We just released my newest LIVE interview with my good friend, Paul Lizell. Paul has been an investor for over 20 years, and we discuss techniques to THRIVE in a shifting marketing.  The sky is NOT falling my friends…opportunities are coming our way…but you have to be ready!

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FlipNerd Show Transcript:

Mike: [00:00:00] Welcome to flip nerd, live discussions with and training from America’s very best real estate investing professionals. We meet live twice a month to discuss what’s working now and get your questions answered. We broadcast live inside of a private online community, which you can join for free by visiting flip nerd.com/live.

Let’s start today’s. What’s up everybody. Hey, welcome to today’s show I’m here with my good buddy, Paul LaSelle. We’re gonna be talking about, uh, this shifting market. And fortunately we coly had my buddy Paul, uh, scheduled to join us today. He’s been around for a million. Years’s done a ton of deals and really has a lot of perspective on the shifting market.

So, uh, glad you’re here today, Paul. It’s up, buddy? How are. Good. How are you doing good. Good. Really excited to talk about this. I, I, it just kind of hit me when we jumped on. We’ve been friends for a long time now. Yeah. That, uh, you’ve been doing this longer than me. And I feel like I’m a little more veteran than a lot of the folks that run in our circles these days.

I, I used to be the young guy and now I’m [00:01:00] like the, uh, now I’m like the old guy, I guess you’re no G now. Yeah. Yeah. I got the gray hair to prove it too. So I hear you, um, but really excited to talk about this shifting market today, and this is very timely. So for those of you that are watching, uh, right now, we’d love to kind of make this interactive and ask, answer some of your questions and stuff too.

So make sure you’re chatting them in. Uh, today. And if you do, uh, I’m gonna ask Paul to tell us a little bit about his background, but before that, if you can just make sure you’re chatting in, uh, here, where you’re joining us from what’s going on, any fears or concerns you have right now, let us know you’re out there.

Uh, just wanna make sure that, uh, that we’re getting through to you. So, Paul, tell us a little bit about your background.

Paul: Sure. So I started investing at the very end of 2001 December. Uh, December 20th, 2000 0 0 1 is my first transaction I did. And since I’ve probably done, you know, 12, 1300 transactions, but, uh, most of ’em were the same too bank owned properties have bought and overtime.

That was a HUD property. You know, I picked up for 29, 5, put a few grand Inwood sold for [00:02:00] 69, you know, a couple months later. So that was my. I did some direct mail back in the day, which I stopped in, uh, 2013, but was still, always doing the bank own stuff. And yeah. Been through that market cycle. Went through that horrible crash.

I think Mike, you kind of started in the time around that crash, right. As the world was crashing down.

Mike: Yeah. That’s what I’ve been telling a lot of people. In fact, we have a event going on later today for folks that are in our investor machine program, just to talk about the shifting market and. I use this kind of funny quote, not everybody’s gonna, this is gonna resonate with everybody because not everybody knows this, but I’ve watched, uh, uh, Batman, uh, uh, dark night rises like a million times.

I don’t know why it’s kind of a dark movie. I don’t really know why I’ve watched it so much, but there’s this scene where Batman’s trying to overpower Bain and Bain says that Batman’s trying to adapt to the dark, but I was born at. Because he was kind of basically lived in a dungeon. Right. And I’m like, well, I was born during this market.

Like, and by the way, this is not even a bad market yet. Like, this is a different market than 2008, for sure. But my point in that is there’s a lot of folks, if you’ve [00:03:00] gotten in, in the last gosh, 10, 12 years even, um, you haven’t really been through a, a downturn in a market. And that’s kind of when I came in and Paul’s been through that and more.

Um, and so, um, you know, I think you gotta rely on guys like us that have, have been through something like this before, cuz the truth is. If you would’ve asked me five or six years ago, I would’ve told you that I’m primarily waiting for another down market. Yes. And it just took forever to get here. And I don’t, again, I don’t think we’re in this, like, you know, it, it might be considered a recession.

It might be slowing down. It depends on where you’re at. Right? I mean, you, Paul buys all over the country, so he’ll know more than anybody, um, of this is very market specific, but, uh, this is the time to talk about it. And I think guys like us can hopefully help you that are listening.

Paul: A lot of people are nervous about it.

Right. It’s the first thing I get from my students too. What’s going on in the market. Whereas the heading, it kind of reminds me and you I’m sure you remember this too. Just back in 2020 when the COVID lockdowns, right. People were scared. What was going on was real estate gonna crash. And, uh, [00:04:00] it certainly did not crash from that.

Right. It’s made boom from that, that caused the whole shift.

Mike: Right, right. Right. And, and the truth is, I think people need to separate if, if you’re, if you’re, uh, a newer real estate investor, you have to remember, you have to separate the retail market from the kind of wholesale market. Right. I mean, at the end of the day, so Paul buys a lot of stuff at auction, and he’ll probably talk about that today.

That’s really, his primary model is buying it online auctions, but I’ve been a, a main street guy like buying, you know, marketing to people and buying direct from seller, um, for 14 years, And the types of problems that people have, death, divorce, inheritance, problem rentals, all those things. Like those things, don’t ride market waves.

Like they’re happening all the time. People are not saying, you know, I was gonna die this year, but the market’s kind of down. So I’m gonna hold off on dying. Like that’s, those problems are still happening. Those people still need help. And now a word from our sponsors. Investor fuel is America’s number one, mastermind community for professional real estate investors, where hundreds of the top investors from across the country [00:05:00] come together to build stronger businesses and stronger lives.

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Paul: seller leads.

Mike: Visit flipper.com/carrot. To learn [00:06:00] more about how carrot can help you. Uh, from investors like us. And so our time really, and the truth is, is some of those things get worse because people start to have some financial issues. Right, right. And so that creates opportunities for us. Again, we don’t wish those things on anybody, but it’s just, it’s the reality of the world we live in.

Right. Paul.

Paul: Totally is and UN the unfortunate side for real estate investors like us is we actually thrive in a down market more than we do in a boom market like this. Right. We make more money, we have way more opportunity, but at the same time, it’s a lot of pain going on for people. So we definitely don’t enjoy that perspective, but yeah, we’re just hitting a shifting market right now.

We we’re in a market like we’ve never had before we still have fairly low inventory. Right. Especially in those hot markets like Dallas, where you are, you know, in Florida and Arizona and Tennessee, And, and even, uh, South Carolina, North Carolina, which are kind of the, the markets, people have been moving to the most right recently

Mike: anyway, over the past year.

And we’ll continue to, right. If you, if you live in California, And your job is a little more, less [00:07:00] stable now. And all of a sudden they’re just the, the state or city government, whatever you live in is like, you know what? It’s a good time to raise taxes now because their revenues hit and they think, well, you know, a lot of those blue states are like, let’s just tax.

’em more, we gotta find a way to, uh, get more revenue out of these people. People just start to move up their pace of moving to states like Texas and Florida and Arizona even faster.

Paul: Absolutely. And being able to work from home for a lot of people, right. Has really just pushed that more. If you think about it, it’s probably a perfect storm of three different factors causing this Exodus, right?

Yeah. You have the baby boomers, the biggest generation right now that we have. Retiring and going to the Sunbelt, right? Yeah. So that’s one, COVID the lockdowns and what the governments did in the Northeast, especially, and you know, up in Oregon, all these different areas, Michigan, that lockdown so much people like myself.

I’m, I’m actually a factor of that. Right? Cause I decided to move a year ago to Florida from Pennsylvania, cuz Pennsylvania had crazy lockdowns. As a matter of fact, we were only state and union to stop real [00:08:00] at real. In 2020 in April, they actually should governor shut it down. The only state union to do.

So a lot of things like that, push people like me out politics, taxes, you know, rising cost of everything. And again, a rising cost of food of fuel and everything is shifting people down to those less tax states where they have lower cost of living too. So there’s a lot of factors, like three different factors going in here.

Pushing more and more people that way. So even when other markets are switching, like we are seeing that more in the Northeast. So, and, but those markets like Texas, like Florida, like Tennessee and Arizona are gonna continue to thrive. I would expect as long as rates don’t shoot up past 8%, 9%. I expect they’ll continue to thrive.

Plus a lot of people are buying cash in those markets. Right,

Mike: right. Yeah. And not to mention, uh, your quality of living goes up when you move, if you move from the Northeast down to Florida or Texas or somewhere, I mean, yeah. Yeah. You deal with lot weather, but you, you’re not dealing with cold winters and stuff.

So most people, you know, don’t really, I don’t know. I guess some people like agree. quality. I don’t mind going to the winter for [00:09:00] like a week. Like, Hey, let’s go snow somewhere, but I like to come back home where it’s nice and.

Paul: Exactly. Yeah, we got plans. We have two weeks next year to go to Breckenridge, Colorado ski and two different weeks during the winter.

So that’s, that’s enough. That gets you

Mike: fill in, right? Yeah. Yeah. Well, you know, I’m going to VA next week, which, uh, is in the summer. We love it out there in the summer. And it’s like 30 degrees cooler than Texas, but truthfully, I wouldn’t wanna live out there year round. I, I think it would be a little boring and I don’t wanna live in.

Winter type weather year round, but it’s nice for a couple weeks here and there, right? Yeah. So, uh, let’s kind of dive into, and, and before we do, uh, folks, if you’re listening to a recording this, if you’re watching it live, thanks for being here. Uh, the way you got here is by one way or another, going to Flipp nerd.com/live.

Flip nerd.com/live and registering to get notified. So we’d love to have, you know, a ton of people watching this live. We’ve I’ve been doing podcasts for coming up on, uh, this, this winter, Paul will be nine year anniversary of flip nerd. If you can believe that. And we have a few different shows. Now, the live show, uh, we stream inside of some of our groups and we notify you of when we’re going live, but you [00:10:00] gotta go to flipper.com/live.

To register to kinda get on that list. So we’d love it to be live. And again, post your questions in the right here. If you are joining us live right now. Cause we’d love to interact a bit. I see a bunch of folks saying they’re joining us from a lot of the states. We just talked about Texas Nashville, Alabama.

Um, so Paul, uh, You’re primarily an auction guy, right? Yes. And do you see, let’s just kind of get that out out, out of the way. Let’s talk a little bit about, do you see you’re? I mean, we’re gonna see an uptick in auction type activity that feeds a guy like you from this market, right?

Paul: Oh, absolutely. So, you know, when the, when COVID lockdowns happened, they stopped the, uh, foreclosures from happen that really shrunk our inventory big time.

Right. But now, right, as of last December, they opened it up and we’re seeing inventory go six, seven fold from where it was. So, yeah, we got a lot of properties to choose from now and different markets all over. So it’s really increasing, they’re expecting, expecting it to increase drastically even further.

And I saw something today. I just read today that the interest in. [00:11:00] Uh, adjustable rate mortgages is increasing dramatically cuz these rise rates, which in turn will then lead to more foreclosures, cuz those are more likely to become foreclosures down the road yeah. Than a standard 30 year fixed

Mike: is. Right, right.

Yeah. I have some, I have some adjustable rates on my rent. Some of my rentals, we have a lot of, we have a lot of paid off rentals, but it hasn’t been an issue for years now because. Rates have been so low, they just didn’t adjust up. Yeah. But now, and, and then, and my rentals were, um, you know, it was the type of loan where it won’t adjust for it’s fixed for five years and then it adjusts.

Some of ’em were fixed for three years and then it adjusts, but it just stayed there and maybe adjusted down to what the floor was because the rates were so low and some of these, and honestly, I don’t have a ton of debt, but surely when some, and then, then they start to adjust every year. So some of my rates I’m sure are gonna take up.

Uh, I didn’t think about that until you said it, but I, I guess that’s coming, but I, we have so much equity in em. I mean, I don’t want my rates to go off. Don’t get me wrong, but we’re, we’re not at any sort of risk other than [00:12:00] having to pay a little bit more, but our rents are, are up tremendously at the same time.

Right.

Paul: The brands are gonna more than offset your increasing your interest rate for sure.

Mike: Yeah. Yeah, no doubt about it. So guys, what I wanna do today is we’re gonna walk through like how to, you know, we talked about this a little bit. This is, there’s a shift in the market right now. And, uh, on the other side of that, honestly is probably a better place for real estate investors, because there’s just less competition.

Yes. Rates are up, but it drives out a lot of the people that are on principled investors, the people that we’re paying way too much for houses anyway, and everybody’s scratching their head as to why. How did they even make an offer like $80,000 above my offer or whatever. I’ll tell you this the same time I heard this today that, uh, Sunday just laid off 90% of their acquisitions for the same people that are buying houses and were like, How are those guys surviving?

Because they’re paying so much, a lot of these institutional type buyers were just way over paying for houses because they were betting on more appreciation. They had access to super cheap money. They raised a bunch of money anyway, so it wasn’t even their money that they’re [00:13:00] playing with. And so kind of unprincipled in, in a lot of ways, but what I wanna dive in with Paul is.

Um, really it’s we know we want to go here and we’re here right now. It’s the shift. It’s kind of that gap we have to get through. Uh, that’s the real risk for people kind of struggling as real estate investors. So we’re gonna break this event down and this, uh, show today. Talk about dispositions. We’re gonna talk about acquisitions first dispositions and, you know, raising money.

If you’re used to relying on capital, like how does that look and what do you do differently? So, Paul let’s kind of start with acquisitions. What, what do you need to do a little bit differently? When a market shifts from where we’ve been to, where we’re probably. And it’s the most important

Paul: aspect of it, right?

So what you gotta do, is it just down your ARV? So look at what the ARV is now, and maybe give it a 10% discount for a discounted market, depending on where you are. Some you might wanna do a 20% if you’re in a market like Las Vegas, which gets hit harder than other markets still. Yeah. That’s the first thing you gotta reduce.

Those numbers reduce, you know, typically people look at the ARV times, 75%, some markets, they were doing 80 I’m down to 70% right [00:14:00] now just reduced the university across the board. Minus out repairs. Now, when my wholesale fee is, that’s kind of what I’m looking at right now. Just adjust your numbers down.

Mike: Yeah. And, and on top of that, you know, uh, we’ll talk about dispo in a little bit, but just consider what you’re gonna do with it before I think yeah. At the end of the day, when you, when you’re acquiring properties, like you, your, your disposition strategy, which we’re talking about in a minute might change your acquisition strategy, right?

Mm-hmm because generally you, you probably wanna be doing a little less retail activity or certainly less like, you know, really high end rehabs, for sure. So just when you’re buying a property, you have to think about what you’re changing on. The dispo side, also with the acquisitions. I, you know, for those of you that who buy in direct from seller, um, sellers know now, right?

You, you just talk to them a little bit differently. I think they’ve been in a position that’s been a seller’s market for a long time now to where they seemingly can’t go wrong, or they’re gonna hold on forever. Part of this gap, or this shift we’re talking about to kind of get over is that sellers are still, uh, you.

[00:15:00] Listening to what they’ve heard for the past several years is that they’re holding the gold. Right? It’s gonna take them a couple months to come to terms with maybe your property isn’t worth as much as it was before. Right. So, uh, just keep that in mind. And I’m not saying to inject fear into the conversations, but you’ve got a little bit more control over that lever now to say, to talk to them about the market is shifting.

You’ve probably seen it in the news stock markets has been hit tremendously this year. And, you know, housing is, uh, rates are up. And so the values of housing are likely going down. And again, I’m not saying to inject fear into people, but use that to your benefit a little bit to say that you need to come my way a little bit here because the market is not where it was and it’s not going where you thought it might have been before.

Right?

Paul: Yeah. You wanna create some FUD with the sellers, right? Fear, uncertainty and doubt. Yeah. And what you have is high gas prices, high cost of living inflation going through the roof, you know, recessions looming. So the more you push that, so the sellers say, look, we just can’t do the numbers we were gonna be doing [00:16:00] before because now our buyer pull was dropped just with the rate increase.

I read an article where 9 million buyers fell off. Mostly first time home buyers, right? People were less qualified, 9 million, still pretty decent chunk of change for amount of people

Mike: looking to buy. . Yeah. And you know, in the last mark, well, let’s talk about the differences between this market and the last market is in the last downturn.

And again, I’m not saying that there’s this massive downturn right now, like time is gonna tell, but what I don’t want is people to kind of freak out like, oh my God, the sky’s falling. It’s not falling. Like, it’s not, there’s a better opportunity ahead. This is where this is what separates the men and the boys or the women and the girls I’ll say , uh, is getting through this time because this, this is a, is a there’s there’s, there’s a pot of gold on the other side of, uh, of this gap, we have.

Get over here is in the last market. There were a lot more people with like no equity, right? They, they just, they bought it. Now, if you’re talking to people right now that bought in the last couple years, they might have an equity issue, but there’s a ton of people, the types of houses that we typically market to that they’ve owned for a long, long time.

And those [00:17:00] people, even if the market comes down, they’re still selling it for yeah. Like way. Then they would have even just a few years ago. Um, and, and then of course the hope is that they didn’t refinance and pull all that out. Right. But I think the difference now, and you’re probably seeing this on the auction side too, is that people, um, they have a lot more equity in their houses than they did during the last downturn.

Oh, yeah,

Paul: yeah. A lot more equity. So that’ll reduce foreclosures a little bit too. Yeah. Um, no doubt about it. I mean, it’s all gonna be effect, but it’s so different from last market that you don’t have Nina mortgages, no income, no assets. Right? Right. No job. People are getting ’em. They were all these adjustable rates that were crazy and shooting up wild after, you know, six months or 12 months or two years, whatever the period was.

So you don’t have those same type of mortgages out there. So you won’t have the ravaging of the market that we had back then. Right? We do have more equity, like you said, so people have more options back then. They didn’t have the same amount of equity. And even though, but it’s gonna bring new opportunity too.

Right? So the biggest new opportunity I think for us, and [00:18:00] it could become a great time to build a big rental portfolio using other people’s money. Basically, if you could take property subject too, with people that have three, 4% mortgages, you’re gonna be in very, very good shape, give them some money to walk.

And then keep those current mortgages in place. So there’s gonna be huge opportunities for people doing that. So it’s something actually I’m even looking at potentially marketing to here down the road. Yeah. As we go along another year or two down the road, probably, but that’s gonna be a big opportunity for people, but it’s far different.

Then that last market was where you had that big crash, huge amounts, unemployment, the stock market lost 50 plus percent of its value, you know, and that basically brought about that was what brought about the advent of. Class, uh, that I like, like called crypto is when Bitcoin was brought out 2009. So that’s a whole other thing we’ll talk about, but that market’s been

Mike: crushed too.

Yeah, yeah, no doubt. So let’s talk a little about dispo and by the way, if you guys have any questions on acquisitions, we’re kind of moving on now, but chat ’em in, like what, maybe just tell us about what you’re doing differently here. We’ve got some folks that are watching us live. So on the dispo side, Paul, what [00:19:00] are some key things that you do a little bit differently or that you recommend doing as we kind of shift into more of a buyer’s market from a seller’s.

Paul: So normally what we would do right now, and it’s probably the same thing everybody else has been at doing out there doing a little bit of whole tailing, right. Clean the place up, get it. Mortgageable resell it, make a nice little profit so that a lot of that’s gonna potentially be going away. So you might not be able to just throw it on the MLS, unless you throw it on the MLS in a very big discount where you get people in there.

It’s gotta be mortgageable too right for that. Right. So right. It’s I think we’re gonna have to switch to what we’re planning on doing more. We’re already trying to build the buyer’s list up even more. The buyer’s list we’ve had over the years. There’s people that fall off that list and aren’t in real estate anymore.

So now you gotta constantly get new buyers lists, update them. And then when you get properties, just start marketing that. Marketing. I mean, really social. Media’s gonna be, it’s been, and it’s gonna be the big play for the future, whether it’s on Instagram, where you’re gonna catch that millennial generation in generation Y right.

That’s gonna be a big play and not the old traditional stuff. [00:20:00] Newspapers, maybe not even postcards, this must much, but you know, online a lot more, I think gonna be online, focus for dispositions. The more you could do with that, the better. Now, if you’re in areas like we’ve been in a Carolinas where you have older population, it’s aging population, social media doesn’t work as.

Right saying you have to go old school. Like we do. We actually do the newspaper ads and a lot of those markets to sell properties, believe it or not. So you gotta get creative dependent on what market you’re in. I see some people in Nashville on, in that market. Tremendous market still. Boom. And for people who feel like they’re getting priced out of the national market, just do another ring around Nashville, about half an hour to an hour out.

And don’t worry in the next 10, 20 years, that’ll that area will build up and be grown out too. So, yeah. Keep on, keep on

Mike: looking for different markets. Yeah. The main, the main thing with dispo is just like, think of these like levers you have of like, where where’s the risk at. Right. You gotta pull, like let’s like lower the risk there.

It could be on if you’re used to doing. You know, I have a bunch of friends, some of our buddies in investor fuel, our guys that are doing like hundred thou their [00:21:00] average rehab is a hundred thousand dollars rehab, like really high end stuff, tearing it down to the studs and building it back up. And it turns out a beautiful properties, but that’s clearly more risky than say.

Certainly assigning, I mean, or, uh, even in the middle there of like whole tailing, it’s just more risky to do those heavy rehabs if you’re in a market that, uh, especially if you’re rehabbing to a point and I, I have some, you know, friends that do this too, and I always knew that there’s, there’s just gonna be the first to get hit if their model.

Is to try to become the new high comp in the area. Um, you know, I I’ve always been a guy that’s like, look, I don’t wanna beat everybody. I just wanna join him. Like, I don’t wanna create something that’s never been done before. I don’t wanna blaze new trails. I’ve got enough arrow wounds in my back already.

I just want to do something that’s already been proven and just try to like, you know, get myself right in that middle price point. And if we get more than that, then that’s just gravy on top. But I never banked on that. Right. And so I think kind of pulling back on how heavy of rehabs you do, especially if you’re in a market.

Has had a big run up because it’s got a little more room to fall and, um, you know, perhaps doing more [00:22:00] kind of downstream strategies, like assigning a little bit more, if you’re doing a lot of rehabs, maybe doing a little more whole tailing, just kind of pulling back on basically the speed of the transaction, like stuff that is faster cash to cash.

You agree with that, Paul?

Paul: Yeah, I agree with that a hundred percent. So we used to be back, you know, go back to the 20. Nine to 20 17, 20 18. We were really focused on wholesaling. About 80% of our business was wholesaling, you know, 10% fix and flip and about another 10% buy and hold or owner financing now.

And then we switched opposite. We went to about 20% wholesaling wholesaling, if that at the peak. And now we’re going back the other direction. We’re close to 50 50 now where we’re going. We’re doing, we’re planning on doing a whole lot more in a wholesaling perspective and probably we’ll get back to that 80 20 within the next year or.

Yeah,

Mike: I think the important thing to think about cuz Paul you’re, you were a finance guy too, before you got into real estate. Uh, and, and I was, my wife used to be an investment banker is just to think about like how to shift through different markets. Like let’s assume you’re, if you [00:23:00] were an investor in the stock market, you, you don’t.

Completely pull outta the market and stop investing. You just shift your strategies around. You’re like, I’m gonna move into something that’s a little more conservative. I’m gonna move into something that’s a little more speculative. Like whatever that might be based on where you are in life. Like, you know, how much runway do you have left, where you wanna retire, quit the game.

And based on what’s happening in the market, right? You don’t need to pull out. You need to just like shift what it is that you do, right? Shift your

Paul: focus. You look at these companies that haven’t shifted or focus over time. Like the Kmar. Sears, JC penny. I mean, these are all companies that are going away because they have not shifted and adjusted with the time.

The companies that are really quick to maneuver are the ones that generally hang around for a long time and have pretty good success. But yeah, as investors, we gotta look at what is. What is coming and that’s what we’re looking at now, right? What is coming, how bad will this get? I’m anticipating something like a 10%, maybe 20%, um, change in the market, which is not all that bad.

Right. We can adjust with that. Very simply as investors, as long as it’s [00:24:00] not an overnight thing, which shouldn’t hopefully. God forbid happen, you know, word ramps up and interest rates go through the roof that could throw everything in there. That’s a, that’s something we can’t plan on and you can’t expect that to happen.

You hope you hope it doesn’t plan for the best expect worse, I guess, or something moves. Yeah.

Mike: Yeah. Stuff. And I think, you know, one of the things that I, and I, I, we own an agency, so I, I, I, this is gonna sound like. A one-sided, uh, suggestion, but I believe this too. This is what I practiced. And this is, this is kind of our claim to fame.

Back in 2008 is a lot of people around us were pulling way back on their advertising. And we literally went up for one month to the next, we went up 500%. We like literally went from like five grand a month to 20 or 25,000 a month because all I saw was a chance to steal market share. Right? Yes. And so one of the things we were.

You talked about acquisitions earlier is I, I suggest to people you wanna be smart with your advertising dollars, but lead generation is like the last thing you should cut acquisitions is the last thing you should cut. You don’t ever wanna stop buying because that’s the lifeblood of your business. You just wanna buy more [00:25:00] conservatively and then have a little bit more conservative disposal strategy because let’s face it.

Like there’s still low inventory everywhere. Yes. There’s still a lot of demand for housing right now. And that’s not really. Slow anytime soon, like what’s gonna slow is more luxury stuff, stuff at the high end, people that are in a situation where they wanna move up. They might just hold off a little bit before moving up.

But if you stay in that first time home buyer marketplace, which is where honestly, considering considering the average, the average American is, is broke and somehow they can still get a house. Like you wanna stay in that pocket of like every man’s house. Right.

Paul: Absolutely do. And you think about it with what’s going on now?

The luxury market people drop down to a mid-tier those mid-tier markets fall down to your average every day. Um, Joe, so you’re gonna have more buyers get you all buyers falling off the bottom side. You’re gonna have more buyers coming from the top down too, to join that. And you’re always safest in that one.

It’s always the most. Um, there’s always usually the most inventory for that. And there’s usually always the most buyers for sure. And that the luxury, you know, a lot of [00:26:00] these people buying cash, if they have the money to do it. So that’s a bread and butter stick with the bread and butter. If it ain’t broke, don’t fix it.

And I agree a hundred thousand percent with what you said too, when you ramped up. Back in 2009, you, when you ramped up the marketing, cause the, the key is, and the old saying is be fearful when others are greedy and be greedy when others are fearful. Yeah. So I look at like the crypto market right now, I’m being greedy, cuz everybody’s fearful.

And in real estate market, I’m being careful because people have been greedy over the years now, now, or I scale back and start pulling back a little bit with my acquisition as far as what price points I’m going at. I’m just gonna be more conservative with my price points.

Mike: Yeah. Yeah. And I think in that first time home buyer space as well, you know, everybody has different, uh, goals, I guess, but if you buy it right and it doesn’t work out or something, if you could keep it as a rental and it’s still cash flows, you have that option.

If you start buying higher end properties that wouldn’t cash flow as a rental and you get stuck with it, you got a different problem there. You, you really only had one option and you made a bad bet. So if you stick to those lower price [00:27:00] points, you could always own or finance ’em, you could rent ’em out.

There’s a lot of options you could do with that entry level price.

Paul: And they called that the accidental rental, right? The one you were expecting to flip and you aren’t getting what you thought and I’ve had those and now I’ve, you know, I held them for years and I’ve cashed out on so many of those rentals over the past year because the prices went up so much.

Right. They were ones I didn’t really like, they weren’t in the greatest location. But the, the numbers have gone up so much. It was worthwhile for me to hold all to ’em and they cash flow during that time. But you’re not gonna cash flow the higher level or luxury properties ever. They’re just gonna put you outta business if you have those.

Mike: Right. Right. Yeah. So Paul, let’s talk about, um, financing. So one of the things that, you know, during the last downturn, um, there were a lot of lenders that just went away and I think, and honestly, I don’t know this statistic. I think the national. Hard money lenders like the big guys who have a lot of market share.

Now mm-hmm, I think their market share’s way bigger now than it was back during the last downturn, it was a lot more local regional mom and pop type folks that were lenders, I think. And [00:28:00] the, these national guys are smart, right? These are, these are wall street guys, and they know how to hedge their bets.

They just kind of are raising rates based on what they can re because they’re reselling most of their loans. Right? Yeah. So I feel like in the last market, a lot of lending went away. I think all that’s gonna happen this time is they just change their prices. Right. I agree.

Paul: I agree. I mean, last market, there were no lenders.

It was hard to get any kind of mortgage, anywhere line of credit, anywhere, even credit cards. Now it’s totally different just when you and I were at the IMN conference in Miami, what a few weeks back or a month ago, the amount of lenders, I think there were 27. I think I counted there last, there was a bunch, right?

Last time I was there. There were. And that was in 2018, so that wasn’t too long ago. Right? So they mapped the people that have gone to that space. Like you said, they’re wall street, people they’ve created these funds and they’ll just adjust their prices up. Like you said, to still sell these mortgage out, there’s still gonna be an appetite for buyers out there.

Yeah. For these mortgages, cuz they are generally great performing assets. Right. So they’re gonna be out there. We’re gonna have, it’s gonna be a little bit [00:29:00] easier for investors as to market shifts and change to find a lender that works for you in whatever market that is national lenders. Right? Cause we use mostly national lender.

Um, it’s gonna be a little bit easier to navigate through the next downturn than it was the previous one,

Mike: which is great for us. Yeah. And you know, in, in 2000 people are, if you haven’t been around for a while, like you think rates are really high. But when I let’s just say from an investor standpoint, when I in 2008 and I was fortunate to build a relationship or with a couple of banks, uh, and we had some, um, friend and family type money, like private money that we used, but, and I didn’t use a lot of hard money.

The going rate in 2000 8, 9, 10 ish in Dallas. I know it was higher in other markets was like 14% and four points. Yeah. That was pretty common. 14 to four. Then it went down to 12, two after a little while. Um, and these rates lately and part partly because a lot of the national lenders came in and they have access to cheap money, cuz they’re really good at raising money.

Mm-hmm I mean, they really beat themselves, beat each other up over rates over the last five or six years to get rates down to. [00:30:00] Seven and half a point and stuff like that. Like that’s, what’s kind of unheard of. Right. So, uh, if rates go up a little bit, you just have to bake that into your, bake it into your model and make sure you’re buying low enough to offset those new rates.

Right. Yeah,

Paul: totally. I mean, I remember those days too. I remember back in early 2002, three timeframe, when our local hard money lenders, they call them were 15% and five points. Yeah. And then when you had experience, you got down to say 13% and three points. So you weren’t dropping a whole lot with that.

And now all those guys are outta business. Cuz these national guys have come in and taken all their market. But you’re also leading into something that’s really important to always have too is private lenders, right? You talked about having private lenders. We have, and we’re still adding more because that’s the easiest access to, to capital.

And right now it’s never been easier since I’d say 2009 or eight, that to raise money, cuz the market has been dropping stock. Market’s been dropping. So people want to know where they can put their money. Still make a return on it, not have the risk of the [00:31:00] stock market. And right now the last man’s. It’s real estate, right?

Real estate is still the one asset that’s still standing and still going strong. Despite the fact that there’s a little bit of headwinds going, going in our face. Yeah.

Mike: And I think, you know, I, can’t not everybody, this, you can never like broad brush this and say this how everybody feels, but there’s a lot of people that are afraid of the stock market.

I mean, honestly, I. Like I, you know, my wife used to be an investment banker. I was a finance guy. I, we, we have stuff in the stock market and we’ve taken a big haircut lately, but not a lot. And I honestly, I don’t stay in tune with it. I really don’t like being in the stock market. Um, because I don’t trust it.

I don’t know it, like, I know real estate. I would much rather put my, put my money into real estate. In some instances we just have to keep it busy right now, or it’s in like retirement accounts or whatever mm-hmm . And so we’ve got some in the market, but I think there’s a lot of people that feel that way.

At least with real estate, whether I’m a lender I’m buying, I, I can, I can touch and feel it. I can drive by. I could go there if I have to, I [00:32:00] can take it back. If something goes south instead of the stock market. That could take a, a massive dive and they would feel completely helpless cuz they don’t even know where that company’s based at.

Right.

Paul: Right. You have a tangible asset, right. Something, that’s not gonna go down this zero, right. Something that you can rent out, something that you could fix up and force appreciation in. So it’s just offers so many different things and it’s really, it’s the most taxed tax advantaged asset class out there by a ton.

Where else can you borrow? 80, 90. To buy these properties, some cases, a hundred percent with a VA mortgage, you know, or U S D a mortgage. There’s no other ask class where you can do that. You can write off depreciation, you can write off real estate taxes, insurance, you know, if it’s investment, property, write off maintenance, all kinds of different things.

It is still. Far and away the best asset class to be in. And, you know, I love cryptos. Right. Love them, but secondary to real estate real, estate’s always gonna be my bread and

Mike: butter. Yeah. Yeah. Awesome. So, Paul, is there anything that we haven’t talked about that folks should keep in mind as they’re making through this shift here, we’ve talked about acquisitions, dispositions.

We talked about raising [00:33:00] money. We talked a little bit about mindset of like the sky’s not falling. Uh, none of us have crystal balls, but you know, people, people aren’t going away and people need housing that that’s not gonna change. Right. definitely. Anything else, anything else we missed?

Paul: I’ll just go over, like historically you touched on it a little bit ago.

8% is the historical mortgage rate, right. We’re still far below that 8%. We’re around 6% right now on a 30 year mortgage. So we’re still below that rate. So the sky is not falling, right? We’re not going to nine, 10, 11%. Like I do remember that in the eighties interest rates and up as high as 21%, I remember.

Um, my parents, I think had had 18% mortgage back in the early eighties. So we’re not in those days. And hopefully God forbid we won’t go to those days. Cuz that would be catastrophic obviously. Yeah. But I don’t think the fed would allow that they would probably buy the 10 year T bond, bring that down. So basically what we gotta look at, we can’t control that stuff.

Rates are still solid right now. I still plan on adding rentals this year. Even with higher rates, long like cash. I’m good with it. I still wanna add to the, to my rental [00:34:00] portfolio and, and continue that in the future and just adjust your numbers. Just adjust everything back. Yeah. Um, there is no magic bullet out there.

Um, maybe shift. Okay. One thing I did wanna talk about shift where you’re buying, right? So where, where is the Exodus going and where, where are they leaving from and where are they going to? So we’re seeing a lot, like, I think I just looked at top 10 this morning. Number one was somehow my Miami, the number one destination, which frog Tampa.

Wow. Believe it or not. Most of those people that were going outta Miami were coming from the New York area. Most of the people going to Tampa, New York as well. Then you go to, I think it was number three or four, which is Cape Carl, Florida really close to me. And that was Chicago. The west side of Florida is Midwesterners.

The east side of Florida is Easterners. For the most part. Uh, people are shifting there. They’re shifting to Utah, they’re shifting to Arizona. They’re shifting into Tennessee. These are, the markets are going to looking. Zero income tax states. I personally am too. So all my rentals, I’m gonna hold now, Texas, Tennessee, Florida, Wyoming, [00:35:00] all zero income tax states.

I’m outta Pennsylvania completely. Now as a rental, I just sold my last one last week. So I’m completely outta that. So shift where you’re going from know that the Northeast is gonna be hit more than your, your, um, Bible belt on the Midwest and also your sun belt down in the south because of the higher, um, taxes, the higher cost of living the higher.

Um, insurance and gas and bad leadership, right? Just bad leaderships in some of these states. Unfortunately, these Democrats have destroyed a lot of different not to get political, but they’ve destroyed a lot of different states with all these lockdowns and they’ve right. I did here on a radio last week, driving up here in New Jersey, 59% of people that live in New Jersey want to leave.

Wow. That’s pretty bad. When 59% of the people that live there don’t want to be there. That’s pretty telling no, that’s not a, an area you wanna invest in. You definitely don’t wanna hold rentals because trying to evict tenants, I’ve seen it take people two years to Vic tenants in new Jersey’s pretty know your markets, right?

Pick your markets, your linear markets, like your Carolinas, like [00:36:00] Indiana, Ohio. Kansas city, you know, Missouri, um, Kansas, New Mexico, Texas hit these markets where, you know, you’re gonna be pretty good long term, and they’re not gonna get hit by a downturn. Like the last downturn did not crush any of those markets.

So I don’t expect this downturn to do anything more than put a slight that in. .

Mike: Yeah, that’s awesome. One thing I want one, one last thing I wanna comment on that you just said, Paul, and for everybody is you said something about, uh, focusing on what you can control, right? There’s a lot of stuff you can’t control in this market.

You can’t control the political environment. You can’t control what the federal reserve does. You need to be in tune with what’s going on, but really focus on what you can control for us. That a lot of the times that’s solving people’s problems, helping. Get people into houses. Like if you, you know, if you’re sell, if you’re wholesaling and selling to other investors, you know, just make good decisions.

I mean, there’s people that I know that have been in this business for a long time. Paul you’re one of ’em people that have been in this for a long, long time. And they’re, they’re generally people that always did the right thing. They were a little bit conservative, but they saw op when they [00:37:00] found an opportunity, they would jump all over it.

And so that’s the market we’re coming into is to be able to pounce on opportunities when they come. Uh, be conservative generally, but not so conservative that you just sit on the sidelines for sure. Mm-hmm and always do the right thing by other people. And there’s always gonna be an opportunity for you in this industry.

Paul: Absolutely. Yeah. Do right by other people. It always comes back to you in spades, right? When you take care of other people, for sure.

Mike: No doubt. So Paul, if folks wanna connect with you, you gotta you’re, you’re a man on a mission. You got a lot of stuff going on. Podcast of your own lots of stuff. Give us a couple links where people can go learn more about.

So I

Paul: do have the flipping out podcast. You can find that on YouTube, but it’s also, um, the virtual investor.co on that one. Uh, our educational side is R E O auction academy.com. Uh, there’s the two house deals. america.com is website where you can see where we post deals that we have coming in. um, we’re doing a lot of joint venture stuff with our students right now, and they’re having real, real good success with it.

Just cuz the inventory’s gone up so much in these [00:38:00] auctions and yeah, they need a resource that they can depend on. We’re giving ’em, you know, we’re, we’re invested in this deal too, so we’re make sure we look at the deal. Make sure it’s a deal. Tell ’em if it’s not a deal, just let it go. So. Yeah,

Mike: that’s awesome.

That’s where we’re heading. Good stuff. Good stuff. Well, Hey Paul, thanks for joining us today. Everybody that joined us live. Hey, thanks for being here. Uh, again, if you, if you listen to this after the fact, we appreciate that you’re here. If you wanna join us on the next podcast, we’ve got some amazing guests I’m, I’ve, uh, shifted focus on this show a little bit.

It’s a really bringing in, not taking away from the thousands of people we’ve had in our shows before some great friends of mine that have been around for a long time, that are real industry leaders, uh, on the live show here, which we just do twice a. Love for you to join us next time. If you go to flipper.com/live, you could register and we’ll send you notifications so you can join us live.

And we can maybe have some dialogue and ask, answer your questions for you as well. So, Paul, thanks for joining us. My. Thank you for having me. I appreciate it. Good to see you, buddy. And everybody. Thanks so much for joining us today. We’ll see you on the next show. Thanks. Thanks for joining me on today’s flip [00:39:00] nerd.

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