Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Many people watched and waited probably what I consider too long. Yeah. And they missed out an opportunity. Right. Now, having said that, to those same people, I would say, Hey, no problem. It’s what you just described. The best time to plant a tree was 20 years ago. Well, the second best time is today because the world, it’s cyclical things, moving cycles, and tomorrow there’s always gonna be another.
Another opportunity and things will move forward and progress, but, but make no mistake, like there’s never an ideal time to be investing in the market. What would your life look like if you could replace all of your working income with simple and conservative investments that could do it for you over the last 13 years?
We’ve helped thousands of clients transact over half a billion dollars in simple and conservative real estate transactions, allowing them to begin replacing their work income with real estate investment income. Each week, we’ll be pulling back the curtain on the ins and outs of real time retirement based real estate transactions.
That will transform your financial future even if you have no real estate experience. This is replace your income with me, Kevin Clayson and Steve Earl. All right, Well, hello everybody. Welcome to Replace Your Income with me, Kevin Clayson and my good buddy sitting not too far from. Steve Earl. Good to be here.
Kevin. Hey, and let’s just be clear. Listen, we’re, we got a topic today. We’re gonna be talking about some things and in the spirit of the topic, I think we should let everybody know that we are adequately social distancing as we record this podcast. Absolutely. We are adequately social distancing, not to mention.
Steve, I could tell you I’m, so, I’m looking at him right now. He’s fully clothed, but waiting in a pool of, what’s that called? Sanitizer. So he’s good. I have a astronaut helmet on and the bottom of it is filled with sanitizer, and I have three masks over my face. So guys, we are totally safe. Listen, we’re kidding.
But you know what, this is really kind of what we wanna talk about, you know? We actually had an entirely different episode that we were gonna do today, and we thought, you know what? There’s a question that we are getting every single day. I don’t know if you, Are you getting these questions just about every day?
Yeah. I mean, every day it’s on the news. It’s everywhere. There are certain states across the country that are really spiking and. It’s just on everybody’s minds, right? Yeah. It’s something that everybody’s kind of talking about, and so we want, This is the question that everybody’s been asking, Is it safe to invest in real estate right now?
And so the kind of subtext there, or the subtitle would be, As a result of everything going on with Covid 19, and, and this is actually, we were kidding just a second ago, just cuz we like to have some fun, but in reality, look, we understand that it is a problem. We understand that there are things happening.
We understand that the economy has been hard hit and there’s a very close friend of ours. Steve and I both, who just tested positive for Covid 19, like two hours ago. Like we literally got the email. Yeah. Like a couple hours ago. So we know that this is a very real thing. It’s something that we want to consider.
We also are not ones that are necessarily prone to panic. We just like everything we do with real estate and just I think in general, In life, we try to take a level headed, analysis driven, logical approach, and that’s what we wanna do today when it comes to the real estate market, is what is the logical, level headed, data driven approach to what’s happening in the market.
And it, the question is, is it safe? To invest in real estate right now, given the current circumstance and, and full disclosure, you know, Steve and I, I think he would agree with me 100% here. If you would’ve asked us this question in 2007, we would’ve said, Yep, it’s a great time to invest. Then if you would’ve asked us again in 2009 and 2010 during the Great Recession, we would’ve said, Holy cow, it’s a great time to invest.
Then if you would’ve asked us between the Great Recession and today, we would’ve said, It’s a great time to invest, and if you asked us today, we would tell. It’s a great time to invest. We kind of subscribe to the philosophy that the best time to wins, the best time to plan a shade tree 10 years ago or 20 years ago wins the second best time today.
And that’s the way we view our real estate. Now, I wanted to get that out of the way, but this is not gonna be an episode where we’re gonna tell you, go out and buy today. Put all your money into real estate today. Instead, Here’s what we’re gonna. We’re gonna present the facts. We’re just gonna let you know what’s going on.
What are we seeing on the ground with our teams in the markets? What are we seeing here where we live? We are plugged into the mortgage industry and real estate agents, and we are plugged into every facet of the real estate industry. We are just gonna share with you what is really happening in real time so that you can make your own decisions.
Yeah, Kevin, I mean, and one of the reasons why I think this is such an important topic is. The world is always in a state of chaos. Like during the history of mankind, from the very beginning, from, at least from what I can tell, there have always been wars. There have always been famines, there’s always been disease.
There’s always been, the world is always in turmoil. I once was told by, A, an an individual good friend of mine who I consider, you know, one of my mentors, you know, he said, Steve, the world is always gonna be in chaos. And we weren’t talking about real estate, but we were, we were talking about something else.
We were talking about the concept of how we can find peace in our own lives. Right. Regardless of what’s going on in the world. Sure. Um, because the world’s never gonna be at equilibrium. Yeah. There’s, the pendulum is always gonna be swinging one way or another politically. Or economically or socially there, there’s always a, a large degree.
Of chaos. And so the key is to figure out like in our lives, how do we live? And in our case, what we’re talking about today, how do we continue investing? How do we not get stuck, and how do we not become paralyzed into just constantly watching and waiting, right? Because even back when the Great Recession, there were a lot of people, like right after it happened, I mean they stopped and they watched and waited, and many people watched and waited.
What I consider it too long. Yeah. And they missed out an opportunity. Right. Now, having said that, to those same people, I would say, Hey, no problem. It’s what you just described. The best time to plant a tree was 20 years ago. Well, the second best time is today because the world, it’s cyclical things, moving cycles, and tomorrow there’s always gonna be another day, another opportunity and, and things will move forward and progress.
But, but make no mistake, like there’s never an ideal time to be investing in the. . Yeah, that’s right. And well, yeah. Okay. So there’s never an ideal time, but I would say that there’s always the right time. Okay. Yeah. So ideal is one thing, right? Ideal is like, Oh, the market conditions have to be absolutely suddenly perfect for me to move forward and, And if you’re waiting for that day, it ain’t, it probably ain’t gonna come.
Right. But, Well, and when you recognized. That it came, Notice I said came. Yeah, ca Yeah, because it Right. Hindsight’s 2020. Yeah. And it’s like, oh, I should have done that, you know, six months ago, like, gosh, if I would’ve, you know, known differently, I would’ve invested something in the stock market right as Covid hit.
And it took that big dive. But, but the only way to have seen that with is in the future. Right. So. Exactly. And hindsight is 2020, and you don’t wanna be in 2023 looking back right now at 2020 and going that. Oh man. Hindsight really was funny until I should have been investing in 2020, not just the old thing that all of us say hindsight’s 2020, but literally 2020 there was something going on that I had an an opportunity to take advantage of and I didn’t.
And, and look, I will say, Steve, you and I both know there is unbelievable amount. Fear out there right now. Everybody is freaking out. It’s, it’s completely, uh, proliferated by, by the fact that we are just reporting on this thing nonstop. And this is why we didn’t wanna give you a report on the state of Covid 19 in, in all things real estate, as much as we wanna say what’s just happening in real estate, Like what’s going on right now.
Well, and if I could. So we’re gonna jump in. I think that we have some really good questions that we’re gonna try and answer because they’re questions that are clients and prospective clients and just people that we know are, are asking us, you know, on a regular, daily basis. But I think it’s very interesting.
Um, Warren Buffet, you know, the, the man he’s probably the most prolific, most successful investor of all times. He, one of his quotes is, um, When others are fearful and hold when others are, you know, going crazy, Right? That’s right. And right now you just stated everybody is in the state of fear. Yeah. Do you know that for months now, Warren Buffet has just been sitting on the sidelines?
He, in fact, he sold a lot. And he’s just been sitting on a lot of cash. Literally, a few days ago, he made a $10 billion purchase. Oh, that’s all. Is a company? Just 10 billion? Just 10 billion. Okay, cool. So, you know pocket change Yeah. For, for Warren . But that’s an indication, right? Yeah, it’s an indicator. That Warren just jumped into the game.
He’s not jumping into real estate. Right. He, he bought a business. Yeah. But the timing was right. People are fearful and he took advantage of, of what he sees as as an opportunity. And I’d look at that just broadly as a, Hey, we ought to be looking seriously at what we’re doing. Yeah. And maybe we ought not to be quite so fearful as long as we understand.
How do you get rid of. The way you get rid of fear is you, is you come to an understanding when you know and you understand fear begins to dissipate. Yeah. A lot of fear just comes from not knowing like what’s gonna happen and yes, am I gonna get sick or is real estate gonna fall or right or price is gonna go up.
Are they gonna go down? Am I gonna be able to rent the property or not rent the property? And, and those types of things. You know, fear is so interesting. We’re gonna jump into these questions, but one of the things when you know, Steve, I get a chance to go talk to the youth a lot and, um, you know, as a kind of a motivational speaker, and I always tell this story that like, I don’t like spiders.
I’m terrified of spiders. I don’t know why I’m terrified of spiders. It’s probably cuz of the movie Rocko Phobia, which is a great movie, but terrifying. And if there’s a spider on the wall, I’m the man of my family. I’m supposed to kill it. I don’t wanna come near that thing. Listen, I’ve never been bit by a spider.
I’ve never been hurt by a spider. I’ve never had a spider fly off the wall. Crawl up my nose and lay eggs in my brain. I’ve never had anything like that happen yet. I still have this fear. Where does that fear come from? I don’t know. It’s irrational. And what we see in the, in the real estate market is there’s a lot of people that have an irrational fear.
And most of that fear is coming from people who haven’t dived, who have not. I never know, is it dive doven, divin, dive, dod, whatever, when haven’t got in to the market and they’re going, I don’t know, I just wanna be careful. So here’s what we don’t want. What we don’t want you to do is react out of fear.
What we do want you to do is be informed and have the information that is appropriate for you to make the decisions based on where you’re at in your financial life and what you’re trying to accomplish. And so in that spirit, we’ve got a couple questions that we are getting a lot. From our, uh, clients and from prospective clients and just individuals that we interact with, and we are gonna answer these questions.
We also went to our teams in the field. So for those of you that don’t know, we have teams in the field in multiple real estate markets. Where we help our clients physically do the real estate, right? We go find ’em the properties and we fix ’em up and we get ’em leased out and we get ’em the financing and we ensure the properties that that’s what our company’s called done for your real estate.
So we do all that stuff, but that means that we’ve got these teams on the ground constantly that are plugged in to the real estate matrix the entire time, right? We know on the daily what’s happening with, uh, you know, how consumers are acting, how often there’s showings both for, uh, purchases as well as.
For, you know, potential tenants renting a property. We know what the prices look like, we know what the values are, we know what stuff is comping out at our teams and working with us. Have all that information. So we’re gonna just boil it all down to really six general topics that we’re gonna touch on here today that I hope will be helpful.
Let me tease those topics so that I don’t want you guys tuning out and missing this. We’re gonna talk about what’s happening with property values since Covid. We’re gonna talk about where it we anticipate values to go over the next 12 to 24 months. We’re gonna talk about the inventory problem. Is there an excess of inventory?
Is there a limited inventory in terms of what we’re looking to invest in? We’re gonna talk about the property management aspect. Our tenants paying rent, Are they not paying rent? What does the entire property management and rent collection landscape look like? Then we’re gonna talk about individual local economies, right?
There’s a lot of the stuff that we get from the media. It’s very. Grow. It’s very, Here’s what’s happening across the world. Well, we’re gonna give you some insight to individual local economies and what impacts we’re seeing there. And then the last thing we’ll touch on is the lending industry, which is totally weird right now, but there’s some really good stuff.
There’s some not so great stuff. So we’re gonna touch on all that and we’re gonna start off with what have values been doing since covid 19? So let me go ahead and would you mind if I jump in, like, and maybe I could tell everybody what’s going on in the Orlando, Florida market? Yeah, sure. Let’s talk about that.
So I had a conversation with our, uh, director of acquisition out, out there, uh, this morning, and, uh, asked him specifically these questions and he was kind enough to kind of write it down for me. So I, I kind of wanna. Share, uh, what he shared with me because I, I think it’s really pertinent and it’s just, you know, meat and potatoes here.
So, as far as what is happening with home value since Covid started, now this is very specific, right? And this is the beauty of what, what it is that we do. We get very specific and specific, uh, zip codes in, in this instance in the Orlando area. So what has happening with home home values since Covid started?
So Ryan says, So broadly speaking, home values, Well, the initial projection is that home values were going to, you know, maybe crash, right? They were gonna that, that all over, right? All over the place. It’s gonna be, it’s gonna be, you know, the great recession all over again. It’s gonna be the subprime mortgage crisis.
Tons of foreclosures. Home prices are gonna plummet. We have not seen that. Haven’t seen it. So home values are up, and this is over the CAT course of the last three and a half, four months throughout our area. We are seeing two to 3% increases just since March. Crazy housing had significant tailwinds coming into the covid area.
Low inventory rising wages, robust economy, low interest rates while sales dropped initially. When covid hit, the significant interest rate drop is causing activity to return, and many sellers are not listing their homes in what is typically the spirit, the spring selling season, causing inventory to be further constrained the result.
It’s higher home prices. So it’s a supply and demand as issue. Kevin. Yeah, it’s like demand is far out pacing supply. By the way, I just, before you go on, I just wanna compliment you, everybody, just so you know, I watch Steve read that statement. Steve, I don’t know when you learn to read, but you’ve done a great job.
Oh, so yeah. Is that, Hey, I’ll for you. I. Any compliment I can get. . No, it’s super interesting, right? So there is, and and by the way, I love the concept of supply and demand when it comes to real estate. I mean, I don’t remember much from my college econ class though. One thing I remember. Is supply and demand curves, right?
And that you wanna own supply where demand is high and that supply and demand will have an impact on pricing, on overall behavior by the consumer and in the economy. And so what we’re seeing is that because of what’s going on, home prices have risen a little bit. We’ve got low interest rates. There’s interest in the market, so there’s not enough homes to meet the demand, which means if you can get your hands on one, it’s good to own supply when demand.
Well, let me be really specific as well. Like this is in the price point in which we buy, correct? Correct, yes. Which is, which is just slightly below the median home price in, and it’s, and I’m talking specifically in Orlando now, having said that, in our other markets, we’re seeing the exact same thing, like on every deal that we’re helping our clients buy.
There, there are multiple offers, and that’s corroborated by an article that, well, as part of an article, Zillow, um, just released a study that they did and they’re seeing on affordable home prices. There, there are multiple offers on like 72 point something percent, um, of, of all transactions going on right now.
Now, having said that, In the luxury home market, they’re actually seeing the opposite supply of luxury price type properties. The supply is actually going up. Yeah. Um, there’s not as much demand there, but on the affordable side, um, prices are actually rising. Now also, having said that, in high density metropolitan area, Um, even in more affordable housing, like d higher density type areas, prices, rent prices, um, and prices of the properties themselves is beginning to drop.
And that’s because there is a migration from high density areas to areas of, of lower density, uh, population. And so depending on the area, Depending on the type of real estate that, that kind of thing. So again, real estate is so local, but, and so that’s why it, it’s fun to be able to share this realtime data that we’re able to get from the individuals that, that we work with in, in, in the markets.
Yeah. So to talk supply and demand. Like, uh, you know, I look at the Bay area where I grew up, where my parents were, we sold their home. Those home values have not been increasing to the same level that some of these other markets where they’re more kind of middle income, median home price. And that’s such a critical piece, like I think, Okay, Utah, right home prices are up in Utah and I watch home prices and I’m seeing a lot of stuff in Utah move pretty quickly.
But there’s a home down the street that I can see from my office window that’s listed for 1.15 million and it’s been sitting for a long. Right, And it’s not getting offers and it’s not getting showings, and it’s not, And the reason for that is everything that you just described. So when you look at the markets, and this is a big part of why we select the markets we do, and if you haven’t, um, heard our other episodes on, on how to define a good deal or on, on what the criteria is for us to, to identify a strong market, this is some of the reasons why, and it’s proving itself out during this covid 19.
So Kevin, we subscribe to a data source that’s a very expensive data source. Yeah. It ain’t cheap actually, but we use it to, to help us make decisions and to kind of see and forecast even in the local markets where we’re at and across the entire nation. And what’s interesting is shortly after Covid, you know, hit even in this public.
They revised all of their, their projections, their three, their, their one, two, and three year projections, and they revised them down significantly. Yeah, significantly. And I think across the board, they revised them down. Yeah. And not to say that their projections are wrong, but let me just share you really quick, Kevin, what our guy boots on the market is telling us in the Orlando market.
So when I ask him the question, what is the future of home values in the next 12 to 24 months and in the future, This is what he said. The economy is already showing signs of rebounding with which coupled with historically low interest rates will likely add pressure to home prices. We are still dealing with a housing shortage from lack of new construction in many markets.
I can see high single digit to low double digit price increases being realistic over the next year and the following, man, that’s awesome. So our guy, our boots on the ground, like our director of acquisitions there, like he is a very seasoned real estate investor. I call him an economist. Yeah. Um, he, he is just so in the know across the country, but, but specifically in that market, Yeah, he does that plays an analyst role for sure.
He really does for us. And, and I put a lot of weight on what he says. Now you take that and. You add that to, to the, the information that we subscribe to. And then you take a look also what’s going on, what’s being published on, you know, on Zillow and other, you know, data sources and so on, and you get to make your own decision.
Right? But it, but it is interesting that his analysis is coming from. Real time. Yeah. Data that he’s seeing, feeling experiencing right. In that market. Yeah. Yeah. And so this idea of what’s gonna happen with values, I mean, when we saw values be revised down across the board, I think the reason for that, and this is the way that I interpreted it, right?
So this is the, the world according to Kevin Clayson, but the way I interpreted it as, uh, was this, Covid 19 hit, everybody lost their job because everybody lost their job. There’s gonna be massive amounts of foreclosure. Well then we have, you know, the, we’ve got, what, what was that called? The mortgage, what was it called?
The, the thing where you didn’t have to pay your mortgage. What? Very smart mortgage. No, the thing where, uh, what was it called? For? For, for forbearance. Forbearance. There it is. Couldn’t think of the word. I’m smart guys. Uh, so I couldn’t think of mortgage forbearance. So you have the forbearance, you have kind of this pause that people were able.
Press on rent. And so I don’t know if that’s the reason why we haven’t seen massive foreclosure. I don’t know if massive foreclosure is around the corner, but in general, if we look at why the massive foreclosure happened before, it was because all of a sudden all of these homes that had been kind of artificially inflated, and I know that home prices have been going up, right?
We know that they’ve been going up. I, I don’t know if this is the same kind of artificial inflation that we saw, but, but Kevin, it’s not. And I’ll, and I’ll tell you. Is is back in the day in 2008, 2009, when things crashed, the Great Recession, it was due in large part to the lending Correct. Uh, world where they literally had, um, stated income loans.
I know, because I got a bunch of Yeah, that’s right. And, and, and, and for those of you that didn’t know what’s, Stated income word. We used to call him, I was a loan officer at the time. We’d call him a a heartbeat loan or a fog Amir loan. If you had a heartbeat or you could fog Amir, you’d get a loan. You didn’t have to prove income.
You didn’t have to prove, uh, that you even had the ability to repay. You could tell, just tell ’em No, for real. I, I make like, you know, 15 grand a month, so I’m good. And then they give you the loan. Yeah, yeah. Literally. And, and so you had that going on and you had individuals investing in real estate who, who had no business investing in real estate because if you’re going to invest in real estate, Our philosophy is you need to have skin in the game for multiple reasons.
One of them being that you’ve paid the price to, to earn a down payment, and you do not wanna lose that down payment and you’re gonna do everything you can to save that property. Whereas people who had not, no skin in the game, I stay in the game and no ability, quite frankly, to stay in the game. Yeah. You know, getting loans.
And so there was that element. Yeah. And that was, that was a big part of it. Well, and then you have this massive foreclosure, Right. All of a sudden, And, and, Sorry, sorry Kevin. Yeah, no, you’re good. So on that and there, there was an oversupply. Yes. There was an absolute oversupply of properties, which is the exact opposite of what we’re seeing here today.
Yeah, exactly. And, and loans are very hard to get today. The loans are hard to get today. We don’t have this excessive inventory. It’s not this sort of artificially propped up or inflated sort of scenario. So that’s why I’m not anticipating C and large foreclosure. So even though people lost their jobs, and there’s a lot of people, and this is a big P now, again, look.
We’re talking about the markets that we know. If you look at the markets that we know, the markets that we’re in, here’s what we know. We, we go find the types of homes that we do in the markets that we do, because the types of tenants that they attract, we don’t do really low end properties, right? We’re not doing like seven, you know, $50,000 properties that maybe attract a, a less.
We don’t even do a hundred thousand dollars homes. Yeah. Our average purchase price is 180 5. Yeah. So you’re attracting the kind of tenant that, and this is the way that I describe it. Like you look at the Orlando market, the tenants that are renting those, and, and again, this is just coming from our experience.
The tenants that are renting the properties from our clients in Orlando, they’re not, Uh, and no offense. To you if this is the world you live in. But they’re not the ones selling popcorn at Disneyland or at Disney World. They’re the ones walking around on the collared shirts with a walkie talkie at Disney World.
Right. They’re more administrative type positions and so they, we haven’t seen the same, necessarily the same impact and our other markets too, where there’s a wide basis of, of sort of economic, just a, a larger swath of, of economic underpinning and. Just the types of jobs that these folks have and the types of industries that there are.
We didn’t, we haven’t seen anyway, the same level of like, you know, massive people not paying rent. Sure. There’s been some of that, but it, it hasn’t been the same. So again, now in the affluent community and in the higher priced homes, that’s where you’re starting to see some of that. So it matters what type of real estate you’re getting and which market you’re in.
Yeah. That’s part of why we’re seeing what we’re seeing. Yep. So, third question here is what does inventory look like? And again, specific to Orlando, this is what our, what our guys. In one word he said lacking. There’s a very limited supply of homes anywhere near median home price. I thought we would see some softening in the higher numbers, but we are seeing all price points having inventory constraints.
Now in Orlando specifically, we are seeing a larger than normal influx of people from the Northeast. Um, mainly New York City metro. That are snapping up homes on all ends of the spectrum. New construction is unable to keep up with demand leading to homes selling for over list price. There is no short term solution that will alleviate the supply shortage now.
Hearing that, what that helps us understand, again, the supply and demand, is that for the foreseeable future, at least in this area, it appears that home prices will most likely be on the rise. And Ryan is even suggesting high single digits, maybe even low double digits, which is, Which is amazing and which is counterintuitive.
Yeah. To what you know, mainstream America might be thinking. Correct. But it’s supplying again, guys, it always boils down to this supply and demand, and you said something or rather read something from Ryan. That leads us to the next point, which is this. What Steve read was that there’s people snapping up homes left and right in Orlando, A large number of people out of like Metro New York.
And here’s one of the things that now this is, and these are primary residences that they’re buying to live in, to live in. These aren’t just, these aren’t investors. So this is something that when, when Covid first came around and we started to really kind of get a feel for what was happening, we were all kind of shocked by something.
This was an unintended consequence of Covid 19. We saw, you would think that, you know, cuz we heard all about, you know, tenants aren’t gonna have to pay rent, so on and so forth. So you would think that the rental market would be really soft, that property managers would really be struggling. But what we saw was our property managers were telling us again and again, and.
We are short in inventory. We are, we are leasing more properties more quickly than maybe ever before. And we started to look at it and go, Well, why? And now there’s been a lot of research and articles that have come out, but we kind of drew this conclusion early on because we were just plugged into it that people are deciding, I don’t wanna live in high traffic areas with elevators that everybody shares.
And I don’t. Share recycled air with, you know, 5,000 other people. And I want one of those backyard thingies that I’ve seen on the tv, right? And so they’re moving out of these large d, these high density areas and metropolitan areas, and they’re going to areas that have things like yards and air, and it’s not so densely populated and it’s the suburbs.
In fact, I just saw an article yesterday from the Shark in Guy Robert Hersh. Who said this is gonna, This is about to be the largest mass exodus of major metropolitan cities than we’ve we’ve ever seen, and we’re probably gonna see it across all 50 states. We have been noticing that and seeing that in real time.
I know, Steve, you’ve been talking to our property managers. What are they? Seen on the property management side. So this is the question that I asked him. How has Covid affected property management, meaning demand for rentals, rent prices, and rent collection? He said property management has seen incredible demand since the beginning of the pandemic.
Our view is somewhat limited as most of our exposure is on the single family front. Much of the tenant base is rolling over from multi-family to single. Tenants prefer to have a home with a yard versus being in a large apartment building or community. In addition to Covid, civil unrest and city centers are driving people to the suburban environment, specifically into single family homes.
He all he adds. So this is added pressure to rental prices. So we have seen strengthening in rental. Though I would add home prices arising somewhat faster than rents, which is something that we watch. Very sure. Yeah. And then lastly, he said rent collection has been better than expected with collection rates ranging from 90 to 95%.
Now this is across the board. We’ve seen this in all three of our active markets right now, where our property managers are all saying the same thing. They’re renting the homes as quickly as they’re putting them on the market. We have property managers who have, you know, 700 properties that they manage and they’ve got four vacancies.
Yeah. Which is, is just unheard of. And the other fear was that people just wouldn’t pay their rent. Right. But what’s interesting is in this demographic that you just described, These are, you know, young professionals, young families and decent wage earners, that, that kind of a thing. And in the vetting process that our property managers take the people through vetting their, their credit and that kind of a thing.
The, the one interesting thing that credit is a good indicator of is that people have at, you know, if, if you have a good credit, you tend to pay your bill, tend to pay your bills. And, and people are, are very responsible and they don’t, they, they don’t necessarily. Just do it so they’ll have a good credit rating.
It’s just who they are. It’s like, it’s kind of built in them and uh, it’s a historical understanding of their behaviors. Right. Right. It’s and their habits. And so if their credit check comes back that they’re most, that they pay their stuff, chances are they’re gonna keep paying their stuff. Yeah. And so most people who, if they have the ability, they’re gonna do it.
Even though if they wanted, they could take advantage of the system and be like, Ah, I’m not gonna pay my rent. Yeah. The, you know, the governor said that I can’t be evicted. Now I’m aware of actually one scenario in our Indiana market where a tenant is doing just that. He hasn’t paid rent in like five Yeah.
However many months has, has been going on. Sure. And he, he literally stated that to the property manager. He’s like, Uh, hey, don’t expect a check from me. Yeah. But the vast, vast, vast majority of people, that’s one of the things I just love about this country, top to bottom. Regular Americans are just good people.
Yeah. That is my take as I interact with, with people from, from literally all across the country, from all walks of life, from all my goodness, people, so many different backgrounds. Just good people. Yeah. And if somebody can’t pay, usually like 99% of the time is literally because something has happened in the can’t.
And let me just tell you about one thing about our property manager in, in Orlando. Amazing property manager. He, he didn’t have to do this like of his own fruition. He went out and he found different ministries and different social services, and he has helped tenants who has, who have been having issues, you know, paying rent because of Covid and helped them.
Find the assistance that, that they needed resources. He went out. Yeah, that’s awesome. In order to help their, his renters. I didn’t know he did that. That’s amazing. It has. He’s collected over a hundred thousand dollars in rents over the last five months. Four tenants who are having issues Now, having said that, he has a massive portfolio property.
Yeah. There’s a lot there and. On those, those deals, he doesn’t collect, he does not collect his property management fee because these gift checks are to pay the rent and the rent only, and so he’s literally doing it outta the goodness of his heart. That’s awesome. Both for the, for the tenants and for, for.
The, the owners of the properties, it, it’s pretty amazing. To your point, people I think generally, fundamentally good. Yeah. You know, unfortunately we see a lot of examples when, or or some examples when that isn’t the case. But I think, Oh, by and large, I think you’re right. Yeah. You know, that’s just so, So collection rates have been really, for the most part, pretty normal.
Yeah. Yeah, so, so again, just to kind of restate, I mean values, we haven’t seen ’em go down values over the next 12 to 24 months. We’re, we’re, it’s looking like from a supply and demand standpoint, and then the inventory standpoint, it looks like things are trending in a good direction. And then on the property management side, the rent collection has been high and the speed with which these properties are getting leased out and the, the vacancy numbers are extremely low.
And so look, These are all unanticipated, unintended consequences of Covid 19. We’re not saying that this is the case everywhere. My guess is if we were hav asking these same questions for the city of San Francisco, we would have very different answers. Right? In Manhattan, I, I just read an article that, uh, you know, vacancy rates are astronomically higher than they’ve been in a long time in New York, cuz people are getting outta New York and they’re going, I don’t wanna do this.
But if you look at the markets, if you look at sort of. The middle class, middle income, median home type stuff, that’s where people wanna be. That’s where the vast majority of Americans want to live and do live and seek to live. And so the demand is very high there. So again, it comes down to what type of real estate do you do, where are you doing that real estate?
And that’s all we’re giving you is just based on our experience and, and the massive portfolio that our clients have, that we have, that we, uh, interact with. This is what we’re seeing. Yeah. And, and one thing that I, I’ll throw out there as well, that I think. It’s important that we take into account with this whole Covid 19 thing is, I mean, rent collections have been very, very strong.
Stronger than what we’re anticipated, right? That’s there, there was a lot of fear Sure. On the part of our property managers at the beginning of this thing, and now they’re feeling a lot more comfortable. But there’s still an unknown out there that, that we need to address, which is government assistance.
It’s kind of coming to an end. Yeah. There might be another round of it is what, you know, what we’re hearing. Yeah. Potentially. Right. But a lot of this is ending and we don’t know what the impact of that will be, whether people were literally using those assistance funds to make their, their rent payments or what.
But that is still a bit of an unknown. And, and we’ll know more over the next, the next couple of months, but, Certainly, so far so good. Yeah. Awesome. Okay, last two that we want to cover. Local economies. So, and Steve, you already mentioned this, real estate is extremely local. So we look at what’s happening here in Utah where we live, and we just heard from, uh, an agent that we work very closely with.
She said, Gosh, if you’re thinking about selling, now’s the time to sell because the market’s really hot now. I think she would walk back that statement, if you owned. 3.5 million home. Right. Um, but I wanted to address that too. I think that part of the reason why there’s maybe an excess of inventory of higher priced homes when we hear or when we hear that the market is hot.
If we own a home that has increased a lot in value, or maybe we had a, a larger home, we kind of think, well, geez, maybe I’m gonna just troll the market and I’m gonna throw it out there and see if there’s any takers. Right. But if people are not as interested in buying those, That you got a lot of people listing saying, Man, I’m just gonna go for the gusto here.
I’m gonna swing for the fences and hope that I could sell this thing and collect what I collect. So, you know, take that into consideration depending on the situation you’re in and whether or not you’re thinking of selling your home. But in, in the vast majority of the types of real estate that we see here in Utah, which is, you know, middle and upper middle class, we’re seeing that homes are selling fairly quickly.
That’s what we’re seeing here in Utah. What are we seeing as some of the other. Well, so let, let me share with you what, what we’re seeing in the Orlando market according to our, to our guy there. So in terms of just the economy itself. Okay. So, so kind of jumping back to the economy. So, so locally in the Orlando Metro, the economy has splintered.
Tourism is really at a low, whereas construction is super robust. Tourism is a large part of the local economy. Universal Studios and Sea World are open and Disney World is opening like literally this weekend I think. Yeah. Yesterday is when they opened. We are recording this podcast. This’ll, this podcast will come out in about a week from today, but I think they opened yesterday.
Yeah. So an initial demand is very high. Um, but they’re all operating at limited capacity. So like he told me that, uh, Disney World actually they sold out, but they’re only operating at 25% capacity. Yeah, right. So he said, I think it will be interesting to see how the Disney World reopening works on the Bright side.
Orlando and Disney World will be hosting the NBA season and the major League League soccer season, construction and home building is on a tear. And helping to keep the Orlando economy moving forward. So where he says it’s kind of split, you’ve got tourism, but you’ve got construction and they have tons of infrastructure, um, projects going on in that area as well.
A lot of government investment into infrastructure. So overall it’s a little bit of a, of a bit of a mixed. And Orlando is a little bit of, you know, it’s a little bit of anomaly because it’s so tourism heavy. If you, if you jump in into, uh, Memphis or, or Indiana, their bases, their economic base are very different.
Yeah. Um, there’s a lot of transportation, packaging, FedExes there, manufacturing and um, manufacturing, that kind of thing in both cities. And it’s not reliant on tourism, which is kind of being, you know, hit at the moment. Yeah, so this whole idea that, look, it’s gonna, it’s gonna vary by where you live and we’re just giving you a little bit of info.
What we’re seeing in Utah, what we’re seeing in, you know, we’re lucky here in Utah too, cuz the economy didn’t shut down to the same level that it did and some other states. And so we’ve seen the, in general things have been the guy who kind of is my assistant coach on my son’s baseball team. He worked for a big company here in Utah called Purple Mattresses.
He got laid off, you know, but he’s already. Interviewing and looking at a really great position, and he had a severance. And then with what came from kind of the stimulus, he, he and his family have been okay. Right? And so, so there has been some impact here, just like there has been across the board, but where the economy hasn’t shut down to the same degree that it did in some other states, Utah’s been a little bit healthier.
And you know, even Orlando, you would think of all the markets, right? You would think that Orlando would be so heavily. Because it’s so heavy on tourism, but you’re hearing from our guys in the market that listen, things are still generally pretty good and looking good coming up around the corner. So in fact, I, I, I’d say, looking better than what the initial projections were as, as all the analysts and, and, uh, experts out there, you know, really downgraded home values and, and that kind of a thing.
So, so doing pretty well, you know, for the most part. So at the end of the. What is gonna be the overall impact of Covid? I mean, your guess is really as good as as mine. Sure. But all indications are, it looks like we’re gonna get through this pretty good. Yeah. And as far as investments go, I’m telling you, I’ve been watching the stock market and the volatility there, the ups and the downs, and, and you know, it went way down and it’s recovered now and who knows what it’s gonna do with everything else going on.
It’s been very, I don’t know what the right word. Calming. Mm-hmm. , you know, to know that I’ve, that the majority of what, what I have invested is in real estate. Yep. Guess what? Every one of my properties has paid me its dividend. Yep. Every single month. That’s right. And it, it’s just been that, that consistent and calming influence in, in this, this whole chaotic time.
Yeah. It’s great. Well, last thing we’re gonna talk on just real quick before we conclude, cuz I wanna give you an idea of what’s happening from the lending standpoint. Look, Steve said something before we started the podcast. He’s given the statement you said about easy and. Well, so interest rates have never been lower, but it’s never been harder to get a loan
That’s right. So interest rates have never been lower, but it’s never been harder to get a loan. Here’s kind of what we’re seeing on the investment side. Lenders are wanting 25% down instead of 20% down on, uh, the, on the mortgages that they’re extending. There’s these additional covid 19 overlays. We’re having to verify more or, or there’s, if there’s a question mark, because.
Furlough or there’s just all of these additional hoops that the team’s having to jump through to get people approved. But to that being said, we are still seeing a very high approval rate, and we’re still seeing people closing on lots and lots of properties and getting funding. So what down payment is a little bit higher, not the worst thing in the world.
It means your cash flow is gonna be a little bit higher. Interest rates are extraordinarily low, just like we talked about in terms of why we love real estate. That means you’re locking in your interest at a ridiculously low. Interest rate, uh, while that property continues to grow and potentially grow in the way that we describe today.
And if inflation kind of takes its toll, you’re locking in at a really low rate. Okay. We’re, we’re, we’re locking in loans. In the threes, now in the three. That’s on an investment property. On an investment property in the threes, just to give you an idea, which is unbelievable. So yeah, maybe your credit score needs to be over 700 or over seven 20.
Maybe you can’t go get an investment loan, you know, if you got a six 50. But if your credit’s good and, and if you have a good prospect for being able to verify income and you have enough to be able to put something like 25% down on a property, which for a lot of the properties we do, you know, Somewhere in the 50, 60, 60 $5,000 range.
Um, you’re gonna be in pretty good shape. So phenomenal shape. Little update there on lending, you can still get loans. It, it just, you gotta jump through a few more hoops, which is okay because you’re locking in these awesome, and, and you just have to be patient as well. Lenders across the board are just swamped, invaded, obviously, and rightfully so.
You know, everybody is wanting to refinance at these lower rates, which is. Smart thing to do. Sure. And as such, you know, lenders are super busy, Underwriters are backed up. So you just have to be a little bit patient and My goodness, worth the wait. Yeah, totally. Well, that’s all we got for you guys today. We wanted to share that with you.
We wanted to give you some updates on whether or not it’s safe. To buy real estate in the current economic situation. And so we’re gonna let you draw those conclusions. All we can tell you is that indicators on our, on our end, what we’re seeing, what our teams are seeing, everything’s looking good, it’s looking positive.
But again, do your own research depending on which market you’re thinking about investing in use. Uh, the thing that we gave away on our last episode of the podcast, Where you could go to, uh, dfy dash real estate.com/market research. You could download a guide of, of what you ought to be looking for if you’re considering, uh, markets to go to and take this stuff into consideration.
And we will continue to bring you as many updates as necessary, but we hope that you at least fill a little bit more peace, a little bit more calm, understanding what’s happening in the real estate sector where we spend the vast majority of our time. We are really, uh, we we’re hopeful. And we like what we’re seeing and we like the future, and we hope that you don’t look back at 2020 and go, Man, I should have done something, but I didn’t.
Don’t let fear run your decisions. Let logic, let research, let analysis. And let yourself believe in the American ideal because I think we are gonna get through this and we’re seeing it happen day in and day out. So with that, uh, thank you so much for joining us. As always, please subscribe to the podcast, go and rate and review.
And, and if you could do me. One favor. If you are liking what you’re hearing, just share this podcast with one friend. I’m not asking you to post on social media and tell everybody, but if you want to listen, I, I’m thankful. But if you, I know, you know someone that is interested in real estate or thinking about it, we feel like this information can be impactful and that it can help them sort of get a new, maybe a new, uh, paradigm.
Through which they can view the world of investment in real estate. And so share it with a friend. We thank you for joining us. We love you. We will see you next week. Take care. Thanks so much for listening to Replace Your Income with Kevin and Steve. Do you wanna connect with us and other income replacement rangers out to obliterate the status quo?
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