ones, your New York, Chicago type markets, are being hit much harder than the drive to regional markets. The fly to markets are obviously not as attractive because people don’t want to go to the airport. Not to say that the drive to markets have not been hit. We had an initial wave of cancellations just like everyone, about a week and half ago when the whole panic started. But a few days after that we did start getting some bookings trickling in of people who are sick of being in their own homes, who want to social distance somewhere else.

Brandon:
Actually, yeah. Just saw this comment come through and said that somebody in the … A friend of mine and his wife are taking advantage of Airbnb. The shutdown, it says they’re negotiating with all the hosts. They’re renting a dope house for a month of April for 80% of what it normally goes for, 80% off of what it normally goes for, because if they’re going to social quarantine, why not do it in style? Yeah, it’s an interesting idea.

Avery:
Yeah, yeah. So what I recommend for hosts to be doing right now is to tweak your listings a little bit to make things more attractive to people who are looking to do that. Maybe remove your maximum night stays and minimum night stays. Maybe make yourself pet friendly temporarily if you have to, things like that. Make a list of all of the services that deliver to your location so that people know, “Okay, I can go here. I can stay away from people, but I can still get what I need to live and to work from wherever I’m working from.”

David:
So Avery, what advice do you have for other Airbnb-

David:
So Avery, what advice do you have for other Airbnb owners who maybe weren’t preparing for this much of a slowdown? I know Brandon and I have talked about, for the last five years maybe Airbnb is almost like you can’t miss. That target has just been so big that even people that bought wrong and didn’t run their business well still made a lot of money in the Airbnb game. But we’ve known things can change, regulations can change, cities can change, how permitting works, or an economy going bad’s going to be particularly nasty for short term rentals. Can you share what you would be doing if you didn’t have enough reserves or how you would be preparing to weather this storm?

Avery:
Sure, so what I number one don’t recommend doing first of all is panic selling. I’ve had a lot of my clients come to me and say, “Oh my God, I want to sell.” I’m like, “Let’s see what’s going to happen first before we go nuts.” Number two, another thing that I’ve been suggesting and rates are kind of all over the place right now, but it can give you a little bit of extra time to think, to refinance right now. Rates are pretty decent and if you start a refinance now, close in April, your next mortgage payment isn’t until June. So it does give us a little time to kind of figure out what’s going on before we make any huge permanent decisions.

Brandon:
That’s smart. So the refi thing is something I’m working through right now. Especially, I never thought about the delay in payment because, yeah, you kind of get that little break. So that’s a really interesting idea. What about I guess other aspects of, let’s say, go non Airbnb right now. If you’re just a regular rental owner right now trying to figure out what I should do now to basically take advantage of the situation, I mean, should people jump in right now and start buying? Should they hold back? Like what do you see and what would you suggest?

Avery:
So that would depend on the investor’s personal comfort level. If you want to buy right now, as long as you have the cash reserves to make it through a couple of months, then I say go for it. But if you don’t, then I might say hang on another month and let’s see what happens before we go jumping in and making big purchases, although I did just close on a duplex last week and I’m finishing up a pretty big rehab that I’m going to put on Airbnb right in the middle of all of this. So, keep you posted on how that goes.

Brandon:
Yeah, let us know there. Now somebody did suggest, and I’ve seen this a few times floating around, so I think we should talk about real quick. There are SBA loans, you know, Small Business Administration loans that business owners can apply for and get. I don’t even know if it’s low interest or no interest. If you are an Airbnb owner or just any rental property owner, you are a business owner. That is what you are. I’ve even seen on a couple of documents, like specifically called out rental property owners as qualifying. I’m not a lender, so I don’t know, but that’s something that people can look in as well, as if you’re at a tough time right now, maybe try that. Hey, a question came up from Drew McCluskey. If I’m currently renovating an Airbnb but haven’t bought any of the furnishings yet, would it be wiser just to rent it out now as a long term rental with the uncertainty? Is the long term market more secure than Airbnb with new tenants? What do you think, Avery?

Avery:
Not necessarily. For my Airbnbs right now, they’re covering their expenses, but I’m not sure what my long terms are going to do until the first of the month. So you can really go either way. It just kind of depends on the market. What you could do if you don’t want to spend your cash reserves, if you’re okay with it, there are some small business loans, kind of similar to what Brandon was just talking about that you can finance your furniture with. I know Clearbanc is one of those that a lot of people use to furnish their Airbnbs, so just depends on the market. If you’re a big metro market, I might suggest long term renting, but if it’s in a drivable vacation rental market, then it might be worth looking into to move forward. It just kind of depends.

David:
What do you think about combining the flexibility of the short term rental with the security of the longer term rental and just renting out the rooms? If you buy a three or four bedroom place, if you put it on Airbnb and it’s for like travel or vacation, obviously you’re not going to get a lot of people selling. But my thoughts are, you’ve got a lot of folks who are unsure if they’re going to have a job for the next couple months. They don’t want to sign a year-long lease that they know they can’t pay, so they don’t want to commit to something that big, but they still need a place to stay. What if you just do month to month leases on rooms inside of a property, so you’re increasing the amount that you get like in a short term rental, but you’re not going after a travel demographic?

Avery:
That could definitely work in a big metro market. In my vacation rental markets it probably wouldn’t because people are expecting to stay by themselves, but in a metro market, that’s a great idea.

Brandon:
Yeah, that’s interesting. Hey, let me get a couple of questions from the audience here. We’re going to go deep on this one. Jordan asked based on, okay, so Jay Scott made a comment on the last podcast about rental property investors betting on capitalism. Based on that, do you guys think rental properties would still be great if the U.S. moved away from capitalism in the future? So that is a political question. In other words, like we’re seeing a trend in politics and whatever, that a little bit more away from just pure capitalism and a little bit more towards maybe a socialistic-natured government. So based on that, what does real estate in your opinion look like? And it’s a deep question and I know I’m springing this on you. What does real estate look like in more of a socialism driven country?

Avery:
I’m going to have to tap out on that question. I skipped government in college. I’m not qualified to-

Brandon:
Well, I will throw in to David, because I know David’s, he’s bubbling to answer this one, aren’t you?

David:
I’ve been actually tossing this over in my head ever since Bernie became the front runner for the democratic party. Like, what would happen? Because Brandon and I like to play this what if game. We do this all the time. This is really hard for me to look into the future and think like how would this affect real estate prices? Because there’s different ways to do socialism. There’s like complete communism. There’s the government’s going to give help with health care and education and maybe a housing voucher, but you still have to go to work and you make up the difference. What I tend to think is that even if we end up with a more socialistic economy, there will still be elements of capitalism that run through it. And if you try to have a president come in and immediately say, now we’re going to be socialists, four, eight years later, we probably would be going back to capitalism in some form. You have to think like, it’s not like if you go to socialism, you’re there forever.

David:
It’s more that I think socialistic elements will enter into how we do things, and that’s happening anyways. I mean that’s obviously, the minute you start having credits for things or programs like even in a capitalistic country like ours, we have socialistic elements. You can still get stuff cheaper because the government subsidizes it. Even the mortgage industry is subsidized, right? The reason you’re getting that 3.2% interest rate on your 30-year fixed rate loan is because of socialistic elements within our own country. What I think would happen is it would put a stop on how quickly houses can appreciate. And I think that it may freeze it for a time, but I think that when the pendulum swings back the other way, you’re going to want to own real estate because you don’t know what’s going to happen to our currency with how much money we’re printing.

David:
You don’t know what the next politician’s going to decide as far as what stance our government takes when it comes to global politics. What you do know is as long as the population is growing in America and people are wanting to come live here, which is likely to be the case for a very long time, they’re going to need a place to live. And real estate is an asset class that you can control. Really, that’s my favorite part. Everything we’re talking about right now, Brandon, maybe you should rent it for a year and then you should sell it or, instead of a flip, you can make it a BRRRR. You have so much more control over that than you do with the stock market, right? So the question, it’s good to ask what would happen if there was a socialistic political environment, but the next question is, well, where else would I be putting my money? What else can I do? Right? Like even if real estate isn’t as appealing as it was, it’s still going to be more appealing than all my other options and I think it’s wise to keep that in mind.

Brandon:
Smart. All right, Avery. So where can people connect with you if they want to know more about what you’re doing or reach out, ask questions, whatever? what’s the best way to get in touch?

Avery:
You can always find me on Bigger Pockets, my website, theshorttermshop.com, Instagram at The Short Term Shop.

Brandon:
Short Term Shop. Love it. Thanks, Avery, so much for joining us today. We’re going to actually bring in one of the listeners who is actually watching this right now over on Facebook live. So I think we’ve got Joe coming in. What’s up Joe? Welcome to the show.

Joe:
What’s up guys? How you doing?

Brandon:
Hey, hey. Good. This is new ground for us. We’re not used to bringing in a live callers like this, so that’s kind of cool.

Joe:
My call may be number one here. How we doing? How’s the tan working, Brandon?

Brandon:
Oh my gosh. It’s not working. Did you see my picture of me on the flamingo the other day on Instagram? It was, yeah, it was-

David:
Somebody Photoshopped your head on a flamingo?

Brandon:
Well no, I’m sitting on a flamingo in my pool trying to keep away from Ryan Murdoch. We’re social distancing together and-

David:
Can we get you a really big super chicken to put in your pool?

Brandon:
You could try.

David:
A blow-up super chicken?

Brandon:
We can work on it. Well, hey Joe, speaking of, I got no transition there from that. Joe, what’s your question, man?

Joe:
So, I got a lot of questions.

Brandon:
All right.

Joe:
My wife and I, who’s social distancing right here, say hi, Elizabeth. We’re working [inaudible 00:35:21] in here.

Brandon:
Hi, wife.

Joe:
We’re downstairs, hunkered down in the basement. Kids are upstairs. We’re into the real estate game hard. And basically we found an opportunity. It was a 12 unit apartment, well, it’s a 20 unit apartment complex that we found that got hit by the hurricane down in Panama City. And we sold off 8 units and we have 12 units and obviously with the hurricane it’s extensive damage, commercial roofs, new HVAC systems, tons of mold, tons of it. It was a huge project. I mean we paid like 20 K a door, so we got a pretty good deal on it. They’re two bedroom, one and a half bath, about a thousand square feet townhomes. And because it got damaged by the hurricane, we can’t get funding.

Joe:
So we’ve been self funding this project since October. We got three units rented for about a thousand a month and we have one other unit ready to go. But we’re just, this Corona thing has just totally put a break on everything and we’re just trying to figure out, because again, we’re self funded. We have no outside funding other than like heavily leveraging every lever that we could pull. So just looking for some guidance, ideas, tips, any type of knowledge for two long-time, huge fan, listeners.

Brandon:
Awesome. Well, sorry you’re going through that man. But David, you want to start or you want me to start?

David:
Yeah. Let me ask you a couple of clarifying questions. Are you saying that only out of your 12 units, 9 of them are uninhabitable because of damage from the hurricane?

Joe:
No, it’s probably about six that are uninhabitable right now that are left.

David:
Okay, so then you’ve got three rented, six that are not habitable and of the three that are, are you just having a hard time finding a tenant because of the economic environment?

Joe:
No, I mean, we got three. Like I said, we have three rented and then another one ready to go. And then everyone’s just getting spooked. It’s tourism. It’s Florida, man. It’s at the beach.

David:
Right. All right, so is the bigger question how to get those three rented that are vacant or how to get the sixth that can’t be rented, fixed up without any money?

Joe:
I’m broke, dude. Give me some details.

David:
Here’s some thoughts I had while you were talking. Can you find a tenant who doesn’t want to pay a ton in rent, but it’s very handy, that you can say, “Hey man, I’ll give you a free place to live for three months if you can come fix it up? Let’s work something out where you fix the mold, you fix this, you fix that. Show me your resume. I’ll let you live there for free while you’re fixing it up and then I’ll give you half off the next rent for the rest of the year or whatever.” That’s one idea that I thought of. Another would be what Brandon was just talking about, by the way, is your wife writing this down while we’re talking?

Joe:
She’s diligently taking notes here.

David:
All right, cool. The SBA option that Brandon just talked about, very low interest rate loans compared to a hard money loan that you could be applying for, especially because they have like a lot of programs in place for rental property owners specifically affected by Coronavirus issues, where you could borrow money from them to start work on the other units. And the third one is, look, you’re not the only one hurting. Contractors are hurting, too. These guys were crushing. This is the best time ever to be a contractor. Property values are rising, everybody has money. We were all complaining, “I can’t find a contractor.” Well, I bet you could find one now. Can you find someone that will go do the work and put themselves on a payment plan?

David:
Hey, give me a bid. It’s going to be 15 grand. I’ll pay you $1,000 right now and I’ll pay you 400 bucks a month or 300 bucks a month for the next couple of years and I’ll refinance this, you know, three or four years later, or whenever you can, pay the contractors then. If they’re doing nothing and they’re allowed to leave their house, we may say, well why would they do a deal when they’re not going to get paid over, you know, until three years later? It’s because they’re doing nothing else.

David:
So that’s probably the angles I’d be looking at if I was you and I was just dead broke. You’re in that death throe of real estate where you can’t earn money with it because you can’t rent it out, but you can’t rent it out because you can’t fix it up, and you can’t fix it up because you don’t have money. You’re just spiraling in this. You got to be able to like plug that hole, stop the bleeding and the hemorrhaging and then move forward. And here’s some ideas. What do you think Brandon?

Brandon:
Well I was just going to go, and then I saw the comment come in on live stream as well. What about bringing in partner? And that’s generally where I move to this stuff is the idea of, especially this is an interesting one because it’s like you’ve got all these separate townhouses, kind of. You can even bring in multiple partners. And I’m not saying this is legally how you would do it, but what kind of fascinates me is if you brought in somebody and like let’s say, I mean because how many people have got 25 grand sitting around? Quite a few people I know have got 25 grand sitting around. So you’re like, “Hey man, so here’s the deal. This unit, it’s number 17A, that is your unit. You and me do this together. You bring the 25 grand down, and we partner on this unit together and then you get 50% of all cash flow going forward. I bought the property, I took care of that part, you’re going to help me do this.”

Brandon:
And then you just finish the BRRRR. Or maybe this one big investor comes in for the whole entire thing, and there are people that would probably do it. Now in this week, the next week, maybe everyone’s a little bit fearful, but no matter which way this thing plays out, people are going to stabilize here shortly. Either we’re going to stabilize in chaos or we’re going to stabilize in an old norm or a new norm. But either way, people are going to stop freaking out at some point soon, I believe anyway. So I believe you could probably find somebody, especially if you have a good business plan. A lot of it’s going to depend on how you present this.

Brandon:
So I would make sure you invest some time and effort in maybe even like trading favors with a graphic designer to put this into a nice packet of information, and I would find a partner to bring it in, because I say this all the time, you’re never getting rich off the first deal. You’re never getting rich off the 12 unit, right? The 12 unit could be good. You might make some good money off it. This ain’t going to be your only deal you ever do retirement. In fact, this is just a stepping stone to the next one. So if you had to bring in some partners, the best part of that is, especially if you brought in multiple ones, you get to see who you like working with and who you don’t like working with. And maybe one of those is going to end up taking you to a thousand units later on. So I generally jump on the partnership train, bringing in equity partners. That’s kind of the way I go. But yeah, there’s my two cents. I don’t know, man. I hope that helps some.

David:
Let me ask you this, Joe. What are your thoughts when we say that? Because I think whatever’s in your head is probably in our listeners’ heads too.

Joe:
I mean, obviously if it’s family it’s different than some random person. When Brandon bought one of his flips in Maui, I connected with the guys over Kikko Capital and they were super cool, but they just wanted like 11, 12% plus all this. One of my problems is to get the commercial financing I have to have all this stuff, and I have one short term vacation rental that I flipped, and I remodeled my house. Like, I’m not the licensed contractor. This is my side hustle, man. I’m making calls in my other job, taking other calls for this job. So like, I’m trying to get where you guys are and I just don’t have the resume, the background to kind of go, here’s what it is, and someone will trust me other than my family.

Brandon:
Well, this is the way I usually go with trying to attract non-family money is a 10 local meetups. I mean, there again maybe the next couple of weeks is a bad idea. But I’m surprised there are not more people putting together large real estate meetup scenarios. Maybe they are and I don’t know about it, but like on Zoom or on Skype or on whatever, there’s ways to go to them, GoToMeeting, GoToWebinar. You know, start attending meetups, start meeting with investors, whether it’s over like Zoom, Skype, whatever right now. You just got to start building a relationship with people. And people are still looking for a place to put their money because there’s a lot of money just dying right now. So anyway, I would start there, which is reaching out and building these relationships. Somebody will partner with you. You bring them a good enough deal and people will still want to partner with you. So again, I still would, I’d probably go that way.

Joe:
Yeah. So just to recap, so you’re saying have someone at a fixed price, hey, 25, $30,000, whatever you get. We split everything 50/50. You throw in 50 or 25,000 or whatever the entry is, and then we just kind of split it out indefinitely in terms of the profits, expenses, something like that?

Brandon:
Yeah, or imagine, now, I don’t know that market and I don’t really invest in that market, but imagine you came to me and you’re like, “Dude, I got this deal, it’s already locked up. Here’s the numbers. I already got a bid from contractors. This is what it’s going to cost to fix it up. This is what it’s going to rent for. This is what I’ve already done. All I need is 25 grand or 30 grand or 400 grand”, whatever that ends up being for whether you’re trying to pitch it to somebody on a small or big. You come to me and you make it so easy for me, and then you show me, “Hey, Brandon, you’re going to get an 18% return on your money, cash on cash return and likely more like a 30% IRR over the next five years.”

Brandon:
I’d have a hard time turning something like that down, especially if I knew, at least I kind of knew who you were and you know, had a kind of a relationship with you. I don’t need to be best friends with you, but I’d be like, yeah, this guy, he seems like a pretty awesome guy, so yeah. Corey said you have to ask. No, don’t answer for them. Not think with your own wallet. Yeah. Basically like you’re never going to know unless you start talking with these people. Simon said 5% of something is better than 100% of nothing. There you go.

David:
Do you have much equity in it, Joe?

Joe:
Oh yeah, man.

David:
Okay, so then you’re going to be fine. That’s what Brandon always say, if you buy it right, you have plenty of options. You know, there’s a hundred different ways you could look at this, but you’re a newer investor, so the way I would be looking at it, like Brandon said, is if you’re going to bring in a partner, say, “Hey, I need some cash. I’m raising some cash, I’m giving away some equity in the deal, or I can just pay you back your cash in a year or two, whatever you want to do. What would you do to help me?” If you asked that question to me, I’d probably come up with a very solid plan pretty quickly. Well, let’s look at the numbers. How much equity do you have? How much are they going to rent for? What’s your cashflow going to be? What area are you in? All right, here’s what I would propose.

David:
What you want is the partner who comes up with a plan that makes a lot of sense right off the bat, because like Brandon said, that’s the guy you want to be with doing deals for the next five years. This is a real big opportunity for you because if you have equity man, like you’re going to be fine. The deal finds you as Brandon, the money finds you and you have the equity. So start talking to different investors that you know that are a little bit more experienced. See who comes up with the best game plan and you’re like, you know what, maybe this is a person I want to partner with. That can be the money guy. I’ll be the deal guy. And you’re back on the podcast in three years telling us how you scaled the 80 units and $4 million because you found the right partner. Joe-

Joe:
You guys got more time? I’ve got more questions.

Brandon:
Shoot us with one more, but I’ve got Tarl waiting to come in.

Joe:
You guys talked about on one of your podcasts you were looking for vacation rentals. You guys were potentially looking for people to propose that. What specifically are you guys looking for? Because I’ve been in the game in the short term rentals for like five years now.

Brandon:
Yeah, I think that changed-

David:
This is the number one most common question Brandon and I are getting now.

Brandon:
No, but I think that changed a lot over the last week. I would say I’m not right now looking for a vacation rental, yeah. I think the point we were making back then, I mean the point still applies. It’s like if you can bring people good deals and package it up nicely and hand them a nice bow, you know, a bowed package, people will jump at it. Back then David and I were definitely interested in people. Again, now that changed a lot because now I’m not sure where Airbnbs going, but yeah, that’s what we were looking for.

David:
I’d still be interested, Joe. If you or somebody else said, “Look, not only can I manage an Airbnb, but I can find a deal with a lot of equity in it. I have connections either direct to seller or I know a lot of people that are selling.” If you have a talent to find a deal and then you want to Airbnb it after you find it, I still think that there’s opportunity there. You may not want to Airbnb it right away. There may be a short term play that we do that isn’t, you know, travel related. But if you’re somebody that can find deals and you can manage systems and all you need is someone that can help you scale that, totally. I think you should still be looking for partners like Brandon and I. We’re trying to get people out of the fixed mindset that this is the only way that I do real estate. I look for this and that works great in a rising tide, but now that we’re getting a little bit of choppy waters, you got to have a broader perspective.

Brandon:
Hey Joe, where can people link up with you? Are you on Instagram? Facebook? Twitter?

Joe:
Yeah, yeah. I mean you could hit me up on Instagram. JR_McCullough. And last thing, real quick, hey, I got this guy that I know that owns this business called Open Door Capital. He’s looking for mobile homes. What’s the minimum target to get that 50 grand a home that I need to find to get some money?

Brandon:
Oh man, a hundred unit. We’re looking for a hundred unit mobile home park, city sewer and water anywhere in the country. You do that, 50 K referral fee still applies today.

Joe:
It doesn’t matter how expensive it is? It’s a flat fee, 50 K if it’s like in-

Brandon:
Yeah, yeah because anything over a hundred units is going to be big enough for us to be able to afford a 50 K finder’s fee. So yeah, if people are sitting home doing nothing right now, you can be reaching out to mobile home park investors. Thanks for the setup Joe. That’s awesome, man. Thank you.

Joe:
I hope you guys do great. I really enjoy it. We listen all the time. We love it so much.

Brandon:
Thank you man. I appreciate it. Have a good day. Now I want to actually bring in real quick Tarl Yarber into this conversation. Tarl’s is a good buddy of mine. Hey, Tarl, what’s up man?

Tarl:
First off, hey, I want you guys to know right away that the only reason I’ve done any videos for Bigger Pockets is so I can have recognition from you and David and at least have you guys like realize I exist, and this is my moment that I’ve been working for.

Brandon:
This is your moment. This is everything in your life you’ve been building up to this point. Yeah, Tarl is an amazing video contributor for Bigger Pockets. If you guys are not following the Bigger Pockets YouTube page, then you probably should be, so make sure you do that. I actually want to start this question. Tarl is a very experienced real estate investor, been on the podcast. What number are you?

Tarl:
189. I think it was probably the best one you guys ever did, but.

Brandon:
Okay, 189 and best one we ever did. I want to know your thoughts to that question real quick on what you would do if you were in Joe’s spot. And let’s tweak it a little bit. A lot of people right now are out of money and want to invest in real estate and maybe they have a good deal or they have the ability to find a good deal today. What would you do in those cases?

Tarl:
I don’t think the advice changes than what I would have given a while ago, especially in the guys like Joe’s shoes. Well, you guys were on the right track. One of the things he brought up was that he doesn’t have the ability to even refinance out or maybe get his cash back out because he doesn’t have that, either experience, or the lenders that he’s dealing with are looking for the fact that does he have any reserves, any kind of other portfolio, any other assets to leverage. The thing that I would recommend when you’re in that kind of shoes is that what you guys said was find a partner, but find a partner with that experience, with that portfolio, with that stuff, and that’s part of giving things away. I remember when I first started out and started doing any kind of volume fix and flip, I was giving away 80% of the equity on deals for people to pay for them.

Tarl:
And I thought that was like a great thing, like for me to only get 20% and I did everything else. Now, nowadays, I would never do that today, unless I had to because I was stuck in a situation that I couldn’t get out. And then I know that I’m in this business for the long run, not to make all my money on one deal. But if you’re thinking 5 years, 10 years, 15 years out, even what’s happening today in today’s economy, this could be a blip, right? This could be, if your career in real estate is 15, 20 plus years or more, what is 2 years in that entire time period? What’s three years? Right? When you’re looking at that time period, what’s a few months, which this could just be a few months? Or it could be the next like, you know, a hundred years of our lives and we’re all doomed. But who knows at this point. Yeah. That’s what I think.

Brandon:
All right. Well on that note, what are you seeing right now in your market? First of all, you’re in the Seattle Tacoma market, one of the hardest hit with the virus right now. What are you seeing both in terms of real estate and where we’re headed in your market right now?

Tarl:
So real estate here is interesting, so anything on the single family market right now has been going pretty quick. We listed two houses last week, one on Friday, sorry, one on Thursday, one on Friday. Both went over asking by quite a bit with multiple offers within 24 hours and part of that has to do with rates being low. I think that it depends on your price point with where you’re at. We have a house that I’m really kind of worried about that’s going on the market later this week and it’s because it’s at a higher price point.

Tarl:
The houses we listed last week were houses that, we listed one at 250 and one at 400,000. The one at 250 went way over asking. The one at 400,000 went way over asking. But those are still the first time home buyer type prices here in the Seattle and Tacoma area and I think that people that are in that price point with the rates are in the uncertainty of where rates are going to be. Plus also the uncertainty of income and the business people that have been wanting to buy a house can finally go buy a house with those rates and they’re like, “I got to get it now before, in case something maybe happens.” That’s my theory. The people that are the higher price point, we have a house getting listed for 900 grand at the end of this week, which is in a really nice area of Seattle. And even then, 900 grand in the area that it’s at is kind of like the entry level price point for that area.

Tarl:
There’s a lot of houses that were selling for 1.2 to 1.4 million. We priced this house when we bought it to actually sell for 900 grand. And if the market had continued doing what it was doing, we think that it would probably sell for 950 to a million actually, the way that this market has been. And it still might, but we don’t know. You don’t have to buy a million dollar house. That’s the thing, right? So if you’re uncertain of what’s happening, you don’t have to buy that, right? So unlike maybe a first time home buyer might be their only chance to do that. So it’s a big speculation on our part. A lot of my other investor friends that invest in the Seattle area that do have houses at that price point, they are still selling, but I don’t know if it’s going to be next week. I don’t know if it’s going to be the week after that. So I’m really curious on that one for myself personally. We def-

Tarl:
I don’t know, it’s going to be the week after that. So I’m really curious on that one for myself personally. We definitely have seen all the Airbnb stuff go on a lot of levels. People that are doing that rental arbitrage, where they’re leasing out from a landlord and then Airbnb-ing it out to somebody else. I’ve seen those guys get hit.

Tarl:
There’s people that come to our events that they’ve just lost everything right away because they’re doing the arbitrage. They don’t actually own the building. So I’ve seen that happen.

Tarl:
Commercial building space. I own some commercial buildings and good timing for me with one of them, I just listed it to rent out for office space. I don’t see that thing renting out anytime soon. So we’re going to be looking into what we’ve got to do there. I can talk about the smaller guys.

Tarl:
Commercial lenders are freaking out. And that’s on more the multifamily commercial space, from what I’ve seen. Hard money lenders, probably a little bit more than half the hard money lenders here in the Seattle area just shut their doors, just like we’re not lending. And they’ve just stopped completely.

Tarl:
And partly a huge part of that actually has to do with the secondary market buying their mortgages from them, the capital institutional investors that had been buying the mortgages for those short term loans for the hard money lenders, you’re talking about 6-12 month loans for bridge lending. They basically have all, most of the large institutional portions, have all just said, “we’re not buying anything right now because we don’t know what’s going to happen,” which then shuts a lot of the hard money lenders down. So I’m going to see that market, especially in our market, is already changing pretty fast, almost daily, as far as investors are concerned to buy new properties.

Tarl:
So I can keep going. But if you got more stuff then [crosstalk 00:53:30].

Brandon:
I have a question for you. Over the next 30/60/90 days, how do you see acquisition strategies changing? Should they change? Do you think it’s market by market? What are your thoughts on that?

Tarl:
Dude. All right, so this is something that’s been a hot topic internally. We’ve always had a lot of acquisitions come our way. And we’ve always been really selective over the last two years more for private, personal life. My wife and I’ve been living more of a lifestyle business lately and not just buying anything like we used to do. So we’re lucky in that part.

Tarl:
But as far as acquisitions goes, I get stuck with this phrase that I think Warren Buffett said was, “when people are greedy, be fearful, and when you are fearful be greedy.” And I keep looking around going like, am I supposed to be greedy right now? Am I supposed to be fearful, I don’t know.

Tarl:
But as far as acquisitions goes, I can give you guys some strategies that we’re implementing right now for people to consider. And the thing that I’m finding is a struggle is that our competition is, not a struggle as maybe a potential benefit, our competition it’s going to be a lot harder for them to finance these deals especially if they’re fix and flip loans. If the lenders aren’t lending, private money lenders, some of our private money lenders have pulled back and we’ve almost always used extensively private money lenders for everything we do. And more than half of our private lending lenders like, “hey, I love you guys to death but I need to wait to see what happens before I dish out more capital.” So even on our end, that might make our acquisitions a little bit more struggling if we’re reliant on hard money lenders and private money lenders for everything as well.

Tarl:
But as far as strategies, if you look at how many people are affected by this right now, I would say that if you already have, I guess, how do I say this without sounding like a capitalist, too hardcore, because I am, if you’re in contracts with people right now, in escrow right now, to close, there’s no reason you can’t go back and renegotiate it right now. And try to get the deal even better.

Tarl:
We passed on a deal last week that was an average deal before the market situation, what’s the uncertainty right now. And we probably would have bought it, but we told them, because it was an average deal, even today, we’re not going to buy it because we want to get the big juicy ones. That made them go back and they’re negotiating it down another 20 grand to try to get us to buy it right now. Just because I said, we might’ve bought it two weeks ago, but right now it needs to be a really freaking good deal if we’re going to buy it.

Tarl:
I would look at people that are, if you think about, there are a lot of absentee owners that own a lot of rentals in different parts of the US that also had their money in the stock market. And if you think through that strategy for a second, a lot of people that had their money in the stock market, depending on what age bracket they’re in, were approaching retirement. And the real estate market’s still strong, single family at least. So some of those people might be considering selling some of their portfolio to recoup some of that cash because they know that they can sell.

Tarl:
Some places I can see how the market has been changing so rampantly on landlord laws here to be favoring the tenant way, way more than a landlord. So you take kind of a perfect storm of somebody that was already reaching retirement age. Maybe they had 10 units already or four or five single family homes. They just lost a third or a half of their portfolio. They plan on retiring. And they were already pissed off about the landlord laws already. And they might be wanting to remove some of the portfolio just to recoup some of that loss.

Tarl:
So that’s maybe something to think about. Some of you guys might be clicking on that a little bit. And we’ve seen that a lot recently, not to give away all our strategies.

Tarl:
And the other side we’re seeing too is that our contractors still want to work. We want to make sure that they’re still well fed and we still want to pay for our projects to get done. And take care of our guys.

Tarl:
Washington’s thinking about doing a stay in place situation right now. And I wouldn’t be surprised if that doesn’t come out in the next couple of days. And we’ll see how that affects our construction side.

Tarl:
We have a development happening right now that we were just warned by the, and we’re almost done, we’re literally two weeks from being done with this development, which means it’s also selling. And the buyers are still good to go. We’ve had a lockdown.

Tarl:
We just had the materials, our gravel supplier just give us the warning that said, “we might not be able to deliver gravel next week because we might be shutting down all operation during this situation.” And we need gravel literally just for next week. And you’re talking a lot. We need a lot, because it’s a big development. And we can’t store it somewhere else. So we’re like, this timing sucks, right.

Tarl:
I’m going to stop because I got a lot to say. And I’ll let you guys continue.

Brandon:
No, that’s good man. So where can people reach out to you? I mean, you got a good pulse on the Pacific Northwest market, real estate in general. You do a lot of [bur 00:57:58] stuff, a lot of flipping stuff, a lot of rental stuff. So where do people connect with you at?

Tarl:
You can follow me at Instagram at @tarlyarber T-A-R-L Yarber Y-A-R-B-E-R. I’m the only one. And I’m still trying to get the @tarl tag, but somebody else has it. But, we’ll see guys.

Brandon:
All right, we’re going to let you go, we’re going to bring in another caller with a question about house hacking.

Brandon:
So with that Sawyer, welcome to the podcast, man. Good to have you here.

Sawyer:
What’s going on guys, it’s good to be here.

Brandon:
Hey, where are you calling from?

Sawyer:
I’m in Southport, North Carolina, just south of Wilmington on the coast here.

Brandon:
Cool. What can we help you with?

Sawyer:
I want to try to keep it a little bit shorter than Tarl there, that was [crosstalk 00:58:37]. I’ve just got the one single family residence, my primary residence, new investor, and I’m wondering if now is the perfect time to maybe try to sell my property while the values are still really high and get into a house tax so I can keep those expenses low and kind of posture myself, so I’m in a good position for what could be happening in the next year or two.

Brandon:
David, what do you think?

David:
I think it’s always a good time to sell your house in a house hack unless you’re independently wealthy. So the answer’s going to be yes. But here’s some points I want to make about that.

David:
One, trying to time the market very rarely works in somebody’s favor. Tarl was just talking about, or no, it wasn’t Tarl, who was talking about it, Justin was talking about, you don’t want to catch the falling knife. And that’s absolutely true.

David:
The problem is you don’t know when the market’s going to hit the ground and recover. So based on my own experience in 2009, is when I bought my first rental, prices were going down more. I was like, “oh, if I had waited, I could have got it for 20,000 less.” And I bought one house a year after that. And I thought it would just be this way forever.

David:
And then 2013 hit, and right when I thought, “okay, now I’m going to go buy a lot of real estate.” It was too late. There was no chance to catch it. It was off and running. And every month houses were selling for 20/30,000 over asking price. You couldn’t catch up.

David:
So what I learned was that sometimes you can step over dollars to save pennies by trying to get the perfect deal. And that when you sell and then you buy, you’re doing it in the same market.

David:
So I’ve literally had clients before, they’re trying to sell and buy. And they’re like, “hey David, do you think I should wait to sell my house because I can get it for more?” And I’ll say, “sure, we can do that.” And they’ll say, “okay, well, tell me when it’s at the peak because that’s what I want to sell.”

David:
And I said, “all right, but you do realize now you’re going to be buying at the peak, right?” “Oh, well, okay, I don’t want to do that, so let’s wait until prices drop really far and then let’s go buy.” “Okay, so you realize you’re going to be selling in a buyers’ bottom.” Yeah.

David:
For the majority of people, you never get away from this problem. You’re selling and buying in the same market. So it’s roughly six in one, half a dozen in the other. Don’t try to time markets. That’s the point that I’m getting at.

David:
The only way you can do that is if you own two homes, you sell one for a lot of money, you live in the other, you wait for it to drop, then you go buy back in, you let it rise. That’s why I say everybody should own two homes. I wrote up a post about that before.

David:
But for someone in your situation, if you sell your house and then the market drops, that’s okay. You’re buying into a better market. If you sell your house and then the market goes up, that’s okay, you sold at a high level. So don’t worry about that aspect.

David:
What you should be thinking about is what you’re thinking about. How do I position myself financially stronger with real estate? Which is a house hack, which is exactly what you’re doing now.

David:
So selling a primary that doesn’t earn income to buy one that does earn income is always a good move as long as you’re selling and buying in the same market. And that’s what you’re talking about.

David:
So if I was in your situation, here’s what I would do. I would hire a real estate agent who sells a lot of houses and who’s really good. And I would sell my house and accept an offer contingent on finding a replacement property.

David:
That means that if you go into contract with a buyer, you can back out if you don’t find the house that you want to go buy. Now, that’s harder to do in a market where not as many people are looking. I don’t know how hot your market is. You wouldn’t have a hard time in my market right now. You’d be fine doing that. And then if you don’t find a replacement property, you go back to the buyer and you say, “hey, I can’t sell you my house, I need another two weeks to look for one, I’m still going …” And they can either extend you or they can back out.

David:
If you can’t make that work, arrange some form of living arrangements where you, and whoever your family is, can live with someone else for a short period of time after you sell your house to find your house hack.

David:
What you don’t want to do is what everybody does. They try to go find the house they want first. They put it under contract contingent on selling their house. Then when their house doesn’t sell right away, which is probably not going to, in a market like this, or the buyers come back and ask them for credits or … Anything goes wrong on the selling side, not only are you worried about selling your house, but the pressure’s doubled because now you’re going to lose the house that you went to go find and you got emotionally attached to. It’s a terrible way to actually make the transition.

David:
So if you can, to recap, find a place to stay, sell your house, put the money in the bank, then go buy a house hack on a timeline that works for you. And if you can’t find anywhere to stay, sell your house contingent on finding a replacement property. Don’t put an offer on a house contingent on selling your house.

Brandon:
Hey, just to throw a couple of thoughts on there, first of all, questions to clarify real quick, if you sold your house right now, would you clear a big chunk of money or would you basically just walk away with money?

Sawyer:
No, I’d probably walk away with just about nothing. I might make just a very small amount. But I think the main benefit would just be getting rid of a big monthly expense and being able to save more.

Brandon:
Yeah. Well, what if you rented out the house currently and then bought another house? Could you cashflow out currently?

Sawyer:
That’s another option yeah. We’re at the beach so it’s kind of a vacation spot. The numbers, I don’t think I could get all the way up. It would just offset the cost of the mortgage. I don’t think I can cashflow this primary residence though.

David:
Let me jump in. What would you be losing a month if you rented it out?

Sawyer:
Probably about $200 a month.

David:
Okay, and how much could you lower your mortgage if you went and you house hacked?

Sawyer:
Probably around $1,600 a month.

David:
So I think that that makes this a pretty clear decision. It’s okay to not cash flow if you’re losing 200 a month to go save 1500 a month. That’s a $1,300 a month net to you. Brandon, is that what you were getting at?

Brandon:
Yeah, I was going to go. Basically what I was saying is, maybe it’s worth … if you were going to go sell your house and make a hundred grand, and because of the whole, if you lived in the house two years you don’t pay any capital gains tax, and you could walk away with a hundred grand tax free. Hallelujah. I would do that all day long. Right now.

Brandon:
Because we’re probably at the peak of the market. I would take my money and run with a two year thing. Maybe even rent for a while if you couldn’t find another house to house hack.

Brandon:
Because if we are at the top, which we probably are, that two year, no tax thing is huge. If you’re not going to make a lot of profit, then it doesn’t really matter that much. Unless you’re going to lose a lot of cashflow, which you would be, but because you’re going to house hack then maybe I would.

Brandon:
So this is why it’s important for people to understand when they hear this, not just to take one piece of advice. I say, David says, do this. There are some nuances here to think through. But man, hope that helps you out.

Sawyer:
Yeah, absolutely. Real appreciate your time guys. Actionable stuff here.

Brandon:
All right, well good deal. Well, thank you very much. And we’re going to actually bring in a couple more, is that you, Mel, are you there?

Mel:
Hey, I’m here. Hey guys.

Brandon:
Hey, what’s going on? Welcome to the show. How are you doing?

Mel:
Hey, thank you so much. Hey David, how’s it going? David, here with …

Brandon:
Oh, there you are. Yeah, Dave, I was going to say, I thought I saw Mel and Dave.

Mel:
Yes, we’re here.

Brandon:
Very cool. So you guys are active real estate investors as well, correct? And you’re up in Canada, right?

Mel:
We are. We’re in North Bay, it’s about three hours north of Toronto.

Brandon:
Okay. So what are you guys seeing right now in your market, is what’s going on with the real estate?

Mel:
Yeah, I mean, there’s certainly a lot of fear from everyone that we’re talking to about investing and what should I do next? Should I talk to my tenants about payment or not?

Dave:
Yeah, and people who are in the stock market, they’re just beside themselves with all the money they lost. So I don’t know, that’s why I love real estate. It’s not volatile I find.

David:
Yeah, not quite as much, it didn’t drop 50% in a week.

Mel:
Yeah. We were talking because we, it’s funny, so we’re in Canada, we’re buying in Canada, we’re also looking at the States. And of course David we’ve listened to your book and now it’s that, okay, a) when’s the right time going to be to invest outside of market. And yeah, what are your thoughts on that guys?

Dave:
And we’re looking Florida, just so you know, I’ve got a soft spot for Florida because that’s where we go every winter.

Mel:
It’s not in our backyard, so we love to escape the-

Dave:
Get out of the snow.

Mel:
Get out of the snow.

Dave:
So what are your thoughts, Florida now or Florida later?

Brandon:
What do you think David?

David:
As far as when you should buy investment property there?

Dave:
Correct.

David:
Okay. If you wait until we think the market’s going to bottom out, it’s going to be very hard to time that first off. The next set is, if you’re looking for a really good deal, the best way you find them, everybody knows, is a distressed seller, usually off market.

David:
So I don’t think there’s anything foolish with starting looking now and developing relationships with people that own rental properties who may be thinking about selling, but they’re not super motivated or super distressed. Because you don’t know how they’re going to be feeling in two to three months of maybe not getting rent. They may be begging you to take that thing off their hands.

David:
So what I’m getting at here is don’t wait three months and then start your lead generation to look for the deal. Look for the deal right now, know what numbers that makes sense at and stay in touch with that person until they get to the point where those numbers make sense for you.

Mel:
Yeah, that’s great.

Dave:
That’s awesome. And I know there’s no predictions and no one has a crystal ball. But if you were to have one David, what are you thinking?

David:
Oh, it’s so scary when we say this, because people are going to listen to this six months later and say, “those guys were idiots, what the hell were they talking about.” And that’s why no one ever wants to give direct answers to those questions when you get into this space because they’re always afraid, that’s what’s going to happen.

David:
But I don’t care. I’m not a big enough deal yet to have to worry about that.

Dave:
There’s still a lot [crosstalk 01:07:51] in six months though.

David:
Here’s what I’m fairly confident is going to happen. You’re going to see a lot of people lose their jobs, their businesses are going to close down. You’re going to see a lot of fear, but it’s not really going to be based on systemic problems. It’s just short term markets, market psychology. The stock market’s going to go down, people are going to lose short term money, but the demand for all the jobs that people are losing isn’t just going away.

David:
I had a talk with someone, another realtor that was really afraid, like “what if all these people lose their jobs and businesses close down.” I said, “okay, give me an example of a business that would close down.” “Okay, well, like the sandwich shop down the street, like what if they have to lay everyone off and they close their doors.” I said, “okay, in three months when everybody’s been sick and gotten better and they’re going back to work, do people not want sandwiches anymore? Has the demand for sandwiches disappeared?” No. So either that sandwich shops going to reopen or another one’s going to reopen instead. And then they’re going to hire the same people that lost their job. And we’re right back to normal. And all these people that are screaming the sky is falling are going to be pretending like, “ah yeah, you know, whatever bro. I wasn’t that worried.” The fear mongers are going to slowly pretend that didn’t happen.

David:
And so that’s what I look at. Yeah, this is a horrible virus that spreads very quickly and gets a lot of people sick. Our government has self-imposed economic, I don’t want to say suicide because it’s not that bad, but economic hardship on us in order to slow down the spread of it. That’s it. When everybody’s better, and they’ve caught it and they’ve come back, it’s going to go right back to where things were.

David:
And what I am personally anticipating is it’s going to take off, we have a hose with water going through it right now, which is demand for products. And we put a kink in that hose. Everybody stay home, don’t go to work. You’re not buying stuff. The velocity of money is slowed down. When we go back to work, they’re going to release that kink and … I’m telling all my clients, “hey, home prices this summer are probably going to shoot up and you’re not going to be able to catch up. We need to get your listing agreement signed right now and be ready to put your house on the market when that happens, you need to be preapproved with that lender and ready to pull the trigger so that when you do have certainty with your job, you’re not the person getting in the game two to three months later when prices have gone up 50 grand in my market.” That’s what I’m planning on happening.

David:
This is like a ceasefire. That’s all. It’s a short term thing. Yes, jobs will be lost and those jobs will come right back. The demand for those products is not going away once everyone’s back.

David:
Now, if this was a virus that literally was killing the healthy population of the workforce, I’d have a completely different perspective on this. Because there literally wouldn’t be people to go back to work. But that’s not what the data’s telling us right now.

David:
Most of the worst case scenarios I hear people talk about are assuming that the next two to three months are going to extend for like 18 months. But that’s not what we’re seeing in China. That’s not where we’re seeing in some of the other countries. It’s very hard to see how that would happen to us. And I think that, based on the current political administration we have in America, if this did extend for two to three months, I think that’d be like, okay guys, we got to go back to work. Go to work, get sick. We now have had enough time to get ventilators and respirators into hospitals. We have enough [inaudible 01:10:52] hospitals set up. If you’re old or if you’re at risk, you quarantine, the rest of you guys have to go back.

David:
Brandon, what do you think?

Brandon:
No, I think that’s really good. I don’t think I’d add anything to that. I hope you’re right. I hope the kink in the hose analogy I think is a great analogy. I think that’s where we’re going. So Mel and Dave, where can people get in touch with you? Where can they reach out to you? I know you guys are active on Instagram.

Mel:
Yeah, we’re active on Instagram and Facebook or user name is Investor MelDave, is how they can follow us. It’s funny, earlier today we were outside, there’s snow outside, but we just finished doing a video to get on your podcast, so you’ll-

Brandon:
Oh nice.

Dave:
We left his [inaudible 01:11:25] on so make sure you go look at it.

Brandon:
That’s awesome.

Mel:
So Brandon [crosstalk 01:11:27] you’ll be hearing from us.

Brandon:
I’ll check it out. Thanks guys. So appreciate it. Thank you so much for being here today. And we’re going to actually bring in another caller. We had a question from the audience, Adam. Adam, come on in to the show. How’s it going, man?

Adam:
How’s it going, guys? Thanks for taking the question.

Brandon:
Yeah. So where located?

Adam:
I’m in Tampa.

Brandon:
Ah, we had a lot of Florida conversations.

David:
Floridians.

Adam:
Exactly.

Brandon:
What’s up with you guys having spring break and having all these kids flying into Florida, getting sick and bringing it to their [crosstalk 01:11:54]

Adam:
Those kids are younger than me. So I can’t-

Brandon:
It’s good.

David:
You guys just can’t stop providing ammunition for Florida memes.

Brandon:
I know, yeah, a Florida man. I just learned about the Florida man yesterday. I never knew about that.

David:
Wow, Brandon.

Brandon:
I didn’t know about Florida man.

David:
This is what happens when you have kids, you just get completely cut off from the rest of the popular culture.

Brandon:
All right, so what’s your question, Adam?

Adam:
All right, so my wife and I closed on our first investment property back in January.

Brandon:
Congratulations.

Adam:
Thank you. We finished rehab and moved in about three weeks ago. And it’s a house hack, a luxury house hack with a [inaudible 01:12:25]. So we just finished rehab and everything, moved in and haven’t yet listed it or filled it. So obviously we can swing the mortgage payment, no big deal. It’s not much more than we were renting for previously.

Adam:
My wife’s a nurse. I work from home, not that that has a ton to do with it, we’re trying to decide if we should prioritize getting a tenant in now. We think maximal rent’s about 1300. We’re trying to decide if we should get a tenant in now or wait two or three months until the whole coronavirus, stay at home, initial round of layoffs or whatever potentially flies by or blows over and then get someone in.

Adam:
Got to wrap our head around what to do.

Brandon:
Yeah, that makes sense. So, wait until it all blows over or start right now. So, my personal thought is start right now. Immediately jump into it. And here’s why I say that.

Brandon:
You may not find anybody right now, but I would start at least, put ads on Zillow, on Craigslist, if you use Cozy, or even you use their list. Get the applicants rolling in. Because you might just find the most ideal person ever, but you’re not required to take somebody if you don’t find the ideal person. So there’s zero downside. There’s zero downside to trying right now to getting somebody.

Brandon:
But you’re right, the economy, I mean, things could happen and rents could go down. I doubt they’re going to go up dramatically. They might, but I doubt it. So there’s tremendous upside to trying to get it rented right now. There’s not a lot of downside to waiting. Now, will you actually get anybody, who knows, I mean, you guys are probably going to get the shelter in place thing going as well, just like everyone else does, if you haven’t yet.

Brandon:
So people just might not be interested in renting right now, but at least you get practice. At least you get the phone ringing. Hopefully you still have some conversations. That’s where I’d go. David, would do you think?

David:
Let’s run the numbers and let them make the decision for you. So, what do you think you can get if you had to put it out there and get a tenant in a month, how much rent could you get?

Adam:
1300.

David:
All right. And how much do you think you’ll get if you wait and the economy is rocking and rolling?

Adam:
If it’s rocking and rolling, 1300 was the max we could get. As of right now, I think 1300’s still safe. I think the lowest it’ll come, if 2008 happens again or something that affects rent prices, I think it would be safe to say we’d still got a grand. It’s a 800 square foot flat, awesome neighborhood.

David:
So worst case scenario, you’re talking about getting a 1000 a month instead of 1300 a month. Okay. That’s a $300 difference over one year, that’s $3,600. How long do you think it’s going to be before the economy turns around and you can actually get the 1300 if you wait?

Adam:
I’m an IT guy, God knows.

David:
Let’s say six months, it takes six months before it turns around. So that’s $1,800. If you just rent it out right now and you don’t have to wait two months, you’re already ahead, it would make more sense to do that. The minute you have to wait three months, you’re never going to catch up for the whole year. This is the point I’m making. It very rarely ever makes sense to wait to get more rent because the rent you lost when you waited, dwarf the extra rent you were going to get.

David:
So here’s what you do. You put it up, you get someone in there ASAP, that’s a really good tenant that isn’t paying really good money. That’s okay. Let’s say they only pay 700 a month, all right. And you set it up for a six month lease. And they’re in their for six months. And then when everything turns around and rents stabilize. Or let’s say that it doesn’t stabilize for nine months, worst case scenario. You just go month to month for three months with that person. So they’re in there for 700 a month, nine months in the economy is healthy again.

David:
Now you sign them on a year long lease. And by the way, you make it expire during the spring or the summer because that’s a better time to get a tenant, right. But the thing is, no tenant wants to move out of a house when all their stuff is already there. And they have nowhere to go that’s going to be cheaper than what they have. Because everybody else’s rents are going to be high.

David:
So you kind of get the best of both worlds. You get a person in there, you’re breaking even, you’re not bleeding anymore. And you didn’t lose any upside because as soon as the rents turn around, boom, you put it back to market rent. And they’re not going to leave when you raise the rents because they have nowhere to go. Because everyone else is doing the same thing.

David:
It’s actually a really simple solution to a question that a lot of people ask. So I’m really glad that you were going to ask it because I know there’s so many other people in the exact same shoes.

Adam:
Awesome.

Brandon:
Yeah, well, good luck man. And keep those standards high. The biggest mistake you can do is getting panicky and renting to somebody … That is a terrible idea, right. And you know that.

Adam:
For sure.

David:
It’s not the money, it’s the quality of the tenant that matters right now.

Adam:
For sure. Brandon, we’re using your and your wife’s book as the Bible for getting someone, so hopefully we don’t screw up.

Brandon:
Thanks man.

Adam:
Thanks guys.

Brandon:
Yeah, appreciate it man. Have a good day.

Brandon:
And in case anybody’s curious, that book is the book on Managing Rental Properties by Heather Turner and myself as well. So, very cool. All right, another question just came in, I’m going to ask David here, did 2008 affect rent prices, if anything, didn’t they go up with new demand for rentals?

David:
That’s a great question, Corey. Corey is actually in a group that I belong to, that’s actually very cool, he’s on here.

David:
In 2008 everybody lost, well, not everybody, but a lot of people lost their home and they needed somewhere to live. And so they had to go rent something. And a lot of those people, they didn’t lose their job, they just lost their property. This is almost the opposite where people are losing their jobs, but they probably don’t need to lose their property right away. So that’s one small difference.

David:
But because they had to have somewhere to live, rental demand skyrocketed because there wasn’t a ton of rentals. So even though the economy suffered, rents held the same, or they went up. And then when we saw the economy get better and home prices went up, well, rents went up too. Because now everybody wants to buy a house so there’s less rentals.

David:
So the problem is, when the economy goes bad, demand for rentals goes up. When the economy goes good, supply for rentals goes down. Both of those things cause rental pressure upward. That’s one of the reasons that, I’m always asking people that are older than us, the 50/60/70 year old crew that has been a real estate investor for a long time, when did rents go down? Tell me a time.

David:
… that has been real estate investor for a long time. When did rents go down? Tell me a time where rents went down. I have never had a person yet. That gave me an answer other than for a very short period of time during a time like this where there was a little bit of uncertainty that rents actually went down. Now that’s in the residential space. In the commercial space, I think that’s very different, right? You’re definitely prone in the commercial space to changes in … like systemic changes. One of the things that I think will come out of this is that Amazon is going to get even more successful and online companies because you have a lot of people that are 40 years old, 50 years old that they don’t like using the internet if they don’t have to. They really … they know Facebook and that’s all. They go to the store to get their stuff. Well now they can’t go to the store, so their kids, their grandkids are showing them, “Here’s how you order toilet paper on Amazon,” and now they’re like, “Oh, that wasn’t so hard. I can just click a button.” When this improves, they’re all going to do the online thing like the younger generations are. Okay?

David:
I think stuff like that is going to put pressure on the commercial space where you own a big building and people go to get the byproducts from a company that sells them and leases your space. That’s an area that I can see being affected by this but residential housing, I mean until people don’t need a place to live with water and power and installation, it’s very hard to see that rents are ever going to go down.

David:
I love that question. What do you think, Brandon? Can you picture a scenario where that’s happening? I guess the population dropping could, right? Like if people stopped having babies?

Brandon:
Yeah, I think what would trigger is the people moving in together. I think … like again, supply and demand. So a lot of people moving in together. Builders stop building for a number of years. You know, people are afraid, this economy thing just continues to just ransack America of the virus and millions of people die. I mean, I could see a world where like in [inaudible 01:19:47] event.

David:
Yeah, but what you’re describing is like a population decrease still.

Brandon:
Yes, and that would have to happen is that there have to be less renters or for a long period of time, less building.

David:
No that would [crosstalk 01:19:59]

Brandon:
No, no, you’re right.

David:
… increase.

Brandon:
Yeah, you’re right.

David:
You going have to just be like a change in the way houses are built. Like if 3D printers can figure out how to make a house, that’s something to [inaudible 01:20:07]

Brandon:
Yeah, that’s probably the biggest … actually, we don’t talk about this ever but that’s probably the biggest, one of the biggest concerns is [crosstalk 01:20:13]

David:
I’m afraid to talk about it because I don’t want somebody to hear it and do it.

Brandon:
Because the things that hurt your business are … the things that are going to hurt real estate are the things we never saw coming, really, and it’s going to be the … like what if you just plug into a thing and they put 500 people into a commercial office building. You just plug into the matrix and you don’t need a home anymore. Like, I mean those … that’s what’s going to destroy real estate, not like necessarily … now I can see rent control being a bigger issue and by rent control, I mean I could see it the wrong … I don’t want to say the wrong person. Oh, I’m going to say it. The wrong person gets elected as president and a bunch in Congress because they’d have to be, you know, it’d have to be a pretty big group of people advocating for it, but I can see people forcing rental rates and prices and dropping them if we get to the point where that was a necessity. Again, I hope not.

David:
Yeah, but if that happens then they’ve also probably devalued the dollar so even though you’re getting less rent, it’s worth the same amount of money.

Brandon:
Yeah.

David:
Right? It’s just very, very hard to see real estate being as resilient as it is, unless they increase supply through … they can print houses and make them super cheap so everyone can have their own house or a decreased demand by having less people. So yeah, the question in 2008, did we see rents go down? No, not really. I mean, a short period of time when there was like, it was a flux where people were in foreclosure so they were living in their house but they weren’t making a payment. That was going on, rents weren’t going up during that period of time, but the minute that all the foreclosures started to hit, they were like scrambling to find rentals and rents every month were going up more than they were before.

David:
Just for some context, I bought a fourplex in 2013. When I bought it, rents were $700. We just rented it out last month, I think for $1450 for one unit and another one is on the market at like $1600. That’s over a seven-year period. Rents have doubled.

Brandon:
Crazy. Yeah, beth said 2001 dot com bust saw rents drop in Seattle, the only time I’ve ever seen it in 20 years. Yeah, I think the right, what’s the word I’m looking for? Like the collection of events? Yeah, combination of events that happen could trigger but I bet you anything …

David:
Tech-centered place where a lot of people [inaudible 01:22:22] lost their jobs and there was a demand decrease in Seattle, but that wasn’t happening in Wisconsin where they were making cheese. They didn’t care about the tech crash.

Brandon:
Oh, very good. Let’s see. Yeah, rents tend to go up. Yeah. Jason had left a comment. Just said, I’m in the middle of a duplex purchase right now. I’m nervous about it, but it’s a ride or die for me. Not letting anything stop me.” I like that attitude, man.

David:
What about Nikkei? How does the story end? Prediction for 2020. What happens to the economy, stimulus packages, different types of real estate strategies?

Brandon:
Yeah, so here’s how the story ends. We have no idea. I think David had a good answer earlier that he thinks things are going to, the hose getting unkinked analogy. I have no … you know, you read some stuff in there like, “Stay in your home for two weeks,” well I’ll be fine. Then you read something that’s like, “This is not going away until we have a vaccine and so this could be 18 months to two years before we get out of this.” And everything in between, right? There’s the worst case on one side and then the best case and the other. I like what Justin said at the beginning of the show is, “I’m going to bet on America, I’m going to bet on us figuring this up and I believe that we are going to figure out a way through this.”

Brandon:
Like I said, I think we’re going to stabilize … the freaking out will stabilize at some point. Like even in turmoil, like for example, to use an analogy, if you were on a ship and you’re going across the ocean on a ship, right? Like back in the old days, you’re on a pirate ship, because I want to be on a pirate ship and you’re on one of those pirate ship and a storm comes the first night. I’ve never been in a store before and it’s like crazy and there’s water going everywhere and it’s scaring the hell out of me. But then the storm doesn’t stop. The next day, it’s a storm, the next day it’s a storm the next day it’s a storm. By like the fourth day you’re like, “All right, [inaudible 01:23:58] the storm, it’s that’s what it is. I just live in a storm,” and it’s not scary. It’s still there; it’s not scary. That’s what, if this continues, who knows if it is or not, whether the storm goes down or whether the storm continues, our mentalities will stabilize in whatever situation we’re have. It’s uncertainty. So in a weird way you can be … people will become certain with the uncertainty, they’ll become confident in the uncertainty and that’s going to stabilize, I think, a lot of plans. That’s what I see the end of the story is.

David:
Very brilliant. Ah, brilliant. By the way, if you were a pirate, do they make peg legs big enough for somebody like you?

Brandon:
I don’t know. [inaudible 01:24:38] I don’t know [inaudible 01:24:38] find out. All right. Mike Williams said, I listened to the BP podcast from last week. Great info about what the future might hold. I agree. Thanks, Mike Williams for saying that.

David:
I love that. Brandon, can you get more of your employees to come in and compliment us as if they’re just a regular person? I like these ringers.

Brandon:
I like this too. Hey Ryan, you got any good questions for the BP audience? Yeah. All right. Another thing came in, Jared, if they going to do a interest only bridge loan until this thing gets figured out then refinance into a 30-year in three to four months, fingers crossed, [inaudible 01:25:09] purchase price just appraise for 290. Burr. Yeah, dude, keep going. That’s awesome man. Keep going. Jerry. McCluskey said baseball bat leg.

David:
Perfect.

Brandon:
The pirate leg. Yeah, the peg leg. He sees a baseball event. That was a joke. I was looking for a [inaudible 01:25:26] and I wasn’t quick enough for it. All right, let’s talk about this real quick. This is an important topic and we haven’t really talked about it yet today. Mortgage freeze or the mortgage deferment or the … what’s the word, forbearance? We have a lot of that.

Brandon:
So I posted a video last week on BiggerPockets, a few days ago, that’s had like 50,000 views now just in the past few days. Let me, because I tell you the newest count right now, because this is a super popular topic. The video was called, “Are your tenants unable to pay rent due to the coronavirus? Here’s what to do.” It’s up to 61,000 views. This is a huge issue right now. In this video I said, look, I have a plan in place now for what we’re going to do. If we have to, we’re going to tell them … First of all, we’re going to make sure the tenant realizes that … Well, first of all, we’re going to have a plan. Second of all, we’re going to empathize. We’re going to listen. We’re going to have conversations with our tenants. Third, we’re going to make sure they know rent is still due. Fourth, we’re going to give them their options, like you can pay by credit card, you can take out a small loan, you can borrow from family and friends, whatever, but rent is still due. Fifth, we’re going to make a deferral plan that they could spread out their payments over 10 months starting in June. So they could take technically April and May, not pay either of those … now we’re not going to tell them upfront. This is the worst case, last case scenario. When they don’t pay, that’s what I’m going to tell individual tenants about this plan.

Brandon:
Now that said, when I made this video, I think the planet works pretty good. I had a number people reach out, I mean out of 61,000, I think I had like three people go on and say, “What a bunch of horrible investors, landlords, because you guys aren’t paying your mortgage payment, you guys don’t have to pay your mortgage payments anymore, but you’re still going to collect rent from all these tenants. What a bunch of horrible people.”

Brandon:
Let me first of all just say, I wasn’t talking about if we get to defer our payments, right? But that’s not happening. But this is what the tenant world and a lot of the world thinks is that we suddenly just don’t have to pay our mortgages anymore. Now, Fannie Mae and Freddie Mac have come out with some stuff for homeowners that you can maybe forebear, there’s some forbearance, and maybe something’s coming and if that comes, yes, we’re going to find a way to pass that onto our tenants. So we’re not just being jerks and going to make money off of this thing.

Brandon:
That said, David, what have you heard or what do you know about forbearance, [inaudible 01:27:41] mortgages or anything like that? Have you heard anything that’s coming?

David:
No, but I’m pretty fairly certain it’s going to come unless, you know, Congress has the ability to stop it, which I don’t see any reason that they would. I’m just assuming that’s going to happen. Now, here’s what people need to understand about that. You’re not just getting to skip a payment, you’re just getting it put on to the end of your loan agreement, basically. So you’re still making the payment, they’re just not making you pay it right now. Tenants who think that they should get to skip their rents are probably not thinking, “Oh, I’ll just make an extra payment at the end of my lease after I’ve moved out.” That’s not going to happen, so it’s not an apples for apples trade.

David:
Another thing is my property taxes are still due, my maintenance is still due, my insurance is still due. Everything else that I have to spend money on is still going to be due even if I do get to defer the mortgage. Now-

Brandon:
That is such a … real quick, that’s such a good point. Non-real estate investors don’t realize that. Literally they think like, I mean I’ve seen it in some videos and I’m not knocking these people, but I’ve seen a number of investors say, “You know what? In this difficult time, I’m just going to not let … my tenants are not going to pay rent. I’m going to allow my tenants not to pay rent.” So I’m like, that’s fine. You still have to pay your mortgage but you also have to pay your taxes and the utilities and electricity and all that stuff. Right? This is why we say in real estate, the 50% rule. It says that half of all the money you earn from rent is going to go out to non-mortgage expenses. So even I’ve had people say, “Well doesn’t Dave Ramsey look smart right now?” First of all, I love Dave Ramsey and I’ve always said he’s a smart guy and buying properties for cash is definitely the less risky, but they’re not off the hook either because they still have 50% of their expenses or their income is still going out. So whether they have a mortgage or not, they’re still losing a massive amount of money right now. So anyway, I just wanted to bring up the 50% rule that this is not the only thing. Sorry.

David:
Yeah. I promise you, when you have a big portfolio, you don’t worry about your mortgage payment. You worry about …

Brandon:
Correct. Yeah.

David:
Rakes that you have to go fix or vacancy or them moving out and trashing the house. That’s way, way bigger expense than your mortgage. My properties, they’re not Fannie Mae, Freddie Mac stuff like a handful of them are. The rest of them are all commercial mortgages or portfolio loans where I don’t get that government coming in and they’re not trying to save me. They’re trying to help the average American who just wants to have a house and they’re afraid, “I can’t make my mortgage, my family’s going to be evicted.” That’s who the politicians are looking to help because that’s, they can get more votes that way and that’s just how the whole thing works. I understand that, but don’t assume that just because your landlord is making a mortgage that it’s going to fall underneath that package because it doesn’t. You also have to show that your ability to make your payment was effected by the coronavirus. It’s not everybody just gets a free mortgage where they don’t have to make a payment for the next six months or 12 months. There’s going to be some form of hardship that has to be documented. You’re going to have to show pay stubs or something showing, “My income dramatically decreased,” and you’re still going to have to make that payment later. That’s just what I want people to understand. It’s not free money. You’re just getting a pause on when it’s when it’s due.

Brandon:
A couple more comments and questions that come in. First of all, Beth said, “Most of my mortgage companies have been proactive in offering forbearance.” So yeah, it’s definitely worth talking with your … if your tenants aren’t going to pay rent or can’t pay rent, it’s worth, especially if you’re in an area that was really hard hit, like you had a bunch of Airbnbs, it’s worth having the conversation. Like even if I were a private lender, let’s say I was a hard money lender or a private lender myself and I let David here money for a project … I’m a person. I understand that David … just say I essentially if I lent it to David on a Airbnb property and I know that David’s just going through hell right now, I don’t want that property back so I will still likely work with David as long as I have open communication. So just keep that in mind. If you guys are struggling right now, start having the conversation with your lenders. Keep that in mind in mind as well.

Brandon:
Yeah. Sean said, “My mortgage guy is pushing me into a refinance and the savings would only be 150 bucks a month. I told them no, I think we can wait and do better. Any thoughts on that?” Oh man, this is such a hard question because I’m doing the same thing right now. I was refinancing my house. Like I have a-

David:
No, no, no, no. Tell the story, Brandon. How did the whole refi idea come up? Who was in Maui with you and told you that you should refi?

Brandon:
David says I said refi. Well what happened was I got … my lender reached out and said, “Hey, we can refinance your property.” I was like, “No thanks. I don’t need to.” And I talked to Dave and Dave was like, “Of course you should refinance, you should do it, you’ll save this much money and blah blah blah,” and I think, “Well I can’t because of this reason.” David, you helped me work through that, so thank you.

Brandon:
That said, in that process they were quoting me 3.125% for a mortgage rate to refinance. I was slow because it takes me forever to get paperwork together and I just wasn’t in a hurry. It’s my own fault. Then it went to three point, like, three and then 3.5 and then 3.7 and now I’m at 3.875, that was like last week. It’s probably at four now. So then the question goes back to Sean’s question. Should we just refinance now or is it going to go back down again? Should I just go with it? When should we refinance? What are rates doing? David, you are a lender, at least somewhat, right? You own a lending company as well. What are you seeing?

David:
Okay, there’s two things that are affecting interest rates, and I’m saying this because I can’t tell you the answer but I can tell you how the game is played so that you know the rules and then you can make a better decision. The first is going to be whatever bond prices are, the 10-year treasury note. Jay Scott and I talked about this a little bit on the last podcast. When more people are buying government bonds, then the government can offer less interest to get that money. People typically buy bonds when they pull their money out of something more risky, like the stock market. Bonds are considered safer. So the more that people are running away from stocks and into bonds, the lower of a rate that government can pay on that. Mortgage rates are tied to that 10-year treasury bond because they’re … the people who invest in mortgage backed securities, which is where loans all eventually go are the same people that invest in those bonds more or less, their risk profile is very similar. So those two things are competing with each other for investors, so when one goes up, the other goes up. When one goes down … imagine two gas stations across the street from each other. If you’re the guy who’s 20 cents a gallon more, everyone’s going to your competition. You have to be more or less the same.

David:
All right, so that’s the first thing is when you see that people are pulling their money out of stocks, they don’t want to be investing in other riskier investments, they all want to put into bonds, you can expect mortgage rates to go down. The other factor that I said, there’s two levers, is how busy mortgage companies get. Because when those rate’s at 3.125 and I told Brandon, “You should refi right now,” knowing the odds of him actually having 14 days in a row to put all the paperwork together that’s going to take [inaudible 01:34:04]. It’s not that Brandon’s dumb. He just realized the monumental task that that was going to be for him.

David:
It’s because I was watching demand skyrocket. Smart mortgage brokers were hitting everyone up and saying, “You should refi right now.” Agents like me, we’re seeing a bunch of people like, “Holy cow, rates dropped. I want to buy that house right now. My payment’s going to go down $150.” They got overwhelmed with applications. Now they have a problem. They either can’t get them processed in time or they have to pay over time to their employees to stay late to do it, and when they start paying overtime, the profit that they’re charging goes down. When their profit goes down, now they have to raise rates to make up for that, that pushes rates high. When they get flooded with applications that they’re not prepared to handle, they have to push rates back up, both to pay for the overtime and to slow down the flood of applications that they’re getting.

David:
We were looking at the fact that on the clients that I had when lenders were that busy, it was going to be like 60 days before we could get loan approval. The lenders just could not keep up with the demand. So even when bond prices go down, if rates go too low, they’re going to pop right back up again because they’re going to get overwhelmed.

David:
So you have to pay attention to two of those things. If you’re trying to time it perfectly, you wait for horrible news to happen where the stock market takes another huge dip and everyone says doom and gloom and the sky is falling. Money flows the bonds, interest rates on mortgages go down. Side note, this is why when the Fed dropped the rate down to zero, that doesn’t mean mortgage rates went down to zero. The Fed rate is the money that banks use to let each other borrow money. That impacts like HELOCs and private loans and stuff like that. But when they go down, you got to jump in right away because everyone else is going to be jumping in too and if you wait too long, when they get overflowed, they raise the rates again and that’s kind of what happened with Brandon.

Brandon:
What do you think? Is it going to go up or down?

David:
It’s going to do both. [inaudible 01:35:44] nuts like this, right? Like when everybody stops, nobody’s buying houses anymore, they’re going to probably lower rates down again. Right? Especially with nobody wanting to buy stocks. Then when we get good news, they’re going to go right back up.

Brandon:
Well then let me ask you this question then. Kind of a different take on the question and it’s might’ve been what the actual question was asking, I’m not sure, is $150 a month worth refinancing over? Like you know, even if you’re not waiting, when is it worth that hassle of refinancing?

David:
This is a good question too and I’m going to answer it the same way we did. I can’t remember his name now, but the gentleman that was asking should I rent? Yeah, let math do the, answer that for you. $150 a month, if you take that over a year, that’s going to be $1,800 a year. You have to ask yourself, what are I closing costs? How much am I adding to my loan if I do this? Okay, let’s say it’s going to be like seven grand or something like that in closing costs you’re going to be tacking on. That means you have … it’s going to four years before you break even on that loan. More or less, right? Yeah. That doesn’t include your mortgage interest deduction and all those other tiny little variables. So if you’re going to stay in the house for more than four years, it absolutely makes sense to refinance it right now. If you think you’re going to be moving in less than four years, then no, it doesn’t. That’s how you do it. You look and say, how much am I going to save a year? How much is it going to add to my principal balance? And you see, okay, this will take this many years before I break even, am I going to own the house for that long?

Brandon:
Well, something to keep in mind there too, that … I don’t know if I’d call it shady, but definitely an angle or marketing angle. When I see lenders oftentimes will show me the amount of money I will save by refinancing, it’s largely not even because of the interest rate. It’s just because they reset my loan to over 30 years ago. I’m like, wait, I’ve been paying on this thing for nine years. I only owe 21 left on it, so of course my payments going down, I’m going to save $150 a month but in reality, I’m paying actually more interest over the life of the loan. Now maybe that’s my goal. Maybe my goal is to reduce my … or increase my cashflow, so maybe spreading it to 30 again is a good idea, but don’t just assume that the lender is being completely transparent.

David:
That’s a good point. [inaudible 01:37:43] deep into an advertised loan and you’re like 15 years in, 20 years in, you’re actually making really big chunks of principal payments when you’re deep in there. I think I just assume like most people, he’s looking to refinance three years after he bought but yeah, you’re like, you’ve only got 10 years to go on your loan, you’re making huge, huge cuts into your principal. Basically as a general rule, when they quote you that say, okay, what if I owe 15 years left on my mortgage? If I refinance into a 15-year note-

Brandon:
15-year, yeah. I will try to keep it the same. Yep.

David:
Yeah.

Brandon:
Yeah, what’s my payment if I were to keep it exactly the same? Then you’re comparing apples to apples. All right, well we’re going to do, we’re going to get out of here in just a moment. This was a kind of a very different but cool show. If you guys like these kinds of shows, these call in shows, maybe we’ll even do it more regularly if you guys enjoy this. So do us a favor, let us know in the show notes of this page for the show or in the comments below the video if you’re watching this, if you enjoy the Q and A, if we should to be doing more of these.

Brandon:
I want to give a last thing we do before we get out of here, just some final words of advice for people. I’ll start and then I’ll let you, Dave, kind of like close it up. I just want to say this. First of all, understand, like I said earlier, we’re all going to get through this. Everything’s going to be fine. We’re going to stabilize whether it’s we’re stabilizing rocky ship or on a smooth sailing ship, none of us know. I said this on the end of the last podcast, I’ll say it again now. It’s like, they can’t take away, the economy can’t take away your work ethic, what time you wake up in the morning, how intentional you are about your goals and your days. Use this time to better yourself and to put yourself in a good position so that no matter how rocky the ship is, you’re going to be fine afterwards. Don’t freak out. We’re going to be fine. Dave, what do you think?

David:
I love it. I think if there’s one thing I learned in 2019, it was that I need resistance and tension and fear because that provides it to grow. I just, I had kind of a little epiphany in my own life that when things get hard, I became very grateful because I .. you can’t get strong without a weight to lift basically is what I learned. So this is just introducing a tiny little bit of more weight to lift and I say a tiny little bit not because this is a small deal, but because compared to what human beings have endured before, I mean would you rather be in Venezuela right now with their economy in complete shambles and no one’s talking about that, right? This is a bunch of people that could get sick and come back. This is not a bunch of 18-year-olds storming the beach of Normandy.

David:
That’s a big deal. I would much rather be, “Oh, I got to stay home for a month or so,” than the guy that had to go to war to go do that. So comparatively speaking, this is not a huge weight that I have to lift. It’s going to make me stronger. The conversations that we’re having, the questions that we’re posing, the way our brains have to think outside the box, the grasp of real estate that we have to have to be able to make money here is improving us. When you get stronger during these times and then everything stabilizes, it feels easy. You got stronger. Now the weight that you used to lift that you were like, “Oh, this sucks so bad,” doesn’t really suck anymore. It’s not bad. So you’ve got to have a small piece of you or a big piece of you, whatever, that runs into this and likes it. That likes it this is going to be challenging to you, and if you love growth, you’re going to.

Brandon:
You know, on that note, there’s something that Justin stamper, who again we interviewed earlier on this show, the first guest today, he said on my Instagram, we did an Instagram live the other day together and he said … how did he put it? Basically like, difficult times like this, I think he basically said difficult times like this help bring us back to the fundamentals of business, of what we’re doing. So it’s a time for us to … you know, it’s easy to get caught up in the fads of what’s working. Like, I mean Airbnb, I’m not saying we shouldn’t do it, but it’s like, oh this is working really well so let’s throw out the foundations, the fundamentals of what works and let’s just do this because it can make a lot of money or let’s go build a bunch of houses.

Brandon:
But this is a time that the correction is when we remember what are the fundamentals. Cashflow is a fundamental thing. Making money, being conservative is a fundamental thing, in your finances. Having enough money in reserves. It’s easy when everything just keeps going out more and more, more. It’s like, “Who needs money in reserves? Because I can get more, I can even … my bank is going to only pay me 1%. I can get way more than that so I’m going to dump all my extra cash into another deal. The fundamentals are what revealed to us in these difficult times.” So use this again as a learning tool, use this as a moment to redefine what you’re looking for, what you want, what’s important, and emerge out of this thing stronger.

David:
Boom. That would be a mic drop or if your mic wasn’t on a stand and unable to drop.

Brandon:
I can tip it over.

David:
It’s mic tipper.

Brandon:
Mic tippin’. All right, if you guys enjoyed the show, make sure again, leave us comments on the show notes at biggerpockets.com/show375. Make sure you guys are reaching out to some of the guests that we had on the show today or reach out to them on Instagram. You can find David here on Instagram at @DavidGreen24. you can find me at @BeardyBrandon, you can follow Bigger Pockets everywhere @biggerpockets. We’re going to be with you guys through this no matter what happens over the coming weeks so stay tuned to Bigger Pockets. We’ll keep doing these podcasts, current conversation about what’s going on. So thank you everybody for joining us today. Have a fantastic afternoon, evening, and good night.

Brandon:
David, you want to [inaudible 00:24:40].

David:
Yup. Brandon and I are committed to actually being there for you guys. I know this sounds cheesy. We talked yesterday about doing more Instagram live and Facebook live. If you guys start reaching out to us on Instagram and telling us what you’d like to talk about, we will start scheduling those things and we all get closer through this hard time of quarantine. So yeah, please do that. This is David Green for Brandon the Mic Tipper Turner, signing off.

Speaker 2:
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